♪ opening music ♪ ♪ ♪ Welcome to This Week in South Carolina.

I'm Gavin Jackson.

The University of South Carolina held their annual Economic Outlook conference this week.

And economist Joey Von Nessen joins me to discuss what we can expect in the upcoming year.

But first, the fourth Republican presidential debate was held Wednesday evening and Republican strategist Rob Godfrey joins me in studio to break it down.

Rob, welcome to This Week in South Carolina.

<Rob> Thank you for having me, Gavin.

<Gavin> So, Rob, the fourth Republican presidential primary debate was held this week in Alabama.

There were just four candidates on stage, Florida Governor Ron DeSantis, former New Jersey Governor Chris Christie, Vivek Ramaswamy, and your former boss, Nikki Haley, former governor here in South Carolina.

Now, it's been years since you worked for Haley and you're not part of her campaign, but we're having you on for some insight, some objective analysis and what was being said.

So what were some of your big takeaways from that debate in Tuscaloosa?

>> Sure.

Well, the smaller the field of candidates on the stage gets, the more potential there is for substantive discussions.

Now, last night, I'm not sure that the moderators always had control of what was going on, because there continues to be a lot of cross talk and a lot of, quite frankly, yelling that doesn't benefit any voters.

But I do think we were able to, you know, flesh out, illuminate some issues that were important.

You know, both the voters and to the candidates as they continue to do the work that it takes to try to win the Republican nomination.

Now, some people do downplay the significance of these debates as undercard fights because, you know, the prohibitive frontrunner is continuing to skip them and by all accounts, given his lead in the polls, he has made the right calculation to skip them.

But they have continued to be an opportunity for Governor Haley, Governor DeSantis, Governor Christie and other candidates to talk about their stories.

To talk about the issues that are important to them and to, frankly, in some cases, including Governor Haley's build momentum that has been reason for people in early primary states and across the country to either give her a first look or a second look or another look as they continue to try to figure out what they're ultimately going to do, whether they're caucus goers in Iowa, whether they're voters in New Hampshire, or whether they're the most important early state primary voters here in South Carolina.

<Gavin> That's true.

We do have a track record, I should say, of picking the nominee, with a pretty successful track record, except with one exception in 2012.

So, you know, there's always that, you know, focus on Iowa, focus on New Hampshire.

We're really seeing that because a lot of folks just don't seem to be coming here as much.

That's a whole different story.

But we do kind of really make that big decision.

<Rob> We do.

And you know, they may not be coming right now to South Carolina, but that month in between New Hampshire and South Carolina is really going to be important.

I think we'll see more candidate visits than we can ever imagine because more voters are going to participate, more conservative.

You know, self-identified Republican voters are going to participate in this South Carolina primary than do in the in the previous two contests.

And there will be more that will participate than ever before, most likely.

So it is truly the most critical of the early state primaries.

<Gavin> Could be a long month.

God save us all.

But Rob, what were some of the big moments on that debate stage that really stood out to you over 2 hours?

<Rob> Some of the big moments were, you know, first of all, discussions about some of the big issues facing the world right now, whether it's policy surrounding the ongoing crisis in the Middle East that was ignited when Hamas attacked Israel on October 7th.

Or it was, you know, the cross talk between Vivek Ramaswamy and any of the other candidates, because he seems to be the one who is on, on-stage acting as though he has nothing to lose, a real kamikaze candidate if there ever were one on-stage.

And at this point, if we're talking about candidates who just don't bring anything to the table at these debates, I think Vivek has you know, proven himself to be someone who's, you know, better outfitted for, you know, talk radio or something like that than he is to be debating on the debate stage.

<Gavin> That's always a launching pad for future careers in a variety of different areas.

So we can talk about him and some other folks in a moment.

But, you're talking about Haley being the focus of a lot of those attacks with Vivek Ramaswamy.

She's rising in polls.

She's getting these big donations really hitting her stride.

It seems like now some six weeks, less than six weeks away from Iowa.

<Rob> Right.

>> And that's no thanks in no small part to her three previous debate performances.

What did you think of Haley's debate performance in Alabama?

It seems a little bit more handled, a lot more incoming fire than she kind of was a little bit more reserved and kind of saving her, keeping her ammo dry in some of those situations.

<Rob> So, you know, it's a totally different dynamic when every candidate is coming after you.

