09/01/2010
Thoughts on Hurricane Katrina, five years later
An anniversary is a time of reflection and a time of planning for the future. We marked the fifth anniversary of Hurricane Katrina a few days ago. My first thoughts of reflection go back to the morning when the storm came in. I had planned to get to work early, knowing I would spend the day doing various economic assessments of what damage the hurricane had wrought. But I first had to deal with a disaster of my own. My 9-year-old daughter had left the faucet running into a plugged sink in our upstairs bathroom. Our entire downstairs was flooded. As we did what we could to begin the cleanup, I watched the radar image of Katrina come on land from my wet, but safe, home outside Atlanta. What I would see that day would put our little problem in perspective.
By the time I got into work Katrina was well ashore. It seemed pretty clear that the Mississippi coast had borne the brunt of the storm and New Orleans had been spared a direct hit. As we began to develop briefing materials for the Bank's senior officers, news reports began to roll in describing the devastation in Biloxi, Gulfport, and Pass Christian. We also saw pictures of the damage in New Orleans—hotel windows missing and the torn fabric atop the Superdome. I wrote in one of my first communications of the day that "In New Orleans, structural damage appears severe in places but not catastrophic."
It wasn't until later that day that we began to hear that there was flooding in the Big Easy. From Atlanta, we figured it was the effects of the storm surge through the wetlands bordering St. Bernard Parish, and maybe levees were overtopped. All hurricanes bring storm surge and some flooding, so we didn't think too much of it, to be honest. We were focused on getting damage assessments from the Gulf's energy infrastructure, which we would find out were severe.
Then I read a newswire report that several levees in New Orleans had given way. I had watched a TV special about how New Orleans was vulnerable to hurricane-induced levee breaches, but the storms they described hit New Orleans head on; Katrina had missed to the east. It still didn't register. Then we saw the first photos. The entire city was flooding. It was clear we were dealing with a disaster we were told could happen, but none of us believed it would ever really happen. But it was happening, and like all Americans we felt helpless.
That was five years ago, but we can all remember watching the tragedy unfold like it was yesterday. I remember worrying about my colleagues in our New Orleans office, about the friends I had in Mississippi, and how we could ever be expected to go about our work in trying to measure the impact on the economy in what was clearly an immeasurable human catastrophe.
The response of the Federal Reserve Bank of Atlanta to Hurricane Katrina is documented in our 2005 Annual Report and in several articles and presentations made in the days and months following the event. In the Research Department, we became unwilling experts in disaster economics, never forgetting the heartbreak and human toll of Katrina. The Brookings Institute performed similar exercises, and their latest work is an outstanding look back, and also a look ahead.
I'm fortunate that my work takes me to New Orleans several times a year. I've been able to witness the city's slow but steady recovery and have met some of this country's best and strongest citizens. I've viewed the restoration along the Mississippi coast with awe.
When the most dire predictions were being made regarding the impact of the oil spill, I thought back to Katrina and how these people bounced back with pride and dignity.
As the people who survived and rebuilt five years ago reflect on and plan for the future, I had one recurring thought—not one measured by any economic time series or accounted for in any econometric model. No matter what my friends along the Gulf Coast and New Orleans may face, I wouldn't bet against them. Ever.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
September 1, 2010 in Hurricanes, Katrina, Natural Disasters, New Orleans | Permalink | Comments (0) | TrackBack (0)
08/20/2010
Recent Atlanta Fed polls show housing slump continues; capital spending plans mixed
Southeast Housing Update
The Federal Reserve of Atlanta's monthly survey of regional residential real estate brokers and homebuilders saw home sales weaken notably again in July. Reports indicated that sales in July fell below the year-earlier level (see chart 1). Sales also weakened on a month-to-month basis. More than half of contacts reported that sales declined from June to July.
|
|
| ENLARGE |
Reports from Southeastern sources confirm slowing home sales growth in July. The Orlando Regional Realtors Association reported that existing home sales in July exceeded the year-earlier level, up 3.8 percent, but sales were notably weaker than the June gain of 37.8 percent. The Northeast Florida Association of Realtors reported that home sales growth turned negative on a year-over-year basis in July, down 12.8 percent, following a gain of 29.3 percent the prior month. According to the Greater Nashville Association of Realtors, July home sales weakened as well on a year-over-year basis, down 21 percent, following a 16 percent gain in June. According to data from the Knoxville Area Association of Realtors, July home sales declined 26 percent compared with a year earlier following a 10 percent gain the prior month.
