03/10/2010
Clean manufacturing benefits Tennessee
There is no disputing that Tennessee's economy has taken a substantial hit in the recent recession. The state's manufacturing sector is composed of more than 20% transportation-related manufacturing, which has been hit especially hard in the throws of this economic downtown. However, one bright spot leading the Volunteer State's manufacturing sector recovery is high-tech manufacturing-related to renewable energy.
In 2009, The Clean Energy Economy study by the Pew Charitable Trust reported Tennessee as one of the three leading states in the United States for clean technology job growth. Tennessee, Oregon, and Colorado were categorized as states with a "large number" of clean energy jobs as well as "fast growing" when looking at the average annual growth rate of these jobs. While the national annual average for clean energy jobs from 1998-2007 was 1.9%, Tennessee's annual average was ahead at 2.1%.
High-tech, clean energy manufacturing firms are popping up all over Tennessee.
In addition to the green job investments listed in the state's 2009 Annual Workforce Report (p. 63), Missouri-based Confluence Solar announced in late January 2010 selection of Clinton, Tenn., for a new $250 million manufacturing, warehousing, and distribution facility, which could add 250 new jobs to the area. Prior to 2009, Tennessee had already recruited solar firms such as Sharp Solar and Shoals Technologies, large players in the state's clean manufacturing sector.
1The University of Tennessee highlights the importance of electric car manufacturing to the state’s economic outlook in their 2010 Economic Report to the Governor.
What's attracting these green jobs to Tennessee?
In 2008, Governor Phil Bredesen created a Task Force on Energy Policy, which developed significant strategies to make the state a viable competitor for green collar jobs. According to the Tennessee Economic Partnership, in the last two years, Tennessee attracted more than 1,000 new jobs and more than $2 billion in capital investments. Tennessee also has a welcoming tax environment for new clean-energy manufacturers. In June 2009, Tennessee enacted the Tennessee Clean Energy Future Act of 2009 and expanded its sales and use tax credit for emerging industries to manufacturers of clean energy technologies.
Additionally, Tennessee is using about $31 million in stimulus funds to create the Tennessee Solar Institute at the University of Tennessee at Knoxville and at the Oak Ridge National Laboratory. The center will focus on increasing efficiency in clean energy manufacturing and should benefit solar firms in the area.
So, while employment levels remain low for the Sixth District and Tennessee overall, statewide initiatives and firms are making investments to ensure clean energy will provide a bright spot in the manufacturing and employment outlook for Tennessee.
A special thanks to the Tennessee Department of Economic Development for their contributions to this report.
By Mark Carter, an economic analyst in the Atlanta Fed's research department, and Amy Pitts, senior Regional Economic Information Network analyst at the Atlanta Fed's Nashville Branch
March 10, 2010 in Employment, Energy, Green, Manufacturing, Tennessee | Permalink | Comments (0) | TrackBack (0)
02/24/2010
Regional labor markets: Some initial signs of improvement
In a speech last week to the Augusta Metro Chamber of Commerce, Atlanta Fed President Dennis Lockhart said that inventory replenishment and business spending are keys to unlocking the trajectory of the economic recovery. He added that:
"The third and maybe most important factor I'm watching is the labor market. I expect a very slow recovery of employment markets and, therefore, a slow decline of the unemployment rate. But it's worth noting that as the recovery got under way in the second half of last year, businesses relied on productivity enhancements to expand production and were able to defer hiring.
"A shift from productivity-driven expansion to jobs-driven expansion could materialize as benefits of earlier cost and head-count reductions reach their limit. The additional hiring that would follow would likely improve business and consumer confidence and feed a virtuous cycle."
There is little hard data showing a turnaround in the regional labor market, in part because most state-level labor market data from the Bureau of Labor Statistics are only available through December (January data will be released March 10). However, we do see evidence that job losses tapered off. For example, initial claims for unemployment insurance continue to decelerate:
In addition, the number of job losses declined steadily throughout 2009:
Anecdotal information is mixed as well. Temporary help agencies in the Southeast noted an increase in job orders in January and early February. Yet, according to our business contacts as a whole, overall job creation remained tepid. Businesses continued to describe attempts to do more with less, such as combining the duties of several jobs into one.
