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					Forecast for the Nation, Georgia and Atlanta




           Dr. Rajeev Dhawan
                       Director
ECONOMIC                            Presented at the
                      Quarterly Forecast Conference
FORECASTING
                                GSU Student Center
CENTER                             August 24th, 2005
                Office: 404-651-3291
                email: forecast@gsu.edu
                http://www.robinson.gsu.edu/efc
Source: Walt Handelsman, Long Island, NY, Newsday
The Good, the Bad, and the Ugly
        US Sector or Area               Grade
        Construction                     A++
        Tax Collections                  A+
        Real Dividend Growth             A+

        Bank Loan Activity               A+

        Corporate Revenue Growth          A

        Health/Finance/Insurance Jobs     A



        Weak Dollar (Earnings)           B+
        Overall Job Growth               B+



        Euro Zone Malaise                 C
        Oil Prices                        C
        Benefit/Health Costs              D
        Manufacturing Jobs                D
        Auto Over-Capacity                F
        Iraq/Terrorism                    F



        Overall US Economy               A-
    Forecast Theme
Antidote to the Naysayers:
 Economic Logic and a
 Dash of Common Sense!
U.S. Short-Term Forecast
                                  2004 2005 2006 2007
Real GDP Growth                       4.2   3.7     3.0   2.6
  05q3: 4.4   05q4: 3.0   06q1: 3.0     06q2: 2.6   06q3: 2.2



Consumption Growth                    3.9   3.6     3.0   2.7

Bus. Investment Growth                9.4   9.3     8.9   3.3

Federal Purchases                     5.2   1.9     2.7   1.3

State & Local Purchases               0.4   1.7     1.9   1.7
      Short-Term Forecast Comparison
Real GDP               05Q3   05Q4   06Q1   06Q2   06Q3    06Q4


EFC                    4.4    3.0    3.0    2.6    2.2     2.2
Blue Chip              3.9    3.3    3.2    3.2    3.2     3.2
       (Bottom 10)     2.9    2.5    2.5    2.5    2.5     2.7
            (Top 10)   5.2    3.9    3.8    3.9    3.9     3.9


Bus. Fixed Invest
EFC                    10.6   10.7   12.0   8.3    4.5
      Philadelphia     9.4    7.8    8.2    8.0    7.4



Res. Fixed Invest
EFC                    -0.8   -6.4   -9.5   -9.0   -14.2
      Philadelphia     2.3    -0.8   -0.7   -3.0   -2.0
                   Bursting Bubbles
          Dow (2000-2005) vs. Nikkei (1990-2005)
100
                              Dow Jones
90

80

70

60

50
                                              Nikkei
40

30
      1      2        3        4          5            6
      Consumer Sentiment and Stock Market Wealth
(Index: 1966 = 100)                                                        (Bil.)
160                                                                       16000


140                                                                       14000


120                                                                       12000


100                                                                       10000


 80                                                                       8000


 60                                                                       6000


 40                                                                       4000
  1996    1997   1998   1999   2000   2001   2002   2003    2004   2005
         Consum er Confidence (L)       Wilshire 5000 (R)
                    GE and Wal-Mart Revenue Growth
                           2000q1 to 2005q2

35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

 5.0%

 0.0%

 -5.0%

-10.0%
         2000q1 2000q3 2001q1 2001q3 2002q1 2002q3 2003q1 2003q3 2004q1 2004q3 2005q1

                                           GE   Wal-Mart
                Breakdown of Retail Sales
                                            Y-O-Y           2004    2003

                                   July’05          05 Q2   % Y/Y   % Y/Y
     Category
1.   Motor Veh. (26%)                24.7            8.7     3.9     3.0

2.   Furnishings (6%)                4.4             4.7     6.0     2.8

3.   Build. Mat. (10%)               9.2             9.3    14.1     6.5

4.   Food (15%)                      3.8             5.2     4.0     2.3

5.   Health (6%)                     6.1             6.4     5.6     6.4

6.   Gasoline (8%)                   19.5           16.9    16.3     9.5

7.   Clothing (5%)                   3.8             7.3     6.1     3.3

8.   Gen. Merch. (14%)               6.9             7.0     6.9     4.7

9.   Non-store (5%)                  10.1           12.8    13.2     7.4



                         Overall     11.2            8.4     7.2     4.2
When the Party’s Over




      Source: Fortune, August 22nd, 2005
      Gas Spending Dings Discretionary Expenses
(Bil.$)                                                         (%)
280                                                            10.0
260
                                                               8.0
240
220                                                            6.0
200
180                                                            4.0

