State economy expected to slow

COLUMBIA — All is well at work and in the bank account, but jitters in South Carolina's economy are evident at housing developments, gas pumps and shopping malls, according to a report released Monday by the University of South Carolina.

Despite strong incomes and job creation, the state economy will slow down next year as consumers, unnerved by the housing slump and nearly $100-a-barrel oil, spend less, according to USC research economists Doug Woodward and Paulo Guimaraes.

"There's a souring consumer mood out there … and what's driving that, of course, are the housing woes," Woodward told a crowd of several hundred at the school's annual economic forecast Monday.

"We have kind of a convergence of forces coming together that we haven't seen in a long time that spell stagnation or a slowdown," he added.

Woodward said he has not seen as much uncertainty in the economy since he began forecasting 20 years ago, but he said the state will likely avoid a recession.

"I believe we're going to have a soft landing," he said. "We don't want to use the 'R' word."

In 2008, the state will increase employment by 1.1 percent, or 21,000 jobs, just enough to keep pace with population growth, according to Guimaraes. The unemployment rate is unlikely to improve and could worsen.

Growth in personal income next year will slow from about 6 percent to just under 5 percent.

"This is what's so puzzling," Guimaraes said. "We clearly have a lot of uncertainty in the economy, but there are no clear signs of a recession."

Anxiety about energy costs and real estate fallout is playing out at cash registers, where consumers have shown restraint for the first time in years.

Retail sales have been flat in the past two months, and USC predicted sales will barely outpace inflation next year with 3 percent growth.

Woodward said it is good that Americans are saving money again but warned that low retail sales could have a "chilling" trickle-down effect.

"There's nothing to fear but fear itself," he said. "That was Franklin D. Roosevelt, but that's true in the economy, too."

Slowing activity at malls and grocery stores will be a relative bright spot compared with the housing market.

Single-family housing permits were expected to drop by about 11 percent next year, deepening this year's 25 percent decline.

And the state's manufacturing industry will continue to suffer job losses next year, when it is projected to trim 4 percent of its labor force, according to the USC forecast.

Also, the weakening dollar, which some economists think could spark inflation across the nation, could be one of South Carolina's saviors.

A euro now buys almost $1.50 and a Canadian "loonie" demands a buck and change for the first time in about 30 years. Those kinds of exchange rates are expected to help boost tourism and incite foreign companies to purchase more goods from the Palmetto State, as well as build more facilities here.

"I can guarantee you that's going to help us," Woodward said. "The Russians, the Irish — they haven't found South Carolina yet, but they're gonna."

Reach Kyle Stock at 937-5763 or kstock@postandcourier.com.