State economist says slow wage growth, higher inflation likely to continue

Georgia’s economy is showing signs of strength, but persistent inflation and slow job and wage growth have left consumers feeling sour about their finances.  And the state economist, Robert Buschman, told lawmakers Tuesday that he expects that slow growth and higher inflation to continue.  Buschman’s presentation to legislative budget writers put charts and graphs to […]

Robert Buschman, the state economist, speaks to lawmakers Tuesday. Jill Nolin/Georgia Recorder

Georgia’s economy is showing signs of strength, but persistent inflation and slow job and wage growth have left consumers feeling sour about their finances. 

And the state economist, Robert Buschman, told lawmakers Tuesday that he expects that slow growth and higher inflation to continue. 

Buschman’s presentation to legislative budget writers put charts and graphs to the unease lawmakers are hearing from their constituents back home as affordability concerns take center stage under the Gold Dome. 

“Reluctance by businesses to hire suggests fewer opportunities to change jobs for better pay, and that those between jobs or entering the workforce will remain unemployed for longer, dragging on consumer confidence,” Buschman said. 

“Consumers also still feel squeezed by inflation. Incomes have not really kept up for the average worker. So consumer sentiment is weak,” he said. 

Inflation had been falling from the recent highs seen in 2022 but has crept back up to 2.7%. 

Buschman highlighted some bright spots for Georgia’s economy, like its low unemployment rate. But he said there are also worry-inducing factors at play, like the tariffs that have become a central element of President Donald Trump’s economic policy in his second term in office. Trump has issued new tariff threats in recent days in his pursuit of Greenland. 

The bulk of the cost of these tariffs fall on consumers and businesses, depending on much of the cost companies are willing to absorb to avoid losing sales in the short term, Buschman said. 

“As time passes, businesses, both domestic and foreign, have to pass more of the cost on to consumers to remain profitable, so we’ll see continuing upward pressure on consumer prices,” he said. 

There’s also the risk of other countries placing retaliatory tariffs on American exports. 

“Large exporting states like Georgia are the ones harmed the most by that,” Buschman said, noting that Georgia is the 12th largest export state. 

Buschman’s presentation was part of the kick-off for this week’s budget hearings at the state Capitol. The hearings continue Wednesday morning with agency heads who oversee social and health care services in Georgia.  

The state economist’s outlook also provides context for the words of caution Gov. Brian Kemp has been weaving into his public comments on the budget. As he wraps up his last year in office, the governor has been touting his administration’s conservative approach to the budget. 

“It has allowed us to store up strategic reserves for the next economic downturn, ensuring you all or future legislators won’t be forced to cut critical services for Georgians when, not if, the next economic crisis hits,” Kemp said to lawmakers Tuesday. 

Kemp has proposed accelerating another incremental income tax rate decrease at a time when some legislative leaders are pushing for more aggressive steps toward eliminating it entirely. He has proposed cutting the rate to 4.99%, down from today’s 5.19%, and built his budget proposals on the assumption those revenues will be foregone. The already-planned cuts would happen three years faster than originally planned. 

He’s also proposing another round of bonus tax refunds for this year, paid for by funds from the state’s $14.6 billion reserves. With those payments to taxpayers and one-time infrastructure spending boosts, the state is still set to have about $10 billion left in reserves when Kemp leaves office next January. 

Buschman, who was appointed by Kemp, expressed skepticism about talk of eliminating the state’s income tax. A special Senate committee unveiled a plan earlier this month that would end the tax by 2032. 

“I think what the governor has been doing in lowering income tax rates slowly over time, as we were able to evaluate how much of our surpluses were structural surpluses, is the better way to go,” he said. 

Kemp told reporters Tuesday that he is optimistic about Georgia’s ability to weather any economic storms that may await. 

“We have been cautiously budgeting since we came out of the pandemic, because nobody really knew what this was going to look like,” he said. “So we’re prepared to deal with what’s going on in the world right now.”

It was also announced Tuesday that Kemp and first lady Marty Kemp would lead an economic development mission this week to Belgium and the United Kingdom. He will be there at a time of rising tensions between the Trump administration and America’s allies. 

“We cannot rest on our laurels. We’ve got to finish strong. We’ve got to keep finding people that want to grow jobs in our state so, God forbid, if somebody does lose their job, they’ve got other opportunities that pay just as well or better,” he said.