Nashville’s Music City Center: If You Build It, They Will Come
Borrowing and slightly altering a line from the movie Field of Dreams somewhat applies to Nashville’s high expectations for its new state-of-the-art convention center. The new downtown Nashville facility, aptly named “The Music City Center,” is scheduled to open May 19. Located in the heart of downtown Nashville and within walking distance of the famous Ryman Auditorium and the Country Music Hall of Fame, Nashville expects the convention center to serve as a catalyst for economic development by luring hundreds of thousands of visitors to the city each year. It will be the centerpiece for activity in an already lively downtown area.
The Nashville metropolitan statistical area is already riding a wave of employment expansion. Tennessee’s unemployment rate is slightly above the national rate; however, Nashville’s rate is more than a full percentage point lower. The city’s employment expanded 3.8 percent in 2012 and has expanded 16.6 percent since 2001. Throw a deep recession into the middle of that time frame, and the numbers are impressive. The city’s diverse economy, along with the state’s business friendly environment are just a couple of reasons why Forbes magazine recently ranked Nashville second to only San Francisco on its list of best cities for jobs in 2013.
The Music City Center (MCC) project was born in 2004 when metro Nashville government felt the city needed more convention space. In 2007, Nashville Mayor Karl Dean, along with local business leaders and community activists, pushed the project to the front of Nashville’s developmental priorities. The Metro Council of Nashville approved construction of the project in January 2010. Three years later, the grand opening is upon us.
The massive building, dubbed a “widescraper” due to its enormous footprint, covers four city blocks and is longer than 12 football fields. The building has a total of 1.2 million square feet, with a 350,000-square-foot exhibit hall, a 57,000-square-foot ballroom and 1,800 parking spaces. The center also features 60 meeting rooms and 32 docks to allow seamless loading for convention center exhibitors. The “Green Roof” is four acres of a grass-like plant called sedum. The roof also features the outline of—what else?—a guitar.
The Music City Center’s green roof and guitar motif (photo courtesy of the MCC)
The MCC’s economic benefits could also be significant and immediate. According to the Nashville Convention and Visitors Corporation, hotel room bookings for the center have already surpassed 800,000. The Omni is constructing an 800-room hotel adjacent to the MCC that has surpassed 250,000 nights booked, which is four months ahead of schedule. Another 18 hotel projects are under way or proposed in the downtown market.
The city has already seen a spike in hotel tax revenue because of an increase in leisure travel. A total of 101 meetings with dates ranging between 2013 and 2026 are now booked at the convention center, with another 300 considering Nashville for their meeting, according to Music City Center CEO Charles Starks. The annual impact is estimated to be about $200 million, with more than 1,500 jobs being added to the local economy. Business owners in the downtown area are counting on the new convention center to bring an array of visitors.
Dennis Lockhart, president of the Federal Reserve Bank of Atlanta (right), and Larry Atema of the Nashville Convention Center Authority tour the Music City Center.
Saying that Nashville has high hopes for the Music City Center is an understatement. The city has built a top-of-the-line facility to attract conventions from all across the nation. The project should add to Nashville’s growing economy.
Nashville built it and, based on early indications, they are indeed coming.
By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch
The Regional Housing Recovery: Where Are the Jobs?
We’ve been reporting for some time that our business contacts in the homebuilding industry were observing an increase in sales and construction. This growth is clear in the Atlanta Fed’s monthly Residential Construction and Real Estate poll and can be seen in the charts below.
With sales and construction of new homes on the rise, we should expect an increase in the number of workers employed in the construction industry. But these employment increases have not been readily observed. The chart below shows total construction employment for the six states in the Sixth Federal Reserve District. It has barely budged for the last three years.
Another way of looking at construction employment is to measure the change from peak to trough and from the trough to the most recent data point—March 2013—for each state in the region. The table below shows that the region as a whole has added more than 27,000 construction jobs since the low point, but this number pales in comparison to the number of construction jobs lost during the downturn—more than a half-million.
This observation is not to suggest that we should be looking for a return to the 1.35 million total people who were employed in the construction sector during the peak of the housing boom, but it does help add perspective. Also, looking at the state-by-state data, we see that each state has performed a bit differently. That said, the question still stands: Given the increase in construction activity, shouldn’t we be seeing stronger gains in construction employment? The answer appears rather straightforward, as the chart below shows.
