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10/28/2009
State revenues and recessions, part one
This recession has hit state government finances hard. Just how hard is the subject of The Nelson A. Rockefeller Institute of Government's October State Revenue Report.
"Total state tax collections as well as collections from two major sources—sales tax and personal income—all declined for the third consecutive quarter. Overall state tax collections in the April-June quarter of 2009, as reported by the Census Bureau, declined by 16.6 percent from the same quarter of the previous year. We have compiled historical data from the Census Bureau Web site going back to 1962. Both nominal and inflation adjusted figures indicate that the second quarter of 2009 marked the largest decline in state tax collections at least since 1963."
The chart below, which is a part of the report, highlights how steeply state revenues have declined during the current recession as compared with previous recessions:
The data are the sum of all states. How does the Southeast compare with the overall picture? Not very well. According to the report,
"One way to gain insight into which states have been hurt most by this crisis is to compare current tax revenue to its recent peak — a period that is different in different states. For this analysis, we determine a peak tax revenue year for each state, defined as the year ending between June 2006 and June 2009 period that has the greatest tax revenue, after adjusting for inflation and population growth. States hit hardest by the housing bust, such as Arizona, California, Florida, and Nevada, generally attained peak tax revenue in 2006 and have been heading downhill since then."
The table below lists states in order of how deep the tax revenue decline has been:
Two states in the Sixth Federal Reserve District—Florida and Georgia—are in the top five. Tennessee is 19th on the list. Louisiana, Mississippi, and Alabama are also negative but less so than most other states.
Next week we'll look into what state governments are doing to cope and investigate just how long we can expect the states in the region to remain under fiscal stress.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
October 28, 2009 in Southeast, Taxes | Permalink
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10/22/2009
Florida: Green shoots breaking through?
Recent reports from several universities and the Florida Realtors Association point to further stabilization in one of the states hit hardest during the recession.
Florida consumer confidence rose three points in September to 74, following a revised increase of four points in August, according to the University of Florida's Bureau of Economic and Business Economic Research. Stabilization of the stock market, falling gas prices, and a bottoming out of home values in many parts of the state have helped, according to UF's Dr. Chris McCarty, who runs the survey.
Meanwhile, the August reading for the University of North Florida's leading economic indicators for Jacksonville showed a second consecutive monthly increase. The index is part of the Local Economic Indicators Project, developed and administered by Dr. Paul Mason, and tracks indices including orders for consumer and capital goods, consumer confidence, help wanted advertising, building permits, and new unemployment insurance applications.
There's also some positive news from Florida's housing market. The S&P/Case-Shiller home price index showed Miami and Tampa home prices posted their second consecutive monthly gain in July. The index was still down 21 percent in Miami and 18 percent in Tampa from a year ago, however.
Florida's Association of Realtors reported that the state's existing home sales rose 28% in August. The group also reported a 45 percent increase in last month's statewide sales of existing condos compared with the previous year's sales figure.
But Florida's median sale price for existing homes last month was $147,400, a 22 percent decrease from 2008 to 2009. A year ago, the median sale price was $188,500. Sales of foreclosures and other distressed properties continue to put downward pressure on home sales, the Realtors noted in their monthly commentary.
So green shoots may be emerging, but "without the fertilizer of population growth and construction, Florida's recovery will be painfully slow," according to the Sean Snaith, director of the Economic Competitiveness Institute at the University of Central Florida. Although home sales may be reaching the bottom, a strong rebound in construction activity is unlikely in the near term as population growth is currently absent. Stan Smith, an economist at the University of Florida, reported that the state's population dropped by 58,000 last year.
Overall, the data point to stabilization in economic activity at a low level, but we don't see compelling signs that the green shoots are ready to break through.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
October 22, 2009 in Florida, Housing | Permalink
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10/14/2009
Southeast PMI
The manufacturing sector is a large and economically important piece of the regional economy, making up 10.8 percent of nominal gross domestic product for the states of the Sixth District in 2008. By looking deeper into manufacturing data, we gain insight not only into current production, but into the likely path of near-term output as well. Continued increases in new orders for manufactured goods, for instance, should lead to increased capacity utilization and employment. In the current economy, economic indicators pertaining to manufacturing deserve close monitoring. An important regional manufacturing indicator is the Southeast Purchasing Managers Index (PMI).