160
                                                               2.0
140
120                                                            0.0
      I  II   III IV I  II   III IV I   II   III   IV I   II
      2002           2003           2004              2005
          Spending on Gasoline (Left)
          Growth in Food, Clothing & Shoe Spending (Right)
                         Business Investment
40 (Percent change, 2000 dollars)
                                                                       High Gasoline Prices
                                                                      Also Cause Investment
                                                                  in Energy Efficient Equipment
30



20



10



 0



-10
         Structures            Com puters             Softw are           Com m unication   Transportation
                                                                            Equipm ent

                                         2003     2004    2005     2006    2007


                               Source: GSU, Economic Forecasting Center, August 2005
20%
       Dow 30 Revenue Growth
15%




10%
                                                                                     ?
                                                                      AIG, Merck, Walmart
5%                                                                       & Exxon Mobil



0%




-5%
      01q1 01q2 01q3 01q4 02q1 02q2 02q3 02q4 03q1 03q2 03q3 03q4 04q1 04q2 04q3 04q4 05q1 05q2
                               Data Revisions and the
                                Employment Report
                               Month Report Published
                                                                     High Pay   Low Pay
                               Mar   Apr   May   June   July   Aug     Jobs      Jobs
Latest Month of Data




                       Feb     262   243   300   300    300    300    44        149

                       March         110   146   122    122    122    22         33

                       April               274   274    292    292    26        127

                       May                       78     104    126     7         44

                       June                             146    166     9         79

                       July                                    207    25         93
                        Banks are Opening Up!
(% Ch.)                                                            (%)
50                                                                 10


40                                                                 9

                                                                   8
30
                                                                   7
20
                                                                   6
10
                                                                   5

 0                                                                 4

-10                                                                3
  1999        2000    2001     2002        2003    2004     2005

          Home Equity (Left)                 Prime Rate (Right)
          Commercial & Industrial (Left)
      Is The Bond Market STILL Not Cooperating?
 5
                                 10-Year is DOWN
4.5                             by 40 Basis Points!

 4


3.5
            10 Hikes Totaling 250 Basis
 3
                Points in 13 Months                             29-June'04
                                                                18-Aug'05

2.5


 2


1.5


 1
       3-month   6-month   1-year   2-year   5-year   10-year
       Index of Unit Labor Cost Versus Productivity Changes
                     (% Ch. of 7-Qtr. Moving Average)
12                                                                      5

                                                                        4
9
                                                                        3

6                                                                       2

                                                                        1
3                                                                       0

                                                                        -1
0
                                                                        -2

-3                                                                      -3
     1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
          Labor Cost Index (Left)     Productivity Grow th (Right)
          Breakdown of Consumer Prices
                                   3-Month Rate
      Category         Weight   July’05   July’04   Dec’03

1.    Core              79%     1.7%       2.3%     1.0%

2.    Non Durables      29%     4.1%       8.2%     2.4%

3.    Durables          11%     -0.6%     -1.3%     -6.3%

4.    Services          60%     2.8%       3.4%     2.6%

5.    Housing           40%     2.5%       3.6%     1.7%

6.    Commodities       40%     2.6%       5.5%     -1.3%

7.    Food              15%     2.7%       4.7%     4.8%

8.    Gasoline           3%     14.0%     43.1%     -12%
9.    New Cars           5%     -1.7%     -0.4%     -1.9%
10.   Medical            6%     3.8%       4.1%     4.2%
                     Overall    2.7%       4.2%     0.9%
                           Yield Curve and Recessions
(%)
 5


3


2


0


-2


-3


-5
      1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005

            10-Year - Funds Rate
        Bold FED Forecast!

