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09/30/2009
Some good news from the labor market
Initial unemployment insurance claims are a very useful economic indicator, providing insight into general labor market conditions as well as serving as a good gauge for the path of overall economic activity. The Atlanta Fed's Q1 2009 issue of EconSouth highlighted these data, and you can read the most recent report on the Department of Labor's Employment and Training Administration Web site. So what do we see when we look at these numbers?
The deceleration in initial unemployment claims seems to indicate that the end of recession is near. Chart 1 shows that the deceleration in U.S. initial claims occurred near the end of recessionary periods in 1991 and again in 2001. In the second quarter of 2009, U.S. initial claims averaged 624,000 per week. In July and August that average fell to 565,000. Is the current deceleration in initial unemployment claims a sign that the recession is over? Well, it's clearly a good sign. As you probably read, Chairman Bernanke earlier this month indicated that the recession "is very likely over."
Can we say the same for the region? Well, Chart 2 shows that initial claims for unemployment in the Southeast have also decelerated in much the same manner as have U.S. initial claims. (We define the Southeast as the states of the Sixth Federal Reserve District—Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee.) In the second quarter the average number of initial unemployment claims was just over 80,000. In July and August that average fell to just above 72,000. The chart also shows that, in the United States, the deceleration in regional initial claims occurred near the end of recessionary periods in 1991 and 2001.
While the drop in initial claims appears to suggest the end of recession, it does not equate to a net job gain. The Southeast is still shedding jobs, according to the latest report on national and state employment from the U.S. Bureau of Labor Statistics. Maybe the best way to think about the initial claims data for the nation and region is that they show that labor market healing is under way.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
September 30, 2009 in Employment, Labor Markets, Recession | Permalink
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09/23/2009
Keeping up with the South's economy
Over the years, the Atlanta Fed's research group has found value in reviewing reports from other sources. Often these reports offer a broader perspective that adds insight into economic development in the region. For instance, two recent reports and a rural issues blog look at the effect of the decline in economic activity on metropolitan (divided in to urban and suburban) and nonmetropolitan areas.
In June, the Brookings Institution published a report titled "The Landscape of Recession: Unemployment and Safety Net Services Across Urban and Suburban America." Authors Elizabeth Kneebone and Emily Garr reviewed employment data and concluded that the statistics
"…belie the notion that big cities (versus suburbs) have cornered the market on the family and community distress accompanying rising unemployment during this recession. More so than the last recession, suburbs have felt the effects of this downturn alongside primary cities and core urban counties. The trend is fairly consistent across regions, with Western suburbs generally faring the worst. Exurbs have been hit particularly hard by this recession, perhaps owing to their economic reliance on a battered housing market."
The report contains information on all urban/suburban areas, including those in the South.
The Brookings study, however, does not look at rural areas, which traditionally have fared worse than metropolitan areas during recessions. The Department of Agriculture's Economic Research Service recently published the 2009 edition of Rural America at a Glance. This work focuses on rural developments during the recession, showing that (all material quoted):
- After several years of steady growth, nonmetro employment began to decline in the fourth quarter of 2006, according to seasonally adjusted Local Area Unemployment Statistics data, preceding the national economic downturn that began in late 2007.
- Nonmetro employment losses accelerated in the second half of 2008 as the recession deepened.
- Metro employment declines began later than nonmetro declines. Metro employment grew slowly through 2007 and into early 2008. The subsequent decline in employment, however, was sharper in metro areas than in nonmetro areas.
- In both metro and nonmetro areas, employment declines were steepest in the first quarter of 2009, but they abated in the second quarter.
While this report approaches the topic from a national perspective, it has good information on the rural South.
In addition to sources like the Brookings Institute and the Department of Agriculture there are other sources that provide information we find helpful. The Daily Yonder provides daily news, commentary, reports, and updates from rural correspondents and bloggers, and many of these postings have an economic focus. The Daily Yonder provides frequent updates on Southern social and economic issues.
