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10/30/2014

Regional Housing Sales, Construction Slowing

The Atlanta Fed conducts a monthly poll of regional residential brokers and homebuilders to track emerging trends in housing markets. The latest results, which reflect activity in September 2014, suggest continued slow growth in sales and construction activity.

Many residential brokers and builders indicated that home sales were flat to slightly up from the year-earlier level. The report from brokers and builders on buyer traffic was mixed. Those who indicated a decline in traffic suggested that seasonal factors and a decline in buyer confidence were behind the decline. A growing share of residential brokers and builders reported that home inventory levels had increased slightly from the year-earlier level. Comments suggested that well-priced homes are moving quickly, but that many sellers are pricing their homes fairly optimistically, causing inventory to build until prices are adjusted.

Many builders reported that construction activity had increased from the year-earlier level. The drop depicted in the chart below reflects the fact that a growing share of builders reported construction activity as flat to down slightly.

September 2014 Southeast Construction Activity

Most builders indicated that they continue to experience upward pressure on materials prices. Builders’ reports ranged widely when we asked them to specify the materials experiencing the greatest pricing pressure, and their responses included concrete, drywall/sheetrock, and lumber. These reports are fairly consistent with year-over-year changes in the Engineering News Record’s cost indices: on a year-earlier basis, concrete prices are up 3–4 percent, drywall/sheetrock products are up 10 percent, and lumber products are up 7–9 percent.

Builders also continued to report upward pressure on labor costs and that they are having a tougher time filling positions compared to a year earlier. In addition to asking about builders’ difficulty filling positions, we posed a special question about labor shortages. Two-thirds of builders indicated that they were experiencing a labor shortage. Reports about the trades most affected by these shortages were also fairly wide-ranging, but there seemed to be a fair amount of consensus around the idea that framers, masons, carpenters, and drywall installers were the hardest tradespeople to come by on job sites. These results are fairly consistent with report released by the National Association of Home Builders earlier this year.

To explore these results in more detail, or to view other results that were not discussed in this post, please see our Construction and Real Estate Survey results.

Note: The latest poll results, which reflect activity in September 2014, are based on responses from 40 residential brokers and 25 homebuilders and were collected October 6–15. Please sign up if you would like to participate in this poll.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department


October 30, 2014 in Construction, Economic conditions, Economic Indicators, Prices, Real Estate, Southeast | Permalink | Comments (0) | TrackBack (0)

10/28/2014

Southeastern Labor Markets Give Off Some Positive Signs

Following an encouraging national employment report released on October 3, last week's release of September 2014 state-level labor market data from the U.S. Bureau of Labor Statistics likewise showed some positive labor market signs. The unemployment rate fell in 31 states, was unchanged from the previous month in 11 states, and rose in eight states. This was the smallest number of states to see a month-over-month increase in unemployment since April. The September report also revealed that employers added net jobs in 39 states and cut jobs in 10 and that payrolls were unchanged in one state. So how did the Sixth District states fare?

Before we dive into the numbers, I'd like to share a disclaimer that might make sense if you've read my posts about state-level employment data during the last few months: churn and seemingly unintuitive results are to be expected with high-frequency economic data, labor market data in particular. Read on to see what I mean.

Unemployment rates
The aggregate district unemployment rate in September was 6.8 percent, a 0.1 percentage point decline from the previous month, though nearly a full percentage point above the national rate of 5.9 percent (see the chart).

The unemployment rate declined in nearly all states, and Georgia and Tennessee bucked a four-month trend of upward movement, falling to 7.9 and 7.3 percent, respectively. Also, Alabama had a 0.3 percentage point drop in its unemployment rate, which fell to 6.6 percent in September—it's lowest rate in seven months. Florida's rate fell 0.2 percentage point to 6.1 percent, the lowest it's been in over six years.

On the other hand, Louisiana's unemployment rate increased for the fifth consecutive month to 6.0 percent, which isn't necessarily a bad thing in the short run, since the state added jobs (I'll get to that). By definition, Louisiana added more people looking for work than the number of people who found work; hence the increase in unemployment. (This result is what I meant by "seemingly unintuitive.")

