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02/24/2010
Regional labor markets: Some initial signs of improvement
In a speech last week to the Augusta Metro Chamber of Commerce, Atlanta Fed President Dennis Lockhart said that inventory replenishment and business spending are keys to unlocking the trajectory of the economic recovery. He added that:
"The third and maybe most important factor I'm watching is the labor market. I expect a very slow recovery of employment markets and, therefore, a slow decline of the unemployment rate. But it's worth noting that as the recovery got under way in the second half of last year, businesses relied on productivity enhancements to expand production and were able to defer hiring.
"A shift from productivity-driven expansion to jobs-driven expansion could materialize as benefits of earlier cost and head-count reductions reach their limit. The additional hiring that would follow would likely improve business and consumer confidence and feed a virtuous cycle."
There is little hard data showing a turnaround in the regional labor market, in part because most state-level labor market data from the Bureau of Labor Statistics are only available through December (January data will be released March 10). However, we do see evidence that job losses tapered off. For example, initial claims for unemployment insurance continue to decelerate:
In addition, the number of job losses declined steadily throughout 2009:
Anecdotal information is mixed as well. Temporary help agencies in the Southeast noted an increase in job orders in January and early February. Yet, according to our business contacts as a whole, overall job creation remained tepid. Businesses continued to describe attempts to do more with less, such as combining the duties of several jobs into one.
The Chicago Fed's Bill Testa blogged on the Midwest economy last week and noted another useful indicator that can bridge the gap between official releases from the BLS. Bill writes:
"The Conference Board tracks national and state online job vacancies on a monthly basis. Their recent release reports a third consecutive month of strong national gains in advertised vacancies. Their recent release reports a third consecutive month of strong national gains in advertised vacancies. The gains were widespread across U.S. regions, including the Midwest."
Southeastern states also saw increases in January from December in the total number of online job vacancies.
President Lockhart concluded his remarks on the outlook in Augusta by saying:
"I expect businesses to be very cautious with respect to inventory accumulation, capital spending, and hiring. But I will be watching carefully for signs that an alternative, faster-growth scenario is developing."
Through February, we see little evidence that a faster-growth scenario is building in regional labor markets. We are hopeful that the positive signs we see in temporary employment increases and in job advertisements in the region feed through into measurable job gains, but as of now we continue to expect a very slow recovery in employment.
Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
February 24, 2010 in Labor Markets, Productivity, Unemployment | Permalink
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02/17/2010
Unemployment insurance issues
Back in December, SouthPoint highlighted the issues Southeastern states were facing with their unemployment insurance funds. In our ongoing contacts with business owners and managers, we continue to hear about this pressure at a particularly bad time. Generally weak demand and low revenues have already depleted the cash positions of many businesses, especially small ones. Now, as a majority of states have drained their own unemployment insurance reserves, forcing them to borrow from the federal government, some states are increasing unemployment taxes to help replenish the funds:
Not surprisingly, anecdotal feedback we have received indicates that the timing couldn’t be worse. While any additional monetary outflows are of concern for businesses focused on surviving the current situation, for those with larger numbers of employees, dealing with the increased taxes has the potential to be devastating. Of course, some businesses that were considering staff increases are now going back and “doing the math” to determine if the additions are affordable given the new circumstances.
We have also noted that state lawmakers might be viewing the unemployment insurance tax increase as a problem for potential job-creating companies. In Florida, this issue is getting an increasing level of attention from both politicians and the media.
The good news (if you care to characterize it as good) is that some states are even worse off than those in the Southeast: California, Michigan, and New York, among others, have debt from the Federal Unemployment Account that is even higher than that of the worst Sixth District state. And employers in Hawaii may see an increase of more than 1,000 percent on the 2010 average unemployment tax per worker. Regardless of location, though, eventually businesses (and those they pass their costs on to) will have to pay for the significant insurance expenditures being made as a result of the large number of unemployed.
By Chris Oakley, vice president and regional executive of the Jacksonville Branch of the Federal Reserve Bank of Atlanta
February 17, 2010 in Employment, Taxes | Permalink
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02/10/2010
Southeastern PMI divergence
Since July 2009, Kennesaw State University's Southeastern Purchasing Managers Index (PMI) has diverged from its national counterpart produced by the Institute for Supply Management. By January 2010, this difference widened from about a 6-point gap to a more than 12-point gap.
Survey methods
Part of the gap may be the result of surveying methods used in calculating the Southeast PMI. Kennesaw State has been producing a Georgia PMI since 1991 while the regional measure has only existed for three and a half years (it began in fall 2006). As a result, there are more Georgia responses in the regional survey than responses from other states. Another reason the regional PMI lags could be that Georgia respondents are geared heavily toward construction-related manufacturing, which in the face of a housing downturn has dragged the index significantly. Recently, the Atlanta Fed has partnered with Kennesaw State to increase the level of participation outside of Georgia, thereby more accurately representing each District state and improving the reliability of the index.
Export boost
Another possible explanation for the indexes' divergence is that national respondents might respond to PMI survey questions based on the performance of their entire corporation, including their international business. Regional respondents for the Southeast PMI may be smaller firms that might not be engaged in exporting, answering the survey based on their firm's local performance. During the past year, the dollar's 6 percent decline has increased demand for U.S. goods from abroad, and the national PMI seems to better capture the high value of exports during this recovery.