You know, you have to be a little bit more deliberate.

You have to, you know, pick and choose the times in which you're going to engage, because responding to every personal attack, one doesn't benefit every doesn't benefit anybody.

It doesn't benefit voters.

It doesn't benefit viewers.

But two also, she's an extraordinarily disciplined candidate and came in there with objectives that she wanted to meet and issues that she wanted to talk about.

And in that context, it didn't do her any good or allow or, you know, or move her towards the objectives that she had set out just to respond to every personal attack that, you know, that might have been waged or leveled against her by, by a candidate that was, you know, a candidate that was not, you know, not doing anything but trying to... <Gavin> Rile them up.

Especially when you.

<Rob> Rile them up or, you know, try to be relevant.

<Gavin> Get those side by side shots and it's, you know, the comments and trying to see any reaction there.

And especially, you know, you heard DeSantis say that Haley caves any time the left comes after her Ramaswamy said she's a fascist and corrupt.

You've known her.

You've worked for her.

You've done her communications.

What do you make of these comments?

How do you think that she responded to them?

<Rob> So, you know, Governor DeSantis, who has done well as the as the Florida governor, knows well, the job that Governor Haley did here and the number of and the number of, you know, arrows that you take as a sitting governor and, you know, none of that's easy whether you're the governor of Florida or you're the governor of South Carolina.

But I think anyone who has ever followed the career of Governor Haley knows that she's never been one to cave to anybody over the course of a fight, whether it's a fight with the federal government over, over jobs for Boeing, whether it's a fight with the federal government over South Carolina, solutions for South Carolina, health matters, or whether it's, you know, attacks in political campaigns.

She's never shirked away from fights with with anybody when she thinks that she's right on the policy or right on the principle.

And she certainly hasn't shirked away from anyone who disagrees with her ideologically, with regard to the you know, kind of inflammatory language that Vivek Ramaswamy used, I don't think she responded to it.

And I don't think that it dignifies her response, you know, in this context.

<Gavin> And a lot of it is coming from her.

Again, a huge endorsement from AFP Action this last past week.

That means volunteers, that means money, that means organization on the ground.

It's already rolling out.

She probably her biggest fundraising week this week in New York as well with a lot of Wall Street types.

But she got hit for that, which is kind of surprising to hear from fellow Republicans who are, you know, use PAC money.

They get big donations from big donors.

Even Ron DeSantis relies heavily on his super PAC that's in turmoil, too.

So it's kind of interesting to hear folks beat up on her getting money from Wall Street.

What was your take on that?

<Rob> You know what's interesting about criticizing opponents for, for donations that they receive or for contributions or support that they receive wherever it's from, is that it usually comes, you know, from candidates who would accept that same support if it were offered to them.

So, it's hollow criticism.

You know, there will be some probably some primary voters, caucus goers who have questions.

Any time, you know, a big group of billionaires or a big group of business people or a big, you know, special interest group unite behind one candidate over an entire field, you know, why did they decide to do that?

What was their decision point?

What were the discussions surrounding it?

And all of those questions are fair and they may be questions that the candidate who benefited from that endorsement has to answer, but when the criticism comes from candidates who you know, from other candidates or opponents who would otherwise have, you know, willingly embraced that support, you know, that criticism does ring hollow.

<Gavin> And excuse me, I'm sorry, DeSantis, It seemed like he had one of the strongest debate performances, too, because he did really have a target.

He's been in jeopardy of losing his second frontrunner status, obviously, to former President Donald Trump, maybe something ignited in that California debate with Governor Newsom.

But it makes you wonder if he would have brought this kind of energy to the previous three debates, where he would be and maybe he'd still be in second place in a lot of these early voting states.

<Rob> Sure.

...You can look back and in the political pundits, in the political class can look back and ask those questions.

But you know, for the last few weeks or even really the last couple of months, you know, my observation of Governor DeSantis is that he has really steadied the ship when it comes to his campaign.

He has looked and felt more comfortable on the debate stage, even if that's not as comfortable as some of the other candidates have looked.

He has gotten more camera time.

He has made more cogent arguments and that only benefits him.

You know, whether the timing of of this steadying of his ship makes a difference.

You know, we'll have to see.

But by all accounts, he is doing well in Iowa, as is Governor Haley.

