Economic Outlook for South Carolina: A Better 2021
By L.C. Leach III
More state jobs, more state employment and more opportunity for growth in 2021 – that was the view of several expert economists during a webinar late last year during the 40th Annual Economic Outlook Series.
Held by the University of South Carolina’s Darla Moore School of Business in Columbia, the webinar featured a Federal Reserve banker and two USC professors and researchers, all of whom, despite the continuing rise of the coronavirus (Covid-19), said to anticipate another economic boom at some point in 2021 because of signs and trends happening across the state.
“South Carolina’s economy has come back strong and is almost fully recovered in many areas,” said presenting professor Joseph Von Nessen, research economist with Darla Moore. “We’ve seen some very strong recovery rates throughout this year.”
With a virtual attendance of around 300 people, Von Nessen used slides and graphs to address more than 15 recovery topics, including:
In February 2020, overall unemployment in South Carolina stood at 2.5 percent (58,000 people) – which Von Nessen called “a historic low.”
All that changed in March and April, during the first two months of the pandemic, when unemployment began rising in all 46 counties.
By March, the South Carolina Department of Employment and Workforce (DEW) reported that the number of unemployed rose to 61,000. By April, it increased to 288,000, and eventually passed the 300,000 mark.
The hardest-hit areas included almost the entire Upstate, with a major decline in manufacturing; and, almost the entire coastal region, stretching from Cherry Grove to Hilton Head, due to the plummet in leisure and hospitality, and the presence of the Covid-19 pandemic.
But while the number of pandemic cases continued to escalate throughout 2020, the state’s economic recovery began as early as June – when unemployment numbers dropped to around 210,000.
By August these numbers had dropped again to around 152,000 – and by October to 100,333.
“The important part is that these people left the ranks of the unemployed because they got a job, not because they gave up on looking for a job,” said DEW executive director Dan Ellzey.
And Von Nessen added that except for leisure and hospitality, which, at the earliest, isn’t expected to start fully recovering until late 2021, unemployment in all other sectors of the state’s economy are approaching pre-pandemic levels – a key indicator to more economic growth.
“We’re now at 4.2 percent unemployment – which is within two percentage points of the pre-recession unemployment rate,” he said. “That’s even closer to being comparable to where we were back in February.”
Employment Recovery by Region
At the height of the pandemic shutdown, employment fell 12.8 percent across 23 of the state’s counties – including eight in the Upstate, plus all of Charleston, Beaufort and Horry surrounding Myrtle Beach.
As of November 2020, employment across the state had come back to around 76.5 percent of where it was before Covid-19.
But just in and around Greenville County, Von Nessen said the rate was even higher.
“It’s because Greenville, and the Upstate, is the most manufacturing-centric region of South Carolina, a very goods-intensive economy,” he said. “Compared to elsewhere, Columbia and Charleston, for example, that are more service-based sectors. So that’s great news for Greenville and great news for the Upstate.”
Home and Real Estate Markets
Despite experiencing a second wave in Covid-19 cases during the late summer, and a third, bigger wave in the autumn, South Carolina has remained firmly in the middle of a huge residential sellers’ market, due in part to low inventory levels and low interest rates.
South Carolina Realtors (SCR) released its November 2020 statewide real estate market data reflecting another month of unusually high sales. Closed sales were up 13 percent throughout the state in November, compared to a year earlier.
The South Carolina real estate market remained strong, and homes continued to sell in a record-setting time frame - throughout November it was 64 days. A year earlier homes sold on average in 80 days.
Sales prices inched higher again in South Carolina throughout November. Compared to a year earlier, prices were up 19 percent from $218,460 to $259,995.
Hilton Head, Aiken and Pee Dee areas saw the biggest price increases, while the Midlands saw a slight decrease.
Unemployment Insurance Claims
Since March 2020, more than 777,000 people in South Carolina filed for unemployment insurance with SCDEW.
Von Nessen said most of the unemployment claims have come from workers in hospitality and leisure – meaning that the state’s economy will continue to be hampered until this sector recovers.
“This recovery is now being led by biological factors more than economic factors, which makes it unique,” he said. “A vaccine is still our best bet to restore consumer confidence. And a full recovery for South Carolina is not expected until at least the third quarter of 2021.”
Douglas Woodward, director of research and professor of economics with the Darla Moore School of Business, said it is equally important to understand how certain economic trends will affect people in South Carolina in the near, post-pandemic future.
Coronavirus notwithstanding, Woodward said global trade has hardly missed a beat, especially in South Carolina.
For example, container terminal volume in November 2020 was down only about 1 percent from the same month in 2019. Inland ports, such as the one in Greer, are growing. And, with the U.S.-China trade war progressing to the point that Woodward said “the trade war is over,” supply chains outside U.S. borders have held up well during the pandemic.
“And that bodes well for South Carolina,” Woodward said. “Usually in a recession we see double-digit declines in trade. But trade volume is reemerging faster than in previous recessions – and with the Port of Charleston as a linchpin, South Carolina is well-positioned to further develop our logistics industry and serve the expanding market.”
More Migration to S.C. and More Remote Work
From 2010-19, South Carolina had a net migration of about 414,000 people coming into the state from other states – and it wasn’t just because of the nice weather and beaches.
This urban exodus was the beginning, Woodward said, of a budding trend toward people wanting to live in places with lower populations while being able to work remotely from almost anywhere.
“People are looking for space to be able to work at home and (keep) a quality of life,” he said. “And this is going to work to our advantage.”
Rather than lasting just through the Covid-19 crisis, Woodward and other economic experts expect the trend to gain a permanent toe-hold in the economy.
For instance, Global Workplace Analytics (GWA), a research-based consulting firm in San Diego, Calif., that helps organizations optimize work-from-home, telecommuting and on-site workplace strategies, estimates that 25-30 percent of the U.S. workforce will be working from home multiple days a week by the end of 2021.
This past April, the firm conducted an online survey of 2,800 global workers to find out their preferences for either working from home or in a traditional office away from home.
The findings were that 76 percent of global office workers and 82 percent of U.S. office workers say they want to continue to work from home, at least weekly, when the pandemic is over.”
“That’s approximately 75 million U.S. employees,” said GWA president Kate Lister, adding that if work-from-home were to happen with this many employees, the demand for U.S. office space could shrink by over a billion square feet. “The impact on commercial real estate would be massive.”
She said this likelihood is still somewhere down the road because the survey also revealed that “only 16 percent (19 percent in the U.S.) want to say goodbye to the office forever, with most preferring a bit of both.”
“But…as workplaces are redesigned for the future of work post-Covid and leases come up for renewal, we will surely see the impact,” Lister said.
That means that South Carolina’s low city population density – as well as its beaches and nice weather – are going to make it even more attractive to residents of other states in the coming year as remote work becomes a stronger workplace trend.
“This will be an advantage for businesses as the economy recovers in 2021 and 2022,” Woodward said. “The increase in population growth across the Southeast means a greater demand for goods and services across this dynamic region of the country. We were in good shape before the Covid crisis in the move towards more remote work, and I think we will continue to see that trend.”
Tom Barkin, president and chief executive officer of the Richmond Fed, agreed.
“I see promising signs for business investment, and I’m also recently hopeful on a vaccine,” he said. “So my outlook is a slow and steady recovery. You might say we took the elevator down, but we’re going to need to take the stairs back up.”