In addition, though, the decline in Georgia's unemployment rate may be considered an encouraging sign. The state had the highest unemployment rate in the nation for the second month in a row, followed by another Sixth District state: Mississippi, with 7.7 percent.

SE-Uneployment-States

Payrolls
Employers in most Sixth District states added to payrolls in September: 39,900 payrolls were added on net (see the chart). The sectors with payroll additions varied state by state, though leisure and hospitality gains were relatively widespread and sizable across Sixth District states, adding 13,200 net jobs. The trade, transportation, and utilities sector contributed the most net jobs with 14,600. However, the majority of these new payrolls came from Florida, and losses in the sector occurred in three Sixth District states: Tennessee (down 1,200), Louisiana (down 600), and Mississippi (down 200). Below, some state-by-state payroll and key sector facts:

  • Alabama, which contributed 11,400 net jobs, hadn't seen this many jobs added in one month in about 20 years. Leisure and hospitality (up 5,000) and professional and business services (up 2,600) sectors were the top contributors. The only sector that subtracted jobs in Alabama was financial activities (down 200).
  • Florida added 13,400 jobs on net in September, mostly from the trade, transportation, and utilities sector (up 11,300), with a large number of them (8,600) from retail trade alone. Payrolls fell in the financial activities (down 3,400), education and health services (down 2,600), and professional and business services (down 800) sectors.
  • After adding nearly 20,000 jobs for two months in a row, Georgia subtracted 2,800 net payrolls from the September aggregate figure. The biggest losses came from the goods-producing sector (down 3,500), with 2,900 manufacturing jobs lost and the professional and business services sector (down 3,300). Georgia's payroll gains occurred in trade, transportation, and utilities (up 3,900), education and health services (up 3,000), and financial activities (up 200).
  • Louisiana added 3,600 payrolls on net, most of which came from leisure and hospitality (up 2,000), professional and business services (up 1,300), and the other services (up 1,200) sectors. Losses occurred in the trade, transportation, and utilities (down 600), government (down 600), and education and health services (down 300) sectors.
  • Employers in Mississippi added 6,000 net new payrolls in September, the state's largest net gain in nearly a year, mostly boosted by the professional and business services (up 2,700), education and health services (up 2,200), and leisure and hospitality (up 1,300) sectors. The biggest payroll losses occurred in the government sector (down 2,700).
  • Tennessee employers increased payrolls by 7,200 on net in September. The largest increases occurred in the education and health services (up 3,100), government (up 2,100), and goods-producing (up 2,000) sectors. Payrolls were subtracted in the trade, transportation, and utilities (down 1,200) and other services (down 1,200) sectors.

Contributions-to-Change

Overall, Sixth District states' labor markets fared well in September (though I plan to keep my eyes on Louisiana's rising unemployment trend; watch this space for further analysis).

Hopefully we'll continue to see signs of gathering strength when October's report is released on November 21.

By Rebekah Durham, economic policy analysis specialist in the New Orleans Branch of the Atlanta Fed

October 28, 2014 | Permalink | Comments (0) | TrackBack (0)

10/27/2014

Southeastern Transportation Continues Rolling

Members of the Atlanta Fed’s Trade and Transportation Advisory Council met in Atlanta on October 8 to discuss the latest updates on and insights into the industry. Most council members reported expansion continuing into the fourth quarter. Year over year, demand was greater across the majority of industries represented. In rail, shipments of frac sand, which is used in the hydraulic-fracturing process (commonly referred to as fracking) to produce petroleum products such as oil, natural gas and natural gas liquids from rock, and crude oil were up substantially, and intermodal volumes were steadily rising as a result of trucking capacity constraints. Ocean shippers reported a shift in the modes of movement of commodities, which were historically shipped in bulk but are now shipped in containers, causing a shortage of containers for traditional use. Demand in the flatbed trucking market was very strong, with shipments of drywall and bulk cement increasing. Going into the holidays, logistics firms anticipate e-commerce volume to pick up substantially by mid-November.

