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03/31/2010
LEARNing
This week marked the second gathering of the Atlanta Fed's Local Economic Analysis and Research Network (LEARN). LEARN is a forum for academics and researchers with a detailed knowledge of economic developments in local economies in the Southeast. The aim is to create a network for discussing and exchanging ideas on research, methodologies, and current economic developments. LEARN members are university-based centers for business and economics research in the Sixth Federal Reserve District (Alabama, Florida, Georgia, eastern Tennessee, southern Louisiana, and southern Mississippi) and Atlanta Fed economists and analysts who focus on regional economic issues. We blogged about LEARN last year.
In addition to presentations from several FRB Atlanta economists, individual state outlooks were discussed. This week we highlight three of these outlooks—Alabama, Florida, and Tennessee.
Dr. Sam Addy, director of the University of Alabama's Center for Business and Economic Research, reported that Alabama's economy is recovering. Economic growth is expected be 1.9 percent in 2010, but employment growth should be flat. He also noted that The Alabama Business Confidence Index (ABCI), a forward-looking quarterly measure of business sentiment across the state, indicated a clear turnaround in confidence. With an index of 49.5, panelists feel economic conditions will be better in the second quarter. However, they do not yet think the state will see a broad-based recovery encompassing output, sales, profits, employment, and capital spending, Dr. Addy reported. See his latest forecast here.
Challenges facing the Alabama economy in 2010 include continuing, but slowing, job losses, declining consumer spending and income, declining revenue to fund public education, decreasing federal government spending, and continuing problems in commercial and residential real estate, he concluded.
Dr. Christopher McCarty from the University of Florida's Survey Research Center (a component of the school's Bureau of Economic and Business Research) highlighted four major indicators of economic activity—consumer confidence, employment, housing, and population. He reported that Florida's consumer confidence improved in 2009 but remains well below prerecession levels. Dr. McCarty reports on Florida's consumer confidence on a monthly basis.
Employment gains remain elusive in Florida, and unemployment is at its highest level on record, Dr. McCarty said. He also noted that long-term unemployment was higher in Florida than in the nation as a whole. The housing downturn in the Sunshine State has been significant, and house prices for the state are down nearly 50 percent from their peak.
Population decreased for the first time in postwar history in 2009, he said. Will population growth return? Dr. McCarty noted that population growth has always returned in the past following recessions, and he felt that baby boomers will still be inclined to move to warmer climates. Reasons why population growth may not rebound quickly include the possibility that retirees could change their behavior and stay put. Regardless, Dr. McCarty concluded, Florida has a large supply of single-family homes and condominiums that, along with declining home ownership, may stall construction growth even if population growth returns.
Professor Matthew Murray from the University of Tennessee's Center for Business and Economic Research told the participants that the state economy should begin seeing improvement in economic conditions as 2010 unfolds. However, he said that a strong and vigorous rebound is not expected. The latest forecast from Dr. Murray can be found here.
Even if rapid growth does emerge, it would be at least two years before Tennessee's economic activity returns to prerecession levels. Professor Murray also reported that the labor market is expected to see a slow recovery. The state unemployment rate will likely average 10.4 percent this year and remain above 10 percent through 2011, he reported.
Taxable sales and state sales tax revenue continue to contract, though now at somewhat lower rates of year-over-year decline. Taxable sales were down 2.2 percent in 2008 and will likely fall a further 7.6 percent in 2009. To illustrate the depth of the problem, Professor Murray added that taxable sales in 2009 were below the level of sales recorded in 2005.
Presentations from the conference will be available on our Web site shortly.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
March 31, 2010 in Alabama, Florida, Tennessee | Permalink
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03/24/2010
Regional hours and employment services
Last month we wrote about some initial signs of improvement in regional labor markets, focusing on evidence of tapering job losses and decelerating initial claims for unemployment benefits. In addition to these sources, we are also watching for improvement in average weekly hours and temporary services employment.
The reasoning behind this is rather straightforward: As businesses become more confident that revenue declines are abating, layoffs decelerate. The slower rate of job losses and drop in initial claims for unemployment benefits seem to indicate that this is well under way.
As sales expectations grow and actual revenues begin to improve, firms may not add directly to permanent payrolls right away. Several months of rising orders and/or revenues are needed to assure businesses that the increase is sustainable. Our discussions with business owners throughout the Sixth District support the idea that companies have been hesitant to add to payrolls. In this environment firms have some alternatives to increasing their permanent workforce—two such methods are increasing the hours of remaining staff and/or obtaining temporary employees. And most of these data are available at the state level.
Looking at weekly hours data, the results are mixed. The chart below shows a weighted average for the six states in the Sixth District (Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee). While overall private sector hours do not show much of a trend, manufacturing hours are rising steadily. A rebound in weekly hours worked is supported by the latest Southeast Purchasing Managers Index.
The evidence regarding employment services data is also mixed. Unfortunately, the U.S. Bureau of Labor Statistics only reports employment services data for two states in the region—Florida and Georgia—and the data are not seasonally adjusted. We seasonally adjusted these series in an effort to eliminate holiday effects caused mainly by retailers adding temporary help over the holiday season. This effort was not wholly successful for Florida, but we do see an increase in Georgia.