My slightly bold forecast is for two
25-basis point hikes by the FED at
its next two meetings, then
signaling the end of this tightening
cycle with a dramatic 50-basis
point hike at the December meeting
  10-Year Bond Rate and Trade Deficit
              10-Year Bond Regression




                              Source: May 2005, Forecast of the Nation


                              2004 2005 2006 2007
10-Year Bond Rate              4.3        4.5         5.2        5.5
CPI Inflation                  2.7        3.2         2.6        1.6
           Core                1.8         2.3         2.2        1.9
Testimony of Chairman Alan Greenspan




 Fannie's and Freddie's purchases
 of their own or each other's mortgage-backed
 securities with their market-subsidized debt
 do not contribute usefully to mortgage-market
 liquidity, to the enhancement of
 capital markets in the United States,
 or to the lowering of mortgages rates
 for homeowners Committee on Banking, Housing, and Urban Affairs, April 6th 2005
                Before the
                         U.S. Housing Starts
                     vs. Average Mortgage Rate
(Mil. Units)                                                  (Percent)
2.2                                                                 9.0

2.0
                                                                    8.0
1.8

1.6                                                                 7.0

1.4
                                                                    6.0
1.2

1.0                                                                 5.0
      1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

               Total Housing Starts (L)   Single Family (L)
               Mortgage Rate (R)
U.S. Short-Term Forecast
                      2004 2005 2006 2007
Exports               8.4     7.8    7.5    9.9
Imports               10.7    6.7    5.8    3.3
Trade Deficit         -601.3 -629.9 -645.7 -581.5

           % of GDP   -5.4   -6.0   -6.0    -5.7
Budget Deficit        -406.5 -270.9 -306.9 -293.2

           % of GDP   -3.5   -2.2   -2.3    -2.1

Housing Starts        1.950 1.995 1.739 1.620
Auto Sales            16.9 17.2 16.7 16.9
          Prediction Vs. Reality
2nd Quarter 2005                Actual May 05 Grade
GDP Growth                       3.4%           A-
                                          3.0% A+++
Components
  Consumption (60% of GDP)        3.3%     3.9%     A-
                Durable (12%)     8.3%     7.1%     A-
           Nondurable (30%)       3.3%     3.4%    A+
               Services (58%)     2.3%     3.5%    B+
 Pvt. Invest. (16% of GDP)        9.0%    10.3%     A-
 Res. Const. (5% of GDP)          9.8%    -2.7%     F
 Inventories (0.4% of GDP)         -6.4     54.2   F++
 Exports (10% of GDP)            12.6%     7.1%     A-
 Imports (13% of GDP)            -2.0%     6.3%     D
 Federal Govt. (7% of GDP)        1.3%     6.3%     D
 S&L Govt. (12% of GDP)           2.4%     1.8%     A-
                     Measured Hikes by FED
(% Ch.)                                                ($/Barrel)
 8                                                            70


                                                              60
6

                                                              50
4

                                                              40
2
                                                              30

0
                                                              20


-2                                                            10
     1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
          Real GDP    Federal Funds Rate     Oil Price (Right)
Source: Michael Ramirez, California, The Los Angeles Times
How China Runs the World Economy

   EXPORTS:                                                                EXPORTS:
 $94.5 (16.2%)    EXPORTS:                                  EXPORTS:      $23.3 (4.0%)
   IMPORTS:      $72.3 (12.4%)                             $25.7 (4.4%)    IMPORTS:
  $40.9 (7.4%)    IMPORTS:                                  IMPORTS:      $29.8 (5.4%)
                 $88.9 (16.1%)                            $57.4 (10.4%)



                                      EXPORTS:
                                     132.9 (22.8%)
Hong Kong           Japan             IMPORTS:
                                                          S. Korea        Germany
                                      42.5 (7.7%)



  EXPORTS:         EXPORTS:                                EXPORTS:        EXPORTS:
 $45.6 (17%)     $122.3 (22.7%)                           $44.6 (17.8%)   $78.6 (8.8%)
  IMPORTS:         IMPORTS:                                IMPORTS:        IMPORTS:
 $14.6 (5.3%)     $56.3 (14%)                             $27.2 (12.7%)   $46.6 (6.5%)




                                  Source: CIA Fact book
              The World’s Growth Imbalance
     (%)      UNITED STATES                    GERMANY                            JAPAN
5


4


3


2


1


0


-1
       2001    2002   2003    2004   2001    2002      2003        2004   2001   2002   2003   2004