While our contacts in the homebuilding sector are reporting an increase in activity—both sales and construction—the increase in permits for new home construction has been modest and is coming off very low levels. The trend is clearly in the right direction and appears to have momentum, but even stronger gains are needed if we are to see more significant increases in construction employment.
My colleagues Jessica Dill and Whitney Mancuso blogged on this subject back in December:
Perhaps the situation with construction employment simply boils down to a comment recently made by a real estate developer contact: "Capacity is lacking in all trades throughout the homebuilding process, which has limited how quickly production can be increased. Such capacity issues are always largest on the front end of the recovery. It is likely that labor will fill in at a quicker pace as the recovery picks up more steam."
By Mike Chriszt, a vice president in the Atlanta Fed’s Public Affairs department
Expansion in Regional Manufacturing Continues
Manufacturing contacts in the Southeast region reported continued expansion for the fourth consecutive month, as reflected in the Southeast Purchasing Managers Index (PMI).
The Southeast PMI, produced by the Econometric Center at Kennesaw State University, provides an analysis of the most current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The index is based on a survey of representatives from companies in those states regarding trends and activity of new orders, production, employment, supplier delivery time, and finished goods. A reading on this index above 50 represents an expansion in the manufacturing sector, and a reading below 50 indicates a contraction.
This positive trend for manufacturing activity came as a pleasant surprise as the Institute of Supply Management (ISM) Manufacturing Index reported two consecutive drops in the national PMI, suggesting manufacturing growth to have slowed nationally. While Southeast PMI is not a subset of the national index, both measure a mix of similar components by surveying purchasing managers.
The Southeast PMI experienced less than a point increase in April compared with March. Although this increase over the prior period is minimal, the overall index reflected the highest level since May 2012 at 55.5, which is 5.5 points above the of 50-point benchmark. Increases in indices of new orders, production, and employment drove this growth, and each of these components was substantially above its respective measure in the national PMI.
Production experienced the most significant jump of the survey components, with an increase of 5.7 points from March to April, ending at 61.2. Employment jumped 4.1 points during the same period to 57.8. While new orders reflected a much smaller increase of 0.4 points, this minimal increase brings the submeasure to 57.8, well above the expansion benchmark (see the chart).
Of survey participants, 43 percent expect production to be higher in the next three to six months, versus 33 percent for the prior survey period. Although this is not the highest level of optimism reported this year by survey participants, those following the industry welcome these positive sentiments while watching to see if the region will continue to outperform national manufacturing activity.
By Amy Pitts, a senior Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch
Food for Thought
I admit it. No matter how much I try, I do not have a green thumb, and woe to any houseplant (or outdoor plant, for that matter) that makes its way into my care.
With that said, you might be surprised to learn that I serve as the Atlanta Fed’s lead agriculture analyst. My duties include meeting with some pretty savvy folks in the field of agriculture. The Birmingham Branch of the Federal Reserve Bank of Atlanta hosts the Sixth District’s Agriculture Advisory Council and we recently convened the first of our two meetings of 2013. Here are some of the meeting’s highlights:
- High commodity prices have resulted in many producers having record revenues although increasing input costs continue to challenge margins.
- Agriculture producers are turning more and more to technology and other capital investments to improve production and reduce the need for manual labor. As an example, the cost to plant Miscanthus giganteus (a large, perennial grass hybrid used for biofuel production) can fall from $1,400 to $400 per acre by using a newly developed mechanical planter. Other contacts report that more advanced equipment entering the market is twice as productive as older versions, thus reducing both labor and fuel costs.
- The two most prevalent labor topics discussed were the continued importance of the guest worker program and the uncertainty associated with the costs and effects of the Affordable Care Act. Council members were heartened that the current immigration bill being debated recognizes the agriculture sector’s need for migrant labor.
- One of the biggest surprises in the conversation is that there is a real increase in the number of young people entering the field of agriculture. “They are coming back to the farm” with college degrees and enthusiasm, one Council member said, adding that these young people are “well educated, globally market savvy, and ready to take calculated risks.”
