05/11/2012
Signs of rebuilding in housing?
Every month, the Atlanta Fed polls a number of homebuilders and real estate agents throughout the Southeast. Our latest survey results show that the majority of regional builders and residential brokers continued to report that sales increased on a year-over-year basis in April.
In April, the Atlanta Fed's Center for Real Estate Analytics broadened the scope of the monthly real estate poll to include contacts in this sector who were not participating in our monthly survey. We also reached out to our boards of directors to gauge a wider view of recent developments in residential housing.
The main message from the broader poll was that sales of new and existing houses were indeed improving in the Southeast. In fact, 70 percent of respondents indicated that total March homes sales were slightly up or significantly up versus a year ago. In addition to normal seasonal trends, survey respondents attributed this recent pick-up in buyer activity to attractive pricing and increasing levels of consumer confidence. While respondents cited low interest rates as an influential factor, we interpret the low-rate environment as more of a necessary condition than a standalone driver spurring an increase in the level of sales.
An overall improvement in the credit quality of mortgage applicants was also noted as contributing to the modest improvement in the housing sector. Our Community and Economic Development team did some digging on this topic as well and found that interest in home buying is increasing modestly among first-time home buyers, as evidenced by a growing number of people participating in home buyer education programs. We also heard that sales were increasing at a faster pace in more desirable locations associated with better-rated school districts.
Also in early April, we held our semiannual Real Estate Advisory Council meeting. Many council members felt it would take some time to achieve widespread house price normalization in real estate markets across the United States. (House price normalization, for the purposes of this summary, refers to a return in house price appreciation that generally keeps pace with inflation [i.e., house price appreciation of 2–3 percent per year].) As a side note, those who disagreed felt that house prices would come back sooner and stronger.
Our advisory council members identified several headwinds that we should watch closely. One involves the dampening effect that high levels of student debt, shorter credit histories, and tighter underwriting standards have on first-time home buyers. The second set of headwinds includes the slight but gradual shift in homeownership preferences over time from owning to renting, the importance of location and school districts in home buying decisions, and the sluggish nature of household formation.
The main message from our surveys and from our boards of directors and advisory council members is that housing markets are improving slowly in the aggregate, but these improvements are uneven in terms of scope and size.
By Carl Hudson, a director in the Atlanta Fed's research department, and
a senior research analyst in the Atlanta Fed's research department.
Both Carl and Jessica work in the Atlanta Fed's Center for Real Estate Analytics.
May 11, 2012 in Real Estate | Permalink | Comments (0) | TrackBack (0)
05/10/2012
Regional manufacturing remained strong in April
Southeast manufacturing activity showed very healthy levels of production and incoming orders in April, according to the Southeast Purchasing Managers Index Report from Kennesaw State University's Econometric Center. The index increased 2.5 points in April to a level of 63.5 points, regaining most of the 3 point decline from March. The Southeast Purchasing Managers Index (PMI) has been above the expansion/contraction level of 50 each month this year. (A reading above 50 indicates an expansion in the manufacturing sector; see the Econometric Center's website for a full description of the methodology.)
The employment component of the index decelerated 4.4 points in April to 57.9 points. Although the reading fell back a bit in April, it remained above the level of 50, indicating that employment gains continue in regional manufacturing. Looking at actual employment data from the U.S. Bureau of Labor Statistics (BLS), we see that over the last two years, factory employment in the region has risen by a seasonally adjusted 38,500. (Regarding the next two charts, note that the BLS does not provide seasonally adjusted data for Alabama manufacturing employment, but it does release seasonally adjusted data for factory employment for the other five states in our District. The Atlanta Fed seasonally adjusted the Alabama data provided by the BLS for this exercise.)
For insight into current and expected economic conditions, we reach out to businesspeople throughout the region. Recently, our contacts in the auto production and energy sectors have shared positive reports for several months. We've received similar reports from our agriculture-related manufacturing contacts as well.