                                 Real GDP      Net Export Contribution

                                     Source: Global Insight, EFC
 Can We Blame China for High Oil Prices?
                                                                                                 NET Change in
                             Production (P)                           Consumption (C)               Supply
                      2000            2004         DP          2000            2004        DC       (DP – DC)

US                    7.73           7.24       -0.49         19.70          20.52       0.82        -1.31

Canada                2.72           3.09        0.36          1.94            2.21      0.27         0.10

Mexico                3.45           3.82        0.37          1.88            1.90      0.01         0.36

Japan                  NA             NA          NA           5.58            5.29      -0.29        0.29

UK                    2.67           2.03       -0.64          1.70            1.76      0.05        -0.69

China                 3.25           3.49        0.24          4.99            6.68      1.70        -1.46

India                 0.78           0.82        0.04          2.25            2.56      0.30        -0.26

Russia                6.54           9.29        2.75          2.47            2.57      0.10         2.65

Middle East          23.38          24.57        1.19          4.60            5.29      0.69         0.51

Africa                7.86           9.26        1.41          2.46            2.65      0.19         1.22

VIN*                  8.13           7.29       -0.84          1.75            1.94      0.19        -1.03




* VIN – Venezuela, Indonesia, Norway


                              Source: BP Statistical Review of World Energy, June 2005
                    International Country Analysis
                                                        Current                     Exchange    Short-
  Top US Trading          GDP Growth                   Account          Inflation     Rate      Term
     Partners      2003      2004       2005(F)       (% of GDP)                    (per US$)    Rate


                                                         2004            2004        Latest     Latest

1. Canada          2.0       2.9          2.8             2.9             1.8         1.21      2.57

2. Japan           1.4       2.6          1.4             3.4             0.0        112.1      0.02

3. Mexico          1.6       4.4          3.6            -1.2             4.7        10.60      9.63

4. UK              2.2       3.1          2.2            -2.0             1.3         1.77      4.56

5. Netherlands     -0.9      1.4          0.5             2.9             1.4         1.22      2.13

6. Germany         0.0       1.6          1.1             4.4             1.6         1.22      2.13

7. China           9.5       9.5          9.1             2.4             3.9         8.10      2.00

8. France          0.9       2.1          1.7            -0.6             2.3         1.22      2.13

9. Ireland         3.7       4.7          4.7            -1.6             2.3         1.22      2.13

10. Belgium        1.3       2.7          1.5             4.5             1.9         1.22      2.13

Euro Area          0.5       2.0          1.5            0.8              2.2         1.22      2.13



                                Source: IMF & Blue Chip International
               UK Retail Sales and Short-Term Rates
(Y/Y %)                                                     (%)
10                                                          6.5


 8                                                          6.0

                                                            5.5
 6
                                                            5.0
 4
                                                            4.5
 2
                                                            4.0

 0
                                                            3.5

-2                                                          3.0
     FEB JUL DEC MAY OCT MAR AUG JAN JUN NOV APR SEP FEB JUL
      00          01      02      03          04      05
          Retail Sales   3-Month T-Bill (Right)
                          US Oil Rig Count and Oil Prices
                                                                                            ($/Bbl)
1500                                                                                            70.0


1400                                                                                            60.0

1300
                                                                                                50.0

1200
                                                                                                40.0
1100
                                                                                                30.0
1000

                                                                                                20.0
 900


 800                                                                                            10.0


 700                                                                                            0.0
   JAN'02 APR   JUL   OCT JAN'03 APR   JUL   OCT JAN'04 APR        JUL   OCT JAN'05 APR   JUL

                                  Total US     Oil Price (Right)
            Anonymous Vent

The end is near when a share of
Delta stock costs less than a
Happy Meal.