The Chicago Fed's Bill Testa blogged on the Midwest economy last week and noted another useful indicator that can bridge the gap between official releases from the BLS. Bill writes:
"The Conference Board tracks national and state online job vacancies on a monthly basis. Their recent release reports a third consecutive month of strong national gains in advertised vacancies. Their recent release reports a third consecutive month of strong national gains in advertised vacancies. The gains were widespread across U.S. regions, including the Midwest."
Southeastern states also saw increases in January from December in the total number of online job vacancies.
President Lockhart concluded his remarks on the outlook in Augusta by saying:
"I expect businesses to be very cautious with respect to inventory accumulation, capital spending, and hiring. But I will be watching carefully for signs that an alternative, faster-growth scenario is developing."
Through February, we see little evidence that a faster-growth scenario is building in regional labor markets. We are hopeful that the positive signs we see in temporary employment increases and in job advertisements in the region feed through into measurable job gains, but as of now we continue to expect a very slow recovery in employment.
Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
February 24, 2010 in Labor Markets, Productivity, Unemployment | Permalink | Comments (0) | TrackBack (0)
02/17/2010
Unemployment insurance issues
Back in December, SouthPoint highlighted the issues Southeastern states were facing with their unemployment insurance funds. In our ongoing contacts with business owners and managers, we continue to hear about this pressure at a particularly bad time. Generally weak demand and low revenues have already depleted the cash positions of many businesses, especially small ones. Now, as a majority of states have drained their own unemployment insurance reserves, forcing them to borrow from the federal government, some states are increasing unemployment taxes to help replenish the funds:
Not surprisingly, anecdotal feedback we have received indicates that the timing couldn’t be worse. While any additional monetary outflows are of concern for businesses focused on surviving the current situation, for those with larger numbers of employees, dealing with the increased taxes has the potential to be devastating. Of course, some businesses that were considering staff increases are now going back and “doing the math” to determine if the additions are affordable given the new circumstances.
We have also noted that state lawmakers might be viewing the unemployment insurance tax increase as a problem for potential job-creating companies. In Florida, this issue is getting an increasing level of attention from both politicians and the media.
The good news (if you care to characterize it as good) is that some states are even worse off than those in the Southeast: California, Michigan, and New York, among others, have debt from the Federal Unemployment Account that is even higher than that of the worst Sixth District state. And employers in Hawaii may see an increase of more than 1,000 percent on the 2010 average unemployment tax per worker. Regardless of location, though, eventually businesses (and those they pass their costs on to) will have to pay for the significant insurance expenditures being made as a result of the large number of unemployed.
By Chris Oakley, vice president and regional executive of the Jacksonville Branch of the Federal Reserve Bank of Atlanta
February 17, 2010 in Employment, Taxes | Permalink | Comments (0) | TrackBack (0)
02/10/2010
Southeastern PMI divergence
Since July 2009, Kennesaw State University's Southeastern Purchasing Managers Index (PMI) has diverged from its national counterpart produced by the Institute for Supply Management. By January 2010, this difference widened from about a 6-point gap to a more than 12-point gap.
Survey methods
Part of the gap may be the result of surveying methods used in calculating the Southeast PMI. Kennesaw State has been producing a Georgia PMI since 1991 while the regional measure has only existed for three and a half years (it began in fall 2006). As a result, there are more Georgia responses in the regional survey than responses from other states. Another reason the regional PMI lags could be that Georgia respondents are geared heavily toward construction-related manufacturing, which in the face of a housing downturn has dragged the index significantly. Recently, the Atlanta Fed has partnered with Kennesaw State to increase the level of participation outside of Georgia, thereby more accurately representing each District state and improving the reliability of the index.
Export boost
Another possible explanation for the indexes' divergence is that national respondents might respond to PMI survey questions based on the performance of their entire corporation, including their international business. Regional respondents for the Southeast PMI may be smaller firms that might not be engaged in exporting, answering the survey based on their firm's local performance. During the past year, the dollar's 6 percent decline has increased demand for U.S. goods from abroad, and the national PMI seems to better capture the high value of exports during this recovery.