And but, you know, both of them face the tall order of, you know, trying to defeat President Trump there in New Hampshire and in South Carolina, where he continues to maintain significant leads.

<Gavin> Rob, with less than 3 minutes left, I want to ask you, are they doing enough to take on Trump?

What do they need to do at this point?

Because they are lagging behind in substantially in all these states?

We heard a little bit more sharpened attacks, at least from Nikki Haley last night.

But do these does it matter to voters?

Do they want to hear this?

These primary voters?

<Rob> You know, campaigns are about contrasts.

Campaigns are about message, contrast messages.

And if you know, you're not delivering a contrast message against someone who is essentially an incumbent and convincing people of why they should peel off of that person and come to your side and support you, you may be you may be engaged in an exercise for nothing.

And so I know that all of those candidates would not would like to think that the work they're doing matters.

And I think that it does matter to some extent.

But I've said all along that in order to defeat President Trump, you are going to have to not just stand up and be an alternative, as in a living like warm body, who says, you know, whose name is also on the ballot, but you have to be an alternative in the sense that you are giving people a reason to vote for you and not for them.

And so far, those candidates have, as Governor Christie has aptly said, declined to make that tough contrast and make that strong argument about why why they are better than President Trump to carry the banner of the Republican Party.

But they've got those six weeks left between now and Iowa to try to do that.

<Gavin> Really quick Rob.

20 seconds.

What are you watching out of Iowa and New Hampshire?

Who's going to be standing up in those races?

<Rob> So I think that 2 to 3 tickets will -excuse me, Let's say 3 to 4 tickets will get punched out of Iowa and probably 2 to 3 out of New Hampshire.

So I'm looking to see who ends up in those two and three slots in Iowa and how close they are to Donald Trump and then how closely those second and third place finishers are and, of course, who they are to Donald Trump in New Hampshire and what that momentum looks like coming into South Carolina because that month in between New Hampshire and South Carolina is going to be an important month.

And we'll have to see what kind of not just campaign chaos, it wroughts on South Carolina, but what kind of impact it has on the race.

<Gavin> So much fun to look forward to in the new year.

That's Rob Godfrey, Republican strategist.

Thanks, Rob.

<Rob> Thank you for having me.

<Gavin> Joining me now to discuss the economy and what's in store for 2024 is Dr. Joey Von Nessen.

He's a research economist at the Darla Moore School of Business at the University of South Carolina.

Joey, welcome back.

<Joey> Thank you, Gavin.

It's great to be here.

<Gavin> So, Joey, we've been talking to you throughout the year, but you and your colleague just hosted the USC's annual Economic Outlook this week and signaled that the year ahead is going to be looking pretty positive despite some pullback in growth.

But before we get to that, kind of give us a recap of what we saw in 2023 in South Carolina.

<Joey> 2023 has been a good year for our state, for South Carolina.

We've seen consumer spending hold up strong.

We've seen strong wage growth for South Carolinians and we've seen a very good jobs market, as well.

So 2023, very healthy, a very healthy economy for South Carolina.

And we continue to see stable growth overall.

But the downside there is that we've also seen some pullback in certain industries, but that's because of a broader readjustment period that the U.S. economy is going through and that South Carolina is part of.

I would even call it the Great Readjustment, a multi-year process where we are basically coming off of a cap being high $6 trillion in stimulus that was injected into the economy in 2020 and 21.

So a very healthy economy, a good year for South Carolina.

But our growth is tapering because we're coming off of that caffeine high and readjusting.

<Gavin> So, Joey, when you say this great readjustment that you're talking about with the economy, obviously rebalancing because of COVID, is that a reason maybe we're still seeing consumer sentiment lag even though we have some strong fundamentals in our economy?

<Joey> Yes.

Consumer sentiment has been very low this year, and in fact, it's been low for the last, the last several years.

And I think one major reason for that is that we've seen a loss of purchasing power for most consumers in the American economy.

Inflation is coming back down.

We've seen meaningful progress.

It's now at 3.2%.

So getting closer to the Federal Reserve's target.

But still, if you look overall over the last three years, consumers have lost purchasing power.

We've seen prices rise much faster than wages.

And so that and that has an effect, particularly when consumers are seeing it every day at the grocery store or at the gas pump.

And to put some numbers on that, we saw wages rise by about 15% in South Carolina over the last three years.

But inflation is up by over 18% and food prices are up by over 20%.