              Source: The Atlanta Journal-Constitution, August 11th, 2005
           Delta / Air Transportation
1. Fuel Prices Still Very High
   – Underestimated Current Fuel Costs
   – Fuel in Q2 was $1.60/gallon, 50% higher than a year ago
2. Crunch Time
   – Posted $1.5 Billion in Losses 1st half 2005
   – Delta needs CASH fast
   – Sold regional subsidiary ASA to SkyWest for $425 million
   – Renegotiated Finance Staves off Bankruptcy? New
      Mastercard/VISA deal costs $750 million
3. Competition Getting Breaks
   – United Dumped $6.6 Billion in Pension Costs
   – US Air and America West Merger
      Can AirTran Fill Delta’s Shoes?
                    Owned Leased   Total   AGE

Delta’s Current      500    345    845     15+
   Fleet


AirTran’s Current    10     77      87     2.5
   Fleet
         Hartsfield-Jackson Expansion
                    Doldrums
Airport Development Program Projected Spending - $6 Billion
    Includes Seven Major Projects
    Firing of Architects HAS DELAYED $1 B New Intl Terminal
         Project                        Cost                   Project       Opening
                                                              Start Date      Date
Fifth Runway                     $1.25 Billion                 In Progress   May 2006
New Car Rental Facility           $500 Million                      2006       2008
International Terminal               $1 Billion                      ???       ????
South Passenger Complex            $1.8 Billion                      ???     2010-2012
Complex Upgrades                  $400 Million                 In Progress   By 2009
Other Facilities Upgrades          $1.2 Billion                In Progress    By 2011


                     Source: Inside Hartsfield-Jackson (2005 press kit)
Local Economy Suffers
   a Sectoral Growth
        Pause
                 Georgia Nonfarm Employment
(Thous.)
3940


3920       Between June 2003 and
             Aug 2004, Georgia
             Gained 70,000 jobs
3900


3880


3860


3840                    HOWEVER, Georgia Gained Only 38,000 Jobs
                                 in the Last 11 Months
3820
       MAR       JUL     NOV       MAR    JUL   NOV   MAR     JUL
       2003                        2004               2005
                       Healthcare Blip
                                               Georgia Healthcare Jobs
•   Healthcare         (Thous.)
                       342
    Usually a
    Leading Growth
                       340
    Sector
                       338
•   1st Half 2005
    created Only                                             1st Half 2005 was Flat
                       336
                                                              Compared to 2004
    14,000 Jobs,
    Last Year          334
    Added 40,000                  FEB
                                  2004
                                         APR    JUN   AUG   OCT   DEC   FEB
                                                                        2005
                                                                               APR   JUN

    Jobs in 1st Half
            Information and Technology

Mergers:                                           Georgia Technology Jobs
                           (Thous.)
   -   Qwest and MCI       150
   -   Sprint and Nextel
                           145
   -   AT&T and Cingular
                           140

Layoffs:                   135
                                                                                                FLAT
   –   MCI -600
                           130
   –   Earthlink -180
   –   AT&T -350           125

   –   Cingular: -10%      120
   –   AT&T/SBC -13,000    115
                                   I II   III IV     I II   III IV     I II   III IV     I II   III   IV     I II
                                 2001              2002              2003              2004                2005
Construction Activity     2005Q2             Last 12 Mos.          Grade
Jobs Added                       20                800                 B
Permit Growth            0.3%         3.2%                             B-
                    Atlanta Housing Permits
                    (4th-quarter moving average)
      (Thous.)
      18.5

      18.0

      17.5

      17.0

      16.5                                1st half 2005 0.3% growth
                                           over the 1st half of 2004
      16.0

      15.5

      15.0
        2003                     2004                       2005


                        Source: US Census Bureau
Commercial Construction is Drying Up
                                   Georgia Construction Jobs
           (Thous.)
           202
                                                                6,000 Jobs From
                                                                2003q2-2004q2
           200
                                                                 but FLAT Since
           198


           196


           194


           192
                   I    II   III    IV     I    II   III   IV     I    II   III   IV     I    II
                 2002                    2003                   2004                   2005
        Georgia’s Report Card: B-
                             Most
      Indicator             Recent    Last 12   Grade
                            Quarter   Months
                           (2005Q2)
Jobs Added
  Self & Small Business     19,000    58,000     A+
    (Household Survey)
        Hospitality Jobs     3,400     5,700     A
          Finance Jobs         30      3,000     B+
        Healthcare Jobs       600      5,400     B-
  Business Service Jobs     -1,900     11,000    C
   Total Non-Farm Jobs       7,000    20,000     C
       Technology Jobs       -300      -1,900    D
    Manufacturing Jobs       -500      -7,500     F
Georgia’s Recent and Potential Job Layoffs
RECENT
  - Winn Dixie
     3,000 workers in 50 unsold stores
  - Earthlink
     180 workers