Reports from Southeastern home builders indicated that new home sales continued to weaken as well in July, falling further below last year's level (see chart 2). More than half of builders reported a sales decline from June to July as well.
|
|
| ENLARGE |
Buyer traffic continued to soften in July on a year-over-year basis (see chart 3).
|
|
| ENLARGE |
Southeast brokers indicated that home listing inventories continued to rise, while builders reported that new home inventories declined on a year-over-year basis (see chart 4).
|
|
| ENLARGE |
Southeastern brokers and home builders indicated that home prices weakened in July (see chart 5).
|
|
| ENLARGE |
Author's note: June survey results are based on responses from 90 residential brokers and 50 homebuilders and were collected August 2–11. The housing survey'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, a senior analyst in the Atlanta Fed's research department
Capital spending plans
In July, the Atlanta Fed conducted an informal poll of its Regional Economic Information Network (REIN) business contacts, asking them questions regarding their near-term capital spending plans. Overall, there were a total of 505 responses.
Chart 1 shows the industry breakdown of the entire District versus the sample:
|
|
| ENLARGE |
The participants were initially asked if they anticipated any changes in spending (on new plants and equipment) over the next six to 12 months relative to what they spent over the last six to 12 months.
Overall, 31 percent of firms noted that they did plan to increase spending, while 18 percent indicated that they had plans to decrease the amount of capital expenditure (see chart 2).
|
|
| ENLARGE |
The businesses that expected to increase their capital spending in the near term were then asked the reason for the increased spending.
Results showed that expected sales growth and the need to replace information-technology equipment were the two most common factors driving their plans. Improvement in the cost or availability of external financing was the least selected factor. Participants were also given the option of selecting "other factors" but were asked to specify them. Of those that selected "other factors," many cited business start-up and expansions as reasons for increasing spending (see chart 3).
|
|
| ENLARGE |
Participants that said they do not plan to increase spending in the near term were also asked to explain their decision. Firms indicated low expected sales growth, followed by increased or high economic/financial uncertainty as the two major factors behind not increasing capital spending (see chart 4).
|
|
| ENLARGE |
Finally, for the firms planning to increase spending, we wanted to know how much of the increase reflected investment that had been postponed because of the recession. Seventy-two percent said that either some or a considerable fraction of that outlay had been postponed because of the recession (see chart 5).
|
|
| ENLARGE |
By Shalini Patel, an analyst in the Atlanta Fed's research department
August 20, 2010 | Permalink | Comments (0) | TrackBack (0)
08/04/2010
Is the worst over for Gulf Coast tourism?
There has been a clear shift among our contacts in the Gulf Coast leisure and hospitality sector since the oil stopped flowing in mid-July. Cautious optimism has replaced outright pessimism. That said, most realize that the damage done by cancellations and fewer visitors may not be undone in 2010. However, fears that long-term damage to the Gulf Coast "brand" of clear water and white sandy beaches beyond the current year have subsided somewhat.