- When the discussion turned to productivity, it was enthusiastically agreed that there are still significant productivity gains to be had in agriculture. “What robotics did for manufacturing will be replicated in agriculture,” was a comment supported by all members.
- Farmland values continue to rise, supported by both low interest rates and high commodity prices. Council members noted that nonfarming investors are purchasing farmland and farmers are buying adjacent properties to expand. Because of continued uncertainties (commodity prices, low interest rates, and government agricultural policy) typical land leases, which used to be three to five years in duration, are now being let for one-year contracts.
- Overseas markets are driving up global demand for protein products, which in turn increase prices for U.S. consumers. Reduced supply may also be affecting beef prices as many cattle producers reduced their herd size because of the combination of last year’s drought and high feed prices. (Because it was so expensive to feed them, more head went to market.)
- The effect of citrus greening, a deadly disease that has done great harm to the Florida citrus industry, continues to concern Florida orange and grapefruit growers. A lot of ongoing research is dedicated to finding a genetic solution for this problem.
- Lumber prices are approaching 2004–05 levels as a result of growing demand (improving housing market and the demand for new homes) and tight supplies.
- Cotton producers are watching China’s large cotton inventory; releasing that supply into the market could have adverse effects on cotton prices.
- Issues surrounding both the use of genetically modified organisms globally and labeling requirements continue to be discussed, and resolutions to both issues will be economically important.
We will continue to reach out to our contacts in the agriculture sector, especially our Advisory Council, for their continued insight. And I’ll continue to watch, like all of you, how agriculture prices move. There’s a lot to that story.
By Teri Gafford, a Regional Economic Information Network director in the Atlanta Fed’s Birmingham Branch
Travel Outlook Remains Bright, but Challenges Remain
Members of the Atlanta Fed's Travel and Tourism Council recently met at the Bank's Miami Branch to discuss economic conditions in the travel and tourism sector. Optimistic about current conditions, council members agreed that the sector remains strong and has a positive outlook for the remainder of 2013.
Driving council members' confidence is continued strength across key metrics of growth such as occupancy, average daily rate, revenue per available room, and bed tax collection. The consensus among members is that the health of the industry continues to improve throughout the Sixth District. As a result of robust activity in leisure travel and strong demand from international visitors, South Florida has experienced significant increases across all measures of growth. Though government and business bookings have slightly decreased because of budgetary constraints, council members expect that activity during the next six months will continue to grow.
The only exception to the positive momentum is casual dining, which is experiencing flat to negative growth. As noted in a previous SouthPoint post, consumers have begun to modify spending in an effort to absorb the impact of the payroll tax increase, elevated gas prices, delayed tax refunds, and increased health insurance premiums. As an increased number of consumers forgo dining out, casual-dining restaurants are feeling the impact of these choices. Hungry for business, the restaurant industry has experienced a 5 percent decrease since the beginning of the year, with some restaurants experiencing double-digit decreases in sales. Council member reports noted that that this recent decline is the weakest performance that the industry has experienced since 2009. Unlike their counterparts in casual dining, fast food restaurants and fine dining establishments are not experiencing similar headwinds.
While socioeconomic class is a key driver of demand for restaurants and currently highlights divergent preferences among income groups, consumers across all income levels continue to show strong demand for travel and tourism. Advisory council members reported that consumers—even in challenging economic times—go on vacation and seek tourism opportunities. Whether it's to take the kids to Disney World, go on a cruise, or listen to jazz in the French Quarter, consumers make vacation a top priority in their household budget. Council members agreed that this consumer preference makes the travel and tourism industry one of the last sectors to feel the effects of a sluggish economy.
The industry is not totally insulated from macroeconomic challenges, however. Council members expressed concern about the impact of sequestration on travelers and, in turn, the potential economic fallout in their industry. Several members reported that sequestration is having a negative impact on government-related travel. As sequestration has imposed limitations on travel for government employees, cancellations of government bookings have increased.