Overall, the manufacturing sector appears to be performing well in terms of total employment. In fact, employment gains in the region's manufacturing sector (as defined by the sum of total jobs in the manufacturing sectors of the six states in the Atlanta Fed's region) have not been as strong as they are today since mid-1995. In March, the year-over-year percent change in total manufacturing employment was 1.5 percent.
All told, recent data from the Southeast PMI and the BLS employment reports point to positive developments in the region's manufacturing sector.
By Mike Chriszt, a vice president in the Atlanta Fed's research department
May 10, 2012 in Employment, Manufacturing, Southeast | Permalink | Comments (0) | TrackBack (0)
05/02/2012
Regional job growth slows in March, unemployment rate falls further
The states of the Sixth Federal Reserve District gained a total of 13,400 jobs in March, down from February's increase of 31,300 and a bit slower than the 12-month average gain of 17,400. Florida, Georgia, and Louisiana added payrolls, while Mississippi and Tennessee reduced employment over the month. Alabama did not experience a change in payrolls in March.
Meanwhile, Sixth District states' aggregate unemployment rate dipped 0.2 percentage points, to 8.5 percent in March. The March unemployment rate is down 1.7 percentage points from its year-ago reading of 10.2 percent. All District states except for Louisiana reported unemployment rate decreases.
For an explanation of the relationship between employment data—as derived from the U.S. Bureau of Labor Statistics Establishment Survey—and the unemployment rate—a product of the same agency's Household Survey—see the macroblog post by our Atlanta Fed colleague Julie Hotchkiss.
While job growth should remain positive, we are prepared for modest gains similar to what we saw in March. In the latest edition of Southeastern Insights, we reported that:
"Many of our business contacts supported the idea that recent employment gains were related to firms' 'catching up' and restaffing to levels that were more in line with current needs, having cut back payrolls severely during the recession and the early stages of the recovery. While companies continue to turn to part-time, temporary, and contract workers to meet short-term needs, their outlook for hiring full-time employees is a bit more tempered."
Despite this moderate demand for labor, many firms we contacted over the last several months continued to report difficulty finding qualified applicants for skilled positions. This factor may also work to hold back the pace of new job growth in the region. (For a deeper dive into the economic debate under way on this topic, take a look at this recent post from macroblog.)
By Mike Chriszt, a vice president in the research department of the Atlanta Fed,
and
Neil Desai, a senior analyst in the research department of the Atlanta Fed
May 2, 2012 in Employment | Permalink | Comments (0) | TrackBack (0)
04/17/2012
What's the story behind Tennessee's strong construction employment data?
Among the interesting developments with regional employment data is Tennessee's mini-boom in construction employment. Well, it's not really a "boom," but when compared with other states in the region, it is clearly an outlier. The Volunteer State has added nearly 10,000 construction jobs over the past year while other states continue to post declines. The chart below shows total employment in the construction sector over the last 10 years, and we can clearly see the jump in Tennessee that begins in early 2011.
I asked David Penn, director of the Business & Economic Research Center at Middle Tennessee State University, about this development. Dr. Penn's center publishes detailed reports on Tennessee's employment picture, among them a sector-by-sector view of recent data. My question was a two-parter, the first asking if there was something odd going on with seasonal developments and whether the jump in Tennessee construction employment was actually picking up on an increase in energy extraction activity. (Tennessee construction data are not reported separately as in other states. Rather, it is part of a broader measure called "Construction, Mining, and Logging.")
Dr. Penn replied that there was some evidence of warmer winter weather playing a role in boosting some construction activity, but if seasonal factors were the driving factor, these same seasonal factors should have affected other states as well (and clearly did not). Furthermore, he said there was no large pick-up in mining activity that could have been captured in the broader measure of construction employment. The increase in the state's construction employment was real. He looked into more detailed employment data from the Quarterly Census of Employment and Wages (QCEW) series from the U.S. Bureau of Labor Statistics, which showed that:
"Within construction, roughly equal numbers of jobs have been created in building construction, heavy construction, and specialty trade contractors. Within these categories, nonresidential building is important (college campus construction, the Nashville convention center), as are utility construction and an 'other' category under heavy construction and building equipment contractors (electrical, plumbing, HVAC)."