So that's what people are seeing every day.

And the fact that inflation is now down to 3.2% doesn't undo that loss in purchasing power.

<Gavin> Yeah, and that's something that we'll be talking about when we look at 2024 and what the Fed needs to do there.

But are we seeing some growth?

...We've been talking about growth in South Carolina.

Obviously, we have a lot of people moving to this state, a lot of hopping areas in our state.

What are the hotspots?

What do we see in terms of growth in these local economies across our state?

<Joey> Well, regionally, the economy that's growing the fastest is Charleston that has done that region has done very well in 2023, has done very well over the last several years because it's such a large and growing economy, a very diverse economy, broad based demand in manufacturing and housing and health care and tourism, as we see the tourism markets pick back up leisure and hospitality.

So Charleston has done very well and has actually been the one region of the state that's been consistent that didn't see a slowdown in 2023.

The good news is all regions of South Carolina grew this past year, but Charleston was definitely the standout and industry wise, the biggest gains came from the health care industry, and that's largely because we're seeing a lot of population growth and an aging of our population, both of which are contributing to higher demand in health care.

<Gavin> And also affecting our labor market, too, which we'll talk about in a moment.

But Joey, all that being said, we did see third quarter GDP growth get revised upward to 5.2%, which was really encouraging.

Another positive sign in our economy.

So what does a strong year like 2023 mean for 2024?

You know, we have declining inflation, some strong fundamentals.

What are you all forecasting for next year?

<Joey> We're forecasting another good year for South Carolina's economy in 2024.

But we do expect for growth to continue to taper.

This great readjustment that we are in is a multi-year process.

It's not over yet.

2023 we saw a bulk of that readjustment happen, but we're not there yet.

And the key is getting back to the Fed, looking at the, looking at what the Federal Reserve is likely to do and how they're going to respond to inflation.

Inflation has come down significantly.

It peaked at 9.1%, remember, back in June of 2022, and it's steadily come down.

It's now at 3.2%.

But the Fed has been crystal clear that 3.2% is not the end.

They want to get inflation down to its target of 2.0%.

So we still have a ways to go there.

And they are willing to leave interest rates high for as long as it takes.

And so we'll see if inflation continues to come down or if it stalls, which could cause the Fed to keep rates higher for longer, which could further slow growth and still potentially put us into a recession.

<Gavin> Yeah, you said the R word before I could.

Joey, talk to us about the likelihood of a recession.

This is something that, of course, we've been talking about every time we talk and still things are looking pretty good.

So what are - what's your confidence level for a recession, a potential recession, or are we just looking at slower growth for next year?

What - how do you mesh all that?

<Joey> Well, I'm more confident now that we can avoid recession, given that we've had a full year of, of this readjustment of a slowing economy, which is what we want to see.

That's what the Fed wants to see.

And we want to get back to a more stable, long run equilibrium between supply and demand and more slow and steady growth.

So we've moved in that direction and we've made it through one year.

I think it's far less likely that we see a recession in 2024, but the risk factor still remains 3.2% inflation and that it's not down to the Fed's target yet.

So the real question is, does the downward momentum of inflation reverse track?

And there are a couple of reasons why it might be the downward pressure on inflation now is coming from housing costs.

So that's the, the bulk of the remaining inflation and housing costs have come down are continuing to drop.

But we also see getting back to this labor shortage, that the labor shortage is going to continue to put upward pressure on wages.

And so if we begin to see wages go back up more in 2024, that could be a counter and veiling force.

And so you basically have two competing metrics that are moving inflation in opposite directions.

So the question is, do we see inflation stabilize around 3%, which means the Fed has to leave rates higher for longer, thus risking a further slowdown, or do we continue to see that momentum of the downward pressure on inflation continue as we drop to 2%?

<Gavin> And so what... what should we be watching to see how that all affects how that all gets shaken out?

>> Wage growth would be one.

If we see wage growth begin to pick back up, that's going to be upward pressure on inflation.

And then a second factor is this movement away from globalization that the U.S. is currently in the process of.

So and what we mean by that is that if we look at international markets, there's a lot of geopolitical uncertainty surrounding the conflict in Russia and Ukraine and Israel.

That could potentially generate some challenges with supply chains.

That has not happened.

But if we do see supply chain disruptions in the new year, that could push inflation up.