The Southeast PMI has been on an interesting ride throughout the current recession. This valuable economic indicator is produced and managed by Kennesaw State University's Econometric Center with the cooperation of the Atlanta Fed's Research Department, assists economists and business leaders in taking the temperature of the manufacturing sector, and helps them plan accordingly. Each month, a survey is sent to manufacturers across the Sixth District asking participants to compare new orders, production, employment, deliveries, finished good inventory levels, and commodity prices with levels from the month prior. Responses are then weighted and indexed to give an accurate and timely snapshot of manufacturing activity in the Southeast. Index readings above 50 index points show that the respective component is expanding while readings below 50 reflect contraction.
Like the national PMI, the Southeast PMI hit bottom in December 2008, reaching a low of 25.8, compared with the national PMI's low of 32.9. Though the Southeast figure dipped lower, it returned to normal levels more quickly, barely breaking the 50-point threshold in May 2009 to reach 50.2.
For its August and September readings, the Southeast PMI lagged the national PMI by about 6 index points. The Southeast PMI for September was 46.7, up 0.5 index points from August, compared with a national PMI September reading of 52.6.
The Southeast PMI has several components that are also indexed and useful for gauging the regional manufacturing economy. Along with the headline PMI, new orders, production, and finished goods inventories all bottomed out in December 2008, with new orders and production reaching above 50 in May 2009. July 2009 brought a surge for many Southeast PMI components. In July 2009 alone, production jumped 13.4 index points and new orders gained 4.5 index points, but the trend may not be a lasting one. As of the September release, new orders, production, and finished goods inventories had all contracted.
Another interesting component watched by many economists is the inventory component. Consistent with national PMI figures and U.S. census reports, the Southeast PMI shows manufacturing inventories are not rebuilding as quickly in this recession as they have in several postwar recessions. Nationally, this recession’s manufacturing inventories are most similar to the 2001 recession. The chart below reflects the national trend for manufacturing inventories in the current and previous four recessions.
Participants in the Kennesaw State PMI survey receive a state and regional report on PMI near the beginning of each month. To learn more about the process, to see a survey form, or to begin participating, click here.
By Mark Carter, an economic research analyst in Atlanta Fed's research department
October 14, 2009 in Forecasts, Manufacturing, Southeast | Permalink
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10/08/2009
Helping teachers teach economics
Over the past month I've had the privilege of speaking at several "Evening with the Fed" events. One of the Atlanta Fed's economic education programs, the "Evening with the Fed" provides a forum for teachers to explore current economic and financial topics that assist them in helping students translate theory into real-world lessons. The Federal Reserve Bank of Atlanta hosts these events at its head office and branch offices as well as a number of other cities throughout the Southeast.
This fall the "Evening with the Fed" program focused on labor markets—employment, unemployment, and how labor markets behave in recession and recovery. We tie these issues together by discussing what occupations are likely to be in demand when today's students enter the labor market. By focusing on the states in our region, we can show teachers details about the job market most of their students will someday enter.
SouthPoint has covered much of the program's content in previous blogs, but here are a table and a chart that look at the Southeast's labor market performance during the recession. The table compares job losses by state in nominal terms and in percent change. What jumps out is that the decline in total employment has been greater than the U.S. average in all states except Mississippi and Louisiana.
During my "Evening with the Fed" presentation, I also showed the following chart that compares the decline in employment across states to the United States average decline. Employment is indexed to 100 beginning in December 2007—the month the U.S. recession began. For Florida, employment declines began well before December 2007, but in Louisiana the employment decline began well after the official start of the U.S. recession.
These comparisons are useful tools in bringing perspective to how employment trends can differ across a region. The "Evening with the Fed" provides the opportunity to share these insights with the people who are teaching our kids economics.
The Atlanta Fed and its branch offices provide a number of economic education opportunities, like "Evening with the Fed," to teachers, students, and others through a variety of programs and outreach efforts.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
October 8, 2009 in Employment, Southeast | Permalink
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