Dr. Penn was also quoted in the Nashville Post, where he provided some context to the relative strength of the state's construction sector:
"The level of employment in this sector had dropped so low that it didn't take a major increase in jobs to show a large growth rate," he said. "The lion's share of this increase is driven by construction," Penn added. "We've seen double-digit increases in housing permits, especially in this area."
I checked the numbers, and there has indeed been a jump in the state's permits for new residential construction, although the latest data (February) did simmer down a bit (see the chart below). Commercial construction, as measured by new projects in terms of square feet, has also trended up.
We don't know yet whether or not the improving trend in Tennessee construction activity and employment will persist, but for this beleaguered sector, any improvement anywhere in the Southeast is good news.
By Mike Chriszt, a vice president in the Atlanta Fed's research department
April 17, 2012 in Construction, Tennessee | Permalink | Comments (0) | TrackBack (0)
04/13/2012
Snapshots from the Beige Book
Eight times a year, each of the 12 Federal Reserve Banks gathers anecdotal information on current economic conditions in its district through reports from Reserve Bank and branch directors and interviews with key business contacts, economists, market experts, and other sources. To compile our Reserve Bank's Beige Book, the Atlanta Fed utilizes its Regional Economic Information Network (REIN). Results are published on the Federal Reserve Board of Governors website.
An overall national summary is prepared as well. Much attention is paid to the first sentences of the national summary and each Bank's report because they give an overall take on economic conditions.
The lead sentence of the national summary for the April 11 report reads:
"Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest to moderate pace from mid-February through late March."
The opening sentence from the Sixth District's section was almost identical:
"Reports from Sixth District business contacts indicated that the pace of economic activity expanded at a moderate pace in late February through March."
The main take-away from this comparison is that businesses in the Southeast—and, for the most part, the rest of the country—are still experiencing positive growth. The pace may not be as fast as we would like, but it is still expanding.
Below are sector overviews from the Sixth District's Beige Book which support the idea that conditions in most sectors are recovering, albeit slowly:
- Consumer Spending and Tourism: Retailers mostly indicated sales were growing at a modest pace and auto sales remained strong. Leisure and hospitality businesses reported robust activity in all segments except cruise lines.
- Real Estate and Construction: Homebuilders and brokers experienced improvements in sales of new and existing homes, and multifamily construction remained strong. General contractors noted slow improvements in commercial construction conditions.
- Manufacturing and Transportation: Manufacturers and transportation contacts reported positive production trends, on balance.
- Banking and Finance: Loan demand remained relatively weak, according to community bank contacts.
- Employment: The share of firms reporting they were hiring continued to increase, although many contacts continued to express a preference for part-time or temporary contract workers.
- Prices: Most contacts continued to report having relatively little pricing power. However, the proportion of firms saying they were successful in their attempts to pass on price increases rose since the last report.
- Energy: Investment in transportation infrastructure for oil and natural gas continued to increase.
- Agriculture: Contacts continued to report concerns regarding available labor supplies in Georgia and Alabama, attributing this concern to the tougher immigration laws.
By Shalini Patel, a senior economic analyst in the Atlanta Fed's research department
April 13, 2012 in Beige Book | Permalink | Comments (0) | TrackBack (0)
04/12/2012
Southeast manufacturing PMI continues to indicate expansion in March
Kennesaw State University's Purchasing Managers Index (PMI) continued to indicate expansion in March, though the index did slip somewhat from February's reading. The Southeast PMI lost 3 points in March, which would be more of a concern if the prior month's reading was not such a strong reading of 64 points.