While geographic and industrial sector analysis lend themselves to data analysis, other sources offer an alternative view that is no less important.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
September 23, 2009 in Metropolitan, Recession, Rural, Southeast | Permalink
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09/16/2009
Comparing recessions in the Southeast (part two)
Last week we looked at how employment levels in the Sixth District states during the current downturn compared with previous deep recessions. Basically, we are trying to determine if the current downturn is deeper and/or longer than past recessions in terms of its effects on nonfarm payroll employment. In last week's post, we showed that the current decline in nonfarm payroll employment has been deeper than the employment declines in the 74–75 and 81–82 recessions. In addition, the current downturn has lasted longer. This week we will see if that holds true for individual states in the region.
For this analysis, we use data from the U.S. Bureau of Labor Statistics, indexing total employment in each state of the Sixth District to a beginning value of 100. We start the time series six months prior to the peak in regional employment, with zero representing the month when employment levels peaked.
For Alabama, the current downturn in employment is a bit deeper than the 74–75 and 81–82 periods, but the decline appears to be leveling off. Employment took 18 months to return to the previous peak in the 74–75 period, and 26 months in the 81–82 episode. Currently, Alabama is 19 months past peak employment. The state has lost 105,000 jobs since the last peak, meaning that if it does not add that many jobs during the next seven months (which would bring the index level back to 100 in the chart) the current employment downturn will be the longest as well.
Florida's employment decline is already longer and deeper than previous experiences. The state is 28 months into the downturn whereas previous declines lasted 16 and 18 months, and the index number is well below the 74–75 trough.
Georgia's current experience looks much like that of the 74–75 downturn. The current index number is a bit below that trough reached in 1975, making the current decline the deepest for Georgia. Whether or not this current episode becomes the longest downturn remains to be seen; it took Georgia 35 months to return to its previous peak in the 1970s episode, and we are in the 19th month of decline for the current period. The state would have to add more than 250,000 jobs during the next 16 months for this current period not to become the longest employment downturn.
Comparisons for Louisiana are difficult because of the unique nature of its economy. The employment downturn in the 1980s lasted from late 1981 until mid-1993—138 months—in large part because of the structural decline in energy-related employment. Another factor making comparisons tricky for Louisiana is that employment levels in the current period have been supported by ongoing rebuilding efforts and repopulation in the wake of Hurricane Katrina.
Looking at Mississippi, it's tempting to conclude that the current downturn in employment will not be the deepest or the longest. Employment appears to be stabilizing one-and-a-half years into the decline and at a level above the 74–75 and 81–82 episodes.
In Tennessee, employment hit the previous low point reached in the 74–75 downturn. However, the uptick seen in the most recent month (July) is tied to a large increase in government employment associated with federal stimulus spending, so we cannot read too much into this as a sign of leveling off. Regardless, the state would still have to add more than 140,000 jobs during the next eight months for the current downturn not to become the longest.
For most states in the region, the current period is or most likely will represent the longest and deepest employment downturn when compared with previous post-war declines. We will continue to monitor employment trends in the Southeast coming out of this recession and keep you posted on significant developments.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
September 16, 2009 in Alabama, Employment, Florida, Georgia, Louisiana, Mississippi, Recession, Southeast, Tennessee | Permalink
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09/09/2009
Comparing recessions
Comparing the current recession with previous downturns has many dimensions. One of the most common comparisons focuses on quarterly gross domestic product (GDP). But this comparison is not possible for states because GDP at the state level is only available on an annual basis. So, once again we turn to employment data because they are available monthly, and they provide a broad measure of economic activity.
In his blog earlier this year, Bill Testa of the Chicago Fed compared employment across recessions (see Midwest in Recession: Then and Now). We replicate this analysis below for the states of the Sixth Federal Reserve District.