In addition to its impact on government travel, the sequestration is also affecting airline passengers. As noted in Jack Nicas and Susan Carey's recent article in the Wall Street Journal, flight delays and cancellations have dramatically spiked as a result of the Federal Aviation Administration's furloughs of air traffic controllers. Our council reported that 1,000 passengers missed their connecting flights at the Miami International Airport in one day alone after the cuts were implemented. As 50 percent of travelers arriving in Miami International Airport are international travelers looking to connect to other flights or visit Miami, the airport is experiencing high volumes of travelers frustrated by missing connecting flights or standing in long lines in customs.
The Miami airport is not alone. As Nicas and Carey noted, delays and cancellations are occurring across the nation. Similarly, the sequestration's impact on Customs Border Patrol has led to significantly longer lines for travelers who must pass through customs. As international travelers have been key drivers of recent demand for travel and tourism in the Southeast, especially in South Florida, the sequestration's effect on them presents a headwind to the industry in this region.
The hotel and airline sectors are not the only ones in the industry to feel the impact of the sequestration. Cruise lines are experiencing the negative effects of not having timely custom clearance. Our council reported that the disembarkation of cruise line passengers has, in some cases, taken as long as two hours. Tourism destinations that offer government-funded programs such as military air and sea shows are also experiencing disruptions. Many of these shows, which draw large numbers of tourists, have been cancelled. Without the shows on the calendar for coming months, cities that host these events expect cancellations of travel bookings.
If prolonged, the widespread delays, cancellations, missed flights, and long lines present a potential headwind to the outlook for the travel and tourism industry. Why? As council members noted, experience and image are integral to consumers' assessment of a travel or tourism encounter and their decision to make future travel plans. Negative experiences, or the anticipation of one, can lead to cancellation or alteration of plans. Thus, while business for the short- and medium-term is booked and council members' organizations are not currently experiencing a significant increase in cancellations, council members agreed that review of activity in three to six months will allow the industry to gauge the economic impact of the sequestration on travel and tourism.
By Jennifer Staley, a Regional Economic Information Network director in the Atlanta Fed's Miami Branch
Southeast Housing Update: Inventory Shortages Appear to Constrain Sales
Once again, southeastern housing contacts reported that March home sales remained ahead of the year-earlier level. More than three-fourths of brokers and two-thirds of home builders indicated that sales were ahead of the year-earlier level (see the chart). Most brokers indicated that sales in March met or exceeded their expectations.
Reports of shortages of available homes for sale continued. As the chart below shows, nearly all brokers indicated that home listing inventories were below the year-earlier level. Low listing inventories continued to restrain home sales and generate multiple offers for properties, particularly at the low end of the market.
Both builders and brokers continued to indicate rising home prices in March. Most brokers reported that home prices rose slightly in March on a year-over-year basis (see the chart). Builders’ responses indicated slightly more positive home price gains, with nearly a third of builders describing home price gains as “up significantly,” and only 13 percent of brokers reported that prices were up significantly.
Once again, southeastern builders indicated that construction activity was ahead of the year-earlier level. However, most builders reported that construction activity had met or fallen below their plans for March (see the chart).
The outlook for sales among brokers and builders over the next several months remained positive (see the chart). Most brokers indicated that buyer traffic was ahead of the year-earlier level in March, and the outlook for sales growth over the next several months was better than expectations for sales a year earlier.
The outlook for new home construction activity among southeastern builders remained positive, as did their outlook for new home sales this spring. Participants indicated that they expect new home sales and construction to be slightly ahead of the year-earlier levels (see the charts).
Note: March poll results are based on responses from 56 residential brokers and 29 homebuilders and were collected April 1–10, 2013. The housing poll's diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. Positive values in the index indicate increased activity while negative values indicate decreased activity.
By Whitney Mancuso, senior economic research analyst in the Atlanta Fed’s research department
Beige Book: Southeast, U.S. Exhibiting Similar Trends
The Summary of Commentary on Current Economic Conditions by Federal Reserve District—commonly known as the Beige Book—is a report is published by the Federal Reserve eight times a year. Each Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector.
Below is a comparison of the national summary and the Atlanta Fed's portion of the report, which was released on April 17:
Overall economic conditions
- National: Reports from the 12 Federal Reserve Districts suggest overall economic activity expanded at a moderate pace during the reporting period from late February to early April.
- Atlanta: Sixth District business contacts reported that economic activity continued to advance at a modest pace.