Comparison of regional and national PMI components
As of January 2010, several factors seem to affect the Southeast PMI—production, employment, and finished inventory levels. Though production saw a 2.3 index point gain in January, it still fell below the 50-point benchmark indicative of growth in the index. This movement contrasts sharply with the national PMI production figure, which recently surged to 66.2 and has been above the 50-point benchmark since June 2009. The Southeastern employment index hasn't seen two consecutive months above 50 since the summer of 2007 (prerecession), whereas the national employment reading has averaged above 50 for the past four months. Falling inventory levels have become the norm during this recession, nationally and regionally. However, the region's manufacturing inventory index suggests that inventory cutbacks are still under way in the Southeast whereas they've begun to slow nationally. January's reading of 32.7, a result of a decline of 8.4 index points, flirts with a historic low for the series reached in December 2008. In January the national PMI's inventory level was 46.5, still indicating a contraction, but the result of a 3.5 percentage point gain for the month.
New orders lift Southeast PMI in January
Perhaps the silver lining for the Southeast PMI is January's new orders reading of 54.3, a substantial 8.5 percentage point gain for the month. This gain was the result of 40 percent of the respondents reporting higher new orders in January relative to December. Though still below the national new orders figure, which is currently at 65.9, January's Southeast PMI new orders figure easily clears the 50-point benchmark indicative of growth. The new orders component is traditionally viewed as the most effective precursor when evaluating the future health of the manufacturing sector. So perhaps this is a sign that the Southeast PMI is beginning to catch up to the national indicator.
More information is available on how the Southeast PMI is calculated. Those interested can review the Southeast PMI survey process, see a sample survey complete with questions survey respondents, or sign up for the survey.
A special thanks to members of the Kennesaw State University Econometric Center, who contributed to this blog posting.
By Mark Carter, a research analyst in the Atlanta Fed's research department
February 10, 2010 in Manufacturing | Permalink | Comments (0) | TrackBack (0)
02/03/2010
Geaux Saints, part deux
Last week's blog posting concerned the impact of the Super Bowl on Miami, the host city, and New Orleans, the NFC representative in the big game. The discussion about the short-term impact on New Orleans included this:
As for the short-term economic gains, there will certainly be more retail purchases of Saints paraphernalia and additional revenue that having a successful sports franchise generates, but the intrinsic psychological impact on the overall recovery of New Orleans is immeasurable.
Gail Psilos, the Atlanta Fed’s Regional Economic Information Network director in our New Orleans Branch, adds some color this week. Gail and Bob Musso, the regional executive in New Orleans, have their fingers on the pulse of the New Orleans economy, and, as Gail notes, the impact of the Saints on the city is shaping up to be even greater than was conveyed last week:
The relationship between the City of New Orleans and the Saints is a very important part of New Orleans and Louisiana–emotionally, psychologically, and economically.
Spending increased significantly the weekend of the NFC playoff game against Arizona and even more the following week, when the Saints defeated Minnesota to earn a trip to the Super Bowl. Grocery stores saw increased sales as friends gathered, spending an average of around $250 for their game-day home parties.
Playoff parties at bars and restaurants were well attended—not only in New Orleans but also throughout southern Louisiana and along the Gulf Coast. An owner of a popular sports bar said his business doubled the week before games and even more on game days.
Sports shops in New Orleans couldn’t keep enough Saints gear in stock. This translates into increased sales taxes for the state and profits for retailers that would not have been had if not for the success of the Saints. When the team prevailed against Minnesota, the French Quarter was bursting with revelers celebrating the team’s first NFC championship. Immediately after the game, retailers opened their stores and fans lined up to purchase their Saints NFC championship gear—some stores were still selling items well past midnight—celebrating while waiting in line! More tax revenues for the state, more profit for retailers, and happy Saints fans.
This year, Super Bowl weekend coincides with Carnival and the run-up to Mardi Gras, which draws people to the Crescent City in droves. According to My New Orleans.com, "it's a little too early to estimate crowd sizes at Mardi Gras 2010, [but] industry sources seem to expect attendance at least equal to that of 2009," which was 800,000 to 900,000.
It’s shaping up to be a great weekend in the Big Easy, and the New Orleans economy is clearly the big winner, no matter the outcome of the Super Bowl.
By Gail Psilos, Regional Economic Information Network director in the Atlanta Fed’s New Orleans branch and Michael Chriszt, an assistant vice president in the Atlanta Fed’s research department
February 3, 2010 in Retail, Sports | Permalink | Comments (1) | TrackBack (0)
01/27/2010
Geaux Saints! On to Miami!