While we do see an increase in hours worked in manufacturing in the region, we cannot determine with clarity that the trend in rising hours is taking place across several sectors. Employment services jobs are rising in Georgia, but not in Florida.
Several times over the past several months we have heard the phrase "no longer firing, but not yet hiring" from our business contacts. The data seem to bear this out. We get a look at February data later this week, and increases in hours or a pickup in temporary employment would indicate that we are moving farther from the "firing" phase and closer to beginning the "hiring" chapter in the region's recovery.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
March 24, 2010 in Employment | Permalink
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03/18/2010
Southeast PMI catches up with national ISM trends
In February, Federal Reserve manufacturing indices caught up with the Institute for Supply Management (ISM) national manufacturing index. Among other regional manufacturing measures, the New York Fed's Empire State Manufacturing Survey showed general business conditions improving strongly in February. The Philadelphia, Kansas City, and Richmond Feds' manufacturing indices also showed overall improvement from January to February.
The Kennesaw State University Purchasing Manager Index (PMI), produced in conjunction with the Atlanta Fed, was no exception; however, this measure saw the largest increase of the previously mentioned indices. As recently as last month there was a growing gap between the national ISM PMI and the regional PMI. Data from the February survey, though, show the gap has closed.
In February, four out of five equally weighted components used in calculating the index saw double-digit gains. Most notably, the new orders and production components shot up 10.8 and 13.6 index points, respectively. Also, the employment component jumped 11.9 index points to reach 53.3, above the index's 50-point threshold indicative of growth. Inventories reached relatively neutral territory at 50.7 index points.
The new orders component rose because 9.2 percent more respondents (now roughly half of the total respondents) noted that orders were higher in February than in January. The increase in production is the result of 13.5 percent more respondents reporting increased levels of production in February.
In response to the prompt: "The level of employment at my plant/division/company last month was ___," 14.5 percent of all contacts reported higher levels of employment in February (a 9.5 percentage point increase from January), while 77.6 percent reported similar levels as in January. With regard to inventories, exactly 25 percent of contacts reported higher inventories than the month prior, while roughly 50 percent reported similar levels of inventory from January to February.
Of course, one month does not a trend make. Subsequent reports will show whether the February increase is sustainable.
By Mark Carter, an economic analyst in the Atlanta Fed's research department
March 18, 2010 in Manufacturing | Permalink
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03/10/2010
Clean manufacturing benefits Tennessee
There is no disputing that Tennessee's economy has taken a substantial hit in the recent recession. The state's manufacturing sector is composed of more than 20% transportation-related manufacturing, which has been hit especially hard in the throws of this economic downtown. However, one bright spot leading the Volunteer State's manufacturing sector recovery is high-tech manufacturing-related to renewable energy.
In 2009, The Clean Energy Economy study by the Pew Charitable Trust reported Tennessee as one of the three leading states in the United States for clean technology job growth. Tennessee, Oregon, and Colorado were categorized as states with a "large number" of clean energy jobs as well as "fast growing" when looking at the average annual growth rate of these jobs. While the national annual average for clean energy jobs from 1998-2007 was 1.9%, Tennessee's annual average was ahead at 2.1%.
High-tech, clean energy manufacturing firms are popping up all over Tennessee.
In addition to the green job investments listed in the state's 2009 Annual Workforce Report (p. 63), Missouri-based Confluence Solar announced in late January 2010 selection of Clinton, Tenn., for a new $250 million manufacturing, warehousing, and distribution facility, which could add 250 new jobs to the area. Prior to 2009, Tennessee had already recruited solar firms such as Sharp Solar and Shoals Technologies, large players in the state's clean manufacturing sector.
1The University of Tennessee highlights the importance of electric car manufacturing to the state’s economic outlook in their 2010 Economic Report to the Governor.
What's attracting these green jobs to Tennessee?
In 2008, Governor Phil Bredesen created a Task Force on Energy Policy, which developed significant strategies to make the state a viable competitor for green collar jobs. According to the Tennessee Economic Partnership, in the last two years, Tennessee attracted more than 1,000 new jobs and more than $2 billion in capital investments. Tennessee also has a welcoming tax environment for new clean-energy manufacturers. In June 2009, Tennessee enacted the Tennessee Clean Energy Future Act of 2009 and expanded its sales and use tax credit for emerging industries to manufacturers of clean energy technologies.
Additionally, Tennessee is using about $31 million in stimulus funds to create the Tennessee Solar Institute at the University of Tennessee at Knoxville and at the Oak Ridge National Laboratory. The center will focus on increasing efficiency in clean energy manufacturing and should benefit solar firms in the area.
So, while employment levels remain low for the Sixth District and Tennessee overall, statewide initiatives and firms are making investments to ensure clean energy will provide a bright spot in the manufacturing and employment outlook for Tennessee.
A special thanks to the Tennessee Department of Economic Development for their contributions to this report.
By Mark Carter, an economic analyst in the Atlanta Fed's research department, and Amy Pitts, senior Regional Economic Information Network analyst at the Atlanta Fed's Nashville Branch
March 10, 2010 in Employment, Energy, Green, Manufacturing, Tennessee | Permalink
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