In fact, most components of the Southeast PMI appeared to adjust after the significant gains seen in February's report. The new orders index lost 5.1 index points but still remains at 68 points, a reading indicating solid growth in orders. The production component slipped 1.6 points to reach 65.6 for the month. Manufacturers also indicated that inventory building is occurring at a somewhat slower rate; the finished-goods measure lost 6.3 index points but still indicates growth at 54.1 points.
The brightest part of March's Southeast PMI report was the employment component. While most components seemed to adjust downward from elevated levels in February, the employment index tacked on 0.4 points to reach 62.3 points, indicating steady growth in manufacturing employment for the Sixth District states. The national measure of manufacturing employment also had a good month in March, adding 2.9 index points to reach 56.1.
Here's a look at how March's Southeast PMI report compares with the national manufacturing PMI, produced by the Institute of Supply Management (ISM):
And this chart shows March's current Southeast PMI levels in the context of the survey's history, which began in 2006:
Of course, the Federal Reserve is always interested in changes in prices. The national and Southeast PMI surveys ask a monthly question about changes in prices relative to the prior month's level, but this information does not get factored into the aggregate index (the overall PMI) of either survey. Regardless, it tends to be a good signal for prices at the early stages of the supply chain.
In March, southeastern manufacturers indicated that prices were rising, but the rate was a bit slower than in February. The Southeast Commodity Price index registered 68 points in March, down 2.9 points from February's reading. The national (ISM) survey indicated roughly the same thing—that manufacturers are continuing to see input prices rise, but at a slightly slower pace. The national price reading for March was 61 points, down 0.5 index points from February's reading.
By Mark Carter, an analyst in the Atlanta Fed's research department
April 12, 2012 in Employment, Manufacturing | Permalink | Comments (0) | TrackBack (0)
04/06/2012
Employment data point to continued regional recovery
February employment reports for the states of the Sixth Federal Reserve District showed increases in jobs for most areas and further declines in unemployment rates. For the six states together, net job gains were 17,900, which is just about what the average gain has been for the region since January 2011. Florida bounced back from its January decline with a net increase of 10,100 jobs. Georgia gave back part of its January jump by shedding a net 8,300 jobs. Month-to-month volatility in state jobs data is not uncommon, so we're not too worried about Georgia's February report, just like we didn't lose too much sleep over Florida's January decline. Other states in the region registered net increases in total employment in February.
Regional unemployment rates also continued to fall. All states in the Sixth Federal Reserve District saw declines in February except Louisiana, whose unemployment rate of 7 percent is already well below than national rate of 8.3 percent and the average for the region (8.7 percent). Importantly, declines in regional unemployment rates are a result of falling unemployment as opposed to a drop in the labor force.
While we would like to see faster growth in employment and further drops in unemployment rates, recent data appear to confirm that regional labor markets are continuing to heal.
By Mike Chriszt, a vice president in the Atlanta Fed's research department
April 6, 2012 in Employment | Permalink | Comments (0) | TrackBack (0)
04/04/2012
More insights from the 2012 NABE Economic Policy Conference
Last week, SouthPoint primary blogger Mike Chriszt and I traveled to Washington, D.C., for the 2012 National Association of Business Economists' (NABE) Economic Policy Conference (see Mike's previous post). After a few words from Federal Reserve Board Chairman Ben Bernanke, a flurry of breakout sessions ensued. One of the more positive ones I attended focused on state government finances.
Highlights of a regional economic update
Steve Cochrane of Moody's Analytics gave a regional economic update in this session, with his talk looking at the most recent regional data available through the lens of state government finances (a job growth forecast, for example, might hint at an increase in income tax collections). I was pleased, for at least two reasons, to see most of the Sixth Federal Reserve District's states in green, as the chart below shows, which indicates that job growth should be at or above the national average by the end of 2012, at least according to Moody's Analytics.