Assessing the economic impact on tourism-related businesses is a challenge. We have received anecdotal accounts of reduced hiring of seasonal workers by hotels and property managers, but this reduction is unlikely to be reflected in data through June. Reports of cancellations from our contacts in the region did not begin in earnest until after Memorial Day. In addition, hotels appear to be faring better than rental properties such as beach houses and condos, so the overall impact on accommodation-related employment may not be as great as feared. Clean-up workers, oil company employees, media, and National Guardsmen appear to have stepped in to fill some of the vacancies created by potential Gulf Coast vacationers changing their plans because of the spill. Of course, it is fair to assume that vacationing families spend more on hotel amenities and pump more into the local economy through retail purchases, recreational outings, and dining out than do workers employed to deal with the spill. For that reason we expect to see the greatest impact on recreation jobs as well as food services because of the decline in recreational fishing excursions and fewer visitors patronizing eating and drinking establishments.
On July 20, the U.S. Bureau of Labor Statistics released state and local employment data for June and revised data for May. Based on the total number of people employed in arts, entertainment, recreation, accommodation, and food services in Gulf Coast metro areas (excluding New Orleans) we estimate there were roughly 105,000 tourism-related workers along the affected areas (see the chart). This number is up slightly compared with June of last year and is in line with the average for June over the past decade. We do not see any large swings in the monthly data, but as we noted above, most cancellations came in after Memorial Day and accommodation jobs appear to be the least vulnerable.
Perhaps vacationers who put off travelling to the Gulf Coast may choose to take a fall vacation this year once they are assured that the coast is clear—figuratively and literally—but a recent survey suggests challenges lie ahead for the Gulf Coast's leisure and hospitality businesses. The State of the American Traveler survey conducted by Destination Analysts Inc. showed 26 percent of respondents said they were less likely to travel to the region over the next 12 months.
By Amy Ellingson, a research analyst at the Atlanta FedAugust 4, 2010 in Employment, Gulf Coast, Oil Spill, Tourism, Travel | Permalink | Comments (0) | TrackBack (0)
07/28/2010
Regional labor markets continue struggle
Similar to the national employment report for June, the regional employment report showed a loss in payroll employment for the month. According to the U.S. Bureau of Labor Statistics' establishment survey, the Sixth District lost 26,800 jobs in June after adding 77,400 jobs in May (see chart 1). Job losses in most District states were affected by the end of Census-related temporary jobs. For the United States as a whole, 125,000 jobs were shed in June, reflecting the end of 225,000 temporary Census jobs. Private payrolls in the District have increased over the past few months, albeit at a slow pace. In June, the District added only about 17,000 private jobs.
Looking at another labor market indicator, we also see a slight improvement in the sluggish labor market. In the U.S. Bureau of Labor Statistics household survey, June's unemployment rate decreased in all District states except for Louisiana, where it increased slightly that month. Despite the easing of the unemployment rate, all states in the District have unemployment rates above the national rate of 9.5 percent with the exception of Louisiana, which has an unemployment rate of 7 percent. Much of the decrease in the unemployment rate during the past few months is attributed to a decrease in labor force participation.
To gauge employment's short-term trend versus its long-term trend, employment momentum can be examined through the use of bubble charts (see chart 3).
The employment momentum chart simultaneously plots both short- and long-term employment trends as well as states' total employment share. The vertical (Y) axis measures short-term trends (three-month average annualized percent change). The horizontal (X) axis measures long-term trends (year-over-year percent change). The size of each state's bubble reflects its relative share of total employment among the six measured states.
The position of a state's bubble in a quadrant—the intersection of the state's short- and long-term plot—reflects its employment momentum by using four quadrants that indicate certain situations:
Quadrant 1: Both short- and long-term employment growth are positive. (The higher in the right-hand corner of the chart a state's bubble appears, the stronger the state's employment momentum.)
Quadrant 2: Short-term growth is negative, but long-term growth is positive. (Recent data point to slipping employment momentum.)
Quadrant 3: Both short- and long-term employment growth are negative. (The lower in the left-hand corner of the chart a state's bubble appears, the weaker the state's employment momentum.)
Quadrant 4: Short-term growth is positive, but long-term growth is negative. (Recent data point to improving employment momentum.)