Employment
Reports on current employment levels this year versus last year at this time were mixed. More than half anticipate just slightly higher staffing levels this time next year. Truck driver turnover for the overall industry is quite high. For new drivers, turnover within the first 90 days of employment is very high. Trucking firms reported that only a very small percentage of applicants are hired, as many do not meet driver requirements.

Costs, wages, and prices
Most reported moderate increases in nonlabor input costs. Wages were reported as modestly increasing across most transportation industries with the exception of trucking, where wages continued to increase at a clip of 6 percent to 7 percent annually. Reports on increases in health care premiums for 2015 varied, ranging from less than 1 percent up to 20 percent. Some companies reported anticipated changes to plan structures to mitigate expenses, and others plan to share rate increases with employees. Regarding pricing power, a few reported an ability to raise prices, but others reported significant pushback by clients. Trucking firms plan to continue raising rates amid rising demand, reduced capacity, and continued increases in driver pay.

International trade issues
According to council members, the net impact of the recent strengthening of the dollar had been minimal on international activity when this meeting was held. A slowing trend in world trade was cited by one council member as the biggest factor affecting both imports and exports.

Overall, the sentiment of this group has improved since the last meeting in April, and all council members reported a higher outlook for short- and medium-term growth, with greater confidence in their forecasts. Council members were asked to cite the single most challenging issue facing their industry today. Trucking firms indicated that the lack of truck drivers and increased industry regulations will continue to cause diminished capacity for the foreseeable future. In maritime trade, ongoing ocean carrier consolidations will impact all U.S. container ports and there will be both winners and losers as a result of the carriers’ decisions.

What impact will these challenges have on commerce? The council meets again in April 2015. We’ll watch as conditions play out, and we’ll relay the information here.

By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch

October 27, 2014 in Economic Indicators, Shipping, Southeast, Trade, Transportation | Permalink | Comments (0) | TrackBack (0)

10/20/2014

Southeastern Tourism Continues Trekking to Health

Members of the Federal Reserve Bank of Atlanta's Travel and Tourism Advisory Council reported continued strength in this important sector at their October 9 meeting. They also expressed optimism regarding future prospects for regional tourism activity.

Members noted that most areas in the Southeast registered increases in hotel occupancy, daily rates, and state park visits. International travel continued to boost the region's overall tourism numbers. Council members continue to report an increase in international tourist activity in 2014 over 2013, primarily from Latin America and Europe, and they added that foreign visitors help drive retail sales in tourist destinations.

Once again, the council discussed capital expenditure projects across the region. Some areas continue to report construction activity in new hotels, sports venues, and other attractions, in addition to renovations of restaurants, hotels, and convention centers. Locations with recently completed construction projects are reporting additional visitors who wish to experience the newly opened venues.

Council members also discussed how expansion in the tourism sector has resulted in job growth. As in other sectors, application of technology has reduced the need for some labor resources. However, council members said that the need to create “experiences” for travelers requires a human touch, resulting in an additional need for workers as the sector expands and new venues open.

Some members expressed concerns about the challenges of finding skilled labor for specialized positions in technology, mathematics, engineering, and management, with some accompanying wage pressure in these specific positions. The part-time to full-time employee has remained stable for some time, with contract workers being used for specific projects.

Council members discussed concerns regarding economic disparity among potential travelers. This disparity is causing high-income individuals to travel more and spend more, and some middle-class people are unable to afford leisure travel. Ideally, members said, traveling and visiting family entertainment venues would be increasingly affordable to middle-class consumers.

Some council members stated that new businesses are emerging, citing rising levels of restaurant franchising. However, even though consumers are dining out, they said that the restaurant dining has not yet hit prerecession levels. In general, travel and tourism looks promising in the near term. With continued new developments in the sector, hopefully even more people will head south for their getaways.