Through this analysis, we are trying to determine if the current downturn is deeper and/or more protracted than past recessions in terms of nonfarm payroll employment losses. Since the 1990–91 and 2001 recessions were much milder than the downturns in the 1970s and 1980s, we chose to focus on the deeper contractions. In the following charts, we index total employment in the states of the Sixth District to a beginning value of 100. We begin the time series six months prior to the peak in regional employment, with zero representing the month employment levels peaked.
The chart shows that the current decline in nonfarm payroll employment has been much deeper than the recessions in the 1970s and '80s. In addition, it has lasted much longer. We are currently 25 months past the peak employment level for the region (June 2007), and employment appears to still be contracting. It is important to note that employment in the Southeast declined very little in the first few months past the June 2007 peak. It was not until December 2007 that we really started to see payrolls start to decline in earnest. Regardless, by this time in previous recessions, employment levels were not only well past their troughs but had fully recovered to their prerecessionary peaks.
So, in terms of payroll employment, the current downturn is the deeper and more protracted than that experienced in the 1970s or 1980s. Next week,we’ll look at individual state measurements.
By Michael Chriszt, an assistant vice president in the Atlanta Fed’s research department
September 9, 2009 in Employment, Recession, Southeast | Permalink
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09/02/2009
Bubble charts and snail trails
I used to look forward to the third Friday of every month. That's when the Bureau of Labor Statistics releases the regional and state employment and unemployment statistics. Since the reports have been negative for some time, we really have not anticipated these releases with much enthusiasm. That may be changing.
We learn the level of employment by state, metro area, and industry. We also get data on unemployment. This information, although it comes with a bit of a lag (August data come out September 18, for example), provides the broadest measure of regional economic performance available. We use a number of analytical tools to gauge the numbers, and we look for signs of improvement.
Although simple month-to-month net changes in total employment and a track of the unemployment rate are basic, they do make for a straightforward picture of where Southeastern states stand. Chart 1 does this for the combined states of the Sixth Federal Reserve District (Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee). While the monthly net change in total employment continues to show declines, these declines have become less pronounced. However, the unemployment rate (calculated by dividing the total number of unemployed in all six states by the sum of these states' labor forces) has continued to rise.
We use a few other tools to look at the employment data. One we call our "bubble charts"—we're kind of nerdy when it comes to data. The more acceptable title for these charts is "momentum charts." An employment momentum chart is basically an XY plot of the year-over-year percent change in total employment (X axis) and the three-month annualized percent change in total employment (Y axis). The size of each state's "bubble" is the proportion of total employment for all six states. Chart 2 is the momentum chart for July.
We divide the chart into four quadrants, each representing a point in the business cycle—expanding (both measures are positive: Momentum is strong), slipping (year-over-year percent change is positive, but the three-month is negative: Momentum is weakening), contracting (both measures are negative: Momentum is very weak), and improving (the year-over-year percent change is negative, but the three-month measure is positive: Momentum is looking up). In July, all states in the Sixth District except Mississippi were in the contracting quadrant—employment momentum was very weak. Georgia and Florida, the two largest states in terms of employment in the Sixth District, had the weakest momentum.
The Employment Momentum chart's name might be a bit misleading because the chart shows the current point in the business cycle for the states, but it does not show the direction the momentum is headed. For that we use charts called "snail trails." The more technical name for this type of chart is "momentum tracks." Chart 3 shows the momentum track from January 2007 (the green dot) through July 2009 (the red dot). The chart shows the path of momentum for total employment for the states of the Sixth District, with each dot representing a month. From firmly in the expanding quadrant, momentum moves through the slipping quadrant, then into the contracting quadrant. What is interesting is the fact that although the path is still in the contracting sector, it has turned up and is moving toward the improving quadrant—an indication that employment momentum is headed in the right direction. I'm hopeful we can soon start looking forward to the third Friday in the month once again.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
September 2, 2009 in Employment, Labor Markets, Southeast | Permalink
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