- National: Outlooks among respondents remained optimistic across sectors and Districts, with growth mostly expected to continue at the same or a slightly improved pace.
- Atlanta: Reports across sectors were generally positive, and expectations for the coming months remained optimistic.
- National: Consumer spending grew modestly, and firms in some Districts cited higher gasoline prices, expiration of the payroll tax cut, and winter weather as factors restraining sales growth.
- Atlanta: Retail reports were mixed, with some retailers citing improved sales and others feeling the pinch from a constrained consumer.
- National: Travel and tourism expanded across most reporting Districts, boosted by both business and leisure travel.
- Atlanta: Hospitality contacts reported healthy activity in both leisure and business travel.
- National: Most Districts said residential and commercial real estate improved markedly since the last report. Home prices were rising in many areas of the country.
- Atlanta: Homebuilders and brokers experienced further improvements in sales and prices of new and existing homes, and inventories continued to decline on a year-over-year basis. Commercial contractors noted a strong year to date as construction levels improved from late last year.
- National: Most Districts noted increases in manufacturing activity since the previous report.
- Atlanta: Overall, manufacturing activity remained positive as new orders and production increased.
- National: Loan demand was steady to slightly up in most Districts.
- Atlanta: Loan demand remained steady, according to bankers.
- National: Employment conditions remained unchanged or improved somewhat.
- Atlanta: Payrolls continued to grow at a tepid pace as firms remained reluctant in hiring, in part because of uncertainty over fiscal policy and health care reform.
- National: Aside from reports of increases in home prices and residential construction materials, price pressures remained mostly subdued across Districts.
- Atlanta: Prices remained stable and most firms continued to report having relatively little pricing power.
Based on these comparisons, the southeastern economy appears to exhibit trends similar to the rest of the nation.
The next Beige Book will be published June 5.
By Shalini Patel, an economic policy analysis specialist in the Atlanta Fed's research department
Regional Employment Grew in March, Led by Florida and Georgia
On April 19, the Bureau of Labor Statistics (BLS) released the March regional and state employment and unemployment report. Data in the report show that Sixth District states added a seasonally adjusted 45,500 payrolls in March, and the aggregated regional unemployment rate dropped 0.1 percentage point, to 7.7 percent, with results generally positive across southeastern states (see the chart). The United States as a whole added 88,000 payrolls in March 2013, which means the Sixth District states accounted for a large portion of the national gain.
Notably, February payroll gains for the region were revised down by 11,800, to a new level of 29,800. Nonetheless, the three-month average employment gain for the region remained a healthy 34,500.
Sixth District highlights
- All states within the Sixth District with the exception of Tennessee added payrolls in March 2013 (see the table). The largest gains were in Florida (32,700, highest in the nation) and Georgia (13,600, third-highest in the nation).
- Leisure and hospitality (12,500) added the most jobs in Florida, followed by trade, transportation, and utilities (6,600) and construction (5,500).
- Payroll increases in Georgia came from professional and business services (6,700), trade, transportation, and utilities (4,200) and construction (3,100).
- Most of the sectors in Tennessee cut jobs over the month, with the leaders being professional and business services (down 3,300) and trade, transportation and utilities (down 2,400).
- Alabama, Louisiana, and Mississippi experienced only small increases in payrolls.
- The unemployment rate decreased in Florida (down 0.3 percentage point), Georgia (down 0.2 percentage point), and Mississippi (down 0.2 percentage point). It was unchanged in Alabama and increased in Louisiana (up 0.2 percentage point) and Tennessee (up 0.1 percentage point; see the chart).
By Neil Desai, a senior economic analyst in the Atlanta Fed’s research department
So Goes the Consumer...
It seems American consumers have begun to feel the impact of the expiration of the payroll tax cut, fluctuating gasoline prices, delayed tax refunds, and increased health insurance premiums as evidenced by the U.S. Census Bureau’s advance retail sales estimates for March. The report showed a disappointing decline of 0.4 percent from the previous month, and the year-over-year increase for the first quarter of 2013 was 3.7 percent—the slowest quarterly increase since the national economic recovery began in 2009. Will the consumer bounce back, and why is it important to overall economic conditions?