Another Moody's slide that may be of particular interest to SouthPoint readers is the one below, which shows that regional indexes measuring exports of goods and commodities were highest in the South at the end of last year. Of course, the chart reflects the Census Bureau's definition of the "South," which is not precisely the Sixth Federal Reserve District. Still, all Sixth District states are included in this aggregation.
State government finances
The part of the session that honed in on state government finances was encouraging, but hinted it may not be time just yet to uncork the champagne bottles at governors' mansions just yet. Though state governments have definitely seen their coffers begin to recover in 2010 and 2011, the deep losses seen in 2008 and 2009 still make the four-year period a net loss.
For the most part, layoffs among state and local government positions are likely at their end, if not close, and that revenues are picking up nearly across the board. For example, according to a March 19 Rockefeller Institute report on state taxes, 41 states reported gains during the fourth quarter of 2011, while just 9 reported declines in overall tax collections for the quarter . One of those nine states still reporting declines in state revenues, Louisiana, lies within the Sixth Federal Reserve District.
We also heard that states may be finding more creative ways to increase revenues. This sentiment is also reflected in a recent article in The Economist, which noted some significant budgetary changes the State of Georgia has made this session. They include:
- Eliminating taxes on energy used in manufacturing
- Taxing online sales in the state
- Setting a goal to lower personal income tax from its current level of 6 percent to 4 percent by 2014 (to be slightly more competitive with neighbors Tennessee and Florida, who levy no personal income tax)
It will be interesting to see what other states are doing in creative ways to spur economic growth over the course of 2012, but that's another blog for another day.
By Mark Carter, a senior economic research analyst in the Atlanta Fed's Research Department
April 4, 2012 in Fiscal Policy, Growth, Southeast | Permalink | Comments (0) | TrackBack (0)
03/27/2012
A broader view of labor markets
I'm writing from the National Association of Business Economists' (NABE) 28th annual Washington Economic Policy Conference, titled "From Crisis Management to Long-Term Renewal." Conferences like this, and other NABE meetings, offer a chance to participate in important economic policy discussions with leading economists and policymakers from around the world.
I wanted to share a few thoughts from yesterday's events, the first of which was a speech by Federal Reserve Chairman Ben Bernanke. He focused on labor markets, but as we have discussed in SouthPoint before, lessons learned by examining national employment trends help us understand what is happening in our region.
We've reported that many of our business contacts have told us that they are having difficulties finding skilled employees for vacancies in their workforce. It's a theme we picked up on in the energy and technology sectors a while back, but more recently manufacturers and some professional services contacts have expressed similar concerns. We saw this as signs of possible structural problems in the labor force. Our first issue of Southeastern Insights released last week noted that:
"We also continue to receive feedback about the lack of qualified labor in several industries. For example, to meet their labor needs, some firms are holding job fairs—some well outside their bases of operations—to attract talent, and they are bringing back retirees on a contract basis to help train new workers hired without the requisite skills."
Atlanta Fed Research Director Dave Altig recently wrote in macroblog about how national labor markets were undergoing repair, and he shared the following chart and supporting text:
"If you try, it isn't too hard to see in this chart a picture of a labor market that is very close to ‘normalized,' excepting a few sectors that are experiencing longer-term structural issues. First, most sectors—that is, most of the bubbles in the chart—lie above the horizontal zero axis, meaning that they are now in positive growth territory for this recovery. Second, most sector bubbles are aligning along the 45-degree line, meaning jobs in these areas are expanding (or in the case of the information sector, contracting) at about the same pace as they were before the ‘Great Recession.' Third, the exceptions are exactly what we would expect—employment in the construction, financial activities, and government sectors continues to fall, and the manufacturing sector (a job-shedder for quite some time) is growing slightly."
So getting back to the conference's topics and discussions, Chairman Bernanke's remarks acknowledged that some degree of skills mismatch is evident in the labor force. However, he reported that this only explains a small part of why unemployment remains very high. The evidence, according to the chairman, is that the labor market woes are explained by cyclical problems—namely, the fact that the recent recession was protracted and very deep by historical standards.