The Sixth Federal Reserve District is currently pro-football central. In just over a week, Miami, home to an Atlanta Fed branch office, will host Super Bowl XLIV (44, for those of us who are Roman numeral-challenged). That game will feature the New Orleans Saints—from another city that is home to an Atlanta Fed branch office.
Hosting and playing in the Super Bowl will be a shot in the arm to the economies of Miami and New Orleans. And they need it.
Few cities have felt the recession as deeply as Miami. Employment in the Miami-Ft. Lauderdale metro area peaked in December 2007. Between then and July 2009, a total of 225,000 jobs were shed, which amounts to a 9.2 percent decline. Miami has seen a bit of a rebound in employment since then, driven largely by local government hiring and a small increase in retail.
In the New Orleans metro area, the job losses have not been nearly as severe, in large part because of ongoing rebuilding efforts as New Orleans continues to recover from Hurricane Katrina. Employment peaked in December 2008 at 531,500 and then declined by 12,000, to 519,500, in July 2009 (–2.3 percent). Since July, New Orleans has added just under 5,000 jobs, with more than half of these in the healthcare and education sector. However, overall employment levels remain well below pre-Katrina levels—by 79,500 jobs, to be exact. The latest "Metropolitan Report" from the University of New Orleans Division of Business and Economic Research notes that post-Katrina population and employment growth stabilized before the recession began, therefore a large part of those 79,500 jobs represent a structural loss.
So, Miami is experiencing a cyclical downturn and New Orleans is still feeling the effects of Katrina. How much of an impact will hosting the Super Bowl have on Miami, and how much of a boost will playing in the game give New Orleans?
The positive impact of hosting big-time sporting events has been the subject of debate and a number of economic studies. Matheson and Baade conclude in their paper, "Padding Required: Assessing the Economic Impact of the Super Bowl," that
Recent NFL studies have estimated that Super Bowls increase economic activity by hundreds of millions of dollars in host cities. Our analysis fails to support NFL claims. Our detailed regression analysis revealed that over the period 1970 to 2001, on average Super Bowls created $92 million in income gains for host cities, a figure roughly one-quarter that of recent NFL claims. While this figure, like any econometric estimate, is subject to some degree of uncertainty, statistical analysis reveals that, on average the Super Bowl could not have contributed, by a reasonable standard of statistical significance, more than $300 million to host economies.
Nevertheless, Miami will receive a much-needed shot in the arm even if the overall impact on economic activity is not as great as anticipated. Add in the Pro Bowl, which will be played this coming weekend, and the overall impact will be greater.
As for the impact on New Orleans, measurement is even less tangible than in the case of Miami. Let's look at it in two ways: first the ongoing impact of the Saints on New Orleans, then what playing in the Super Bowl means to the economy in the short term.
Regarding the longer term, a report by University of New Orleans Chancellor and economist Timothy P. Ryan, "The Economic Impact of the New Orleans Saints," states that the Saints continue to be an essential revenue producer for the city of New Orleans by serving as an engine that pumps more than $600 million annually into local parishes and the state.
As for the short-term economic gains, there will certainly be more retail purchases of Saints paraphernalia and additional revenue that having a successful sports franchise generates, but the intrinsic psychological impact on the overall recovery of New Orleans is immeasurable.
So, even if some folks don't cheer for the Saints on Super Bowl Sunday, we will all be cheering for both New Orleans and Miami for the boost their economies will receive from the game.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
January 27, 2010 in Economic Growth and Development, Labor Markets | Permalink | Comments (0) | TrackBack (0)
01/20/2010
Regional retail holiday sales wrap-up: Strong start, feeble finish
National results
Nationally, retail sales in December were disappointing. A review shows national retail sales posted a strong gain of 5.4 percent from December of last year, the largest year-over-year growth since November 2007. However, December 2008 posted dismal retail sales numbers, so this gain should not be weighted too heavily. On a month-to-month basis in 2009, the market showed signs of rallying; retail sales looked strong in November, anticipating the beginning of at least adequate holiday sales. But hopes were dashed as the numbers came in reporting a drop of 0.3 percent in national retail sales from November to December. The Bloomberg market consensus predicted an increase of 0.5 percent for the same time frame. This information could suggest that most consumers did their holiday shopping in November rather than December 2009 as November retail sales were comparatively strong on both a monthly and annual basis. Coming out of the 2009 holiday season, the national retail sales trend remains positive for the year and appears to be showing growth.