In June, the employment momentum of the Sixth District states is positioned in the improving quadrant, so although long-term growth is still negative, short-term growth is positive. Some states were even entering the expanding quadrant in June. If we take a look back to where the Sixth District was in January (see chart 4), all District states were in the contracting quadrant with both short- and long-term employment growth negative. Although these indicators point to improvement, they show that the labor market in the Sixth District still has a ways to go before getting back to where it was prerecession, with state bubbles in the expanding quadrant and lower unemployment rates.
By Sandra Kollen, a senior economic analyst in the Atlanta Fed's research department
July 28, 2010 in Louisiana, Recession, Unemployment | Permalink | Comments (0) | TrackBack (0)
07/20/2010
Southeastern housing update
The Federal Reserve of Atlanta's monthly survey of Realtors and homebuilders in its region saw home sales weaken notably in June though sales remained above last year's levels. Many brokers noted that sales continued to benefit from the housing stimulus as buyers closed on contracts signed prior to the April 30, 2010, deadline. However, close to half of survey respondents reported that sales in June declined compared with May.
Reports from Southeastern homebuilders indicated that new home sales also continued to weaken in June, falling farther below last year's level.
Buyer traffic continued to soften in June on a year-over-year basis.
Reports also indicated that traffic slowed notably from May to June. Typically, buyer traffic rises from May to June and remains strong in June, but more than half of brokers and builders surveyed reported that buyer traffic declined from May to June.
The outlook for sales growth among both brokers and builders continued to weaken.
Note: June survey results are based on responses from 83 residential brokers and 54 homebuilders and were collected July 5–15. The housing survey'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, analyst in the Atlanta Fed's research department
July 20, 2010 in Housing, Southeast | Permalink | Comments (0) | TrackBack (0)
07/14/2010
Manufacturing cools in the U.S. and elsewhere
Manufacturing leveled off in the United States and Southeast in June. In fact, most developed countries' manufacturing sectors cooled off last month:
| Global Manufacturing Sectors, May versus June | ||||||
| JP Morgan Global PMI | U.S. | U.S.: Southeast | Japan | EuroZone | China | |
| May PMI | 57.0 | 59.7 | 62.7 | 54.7 | 55.8 | 53.9 |
| June PMI | 55.0 | 56.2 | 57.9 | 53.9 | 55.6 | 52.1 |
| % change | –2.0 | –3.5 | –4.8 | –0.8 | –0.2 | –1.8 |
| Source: Institute for Supply Management, Markit Economics, and JPMorgan Chase | ||||||
While this doesn't signal an end to the manufacturing sector's recovery, it's clear that growth is slowing. Though each purchasing managers index (PMI) mentioned above lost ground in June, each continues to be higher than the 50-point threshold that indicates growth in the manufacturing sector.
"Cooling off" is common after sharp expansions
It is important to remember how these surveys are fashioned and how that affects the outcome of the index. PMIs measure growth, not actual levels of new orders, production, etc. Survey participants are asked to compare their current month's levels of new orders and production (among other variables) with the previous month's level. Responses are generally collected in a "better/same/worse" questionnaire format. In most cases for June, including the United States and the Southeast, many participants jumped from indicating "better" conditions, as they had over the past several months, to reporting that conditions were the "same" from May to June. This response resulted in a lower reading of the PMI, which is a common trend early in recovery stages.
|
|
| ENLARGE |
U.S. and Southeast PMIs indicate above-average growth but are coming off of initial recovery highs
Regarding the Institute for Supply Management's (ISM) PMI, Norbert Ore, chair of the ISM Manufacturing Business Survey Committee, said the following:
"We are now 11 months into the manufacturing recovery, and given the robust nature of recent growth, it is not surprising that we would see a slower rate of growth at this time. The sector appears to be solidly entrenched in the recovery. Comments from the respondents remain generally positive, but expectations have been that the second half of the year will not be as strong in terms of the rate of growth, and June appears to validate that forecast."