By Marycela Diaz-Unzalu, a senior Regional Economic Information Network analyst at the Atlanta Fed’s Miami Branch

October 20, 2014 | Permalink | Comments (0) | TrackBack (0)

10/16/2014

Southeastern Manufacturing Continues to Expand

The return of fall has not cooled down manufacturing in the Southeast. The Southeast Purchasing Managers Index (PMI), which was released October 5, indicated expansion in the manufacturing sector for the ninth consecutive month.

The Atlanta Fed's research department uses the Southeast PMI to track manufacturing activity in the Southeast. The Econometric Center at Kennesaw State University produces the survey. It provides an analysis of current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 points indicates that manufacturing activity is expanding, and a reading below 50 points indicates that activity is contracting.

The Southeast PMI fell slightly to 55.0 points in September. The index was only 1.7 points lower than August and still solidly above the 50 threshold for expansion (see the chart). The new orders subindex registered a nice increase, and the employment subindex rose, but all other subindexes fell during the month.

  • New orders: The new orders subindex increased 4.5 points over August's levels and has now climbed 15.7 points during the last two months.
  • Production: The production subindex decreased. September's 59.0 reading was 1.2 points below August but was still well into expansionary territory.
  • Employment: The employment subindex inched up 0.5 points compared with the previous month. The employment subindex has now indicated expansion for 12 consecutive months.
  • Supply deliveries: The supplier deliveries subindex declined 3.6 points during September, indicating that manufacturers are receiving their inputs slightly more quickly.
  • Finished inventory: The finished inventories subindex decreased 8.6 points compared with August. The fall completely reversed the previous month's gain of 8.4 points. The subindex is now below 50, implying that purchasing managers are not as concerned about a buildup of inventory levels.
  • Commodity prices: The subindex measuring input price pressures moved down to 53.0, a 5.3 point drop from the previous month.

Se-purchasing-manager-index

Optimism among purchasing managers continued to rise during September. When asked for their production expectation over the next three to six months, 50 percent stated that they expect production to be higher, an increase from 44 percent in August. Only 18 percent of survey respondents expect their production to be lower.

The rise in new orders and strong production numbers bode well for manufacturing heading into the fourth quarter. The Southeast PMI has averaged a 56.6 reading so far this year. Conversely, the national PMI (produced by the Institute for Supply Management) has averaged 55.2. (I should note that the Southeast PMI is not a subset of the national index.) We'll be on the lookout for any changes in activity. After all, it's fall—the season of change.

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch

October 16, 2014 in Economic conditions, Economic Growth and Development, Manufacturing, Southeast | Permalink | Comments (0) | TrackBack (0)

10/14/2014

In the Volunteer State, Economic Growth Anticipated

The Center for Business and Economic Research (CBER) at the University of Tennessee recently published its fall 2014 economic outlook for Tennessee. The report painted a moderately positive economic picture for the Volunteer State, lining up well with what we have been hearing from our business contacts, highlighted in a recent SouthPoint post.

CBER conducts research on national and state economic trends. Report findings are used not only by the University of Tennessee, but also by state government and other public and private entities. The center—headed by director William F. Fox and associate director Matthew Murray—has provided an economic report to the governor every year since 1975, and these reports serve as the official forecast for the state.

The fall report highlighted a rebound in state employment and noted slow but steady gains during the first half of 2014. Nonfarm employment grew by 1.4 percent in the first quarter and 2.6 percent in the second. To compare, the national employment growth rate was 2.2 percent in the second quarter. Although Tennessee's unemployment rate has come down during 2014, the progress has been somewhat uneven. During the first quarter, the unemployment fell to 6.9 percent, and then it fell further to 6.4 percent in the following quarter. Recently, however, the rate increased to 7.4 percent in August. The unemployment rate is expected to inch downward during the fourth quarter and average 7.0 percent for 2014 and 2015. That said, the state's unemployment rate has remained even with or above the national rate since March 2012.