Regional results
Regional retail sales were slightly more encouraging than the national results. Retailers throughout the district reported that sales either met or surpassed expectations in December. Because expectations for holiday sales were conservative at best, retailers had prepared accordingly by choosing to keep inventories at low levels, and many expressed that this "just in time" level may be the new norm.
In December, about half of our contacts reported sales above year-ago levels. Similar responses were logged when we asked how the entire holiday season stacked up to last year's experience. Information gathered from other retail contacts showed strength in discount stores and outlets while high-end/luxury stores had a mixed performance during the holiday season.
What can we take from this?
Overall the nation experienced disappointing holiday sales. While November numbers looked promising, the trend did not continue into December. Regionally, retailers appear to have experienced somewhat stronger holiday sales trends, especially in December, than the nation. Retail surveys for September, October, and December 2009 reported about half the retailers in the Southeast expressing optimism for the coming months—the highest levels since September 2007, which is an encouraging sign.
By Courtney Nosal, a research analyst in the Atlanta Fed's research department
January 20, 2010 in Inventories, Retail, Southeast | Permalink | Comments (0) | TrackBack (0)
01/13/2010
Automobile production's impact on the Southeast
Automobile production has become a major industry in the Sixth District and has significant impact on the economic health of the region. Recently, the near-term outlook for several regional assembly plants brightened because of two major developments. The first development was a stronger-than-expected rebound in national vehicle sales at year-end. The second piece of positive news concerned changes in the production mix announced by some regional auto manufacturers. Additional facilities recently opened or scheduled to begin production also bodes well for the future of the auto industry in the region.
National vehicle sales rose in December, up to 11.2 million units compared to 10.9 in November 2009 and 10.3 million in December 2008. Although economic uncertainties such as high unemployment and low consumer confidence will likely continue to pressure auto sales, the reported progress is encouraging.
The national economic downturn had a drastic impact on auto production and auto assembly utilization rates. According to MonthlyAutocast.com, national and Southeastern plants' utilization rates, defined as the share of vehicle production volumes to plants' capacity, dropped to 42 percent in early 2009. By the fourth quarter of 2009, however, utilization rates climbed to over 60 percent as most automakers rebuilt vehicle inventories depleted by the "cash for clunkers" program. According to Cliff Swenson, editor of MonthlyAutocast.com, December 2009 capacity was 71 percent, a bit higher than in November, but still anemic at best. Swenson noted that although at year-end dealers were keeping leaner vehicle inventories, with business picking up, a need to rebuild inventories, and higher exports, he estimated that capacity utilization rates will steadily rise in the next two years.
Favorable developments for changes in the production mix of several automakers have also brightened the near-term outlook for auto production. According to the December 2009 sales report from JD Power & Associates, the sales pace of fuel-efficient autos like the Nissan Versa, Honda Fit, and others far outperformed the year-over-year 7 percent increase for all vehicles.
Additionally, several new facilities have begun or will soon begin vehicle production in the region—for example, Kia in West Point, Ga., and Volkswagen in Chattanooga, Tenn. Increased assembly will not only result in additional jobs at the plants themselves but for suppliers as well. Auto industry employment trends from the U.S. Bureau of Labor Statistics show the importance of auto assembly production in job creation at the companies of parts suppliers. According to BLS data (NAICS 3361 and 3363), one job in an assembly plant supported 2.8 jobs in motor vehicle parts industries during 2008. These facts are confirmed by many communities in the region that have seen the spread of jobs in the parts suppliers industry around the fastest-growing regional assembly plants.
The chart below gives an outlook for regional auto production:
Highlights regarding future auto production in the region:
- According to MonthlyAutocast.com, future production estimates for eight regional producers are much higher than the depressed volumes reported in 2009. Several regional auto producers recently announced plans to adjust their production mix to rapidly changing vehicle demands.
- Automotive News reported that Mercedes Benz USA announced plans to produce its C-class sedans at its plant in Vance, Ala., with expected production starting in 2014. The Vance plant currently produces the M-class SUV and R and GL crossovers, with some shipments exported to Europe. With a nearly 60 percent utilization rate, during 2009 this plant produced about 91,000 vehicles, far below the 150,000 assembled a year earlier.