Chris Williamson, chief economist at Markit, cites stimulus-driven growth contributing to the second quarter peak and hints that challenges remain for manufacturing:
"The second quarter most likely represents a peaking in the rate of expansion of manufacturing output, as growth slows in coming months as stimulus-driven tailwinds are replaced by mounting headwinds."
On a more local level, Kennesaw State University (KSU), primary producer of the Southeast's PMI, said declines in the Southeast PMI for May and June likely are adjustments to April's unusually high levels of new orders and production.
ISM and KSU reports additionally conclude that U.S. and Southeast production growth measures are still above the global average in June.
So June's PMI data should not be a cause for concern. Further deceleration of purchasing managers indices, however, could signal bad news for not just manufacturing sectors, but the overall economies they represent.
By Mark Carter, an economic analyst in the Atlanta Fed’s research department
July 14, 2010 in Economic Growth and Development, Manufacturing, Southeast | Permalink | Comments (0) | TrackBack (0)
07/07/2010
The Gulf oil spill: Measuring the impact on tourism
In the weeks following the Gulf oil spill, we counted the number of people employed in sectors most vulnerable to a decline in vacationers. In a macroblog posting back in May, we looked at Bureau of Economic Analysis data and developed a conservative estimate of roughly 123,000 workers, based on the total number of individuals employed in arts, entertainment, and recreation as well as accommodation and food services for Gulf Coast metro areas from western Louisiana to Panama City. Since then, we have been patiently waiting for official employment data from the Bureau of Labor Statistics on state and local employment. On July 20, we will see revised data for May and the first release of data for June.
To further help us understand the impact on tourism, we have also been talking to our contacts in the region as well as tuning into what travel industry experts have been reporting. Last week, Hotel News Now reported on how late-spring and early-summer bookings held up better than expected in most places, but advance reservations were declining significantly for Gulf Coast hotels. Our business contacts in the area also report similar experiences. Part of the decline in vacationers is being offset by an increase in bookings by officials and crews that are migrating to the Gulf to plan and assist in the cleanup. Those reports lead us to believe that the employment impact in the tourism-related sectors of the economy may not be readily seen for some time.
We will continue to watch this important industry as well as the entire region as the oil spill continues.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
July 7, 2010 in Employment, Oil Spill, Southeast, Tourism | Permalink | Comments (0) | TrackBack (0)
06/30/2010
The Gulf spill's employment effect: Early evidence
In an attempt to gauge the oil spill's impact on employment, we've been tracking initial unemployment insurance claims for the coastal regions of Louisiana. Looking at weekly initial unemployment insurance claims, which are first-time applications for unemployment insurance, provides an indication of week-by-week changes in employment for coastal Louisiana parishes and is thus a high-frequency view of employment trends. We developed two measures: one for all coastal parishes, and another that includes Jefferson and Lafayette parishes. Jefferson extends to the coast, but the vast majority of employment in this parish is located in the suburbs of New Orleans, and Lafayette Parish is home to many people employed in oil and gas drilling and related services. Neither measure includes Orleans Parish.
For the Louisiana coastal regions, there was little immediate effect on initial claims data after the spill on April 20, which is not particularly surprising since the true extent of the spill remained unknown at the time. Late May saw the beginning of an increase in claims. This trend was short lived, however, as an equally marked decrease in new claims followed. In addition, BP's hiring of some out-of-work fishermen and others to assist in the clean-up has likely offset some of the job losses.
We are also looking at data about initial unemployment claims by industry, which are available on a monthly basis. Through May, the job losses do not seem to be centered in any particular region or industry in Louisiana. This situation may change as time goes on, and weekly initial claims will be a good indicator to watch.
The Atlanta Fed will continue to watch employment indicators for the coastal regions of Louisiana and the Gulf. More detailed job analysis will be available in late July when the U.S. Bureau of Labor Statistics releases June state- and metro-level employment data.