Future Layoff (Uncertain When & Where They Will Occur)
   - HP - 14,500 jobs (Atlanta currently has 1,600 workers)
   - Kodak - 10,000 jobs
   - Kimberly-Clark - 6,000 jobs over 3 years
   - Coca-Cola Enterprises - 6,000 jobs
           Georgia Tax Collections
                Georgia Total Tax Revenue
                      4 quarter moving average
($ Millions)
3700


3600


3500

3400


3300

                                                               Looks Great,
3200
                                                                  Right?
3100
   2001        2002              2003                   2004        2005


                Source: Georgia Department of Revenue
          But We Have Concerns…
                     Georgia SalesTax Revenue
($ Millions)
600


550


500


450


400


350
                                    Why Is Sales Tax Flat??
300
   JAN         APR     JUL    OCT       JAN      APR      JUL
  2004                                  2005
Blame Flat Sales Tax Revenues on Oil?
         Georgia SalesTax Revenue & Oil Prices
(% Ch. Yr. Ago; Sm oothed)                                         ($)
 20                                                                60
                As Oil $$ Go Up, Sales
15              Tax Revenues Go Down                               55

                                                                   50
10
                                                                   45
 5
                                                                   40
 0
                                                                   35
 -5                                                                30
-10                                                                25
   JAN APR     JUL   OCT     JAN APR   JUL   OCT   JAN APR   JUL
  2003                       2004                  2005
               Sales Tax Revenue (L)         Oil Price (R)
                    Georgia and US Export Growth
                                       4-Qtr Moving Average
    (%)
     8
                      Georgia Export Growth is Still
    6                    Stronger than the US
    4

    2

    0

    -2

    -4

    -6
     1998      1999          2000           2001           2002           2003            2004   2005
                                              Georgia              US


•         Georgia ended 2004 up by 20.6% and started
          2005 up by 20.2%

               Source: World Institute for Strategic Economic Research (Wisertrade.org)
Georgia 2005 Q1 Export Performance
 Top Export Destination Bought GA Equipment
 –   Singapore +$110 more than before
 –   UK +$70M more than before
 –   Italy +$70M more than before

 Main Products:
 –   Transport Equipment increased 50% over 2004 Q1
        – $400 million more sold
        – Includes Turbojets and Airplane Parts
          (Savannah Manufacturer Gulfstream)




                    Source: www.Wisertrade.org
                            CAFTA Details

1. The Dominican Republic and the countries of
   Central America are Georgia’s 9th largest export
   market
2. Georgia exported $640 million in 2004
3. Georgia exported $290 million in Non-Apparel
   Textiles
4. After the first year, Georgia companies expect to
   increase their sales to this region by $262 million
   and add 1,500 jobs



         Source: US Chamber of Commerce, Economic Impact of DR-CAFT on Georgia, 2004 ed.
                            Tourism
1. Hotel Occupancy and Employment Up
   – Hotel Occupancy Up by 5% in May 2005
   – Added 7,000 jobs in calendar year 2004
2. Georgia Aquarium $200 million+
   – Opening November 2005
3. GWCC Reservations Coming Back
   – 55% in 2005 (booked)
   – 45% in 2006 (booked)
4. But Ultra-Large Conventions Look Elsewhere
   – Las Vegas, Orlando, Chicago have more space and
      more hotel rooms



                Sources: GWCC and PKF Consulting
        Georgia August 2005 Forecast
                        Jobs, Income & Housing
Change from May Forecast,                             2005                2006                2007
   Down 30,000 Jobs
 Total Jobs Added (000’s) *                            45.8                79.8               74.3
 High Paying Jobs (000’s) **                            3.2                5.4                 10.3
                                  % Total               7%                 7%                 14%
                   May 05 Report                        6.4                8.4                 12.6
 Personal Income Growth                                6.3%               5.9%                6.0%
  Housing Permits (Atlanta)                          -6.5%                -4.8%              -2.6%
       *Calendar Year Calculations (January to December)

       ** High Paying Jobs are in Manufacturing, Information, Air Transport, Management of Companies,
                 Accounting, Scientific, Computers, Finance & Insurance
                 Employment Gains: History and Forecast
                         Manufacturing vs. Construction
(Thous.)
 20