Reports have indicated that consumers are beginning to pull back and readjust to the change in their paycheck. Many have opted to eliminate some of life’s “luxuries,” with the casual-dining sector taking a huge hit as increasing numbers of folks are staying home and cooking their own meals. Recent discussions with District contacts indicate that casual dining is limping along, having experienced the fourth consecutive year of decreased traffic. To combat this trend, some major restaurant chains are offering incentives to bring the customer back (including my personal favorite—the “buy one, take one” entrée deal!).
Not all segments of the retail industry have experienced the same decline as casual dining and are actually remaining somewhat upbeat. Some of our contacts have mentioned that salary-increase programs are being restored and this move, along with rising home values and equity prices, are having a positive impact.
Consumer spending accounts for nearly 70 percent of GDP. A stronger outlook for the economic growth requires stronger consumer spending, and for this to happen we need lower unemployment, higher wages, and an increase in credit.
Dr. Kleinhenz also discussed how recovering home values may lead to an increase in consumers’ ability to spend, noting that consumers’ willingness to spend is also key. While job security is rising—that is, workers’ belief that their job is safe—expectations regarding the economy and their own individual finances are still uncertain. Therefore, consumption increases depend on the improvement of consumers’ overall confidence.
By Christine Viets, a Regional Economics Information Network analyst in the Atlanta Fed’s Jacksonville Branch
Regional Manufacturing Remains Positive in March (and in the Longer-Term View)
Southeastern manufacturers reported expanding factory activity for the third consecutive month in March, according to the Econometric Center at Kennesaw State University. The increase in overall regional manufacturing activity reported from February to March was not as substantial as the prior two periods, but this sector continues to be one of the brighter spots in the economy. The southeastern Purchasing Managers Index (PMI) reading in March was 5.2 points above the expansion benchmark of 50 and is at its highest level since May 2012. The continued strength in manufacturing activity in the region was a result of an increase in all southeastern PMI components except for finished inventory. Of the six states that make up the Atlanta Fed’s region, four reported activity to be expanding, with Tennessee and Georgia showing the highest activity levels.
In addition, the manufacturing outlook remained healthy as well, although the March survey showed that the percentage of southeastern manufacturing contacts who expect production to be higher in the next three to six months was a bit lower than the past few months. Thirty-three percent expect production to be higher in the next three to six months, versus 45 percent for February. Still, the index level for the outlook remains a very healthy 61.
Employment data also show that the manufacturing sector is growing. Since its trough in February 2010, total manufacturing employment in the region had risen by 65,600, or 4.5 percent, a welcome sign after the manufacturing sector experienced significant job losses during the recent recession.
Recent studies also offer encouraging news for the long-term outlook of the manufacturing sector. A recent report by Capital Economics, an independent macroeconomic research company, addressed onshoring and current conditions in the manufacturing sector that could lead to a potential renaissance. In part, it said:
The offshoring boom does appear to have largely run its course but there is, as yet, little evidence of any significant onshoring. Nevertheless, with US labour costs becoming relatively more competitive, domestic energy prices falling and new technologies being developed, the medium-term outlook for the US manufacturing sector is brighter than it has been for a long time.
While many plants remain shuttered or are producing well below capacity, changes are expected to come over the next decade. Harold Sirkin, a partner at Boston Consulting Group, provides supporting comments for onshoring trends in his report Made in America, Again. Huffington Post provides support of the onshoring trend in an article, Why Onshoring High-tech Manufacturing Jobs Makes Economic Sense.
Looking more closely at the region, the latest Economic Report to the Governor, from the University of Tennessee's Center for Business and Economic Research, addressed the emergence of advanced manufacturing, which is leading to changes in the types of workers manufacturers are looking to hire:
There is no simple definition of advanced manufacturing, but it generally entails the integration of technology and sophisticated labor skills to the manufacturing process. Advanced manufacturing in principle could apply to any manufacturing firm in any sector of the economy. Robotics and additive manufacturing such as 3D printing are good examples of advanced manufacturing processes in practice.
Surveys of manufacturing activity, data regarding employment levels, and longer-term studies all point to a healthy rebound and continued expansion in the region’s manufacturing sector.
By Amy Pitts, a senior Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch