The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.
The blog's authors include staff from the Atlanta Fed’s Regional Economic Information Network and Public Affairs Department.
Postings are weekly.
O Manufacturing, Is Winter Thy Enemy?
While in high school, I really enjoyed studying Shakespearean literature. Not because I liked the plays so much, but because I enjoyed trying to speak Shakespearean. It became a go-to move when I was trying to aggravate my mother. "Mom, would thee please passeth the potatoes ere I starve to death?" My mother would look at me with complete exhaustion but would always pass the potatoes.
While mulling over the data from the December Southeast purchasing managers index (PMI) report released on January 5, I was reminded of last winter and a Shakespeare quotation. A partial line from his play As You Like It read, “Here shall he see no enemy but winter and rough weather” (act 2, scene 5). If you remember, last winter’s weather caused problems for manufacturing activity across much of the country. According to the Southeast PMI, December had been a lackluster month for regional manufacturing activity for several years, and 2014 was no different.
The Atlanta Fed’s research department uses the Southeast PMI to track regional manufacturing activity. 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 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.
After indicating expansion every month this year, the overall PMI fell below the 50 threshold for expansion in December (see the chart). All underlying variables in the December PMI report fell except for finished inventories. In some cases the decreases were significant. The PMI decreased to 45.6, which was a 12.7 point drop compared with November.
- The new orders subindex fell below the 50-point threshold for expansion for the first time since January, decreasing 27.0 points compared with the previous month.
- The production subindex fell 19.8 points compared with November, also falling below the 50-point threshold for expansion.
- The employment subindex fell 10.6 points from November but remained in expansionary territory for the fifteenth consecutive month.
- The supply deliveries subindex decreased 7.3 points from the previous month to 50.0, which represents no change in activity.
- The finished inventory subindex inched up 1.2 points compared with November and now also reads 50.0.
- The commodity prices subindex fell to 42.0, a 10.4 point decrease compared with November.
However, optimism rose in December versus November. When asked for their production expectations during the next three to six months, 66 percent of survey participants expected production to be higher going forward.
Is it just coincidence that winter began and manufacturing activity slowed? One could point to several other factors for the decrease. Maybe the strong dollar is reducing manufacturing exports, or maybe the fall in oil prices is affecting production activity. It’s still too early to know for sure. Based on optimism for future production, let’s hope it was just a one-month anomaly. The Atlanta Fed will be watching—or in my best Shakespeare, "we shalt be watching."
By Troy Balthrop, a senior Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch
New Orleans Area Optimistic Heading into 2015
During the last couple of months, the Regional Economic Information Network team from the New Orleans Branch of the Atlanta Fed was in contact with more than 30 business leaders to gauge sentiment about current and anticipated economic conditions in the region (which covers central and south Louisiana and Mississippi, south Alabama, and the Florida Panhandle to Apalachicola). The optimism and confidence that our contacts expressed over the last few quarters continued and was in fact more prevalent this time. Although contacts' expectations in previous months were for "slow and steady" growth, many business leaders now feel assured about their outlook for a pickup in growth in 2015.
In particular, we continue to receive upbeat reports about the tourism sector. This time, the message came from the Florida Panhandle again, where it was mentioned that tourism was growing into a year-round business, supported largely by an emergence of international travelers rather than the typical wintertime snowbirds. Retail contacts were also very positive, especially about holiday sales in November but also about a notable general sense of improving consumer sentiment. Another sign of strength in the region was commercial real estate, which was reported as robust across Louisiana, particularly for retail, multifamily, and office space leasing and development.
Employment and labor markets
Generally, contacts continued to report positive net hiring in response to increases in demand, though they didn't report acceleration from previous months. We continue to receive reports about firms' efforts to use automated solutions to reduce staffing or conduct optimization studies to enhance efficiency while reducing costs. Once again, contacts noted major challenges filling certain skilled positions, such as trades workers, engineers, truck drivers, and information technology professionals—a predicament business contacts have expressed for more than a year.
Costs, wages, and prices
For several months now, contacts have reported some cost pressures with little pricing power. In most cases, firms have been able to increase prices only after a competitor successfully does so or when contracts are up for renegotiation. Regarding the declining price of oil, energy industry representatives shared their view of the impact on their industry, which they indicated would initially affect smaller players (described in a recent SouthPoint post). In addition, a few contacts noted that declining energy prices posed a risk to their 2015 outlook. For the first time in many months, a number of contacts reported across-the-board wage pressures, which were previously isolated to certain positions. Others indicated they expect to encounter pressure in 2015. Several firms we spoke with indicated they expanded merit program budgets in 2015, with most increases being in the range of 2.5 to 3 percent, though a few in the range of 3 to 5 percent. Though a number of firms reported they were investigating strategies to control compensation costs with tools such as performance-based incentives, health care contributions, and targeted salary increases—a trend we've noted over the last couple of quarters.
Availability of credit and investment
Access to capital and availability of credit remained a nonissue for the majority of our contacts, though some small firms indicated obtaining credit from traditional banks remained difficult because of qualification requirements. Banking contacts indicated that loan demand strengthened in the third quarter. Capital investment reports were consistent with the last few cycles, reflecting some expansion activity but mostly focused on efficiency or maintenance.
Although some contacts noted a bit of uncertainty about the outlook—including the declining price of oil, increased government regulations, and the strengthening U.S. dollar—contacts were overall positive and confident about 2015 expectations. What's your outlook for 2015?
By Rebekah Durham, economic policy analysis specialist in the Regional Economic Information Network at the New Orleans Branch of the Atlanta Fed
Florida's Job Report Shines Bright
On December 19 the U.S. Bureau of Labor Statistics published November 2014 state-level labor market data. This release followed the national report published on December 5, which revealed an impressive 321,000 jobs were added on net in November, while the unemployment rate held firm at 5.8 percent. The state-level data helps us determine how the Sixth District labor market compared with the national labor picture. On aggregate, Sixth District states appear to have fared well. The district contributed 49,500 jobs in November, 15 percent of the national figure. However, although the sum of jobs added in the Sixth District last month was the highest since April, losses in some states brought the aggregate number down a bit.
Florida becomes the region's top jobs contributor
One Sixth District state had a stellar month of job gains and an unemployment rate that declined to match the national rate. If you guessed the Sunshine State, you were correct. Florida was the top contributor of jobs in the district by far, with 41,900 jobs added on net (see the chart).
Florida's job growth in November was the most the state has added in four and a half years, when it contributed 45,200 payrolls in May 2010. The November number reflects 85 percent of all jobs created in the district, and it follows a strong month in October as well, when 34,400 jobs were added on net in the state. At 5.8 percent, Florida's unemployment rate in November was the lowest it's been since May 2008, when it was 5.7 percent.
So where did these jobs come from? Though November's gains occurred in nearly all sectors, the largest contributions came from trade, transportation, and utilities (up 12,700), leisure and hospitality (up 8,400), and financial activities (up 5,800) (see the chart).
Within the trade, transportation, and utilities sector, retail added 8,400 jobs on net, followed by transportation, warehousing, and utilities, which added 3,500 jobs, and wholesale trade, which gained 800 jobs. Looking at Florida's payroll contributions over the year so far, you can glean that the trade, transportation, and utilities sector has often performed well. In fact, the sector has contributed 47,600 jobs in Florida so far this year, 30,200 from retail alone. The other big contributors over the last 11 months have been the leisure and hospitality (up 42,700), professional and business services (up 40,500), and goods-producing (up 39,000, with 33,500 from construction) sectors (see the chart).
Looking at the losses
A few Sixth District states saw payroll declines in November, losses the district had not seen on aggregate since June. Tennessee's loss of 1,900 jobs in November was the first time the state encountered net losses since June. The largest decreases occurred in the trade, transportation, and utilities (down 2,000 payrolls) and leisure and hospitality (down 1,900) sectors. In addition, for the first time since January, Louisiana experienced job losses in November, with 2,600 jobs subtracted on net. The goods-producing sector drove the losses, shedding 3,400 jobs. Within the sector, 3,000 construction jobs were lost. Additionally, Louisiana's unemployment rate rose in November for the seventh month in a row to 6.5 percent, increasing 2.0 percentage points since April. In fact, the movements in unemployment rates of Sixth District states, particularly during the last few months, indicate that all states rates are trending down except Louisiana (see the chart).
Furthermore, Mississippi experienced net job losses in November, shedding 4,500 payrolls. The bulk of the losses were in the leisure and hospitality (down 2,200) and professional and business services (down 1,700) sectors. Mississippi also had the highest unemployment rate in the United States in November with 7.3 percent (previously, another Sixth District state—Georgia—held that distinction for three months in a row).
Overall, the Sixth District's aggregate payroll contributions in November and a declining unemployment rate seen over a three-month trend are positive signs of continued strengthening in the labor market. However, a distinction must be made between the aggregate and state-by-state figures, considering the Sunshine State's occasional tendency to outshine its cohorts, as seen in November's data.
The state-level labor market report for December will be released on January 27, 2015, and we'll parse its numbers for you.
By Rebekah Durham, economic policy analysis specialist in the Regional Economic Information Network at the New Orleans Branch of the Atlanta Fed
Will Retail Sector Maintain GDP Momentum?
There is little doubt that technology has changed the way we live. Online social networks like Twitter and Facebook have changed the way we communicate, and the rise of e-commerce has given us the convenience to shop from the comfort of our homes. Personally, I cannot live without my debit card, and this year I did more online holiday shopping than ever before. Move aside Black Friday, because Cyber Monday is my new best friend! 60 percent off video games? Yes, please. Everything in stock and guaranteed to arrive in time for the big day? Great. Free shipping? Fantastic! And the best part? I'm on my patio sipping coffee, watching the palm trees sway in the breeze and the duck swim in the lake while I tap away—on my smartphone.
While most organizations today have an online storefront, not all of the Atlanta Fed's Miami Branch retail contacts are thrilled about this migration. Last month, some businesses discussed the challenges that are arising as technology continues to change consumer buying habits. One change contacts often report is that their customers who shop online are less likely to purchase add-on items like warranties than when they shop in the store. To mitigate this challenge and boost sales of these items, some online sellers suggest to consumers, when they add something to their shopping carts and again when they check out, that they might like to also purchase the add-on items.
According to information released by IBM Digital Analytics, Cyber Monday this year was the busiest online shopping day of the year, with an 8.5 percent increase in sales from 2013's Cyber Monday. Overall online sales during "Cyber Week"— a five-day period from Thanksgiving Day through Cyber Monday—increased by 12.6 percent over the same time period last year, according to IBM. Sales made with mobile devices increased year over year by 27.6 percent, and these transactions drove more than half the online sales throughout Cyber Week.
So why do analysts spend so much time slicing and dicing consumer spending patterns? Mostly because consumer spending accounts for about 70 percent of total gross domestic product (GDP). This year, there is much anticipation as to whether or not the retail sector will do well enough during the holiday season to maintain the momentum that we had seen earlier in the year. According to the second estimate for GDP growth in the third quarter, real GDP expanded at an annualized rate of 3.9 percent, faster than the initial 3.5 percent estimate. Upward revisions were made to consumer spending, private inventory investment, and nonresidential equipment and software, while net exports were revised downward (see the chart).
Will the sales activity from Cyber Week have enough "oomph" to meet estimated GDP growth for this last quarter? We'll find out more when the advanced estimate for fourth-quarter GDP is released on January 30, 2015. Until then, click to shop till you drop!
By Marycela Diaz-Unzalu, a senior Regional Economic Information Network analyst at the Atlanta Fed's Miami Branch
A Timely Talk with Energy Professionals
If you read or watch the news, you've undoubtedly noticed what's happening with the price of oil. But for those of you who may have missed these reports, here it is in a nutshell: the price of Brent crude oil, the international benchmark, has declined more than 40 percent since its peak of over $115 in mid-June (see the chart).
Many reports have discussed what the decline means to the energy industry and economy as a whole. In fact, the Atlanta Fed's very own macroblog published a post that examined the impact on energy investment and overall economic growth. We were also fortunate to be able to discuss this important and timely situation, along with other industry trends, with energy sector representatives last month during our Energy Advisory Council meeting held at the New Orleans Branch. So what did council members think about the declining price of oil? I gleaned a few key takeaways.
Council members reported that the recent drop in the price of oil had led exploration and production firms to reevaluate operational flexibility, cost-management strategies, and extraction technologies. These firms also initiated renegotiations with oilfield service companies for reductions to pricing structures, which a recent report suggested may drop as much as 20 percent.
In addition, council members conveyed their expectation that marginal oil producers may be negatively affected by falling oil prices, as their breakeven point is typically much higher than the larger producers. They shared that foreign oil-producing countries that acquire a majority of their revenues from the world's most traded commodity may also be adversely affected, which is a known concern among many key people inside the industry. The council also pointed out that if oil prices continued to decline or even hold at current levels, capital spending may be affected since firms would have fewer profits to reinvest into production and growth. Some reports indicate that this effect on spending is already beginning to occur. However, some members told us that they anticipate continued steady production in both deepwater and onshore drilling since many of these projects are large scale and long term and have high front-end costs (which in many cases have already been funded). Decisions about future projects may need to be reconsidered, however.
All in all, the Energy Advisory Council meeting was very timely, considering our attempts to understand what was happening globally with the price of oil and its impact on the economy. It will be interesting to learn how the energy industry will have adapted to current events when the council convenes again in March 2015.
By Rebekah Durham, economic policy analysis specialist in the Atlanta Fed's New Orleans Branch
A Closer Look at Earnings in the Southeast
It is widely accepted that average incomes can vary from location to location. A look at recent data on average earnings by state compiled by the Regional Economic Analysis Project demonstrates the variability in average earnings among Southeast states. Average earnings in all six states in the Federal Reserve Bank of Atlanta’s district fall below the national average. Within the district, average wages are notably higher in Georgia, Louisiana, and Tennessee than in Mississippi, and they are somewhat higher than in Alabama and Florida (see the chart).
Average wages largely reflect the mix of jobs in the state, and so the differences across states partly reflect differences in the industry mix as noted in this report. The table below shows the industry mix of employment among Southeast states:
We might expect to see similarities in average wages across state lines within a particular industry, but in fact average earnings also vary considerably from state to state among almost every broad sector (see the table; figures highlighted in yellow are above the national average):
This information suggests that there is also a lot of variation across states in other factors such as the types of jobs and the mixture of types of businesses within the industry. In fact, the industry categories used here are rather broad and probably encompass a wide range of possible job and business types.
The preceding gives a snapshot of the earnings picture in the region at a point in time. Another perspective is to look at the pattern of earnings over time.
In the chart below, we show for each state a ratio of per-worker wages to the national average. This ratio allows us to see how state wages have compared to the national trend over time (a reading above 1.0 for a given state indicates wages per employee are higher than the national wage per employee measure).
Several things jump out at you as you look at the chart. Once again, per-worker wages among Sixth District states have been below the national level during the last three decades. (The exception is Louisiana, which saw a run-up in wages that coincided with the sharp rise in oil prices in the late 1970s, followed by a sharp drop as the oil industry went bust.) Also, you can see the rise in wages following Hurricane Katrina’s landfall on August 29, 2005.
Wages in Alabama, Florida, and Tennessee were very similar from the late 1980s until the early 1990s, when all three (to varying degrees) experienced a decline in wages. Much of this decline coincided with the decline in manufacturing jobs that took place during this time and affected the entire region. The nondurable manufacturing sector, which accounted for nearly half of all manufacturing jobs in the region (but only about 40 percent of manufacturing jobs nationally), was particularly hard hit as many textile and apparel firms shifted jobs outside the United States after the North American Free Trade Agreement (NAFTA) was implemented on January 1, 1994 (as noted here and here). It wasn’t until the early 2000s that wages across much of the region began to rise. This period coincided with improvements in the manufacturing sector, driven by the durable sector as the automotive industry moved more production to the region, as noted in this paper, and new home production increased as well, particularly in Florida. The subsequent bust in the housing market later in the decade put downward pressure on wages, most notably in Florida.
Average Georgia wages grew strongly during the 1980s and very nearly equaled the national level from the mid-1980s to early 2000s. A striking feature is how Georgia has lost ground relative to the United States since about 2000. Interestingly, this decline in relative performance coincided with a sharp retrenchment in employment in the information technology industry from December 1993 to October 2000. Employment in the relatively high-paying information sector grew by 57 percent in Atlanta (a city that represented about 55 percent of Georgia’s employment base at the time), but by January 2005 employment in that sector had shrunk by 23 percent. Weaker demand for workers in the technology sector may have contributed to declining average wages in Georgia relative to the United States during the early 2000s even as relative wages were rising elsewhere in the region.
Since the end of the Great Recession, wages per worker have varied across the region, with the overall effect being flat to slightly falling average wages compared with the national trend.
So wages vary by location, and the industry and occupational mix clearly influences these differences. Moreover, over time, shocks (both positive and negative) to a particular industry can have a strong influence on average wage growth within a state.
By Whitney Mancuso, a senior economic analyst, both of the Atlanta Fed's research
Has Southeast Manufacturing Found Some Optimism?
Have you ever lost your car keys? How about your wallet? I hate looking for things. I was never one to enjoy an Easter egg hunt. It's maddening when I can't find something. Lately in SouthPoint, I've been searching for a little optimism coming from the manufacturing sector. Following a string of strong reports from the Southeast purchasing managers index (PMI), optimism among manufacturers in the Southeast deteriorated significantly in October. According to the October PMI report, only 21 percent of manufacturers expected production levels to be higher during the next three to six months, down 29 percentage points from the prior month's reading. I was wringing my hands trying to figure out whether the weakness in October was an anomaly or a sign of something deeper. So did the November report disappoint me? No: the November Southeast PMI report, released on December 5, indicated that optimism is back.
The Atlanta Fed's research department uses the Southeast PMI to track regional manufacturing activity. Produced by the Econometric Center at Kennesaw State University, the survey analyzes 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 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.
Most underlying variables in the November PMI report were generally positive (see the chart). Despite decreases in the new orders and production subindexes, the PMI increased to 58.3 in November, which was a 1.8 point rise compared with October.
- The new orders subindex decreased 3.4 points from October but remained above 60.0 points for the third consecutive month with a reading of 61.0.
- The production subindex fell 7.6 points compared to the previous month, but similar to the new orders subindex, it remained close to 60.0 points, registering 59.8.
- The employment subindex rose significantly, increasing 9.8 points over October. November's 64.6 is the highest reading for the employment subindex since June 2013.
- The supplier deliveries subindex rose 2.5 points over October. The rise suggests that purchasing agents are experiencing longer wait times to receive materials they ordered.
- The finished inventory subindex rose 7.4 points compared with October and now reads 48.8. The rise completely reversed last month's fall of 5.7 points.
- The commodity prices subindex rose to 52.4, a 1.5 point increase compared with October.
As I mentioned above, optimism rose significantly in November over October levels. When asked for their production expectations over the next three to six months, 51 percent of survey participants expected production to be higher in that period.
Along with the strong Southeast PMI reading, the national PMI also continued to register strong readings, reaching 58.7 points in November. (Note that the Southeast PMI is not a subset of the national PMI.) Now that optimism is back on the right track, manufacturing looks to close out 2014 on a strong note. And most importantly, I don't have to keep looking for optimism.
By Troy Balthrop, a senior Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch
WHAT WAS I THINKING?!?!
BLACK FRIDAY! Black Friday has historically been the day that retailers wait for all year long. It's the day when merchants hope to move from the red to the black column (hence the name). However, I as a consumer have often avoided going to the stores on this infamous day for two reasons: one, big crowds give me the heebie-jeebies, and two, I am usually working the day after Thanksgiving—doing regional economic analysis but also preparing the Jacksonville Branch for the upcoming holiday season.
As I sit here penning this post, I am steeling myself for what lies ahead: I have to brave the crowds today, Black Friday 2014, to purchase a few last-minute items to complete the holiday transformation of the branch. When I decided to go on this shopping trip with my colleague, Barb, neither of us realized what kind of day it would be...goodness, what were we thinking?!
So, we put on our armor and headed out into the madness. Here are a few pictures I took of what we encountered just trying to get to the store and find a parking space.
Well, I'm happy to report that Barb and I survived our shopping excursion! But I'm also delighted to discuss the survival of retailers, since a successful Black Friday is vital to the retail industry. According to the National Retail Federation's (NRF) Thanksgiving Weekend Expectations survey, approximately 140 million shoppers were likely to take advantage of deals during the Thanksgiving weekend. Of this number, 67.6 million shoppers said they would actually shop, and 72.5 million would take a wait-and-see attitude to judge whether the deals offered were worth the trip to the stores. The NRF also noted that merchants would have to come up with amazing deals to induce consumers to spend, given that retail has been so heavily discounted since the start of the recession.
So what was the condition of the consumer going into this past holiday weekend? According to third quarter results from the New York Fed's Report on Household Debt and Credit, household debt and mortgage balances were up and credit for auto loans and credit cards increased, all pointing to more freely spending households.
Personal savings rate data from October represent further evidence that the consumer is willing to spend. According to the U.S. Bureau of Economic Analysis, the personal savings rate is personal saving (disposable personal income less personal outlays) as a percentage of disposable personal income. Prior to the release of October data, the savings rate appeared to show people saving more. However, revised data indicate that the savings rate has remained about the same since the beginning of the year, September's rate was revised down from 5.6 percent to 5.0 percent (see the chart). It would appear that people are not saving as much as previously thought, which bodes well for retailers.
We have heard from some District contacts that the lower gasoline prices have freed up some discretionary dollars, with consumers taking advantage of the extra cash in their pockets, which benefits retailers. Although the consumer seems to be well positioned to spend, how they feel matters as well. We can gauge this by looking at consumer confidence measures such as the Conference Board's present situation survey and the University of Michigan's current economic conditions survey. However, these surveys represent different points of view. The Conference Board is interested in the consumer's opinion of overall economic conditions as they relate to businesses and jobs, and the University of Michigan focuses its attention on the individual's current condition as it relates to his or her household. For the purpose of this post, let's examine the individual consumer's stance on current conditions. The University of Michigan's current economic conditions index rose from 98.3 points in October to 102.7 in November, the highest it's been since July 2007 (see the chart). It appears that the consumer is feeling pretty good these days.
So how does all this suggest consumers' greater willingness to spend? Let's look at it this way: Personal debt is rising; people are saving less; people are spending; and retail sales are (hopefully) up.
Now that Black Friday has come and gone, the NRF has released its preliminary results, which show the number of shoppers dropped this year. Given that Black Friday still draws the biggest crowds of the Thanksgiving weekend—and the weekend also includes Small Business Saturday and Cyber Monday—it should be interesting to see what the retail sales data (released on January 14, 2015) say about the success of the holiday weekend.
Until then, Season's Greetings, everyone—and happy shopping!
By Christine Viets, a senior Regional Economic Information Network analyst in the Jacksonville Branch of the Atlanta Fed
Southeast Commercial Construction Continues Gathering Steam
Through September 2014, U.S. total private construction spending increased 3.38 percent from the year-earlier level. How did the various categories stack up in terms of their contribution to this year-over-year increase in total private construction spending? The multifamily and nonresidential categories together accounted for 4.34 percent of the change, and new single-family and residential improvements combined to shave 0.96 percent off the change (see the chart).
Does commercial construction activity in the Southeast mirror that of the nation? On a quarterly basis, the Atlanta Fed polls southeastern business contacts engaged in commercial construction to track and better understand regional trends in construction activity. The latest poll results appear to tell a story similar to the one that the national numbers depict.
Most respondents indicated that the pace of nonresidential construction activity and the pace of multifamily construction activity in the Southeast continued to be ahead of the year-earlier level (see the charts).
More than 80 percent of respondents reported a backlog that was similar to or greater than the year-earlier level, signaling that the pipeline of future activity remains fairly robust (see the chart).
The number of respondents reporting that the amount of available credit met or exceeded demand continued to increase from earlier reports. In the third quarter of 2014, 82 percent of contacts indicated that credit was sufficiently available, compared with 68 percent the previous quarter and 78 percent one year earlier (see the chart).
While half of respondents noted that they expect their headcount to remain the same from this quarter to the next, 44 percent of respondents indicated that they were planning to do a modest to significant amount of hiring in the fourth quarter of 2014 (see the chart).
Relative to the previous quarter, fewer contacts indicated that they were having a difficult time filling positions (see the chart).
Most contacts reported some degree of upward pressure on labor costs. When looking across the brackets of labor cost increases, most of the pressure seemed to be concentrated in the category indicating that labor costs are up from 3 to 4 percent versus a year ago. This response marks a shift from prior periods, when the pressure appeared concentrated in the bracket indicating that labor costs were up from 1 to 3 percent. Continuing a trend that we’ve noted over the past few quarters, a growing share of contacts (more than 80 percent) indicated that their labor costs had increased more than 3 percent from year-earlier level (see chart).
The next poll will open on January 5, 2015. If you are a commercial contractor and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.
Note: Third quarter 2014 poll results were collected October 6–15, 2014, and are based on responses from 18 business contacts. Participants in this poll included general contractors, subcontractors, lenders, developers, and material fabricators with footprints of varying sizes across the Southeast.
By Jessica Dill, senior economic research analyst in the Atlanta Fed's research department
Employment Momentum Grows in Florida and the Retail Sector
The U.S. Bureau of Labor Statistics published October 2014 state-level labor market data on November 21. For Sixth District states, a couple of factors stood out. First, after several months of anemic job growth, Florida employers added lots of jobs. In fact, Florida contributed 61 percent of October's net payrolls to the region. Second, although job gains were solid in a number of sectors, retail shined with 13,300 jobs added on net across the District, a figure that represents nearly half of the 27,100 jobs added to the sector in the entire United States in October. These regional retail job growth data confirm what the folks in our Regional Economic Information Network described earlier this month in their recap of economic intelligence gathered from business contacts across the Southeast: retailers anticipate strong holiday sales, and this anticipation translated into robust seasonal hiring in the retail sector in October.
A summary of the payroll and unemployment data for Sixth District states sheds more light on recent activity.
Payrolls flex some muscle
Employers in all Sixth District states except Mississippi added to payrolls: 56,600 jobs were added on net (see the chart). Florida dominated aggregate net gains in October, adding 34,400 jobs on net. Most of these gains came from the leisure and hospitality sector (up 9,300). Big contributors to Florida gains also included the educational and health services (up 9,000), professional and business services (up 6,100), and goods-producing sectors (up 5,100). (The good-producing sector was up 6,200 payrolls from construction alone but was reduced by losses in manufacturing.)