So we need to be on the lookout for that, in addition to rising wages.

So those are the two factors that could put put upward pressure on inflation and potentially counteract some of the momentum, the downward momentum we've seen in 2023.

So those three factors are really going to inform what the Fed is likely to do.

<Gavin> Joey, when we look at potential slowdowns, what areas would you be watching in terms of industries in our state that could be affected from a pullback in growth?

<Joey> Well, the two industries that we've seen so far are housing and manufacturing.

Those have been the ones that have been primarily affected by these rising rates.

And the reason for that is, is very simple.

These are consumer goods that are typically big ticket items.

We look at housing or new vehicles, furniture.

And so as a result of rising rates, when that increases the cost of borrowing money, that generates a decline in demand.

And so we continue to expect to see readjustment mainly in those two sectors, but in the goods market more generally, because the goods sector is what was stimulated most in 2020 and 2021.

Because when we saw consumer spending rise, it was mostly not in the services sector because everybody was staying home.

So this pullback is likely going to continue to be focused in housing and in manufacturing in 2024.

<Gavin> Joey, speaking of housing, do you feel like we've seen the worst of the housing impacts at this point?

Obviously, interest rates are still high, which means mortgage rates are still high.

But how... do you look at that at this at this current time?

<Joey> Well, most of the pullback in housing actually took place in 2022.

So that's been mitigated somewhat in the last year, which is another good sign for South Carolina that this readjustment process is going the way we want it.

We want to see the housing market stabilize.

That means we're less likely to see recession in 2024.

And we can see that in the data.

We saw a double digit pullback in sales activity statewide for housing by about 23% in 2022, but a decline of just about 6% in 2023.

Again, still a decline.

We're still in that readjustment process, but it looks like the housing market is beginning to stabilize.

Prices are still rising.

That has to do with a lack of inventory, which has been been significant in South Carolina for years.

That has continued into 2023.

So we expect prices to continue to rise and hopefully that this pullback in sales activity will really stabilize in 2024.

<Gavin>But like you said, it's still a red hot labor market out there.

So, good news for employees, not so good news for employers.

<Joey> Exactly.

This is by far the best job market that we've seen in a generation.

Unemployment in South Carolina is now at 2.9%, which is close to the lowest that it's ever been in our history.

And actually exactly the same rate that it was at in February of 2020, just before the pandemic.

So our unemployment rate has come all the way back down.

Our labor force participation rate is also recovered.

So we have more people going back to work and the labor force participation has recovered across all age groups except for those over the age of 55.

As we've seen more and more people retire.

That's likely to be permanent.

But in general, the job market very strong and great news for job seekers.

But yes, it does create a challenge for employers and they're going to have to get creative in terms of looking for workers and adapting to this new market environment.

<Gavin>Joey, You guys aren't the only ones calling for a slower 2024.

The Organization for Economic Co-operation and Development said it expects global growth to slow to 2.7%, but again, avoiding a full blown recession, even with China and Germany having some slowing in their economies too.

So how do you see that globally affecting South Carolina?

We're such a globally connected state with our manufacturing base especially.

How does that all going to affect us, do you think?

<Joey> Yes, that's a great point.

And South Carolina is very much globally connected.

We are an export oriented manufacturing state, so a bulk of our growth over the past decade has come from the manufacturing industry, come from advanced manufacturing.

And much of that is is externally facing towards global markets.

China and Germany are our biggest trading partners in manufacturing.

And so as you mentioned, those economies have not seen strong growth in 2023, particularly Europe, which has been teetering on recession.

China's been doing a bit better, but their growth has still been relatively slow and that matters.

That means that simply there aren't going to be as many consumers for manufactured products in South Carolina.

So it does make a difference.

And that's another reason why we do expect for demand to cool in our state in the new year.

<Gavin> Got a lot to look forward to in 2024.

And that's Dr. Joey Von Nessen.

He's a research economist at the Darla Moore School of Business at the University of South Carolina.

Joey, thank you so much.

<Joey> Thank you, Gavin.

Always a pleasure.

Gavin> To stay up to date with the latest news throughout the week, check out the South Carolina Lede.

It's a podcast that I host on Tuesdays and Saturdays that you can find on South Carolina Public Radio.org or wherever you find podcasts.

For South Carolina ETV, I'm Gavin Jackson Be well, South Carolina.

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