- In late 2009, Kia Motors, a subsidiary of Hyundai, started production of its Sorento crossover at its West Point, Ga., plant, with an annual estimated production of 100,000 vehicles by late 2010. This is a sister company to the Montgomery, Ala., plant that assembles the Hyundai's Sonata and Santa Fe models. Currently, demand for Hyundai vehicles is strong with some models taking market share from discontinued domestic models.
- Nissan plans to add capacity for a new wave of light commercial vehicles, including the Leaf, the nation's first electric vehicle, which would start production in late 2011. According to company officials, Nissan is expanding its Canton and Smyrna, Ga., facilities to update its production mix to more fuel-efficient vehicles. This news is important for a regional company with the largest output (about 500,000 vehicles scheduled to be assembled in 2010).
- Decisions for Toyota's Tupelo, Miss., plant are wild cards in the regional production game. News reports from Tokyo are pointing to the company's continued interest in adding production in the United States, its largest and most profitable market. The $1.3 billion plant was to open this year and produce the Prius, but these plans were cancelled in late 2008 as fuel prices dropped and vehicle demand weakened.
- Volkswagen is opening a $1 billion facility in Chattanooga, Tenn., in 2011 and plans to employ 2,000 workers. Production plans are supported by recent strong demand for VW products and by company officials recently stating plans to more than double its sales in the United States.
The outlook for the automobile industry in the Southeast, like the outlook for the nation, shows signs of a slow recovery.
By Gus Uceda, a senior economic research analyst in the Atlanta Fed's research department
January 13, 2010 in Automobiles, Employment, Manufacturing | Permalink | Comments (0) | TrackBack (0)
01/06/2010
Looking ahead to 2010
January is the month for outlooks. The Atlanta Fed's 2010 Outlook for the region starts by noting that:
"The region, like the rest of the United States, weathered a difficult year in 2009, but indications of a turnaround in the economy suggest a less rocky 2010. However, daunting challenges remain before Southeasterners can be confident of a full and lasting recovery."
The outlook goes on to describe current and expected performance in several sectors. Here are a few of the highlights:
Employment
The decline in initial unemployment claims suggests that job losses will continue to ease into the next year. In 2008, when employment losses accelerated, the big question was, When would job losses subside? In 2009, as job losses eased in parts of the Southeast and the nation as a whole, the question turned to, When would employment expand and labor markets recover?
Two factors should support employment growth in 2010. As of Oct. 31, 2009, Southeastern states received less than 35 percent of the federal stimulus funds they were awarded, and this influx of funding should continue to fortify the jobs picture in 2010. Additionally, after four quarters of contraction, the U.S. economy expanded in the third quarter of 2009, which should encourage hiring.
On the other hand, a number of factors could dampen employment recovery. Before hiring, firms will likely rely on current workers for increased productivity. Several Atlanta Fed regional business contacts across the Southeast have indicated that they want to see a few months of sustained growth before they consider increasing hours for current workers or recalling laid-off workers, suggesting that employers may require even longer sustained growth before they hire new workers.
Once firms begin to hire, the rate of hiring may be weak compared with previous expansions. Some business contacts indicated that they have not only reduced their work forces but have structurally changed their firms so they might need fewer workers in the future. Furthermore, the large number of firms closing across the Southeast produced permanent layoffs. For example, the region's auto parts manufacturers will continue to feel the pinch from auto plant closings. Despite some recent improvements in the economy and easing of job losses, Southeastern labor markets are far from recovered.
Auto production and manufacturing
The outlook for Southeastern auto production in 2010 is mixed. Factors such as imbalances among vehicle production and consumer demand, tight credit markets, and low consumer confidence will continue to limit discretionary spending on autos and thus production flows.
On the positive side, foreign automakers are investing heavily in the region, and the economic ripple effects will be felt for years to come. Volkswagen is opening a $1 billion facility in Chattanooga, Tenn., in late 2010 or early 2011 and plans to employ 2,000 workers. Parts suppliers for the new plant will create more than 11,000 additional jobs, according to a University of Tennessee study. Kia Motors also opened its West Point, Ga., plant in the third quarter of 2009 to manufacture its Sorento model, a move that will bring 1,200 jobs to the area and have economic effects felt fully in 2010.