The sectors with payroll additions varied by state, though gains in the trade, transportation, and utilities sector were prevalent, with 16,800 net jobs added. Gains in this sector were dominated by retail trade (see the chart), which was the only sector tracked by all states that added jobs in every Sixth District state in October. This increase is typical for October, as retailers gear up for the holidays.
Employment momentum in the retail sector has been building for most of the region's states for a few months now (see the chart).
District gains in the professional and business services sector were also sizeable, with 13,100 jobs added. Momentum in this sector has been building in district states (see the chart). However, two states subtracted jobs from this sector in October: Louisiana (down 1,200) and Mississippi (down 1,500).
A few other facts about the Sixth District's October payrolls and sectors are noteworthy:
- Alabama added 2,200 jobs on net. The leisure and hospitality (up 3,200) and professional and business services (up 1,400) sectors were the top contributors. The biggest losses occurred in the government (down 1,500); trade, transportation, and utilities (down 600); and financial activities (down 500) sectors.
- In Florida, aside from job gains mentioned above, payrolls fell in the information (down 2,100) and financial activities (down 100) sectors.
- Employers in Georgia added 11,600 jobs on net. The largest gains occurred in trade, transportation, and utilities (up7,900, with 4,700 of those payrolls from wholesale trade) and professional and business services (up 5,400). The biggest losses came from government (down 3,200) and financial activities (down 1,200).
- Louisiana added 1,200 payrolls on net, most of which came from the trade, transportation, and utilities (up 1,500) sector. That sector was up 2,900 from retail trade, reduced by losses in wholesale trade) and educational and health services (up 1,200) sectors. The biggest losses occurred in leisure and hospitality (down 2,600) and professional and business services (down 1,200).
- Mississippi was the only district state to subtract payrolls from the aggregate district figure. The largest losses came from the professional and business services (down 1,500) and government (down 700) sectors. The only gains occurred in the educational and health services (up 1,300), leisure and hospitality (up 500), and trade, transportation, and utilities (up 400) sectors.
- Tennessee employers increased payrolls by 7,900 on net. The largest increases occurred in the trade, transportation, and utilities (up 3,500) and professional and business services (up 2,900) sectors. The biggest losses occurred in educational and health services (down 700) and leisure and hospitality (down 400) sectors.
Regional unemployment declines, if only slightly
The aggregate district unemployment rate was 6.6 percent in October, a decline of 0.2 percentage point from September (see the chart).
The rate fell in all states except for Louisiana, where it increased to 6.2 percent from 6.0 percent the previous month and was the sixth straight month of an increasing unemployment rate in that state. As I reported last month, this isn't necessarily a bad thing in the short run, since the state added jobs yet appears to have increased its labor force participation rate.
The unemployment rate fell in all remaining District states. Alabama's rate fell 0.3 percentage point in October to 6.3, its lowest rate in nine months. Florida's rate fell 0.1 percentage point to 6.0 percent, the lowest it's been in more than six years. The unemployment rate in Georgia fell for the second month in a row, to 7.7 percent in October from 7.9 percent in September. Though Georgia's unemployment rate declined, it had the highest rate in the United States in October for the third month in a row, at 7.7 percent. Mississippi's rate declined 0.1 percentage point to 7.6 percent, the lowest it's been in six months. In Tennessee the unemployment rate was 7.1 percent, a 0.2 percentage point decline from September.
So once again, collectively, the Sixth District states' labor market showed continued strengthening in October, particularly the state of Florida and the retail sector.
Hopefully, this progress continues for the month of November. We'll see when the data are released on December 19.
By Rebekah Durham, economic policy analysis specialist in the New Orleans Branch of the Atlanta Fed
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