10


 0


-10


-20


-30


-40
      1995        1997       1999      2001     2003      2005   2007
             Manufacturing      Construction
                 Employment Gains: History and Forecast
                          High Tech vs. Healthcare
(Thous.)
 20


10


 0


-10


-20


-30


-40
      1995        1997    1999        2001    2003   2005   2007
             High Tech   Healthcare
                Employment Gains: History and Forecast
                           Government vs. Trade
(Thous.)
 25

20

15

10

 5

 0

 -5

-10

-15
      1995       1997     1999     2001      2003   2005   2007
             Government    Trade
                 Employment Gains: History and Forecast
                           Hospitality vs. Admin & Support
(Thous.)
 25

20

15

10

 5

 0

 -5

-10

-15
      1995         1997      1999       2001       2003      2005   2007
             Hospitality     Admin & Support
                             Atlanta Forecast
Jobs Added (000’s)                                  2005           2006                2007
                   Total Jobs*                        29.7          45.7                44.1

             High Paying **                           1.9            6.0                  9.0
                                % Total               7%           13%                   20%
                  Low Paying                         12.2           19.0                 19.0
                                % Total              41%           42%                   42%


      *Calendar Year Calculations (January to December)
** High Paying Jobs are in Manufacturing, Information, Air Transport, Management of Companies,
          Accounting, Scientific, Computers, Finance & Insurance
Housing Starts Will Slip Everywhere…
            Residential Building Percent Change
                                  Atlanta vs. US
(%)
 20.0

15.0

10.0

 5.0

 0.0

 -5.0

-10.0

-15.0
    1998   1999     2000   2001     2002   2003    2004    2005   2006   2007
                  Atlanta Permits      US Housing Starts
        Revenue Tax Collection Projection
             (Percent Change, Based on Monthly Collection Reports)

                             FY 05                FY 06 Forecast

Income                       9.8%*   Grows in the 6.0% Range; Closer to Personal
            (50% of total)                           Income Growth

Sales                        7.2%         Moderates to the 5.0% Range as
            (36% of total)               Home Building Returns to Normalcy


Motor                        0.0%     $60+/bbl Cuts into Discretionary Consumer
             (5% of total)                               Spending

Corporate                    44.0%
                                            No More Positive Surprises?
             (4% of total)

TOTAL TAX                    8.0%                     6.0%+

                 *Excludes the $202 Mil. from HB-43 in May04
MSA Forecast – Best and Worst
  Employment Growth Rates
Metro Area   2005       2006
Savannah      1.5       2.2
 Albany       1.2       1.1
Brunswick     0.9       1.5
Columbus      0.1       1.1
  Macon       0.1       0.9
  Dalton     -0.5       0.9
How Vulnerable is the
   US Economy to
Oil, Housing, Politics
  and Consumers?
                              Oil Price
($/bbl)
75

70                                   EXPERIMENT #1: OIL HITS $75
65

60

55

50

45

40
       III   IV     I    II    III      IV     I    II   III   IV
      2005        2006                       2007
          Baseline       Oil Shock
                                   Auto Sales                                                        Housing Starts
(Mil.)                                                                 (Mil.)
18.5                                                                   1.95

                                                                       1.90
18.0
                                                                       1.85

                                                                       1.80
17.5
                                                                       1.75
17.0
                                                                       1.70

                                                                       1.65
16.5
                                                                       1.60

16.0                                                                   1.55
          III     IV     I    II     III   IV     I    II   III   IV             III     IV     I    II     III   IV     I    II   III   IV
         2005          2006                     2007                            2005          2006                     2007
                Baseline      Oil Shock                                                Baseline      Oil Shock

                        Quarterly Job Additions                                                           GDP Growth
(000's)                                                                 (%)
700                                                                     4.5


600
                                                                        4.0

500
                                                                        3.5
400
                                                                        3.0
300

                                                                        2.5
200


100                                                                     2.0
          III     IV     I    II     III   IV     I    II   III   IV             III     IV     I    II     III   IV     I    II   III   IV
         2005          2006                     2007                            2005          2006                     2007
            Baseline          Oil Shock                                            Baseline          Oil Shock
  Gary Shilling                 EIGHT FACTORS THAT
A. Gary Shilling & Co.
                                  CAUSE DEFLATION
                                                               July 11th, 2005