"Notwithstanding these welcome recent signs, the job market remains quite weak relative to historical norms, as I've already noted. After nearly two years of job gains, private payroll employment remains more than 5 million jobs below its previous peak; the jobs shortfall is even larger, of course, when increases in the size of the labor force are taken into account. And the unemployment rate in February was still roughly 3 percentage points above its average over the 20 years preceding the recession. Moreover, a significant portion of the improvement in the labor market has reflected a decline in layoffs rather than an increase in hiring."
The chairman went on ask, "What will lead to more hiring and, consequently, further declines in unemployment?" His response: "The short answer is mor -rapid economic growth."
Tomorrow, I'll be having breakfast with a few of my fellow Fed economists who are attending the conference. Comparing notes and experiences helps us all better understand economic developments in our respective regions. I'll also be attending additional conference proceedings. You too can take advantage of NABE's conferences and other programs in the future. You can also see if there are local NABE affiliates in your area. It's a great way to stay in touch and network with folks who want to share ideas and learn about current economic developments.
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department
March 27, 2012 in Employment | Permalink | Comments (0) | TrackBack (0)
03/16/2012
Whither Florida?
When the Bureau of Labor Statistics (BLS) released January state employment data on March 13, they showed that Florida had lost 38,600 jobs—a decline of 0.5 percent from December levels.
What happened? Has the state's budding employment recovery been derailed? Let's dig into the numbers.
Job losses in the Sunshine State occurred in several sectors, with education and health care posting the largest decline, down 11,000 jobs. Given the long-term strength of this sector (up more than 6.4 percent since the end of 2008), we are not reading too much into a one-month dropoff. Other sectors shedding jobs in January were government (down 8,100 jobs), professional business services (down 6,400 jobs), and construction as well as trade/transportation/utilities (both losing a net 6,200 jobs). Only information services and manufacturing posted monthly net gains in employment: they were up 1,800 and 500 jobs, respectively.
There was no pattern in geographic terms with regard to the state's January job losses. Daytona, Orlando, Pensacola, St. Lucie/Fort Pierce, and Punta Gorda posted the largest monthly declines in percentage terms. Naples—the metro area in Florida that lost more jobs on a percentage basis than any other in Florida during the recession—saw a 1.8 percent increase in January employment.
Let's put the state's January employment report in perspective. Florida posted monthly employment gains in each month during the second half of 2011, averaging more than 14,000 net new jobs per month over that period, and while January's losses wipe out over half of those gains, one month's worth of data should not lead to conclusions that the job rebound there has stalled. It is also important to keep in mind that original estimates of Florida employment in January 2010 and January 2011 were negative but were later revised up, so there may be some seasonal factors that are affecting the state's reading of January employment.
So far in this post, I've been discussing data collected by the BLS's Current Employment Survey, also referred to as the Establishment Survey, which—as the name implies—is a monthly survey of business establishments. This survey measures the number of people on businesses' payrolls. The BLS also produces the Household Survey, which is—again, as the name implies—a survey of the number of workers in individual households. The BLS derives measures of unemployment from this survey, but it also includes estimates of the number of people who are employed. For Florida, January's Household Survey showed gains, indicating a decline in the state's unemployment rate from 9.9 percent in December 2011 to 9.6 percent in January. It also estimated that total employment actually rose by nearly 22,000 and that the number of unemployed fell by just over 28,000.
Finally, the majority of our business contacts in Florida have been relatively upbeat in 2012. Even in southwest Florida—in many ways, the hardest-hit area in the Sixth District during the recession—contacts noted that economic activity there has shown recent improvement. Taken as a whole, we do not see the state's January employment data as the start of a new downward trend. But we will be watching the data and probing our contacts for signs of a slowdown.
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department
March 16, 2012 in Employment, Florida | Permalink | Comments (0) | TrackBack (0)