By Brian Goodman, an intern in the Atlanta Fed research department
June 30, 2010 in Employment, Louisiana, Oil | Permalink | Comments (0) | TrackBack (0)
06/23/2010
Southeastern housing update
On April 30, 2010, home buyers and sellers rushed to get contracts signed to take advantage of the latest and perhaps final round of housing stimulus. The same buyers have until June 30, 2010, to complete the purchase.
The Federal Reserve of Atlanta conducts a monthly survey of Realtors and homebuilders in its region. The May results are in and indicate that existing home sales growth continued to rise on a year-over-year basis as sales that went under contract prior to June 1 continued to close. (May survey results are based on responses from 92 Realtors and 49 homebuilders and were collected June 1–10.)
However, reports from Realtors on a month-to-month basis indicate May existing sales were only slightly ahead of April. Southeastern homebuilders indicated that new home sales continued to soften in May and fell below year-earlier levels.
However, Southeastern builders reported that construction activity actually strengthened somewhat, up slightly from a year earlier.
Buyer traffic eased on a year-over-year basis according to Southeastern Realtors, while builders continued to note a pullback in traffic that began in March. However, Florida builders ran counter to the trend, indicating a slight improvement in buyer traffic. Overall, buyer traffic in the Southeast remained above the year-earlier level.
Total home inventories have risen in recent months, and in May Realtors indicated that the trend continued with inventories exceeding the year-earlier level. New home inventories remained well below year-earlier levels and were steady on a year-over-year basis.
Builders continued to report downward pressure on home prices and the difficulty they faced competing with bank-owned properties. However, survey results indicated price declines were little changed among builders while existing home price growth softened notably in May, based on Realtor reports.
The outlook among Southeastern real estate contacts weakened notably in May. Builders and Realtors reported that access to financing for both buyers and builders remained challenging. Many contacts noted that buyers remained uncertain and in a wait-and-see mode.
Note: The housing survey'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 analyst in the Atlanta Fed's research department
June 23, 2010 in Housing | Permalink | Comments (0) | TrackBack (0)
06/17/2010
Let's focus on what we do know
The Wall Street Journal's Real Time Economics blog quotes recent analysis from J.P. Morgan Chase in its post, Oil Spill May End Up Lifting GDP Slightly.
" 'The spill clearly implies a lot of economic hardship in some locations, but given what we know today, the magnitude of these setbacks looks dwarfed by the scale of the US macroeconomy,’ said chief U.S. economist Michael Feroli. If anything, he added, U.S. GDP could gain slightly from it….
"Commercial fishing in the Gulf is also likely to suffer, but that's only about 0.005% of U.S. GDP. The impact on tourism is the hardest to measure, although it's fair to expect that many hotel workers who lose their jobs will find it hard to get new ones. Still, cleaning up the spill will likely be enough to slightly offset the negative impact of all this on GDP, J.P. Morgan said. The bank cites estimates of 4,000 unemployed people hired for the cleanup efforts, which some reports have said could be worth between $3 and $6 billion."
Another point brought up by several analysts is that the size of the U.S. economy requires that a disaster would have to be massive to have an impact on national economic performance. Earthquakes, hurricanes (including Katrina), and other disasters simply did not have a significant impact on short-term national economic growth.
Smartly, the Real Time Economics post also notes that the J.P. Morgan commentary points out that:
"[G]ross domestic product measures are often not a good guide to an economy's well being."
It is also important to note that this story continues to unfold. We simply do not know what the long-term implications of the oil spill will be or what potential changes in the regulatory environment could have on future energy extraction—not only in the Gulf but also nationally.
Analysts will continue to strive to put a number tag on the oil spill, both in terms of the impact on the macroeconomy and in terms of the regional economic impact. The truth of the matter is that what we do know is still far less than what we don't know.
By Michael Chriszt, an assistant vice president in the Atlanta Fed’s research department
June 17, 2010 in GDP, Louisiana, Oil Spill | Permalink | Comments (0) | TrackBack (0)