  1. End of Cold War Released Resources
  2. Central Banks are Too Aggressive in Fighting the Inflation War

   3. Corporate Cost-Cutting and Restructuring

  4. Productivity from Technology
  5. Rise of Wal-Marts

  6. Deregulation and Privatization Wave

  7. Globalization has an Ugly Side: Excess Surplus
  8. The U.S. consumer Becomes a Saver!

                           Source: Barron’s, June 20th, 2005
                          Consumer Sentiment
Index
100


 95


 90


 85


 80
                                  EXPERIMENT #2: CONSUMER MALAISE

 75
         III     IV     I    II    III    IV     I    II   III   IV
        2005          2006                     2007
               Baseline      Simulation
                             Consumption                                                         Housing Starts
 (%)                                                                 (Mil.)
 4.5                                                                 1.95

 4.0                                                                 1.90

 3.5                                                                 1.85

 3.0                                                                 1.80

 2.5                                                                 1.75

 2.0                                                                 1.70

 1.5                                                                 1.65

 1.0                                                                 1.60

 0.5                                                                 1.55
          III   IV     I    II     III   IV     I    II   III   IV             III   IV     I    II     III   IV     I    II   III   IV
         2005        2006                     2007                            2005        2006                     2007
            Baseline        Simulation                                           Baseline        Simulation

                                 Auto Sales                                                           GDP Growth
(Mil.)                                                                (%)
18.5                                                                  4.5


                                                                      4.0
18.0

                                                                      3.5
17.5
                                                                      3.0
17.0
                                                                      2.5

16.5
                                                                      2.0


16.0                                                                  1.5
          III   IV     I    II     III   IV     I    II   III   IV             III   IV     I    II     III   IV     I    II   III   IV
         2005        2006                     2007                            2005        2006                     2007
            Baseline        Simulation                                           Baseline        Simulation
                         THE CASE FOR REAL ESTATE?
 Marty Cohen
Cohen & Steers


                                                                August, 2005

Q: Real-Estate Investment Trusts are like the Energizer Bunny.
Can They Keep Going and Going and Going?
 The replacement costs of real estate have risen dramatically - raw
 materials, lumber, copper, steel, cost of labor, or the cost of land,
 particularly in major cities. That keeps supply in check, because it
 costs too much to build a building today.
 Q: Is this the new reality?
 If the economy continues to grow and there is more job creation
 …to continue for the foreseeable future with respect to office
 buildings, multifamily buildings and hotels. Many hotels are being
 converted to condominiums now… in major cities, construction is
 pretty much prohibitive, …..and creates a great pricing umbrella for
 the owners of property.

                          Source: Barron’s, August 15th, 2005
What if There IS a Real Estate Bubble?

The run-up in home prices has proved good
therapy for people who lost their shirts on tech
stocks. In their own eyes, they’ve redeemed their
pride as investors. But instead of learning the
lesson that the fundamentals always win, they’re
buying into a new era of ridiculous arguments.

Looking forward, property taxes will be a major
negative for real estate.

                  Source: Fortune, August 8th, 2005
                            Housing Starts
(Mil.)
2.00

                                    EXPERIMENT #3: HOUSING STARTS
                                            DROP BY 20%
1.80



1.60



1.40



1.20
          III   IV     I     II   III    IV     I    II   III   IV
         2005        2006                     2007
            Baseline        Simulation
                   Sensitivity Analysis

Experiment                              Impact on 2006 Growth

                                                             Non-farm
                                 GDP        Investment      Employment



1. Oil Rises to $75 by 2006q1   -0.4%         -0.1%             -500K


2. Consumer Malaise             -0.5%         -1.1%             -600K


3. Housing Starts Abruptly      -1.0%         -1.7%             -700K

  Drop by 20%

4. #1 plus #2 plus #3           -1.3%       -1.9%         -1.2 Mil.
                      Tiny Bubbles
                      Celebrity Reality TV Shows




The Simple Life 4, Being Bobby Brown, Hogan Knows Best… the list goes on.

When Courtney Love reportedly turns down a reality
show, you know the market has reached saturation!

                          Source: Fortune, August 8th, 2005
Please Send Your Comments
      and Questions to
     forecast@gsu.edu

				
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