Manufacturers other than automakers are also putting down Southeastern roots. Mitsubishi's Pooler, Ga., plant producing advanced steam and gas turbines and servicing turbines used in power generation is expected to add 500 jobs to the region in early 2010. High-tech firm GS Yuasa is scheduled to open its doors, creating 100 jobs in Roswell, Ga., producing lithium-ion battery packs. NCR is already making ATMs in Columbus, Ga., and plans to employ 870 people during the next three years. Additionally, Huiheng Medical is opening a Baton Rouge, La., plant that will manufacture radiation treatment devices, creating 300 jobs in the area.
Real estate
In the coming year, Southeastern housing markets will continue their recovery, but activity will remain weak by historical standards. Bank-owned properties will continue to come to market, particularly in Florida and Georgia, and will continue to depress home prices and keep construction activity in check. Homebuilders have found it difficult to compete against bank-owned properties that have typically sold below replacement cost.
Southeast commercial real estate (CRE) markets will remain challenging in 2010 although activity should stabilize and slowly improve during the year. Construction backlogs are currently at very low levels across most of the region, and financing is likely to remain tight, particularly for CRE projects. Consequently, commercial development should remain at low levels, and projects will remain largely build-to-suit.
Take a look at the entire issue of EconSouth for more detail and reports on other sectors as well.
In addition to the Atlanta Fed's outlook, several university research centers produce economic outlooks for their regions. These centers are part of our Local Economic Analysis and Research Network (LEARN), and most produce updates to their outlooks throughout the year.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
January 6, 2010 in Automobiles, Employment, Manufacturing, Outlook, Real Estate | Permalink | Comments (0) | TrackBack (0)
12/16/2009
Regional holiday sales update
Update: This is the last SouthPoint entry for 2009. Postings will resume on Jan. 6, 2010.
After a tough year of high unemployment, stagnant wage growth, low consumer confidence, and overall uncertainty about the future, it should come as no surprise that holiday sales thus far have been less than stellar.
Currently, holiday sales are relatively flat compared with last year, but what makes 2009 different from 2008 is retailers were not as optimistic this time around and as a result were better prepared for disappointing sales.
In our monthly districtwide retail survey, 100 percent of respondents were satisfied with their inventory levels in November. They have been allowing inventories to deplete throughout the past months and adequately predicted how much inventory was needed during their holiday sales season.
Regional consumers are out and about in large numbers, but they are hunting for discounts and spending with extreme caution. Gift card sales were very weak this holiday season as people prefer to get more value for their dollar by purchasing discounted merchandise.
An interesting anecdote from a Southeastern business contact was that credit card sales are down significantly from last year, but debit card purchases are up as much as credit cards are down; this shift suggests that people don't want to spend beyond their means.
Online shopping
Retailers were armed with promotions both in store and online. According to Time magazine, CyberMonday.com had the best online discounts from more than 700 retailers featuring new deals every hour, most accompanied by free or discounted shipping.
Reports from comScore say Black Friday web-based purchases reached $595 million, up 11 percent from last year. Cyber Monday web-based purchases reached $887 million, up 5 percent from last year. Between November 1 and December 11 online sales have reached more than $199 million, a 3 percent increase from the same period last year.
Some interesting graphs on comScore's blog show the number of daily average discount offers per store during the days before and after Thanksgiving. The graph compares the past four years, and 2009 has some of the highest levels.
What to expect for the rest of the holiday season
December 19, the Saturday before Christmas, could be another big shopping day. In past years there have been high sales on the Saturday before Christmas. Even with that potential sales bump, the National Retail Federation expects total holiday sales to drop 1 percent in 2009 from year-ago levels versus a 3.4 percent decline in 2008; overall holiday sales are expected to decline but not as much as they declined in the last year.
So, to sum up 2009 holiday sales thus far in a few quick points:
- Holiday retail sales are relatively flat compared with last year's levels.
- Online shopping and Cyber Monday, in particular, were huge this year.
- People were out and about hunting for bargains.
- The bargains were out there to be found.
- Consumers spent cautiously—higher traffic, but lower average spending.
- Retailers did not experience anything too unexpected.
By Courtney Nosal, a research analyst in the Atlanta Fed's research department
December 16, 2009 in Inventories, Retail, Southeast | Permalink | Comments (0) | TrackBack (0)