Comparison of regional and national PMI components
As of January 2010, several factors seem to affect the Southeast PMI—production, employment, and finished inventory levels. Though production saw a 2.3 index point gain in January, it still fell below the 50-point benchmark indicative of growth in the index. This movement contrasts sharply with the national PMI production figure, which recently surged to 66.2 and has been above the 50-point benchmark since June 2009. The Southeastern employment index hasn't seen two consecutive months above 50 since the summer of 2007 (prerecession), whereas the national employment reading has averaged above 50 for the past four months. Falling inventory levels have become the norm during this recession, nationally and regionally. However, the region's manufacturing inventory index suggests that inventory cutbacks are still under way in the Southeast whereas they've begun to slow nationally. January's reading of 32.7, a result of a decline of 8.4 index points, flirts with a historic low for the series reached in December 2008. In January the national PMI's inventory level was 46.5, still indicating a contraction, but the result of a 3.5 percentage point gain for the month.
New orders lift Southeast PMI in January
Perhaps the silver lining for the Southeast PMI is January's new orders reading of 54.3, a substantial 8.5 percentage point gain for the month. This gain was the result of 40 percent of the respondents reporting higher new orders in January relative to December. Though still below the national new orders figure, which is currently at 65.9, January's Southeast PMI new orders figure easily clears the 50-point benchmark indicative of growth. The new orders component is traditionally viewed as the most effective precursor when evaluating the future health of the manufacturing sector. So perhaps this is a sign that the Southeast PMI is beginning to catch up to the national indicator.
More information is available on how the Southeast PMI is calculated. Those interested can review the Southeast PMI survey process, see a sample survey complete with questions survey respondents, or sign up for the survey.
A special thanks to members of the Kennesaw State University Econometric Center, who contributed to this blog posting.
By Mark Carter, a research analyst in the Atlanta Fed's research department
February 10, 2010 in Manufacturing | Permalink
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02/03/2010
Geaux Saints, part deux
Last week's blog posting concerned the impact of the Super Bowl on Miami, the host city, and New Orleans, the NFC representative in the big game. The discussion about the short-term impact on New Orleans included this:
As for the short-term economic gains, there will certainly be more retail purchases of Saints paraphernalia and additional revenue that having a successful sports franchise generates, but the intrinsic psychological impact on the overall recovery of New Orleans is immeasurable.
Gail Psilos, the Atlanta Fed’s Regional Economic Information Network director in our New Orleans Branch, adds some color this week. Gail and Bob Musso, the regional executive in New Orleans, have their fingers on the pulse of the New Orleans economy, and, as Gail notes, the impact of the Saints on the city is shaping up to be even greater than was conveyed last week:
The relationship between the City of New Orleans and the Saints is a very important part of New Orleans and Louisiana–emotionally, psychologically, and economically.
Spending increased significantly the weekend of the NFC playoff game against Arizona and even more the following week, when the Saints defeated Minnesota to earn a trip to the Super Bowl. Grocery stores saw increased sales as friends gathered, spending an average of around $250 for their game-day home parties.
Playoff parties at bars and restaurants were well attended—not only in New Orleans but also throughout southern Louisiana and along the Gulf Coast. An owner of a popular sports bar said his business doubled the week before games and even more on game days.
Sports shops in New Orleans couldn’t keep enough Saints gear in stock. This translates into increased sales taxes for the state and profits for retailers that would not have been had if not for the success of the Saints. When the team prevailed against Minnesota, the French Quarter was bursting with revelers celebrating the team’s first NFC championship. Immediately after the game, retailers opened their stores and fans lined up to purchase their Saints NFC championship gear—some stores were still selling items well past midnight—celebrating while waiting in line! More tax revenues for the state, more profit for retailers, and happy Saints fans.
This year, Super Bowl weekend coincides with Carnival and the run-up to Mardi Gras, which draws people to the Crescent City in droves. According to My New Orleans.com, "it's a little too early to estimate crowd sizes at Mardi Gras 2010, [but] industry sources seem to expect attendance at least equal to that of 2009," which was 800,000 to 900,000.
It’s shaping up to be a great weekend in the Big Easy, and the New Orleans economy is clearly the big winner, no matter the outcome of the Super Bowl.
By Gail Psilos, Regional Economic Information Network director in the Atlanta Fed’s New Orleans branch and Michael Chriszt, an assistant vice president in the Atlanta Fed’s research department
February 3, 2010 in Retail, Sports | Permalink
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Posted by:
Paula Munger |
02/09/2010 at 10:28 AM
Hi Gail -
Anecdotally speaking, I know of at least one family in Richmond, VA who contributed to our local economy thanks to the Saints. Between ingredients for the seafood gumbo (for the NFC Championship) and Justin Wilson's red beans & rice (for the BIG game) and the bottles of Abita (which are very expensive here!), we did our part. We are thrilled for the emotional, psychological and economic health of New Orleans.
Very interesting articles and blog. But then again, I have always been an econ geek.