Looking down the road
Employment gains this year and next should be broad-based across most sectors of the Tennessee economy, with the exception of the information and government sector, which is projected to shed jobs this year. The professional and business services sector is expected to lead employment gains, but it could experience slowing growth in 2015. The transportation and utilities, education, and health care services sectors are expected to see stronger growth in 2015 compared with this year, and manufacturing employment growth is expected to slow to 0.9 percent in 2014 and 0.5 percent in 2015. Manufacturing employment in the state remains below prerecession levels although manufacturing output has surpassed prerecession levels, indicating productivity gains in the sector.

Nominal personal income is on pace to grow by 3.5 percent in 2014, well ahead of the 2.1 percent mark seen in 2013. Income growth is expected to accelerate to 4.4 percent in 2015. Tennessee's personal income grew faster than that of the nation in 2013, but it is expected to be slightly lower than the national rate in 2014 and 2015.

New investments on the horizon
Tennessee has recently received several welcome developments on the investment front. Volkswagen announced plans to add a midsize SUV to its manufacturing plant in Chattanooga, resulting in a $600 million expansion and an additional 2,000 jobs. The Maryland-based apparel company Under Armour plans to build a distribution facility in Mount Juliet. The facility will create 1,500 new jobs and represents a $100 million investment.

Overall, it appears Tennessee will hold its own, economically speaking, and the national economy will continue to rebound. If that modestly optimistic outlook doesn't sound like much to get excited about, it nevertheless represents an improvement over recent years.

By Troy Balthrop, a senior Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch

October 14, 2014 | Permalink | Comments (0) | TrackBack (0)

10/10/2014

Construction Employment: On the Rise in Louisiana

In September, the U.S. Bureau of Labor Statistics reported that construction employment increased nationally by 16,000 jobs. And during the past year, the industry added 230,000 jobs on net. Louisiana itself has been no stranger to construction job growth.

Louisiana Economic Development reported that there are more than $50 billion in industrial plant expansion and construction projects in the works over the next few years, spurring growth in both commercial and residential construction and thus growth in construction employment. In fact, the Associated General Contractors of America (AGC) recently reported that Lake Charles, a city tucked in the southwestern corner of Louisiana, had the largest year-over-year percent increase in construction jobs in the country in August: 27 percent, or 2,900 net jobs. Baton Rouge, the state capital, was the fourth-largest contributor to construction jobs in the nation during the same period: 18 percent, or 8,000 jobs.

Despite the upbeat construction job growth picture in Louisiana, the AGC acknowledged that the overall industry has been inconsistent through the recovery. Their report indicated that nationally firms are having a hard time finding enough qualified workers, with one in four firms having to turn down projects because of worker shortages.

For quite some time now, business contacts in our Regional Economic Information Network  have echoed the same sentiment (see past editions of Southeastern Insights), describing difficulties finding qualified workers in various industries. Contacts from the construction industry in particular have conveyed these challenges for a little over a year, often stating that projects were being delayed because of the difficulty finding the quantity and quality of skilled contractor labor. Continuing this theme, the Atlanta Fed’s latest commercial construction poll results revealed an increase in the share of industry contacts who reported a more difficult time filling positions relative to a year earlier (see the chart).

Difficultyoffiling

However, three-fourths of these contacts indicated that they plan to increase hiring during the next quarter (see the chart).

Hiringplans

So how will the construction industry and labor market in Louisiana fare, considering permits were issued for a myriad of construction projects in the pipeline in Louisiana and that more than 13,000 construction jobs are expected to be needed in the near to medium term? Hopefully concerns about the tight labor market and potential labor shortage will be diminished by various efforts happening in the state to provide training in trade skilled crafts to help address the fast-growing workforce needs of the construction industry. Examples of such training programs are currently administered by the Associated Builders and Contractors and Louisiana’s Community & Technical Colleges. Given the significant job growth and positive outlook in the construction industry in Louisiana, construction might be an industry that could merit additional training programs and workforce development efforts.

By Gail Psilos, REIN director, and Rebekah Durham, economic policy analysis specialist, both in the New Orleans Branch of the Atlanta Fed

October 10, 2014 | Permalink | Comments (0) | TrackBack (0)

10/08/2014

Regional Jobs, Unemployment Rate Show Increases

In the latest edition of Southeastern Insights, my colleagues in the Atlanta Fed's Regional Economic Information Network (REIN) conveyed that most regional business contacts' staffing levels increased over the past couple of months. The recent release of state-level labor market data from the payroll survey produced by the U.S. Bureau of Labor Statistics supports these anecdotal reports.

Payroll survey
Nearly all Sixth District states added new payrolls in August. In total, the region added 51,100 net jobs, following 38,200 new payrolls in July (revised up from 27,100). Florida was among the top job contributors in the nation, adding 22,700 new payrolls in August. The only job losses in the Sixth District occurred in Mississippi, which subtracted 4,600 (see the chart).

Contributions to Change in Net Payrolls by Sixth District State

The bulk of new jobs in the Sixth District came from goods-producing industries such as construction and manufacturing, with 25,200 jobs added on net. Florida alone contributed 10,600 of these jobs, with 6,100 added to the construction sector. Georgia added 7,900 goods-producing jobs, with 5,500 added to the manufacturing sector.

Gains in the professional and business services industry were also fairly widespread, with Sixth District states adding 15,500 payrolls to the sector in August. Only two sectors subtracted payrolls: leisure and hospitality (down 1,300 payrolls) and financial activities (down 200). Though neither sector subtracted payrolls in all states, most of the leisure and hospitality job losses occurred in Florida, which shed 5,800 payrolls, and most financial activities job losses were in Georgia, which lost 1,800 payrolls on net.

However, similar to my post last month about July's regional labor market data, jobs increased on aggregate in Sixth District states in August. However, the unemployment rate increased.

Household survey
The aggregate unemployment rate for the Sixth District ticked up to 6.9 percent in August from 6.7 percent in July (see the chart). In three of the six District states—Georgia, Louisiana, and Tennessee—the unemployment rate continued its upward trend (now for four straight months). Georgia had the highest unemployment rate among the states in August, at 8.1 percent, a notable 0.4 percentage point increase from 7.7 percent in July. Mississippi's unemployment rate, though still one of the highest in the nation, declined for the first time in four months in August to 7.9 percent, from 8.0 percent in July.

Contributions to Change in Net Payrolls by Sixth District State

So why did the report reflect an increase in jobs and a rise in the unemployment rate? Though there is some ambiguity about a rising unemployment rate accompanying decent employment growth, one possible explanation is that the number of people looking for work increased more than the number hired. The labor force participation rate (LFPR) is an indicator that supports this notion. In fact, the data show that the LFPR increased in most Sixth District states during the last couple of months. Perhaps recent improving trends in labor market conditions made people more confident in their ability to find employment, thus encouraging them to look for jobs.

The next release of state-level labor market data will be October 21. We'll have to wait and see if this trend continues.


October 8, 2014 in Economic conditions, Employment, Southeast, Unemployment | Permalink | Comments (0) | TrackBack (0)

10/06/2014

Southeast Housing Shows Slow but Steady Growth

The Atlanta Fed polls its residential broker and home builder business contacts once a month to keep a close pulse on current trends in residential real estate and construction. The latest poll results, which reflect activity in August 2014, suggest that growth continues at a slow and steady pace.

The majority of homebuilder respondents indicated that home sales were flat to slightly up from the year-earlier level (see the chart). The report from residential brokers was somewhat mixed.

August 2014 SE Home Sales v Year Earlier

A look at recent regional home sales statistics from the metropolitan statistical area perspective appears to confirm this portrait (see the table).

Existing Year-over-Year Home Sales Growth, August 2014

The majority of builders indicated that buyer traffic was up from the year-earlier level, and the report from brokers was again mixed. Many brokers and builders reported that home inventory levels remained flat or were down from the year-earlier level. Most contacts continued to note that home prices were up slightly in August compared with year-ago levels.

The majority of builders reported that construction activity had increased from the year-earlier level (see the chart).

Existing Year-over-Year Home Sales Growth, August 2014

The incoming data appear to confirm this report of increasing construction activity. In the chart below, I’ve calculated the year-over-year percent change in U.S. single-family housing starts and separated out the contribution that each Sixth District state made to the total change. The stacked bar farthest to the right represents the August 2014 data point and reveals that the states making up the Sixth District all contributed positively to the 4.2 percent year-over-year increase in single-family starts at the national level.

Note: The latest poll results, which reflect activity in August 2014, are based on responses from 38 residential brokers and 19 homebuilders and were collected September 2–10.

By Jessica Dill, senior economic research analyst in the Atlanta Fed's research department

October 6, 2014 in Real Estate, Southeast | Permalink | Comments (0) | TrackBack (0)

09/30/2014

What We Heard in Alabama

During the most recent Federal Open Market Committee cycle (which ran from July 31 to September 17), the Atlanta Fed's Regional Economic Information Network (REIN) team at the Birmingham Branch met with business leaders, including branch directors, to discuss economic conditions in Alabama.

General business conditions
Overall, REIN contacts in Alabama see continued slow growth during the next three to six months. We heard accounts of improvement in industrial manufacturing, and commercial construction contacts reported growing demand for office, industrial, and retail space. Contacts in the finance and professional service industries also reported growing demand. Although comments regarding headwinds had grown scarcer during the past few cycles, we heard more mentions of concerns over the effects of “unknowns” from the upcoming elections and international turmoil stemming from recent events in Ukraine and the Middle East.

Employment and labor markets
We heard mixed stories about future hiring plans, ranging from no plans to hire in the near term to substantial hiring plans on the horizon. The chart below illustrates both the short-term and long-term employment momentum by sector. Compared with a year ago, Alabama has seen employment expand in several sectors like manufacturing, construction, health care, private education, and business services. However, sectors such as retail, other services (including automotive repair, personal care services, and business and professional associations, among others), and state government saw momentum contract.

Employment_momentum

In August, Alabama payrolls increased month over month by a seasonally adjusted 8,400 jobs, on net. All sectors gained except retail, which posted a loss of 1,900 jobs, and federal government, which remained unchanged since July. Alabama has seen overall job growth in the last two months, and August's unemployment rate was 6.9 percent (see the chart).

Alabama

That rate is down 0.1 percentage point since July, but it's still higher than the national unemployment rate of 6.1 percent (see the chart).

Unemployment_rates

Costs, prices, and wages
In most cases, our contacts reported only modestly increasing input prices, with the exception of construction materials, which have reportedly risen. No contacts reported the ability to significantly raise prices broadly, but more are reporting passing along selective increases where they can. However, growing price pressure was noted in the transportation sector and with the exception of ocean shipping (which has excess capacity), other transportation segments have reached capacity, with prices consequently rising.

When the conversations shifted to wages, many of our contacts reported that although they are not planning to increase wages, they are carefully watching what other companies are doing. No overarching wage pressure was apparent, although there was mention of wage pressure being reported for select, high-skilled positions. Mostly, contacts reported continued modest pay increases.

Availability of credit and investment
Participants told mixed stories regarding investment plans. We heard reports of idled plants being brought back online and some talk of companies beginning to consider investments that would increase production capacity. However, we also heard some discussion about companies that had been investing through the downturn considering moderating investments. Additionally, several contacts noted continued challenges in obtaining financing for smaller builder/developer projects.

Our conversations will continue in Alabama, and we'll relay them to you in the future. In the meantime, what are you hearing?

Photo of Teri Gafford By Teri Gafford, a REIN director,


and Susan Remy, a REIN analyst, both at the Atlanta Fed's Birmingham Branch

September 30, 2014 in Alabama, Economic conditions, Manufacturing | Permalink | Comments (0) | TrackBack (0)