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06/30/2010
The Gulf spill's employment effect: Early evidence
In an attempt to gauge the oil spill's impact on employment, we've been tracking initial unemployment insurance claims for the coastal regions of Louisiana. Looking at weekly initial unemployment insurance claims, which are first-time applications for unemployment insurance, provides an indication of week-by-week changes in employment for coastal Louisiana parishes and is thus a high-frequency view of employment trends. We developed two measures: one for all coastal parishes, and another that includes Jefferson and Lafayette parishes. Jefferson extends to the coast, but the vast majority of employment in this parish is located in the suburbs of New Orleans, and Lafayette Parish is home to many people employed in oil and gas drilling and related services. Neither measure includes Orleans Parish.
For the Louisiana coastal regions, there was little immediate effect on initial claims data after the spill on April 20, which is not particularly surprising since the true extent of the spill remained unknown at the time. Late May saw the beginning of an increase in claims. This trend was short lived, however, as an equally marked decrease in new claims followed. In addition, BP's hiring of some out-of-work fishermen and others to assist in the clean-up has likely offset some of the job losses.
We are also looking at data about initial unemployment claims by industry, which are available on a monthly basis. Through May, the job losses do not seem to be centered in any particular region or industry in Louisiana. This situation may change as time goes on, and weekly initial claims will be a good indicator to watch.
The Atlanta Fed will continue to watch employment indicators for the coastal regions of Louisiana and the Gulf. More detailed job analysis will be available in late July when the U.S. Bureau of Labor Statistics releases June state- and metro-level employment data.
By Brian Goodman, an intern in the Atlanta Fed research department
June 30, 2010 in Employment, Louisiana, Oil | Permalink
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06/23/2010
Southeastern housing update
On April 30, 2010, home buyers and sellers rushed to get contracts signed to take advantage of the latest and perhaps final round of housing stimulus. The same buyers have until June 30, 2010, to complete the purchase.
The Federal Reserve of Atlanta conducts a monthly survey of Realtors and homebuilders in its region. The May results are in and indicate that existing home sales growth continued to rise on a year-over-year basis as sales that went under contract prior to June 1 continued to close. (May survey results are based on responses from 92 Realtors and 49 homebuilders and were collected June 1–10.)
However, reports from Realtors on a month-to-month basis indicate May existing sales were only slightly ahead of April. Southeastern homebuilders indicated that new home sales continued to soften in May and fell below year-earlier levels.
However, Southeastern builders reported that construction activity actually strengthened somewhat, up slightly from a year earlier.
Buyer traffic eased on a year-over-year basis according to Southeastern Realtors, while builders continued to note a pullback in traffic that began in March. However, Florida builders ran counter to the trend, indicating a slight improvement in buyer traffic. Overall, buyer traffic in the Southeast remained above the year-earlier level.
Total home inventories have risen in recent months, and in May Realtors indicated that the trend continued with inventories exceeding the year-earlier level. New home inventories remained well below year-earlier levels and were steady on a year-over-year basis.
Builders continued to report downward pressure on home prices and the difficulty they faced competing with bank-owned properties. However, survey results indicated price declines were little changed among builders while existing home price growth softened notably in May, based on Realtor reports.
The outlook among Southeastern real estate contacts weakened notably in May. Builders and Realtors reported that access to financing for both buyers and builders remained challenging. Many contacts noted that buyers remained uncertain and in a wait-and-see mode.
Note: The housing survey's diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. Positive values in the index indicate increased activity while negative values indicate decreased activity.
By Whitney Mancuso, senior analyst in the Atlanta Fed's research department
June 23, 2010 in Housing | Permalink
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06/17/2010
Let's focus on what we do know
The Wall Street Journal's Real Time Economics blog quotes recent analysis from J.P. Morgan Chase in its post, Oil Spill May End Up Lifting GDP Slightly.
" 'The spill clearly implies a lot of economic hardship in some locations, but given what we know today, the magnitude of these setbacks looks dwarfed by the scale of the US macroeconomy,’ said chief U.S. economist Michael Feroli. If anything, he added, U.S. GDP could gain slightly from it….
"Commercial fishing in the Gulf is also likely to suffer, but that's only about 0.005% of U.S. GDP. The impact on tourism is the hardest to measure, although it's fair to expect that many hotel workers who lose their jobs will find it hard to get new ones. Still, cleaning up the spill will likely be enough to slightly offset the negative impact of all this on GDP, J.P. Morgan said. The bank cites estimates of 4,000 unemployed people hired for the cleanup efforts, which some reports have said could be worth between $3 and $6 billion."
Another point brought up by several analysts is that the size of the U.S. economy requires that a disaster would have to be massive to have an impact on national economic performance. Earthquakes, hurricanes (including Katrina), and other disasters simply did not have a significant impact on short-term national economic growth.
Smartly, the Real Time Economics post also notes that the J.P. Morgan commentary points out that:
"[G]ross domestic product measures are often not a good guide to an economy's well being."
It is also important to note that this story continues to unfold. We simply do not know what the long-term implications of the oil spill will be or what potential changes in the regulatory environment could have on future energy extraction—not only in the Gulf but also nationally.
Analysts will continue to strive to put a number tag on the oil spill, both in terms of the impact on the macroeconomy and in terms of the regional economic impact. The truth of the matter is that what we do know is still far less than what we don't know.
By Michael Chriszt, an assistant vice president in the Atlanta Fed’s research department
June 17, 2010 in GDP, Louisiana, Oil Spill | Permalink
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06/09/2010
Georgia on my mind
Determining the sustainability of the current recovery is an important topic here at the Atlanta Fed. Much depends on the rebound in labor markets-job growth and a decline in unemployment. Part of our overall strategy in determining labor market activity is, of course, to look at the data to identify in which areas are new jobs being created.
Let's look at the states of the Sixth District in geographic terms. The chart below shows what we call an "Employment Momentum" snapshot. We plot the longer-term trend in employment (the year-over-year percent change) along the horizontal x-axis against the short-term trend (the three-month average percent change) along the vertical y-axis. The size of the bubble represents the relative proportion of the measured area.
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Interpreting the chart is straightforward. When a state is performing well and new job creation has a lot of momentum, it will be located in the "Expanding" quadrant, signifying that both its long-term (year-over-year) and short-term (three-month average) measures are positive. When conditions begin to deteriorate, the short-term measure turns negative, but the longer-term measure remains positive, evidencing "Slipping" momentum. When an area has experienced sustained net job losses, both measures are negative, and it moves into the "Contracting" quadrant. When job growth returns, the area's short-term momentum turns positive while the longer-term measure stays negative. Then the area is experiencing "Improving" momentum.
Two observations stand out. First, Florida is clearly on the mend. Its momentum is squarely in the Improving quadrant. Second, Georgia is lagging and remains in the Contracting quadrant. Let's look into that.
The three-month average employment change in Georgia is negative, but the latest reading for April showed that Georgia gained 14,500 new net jobs-the state's first substantial seasonally adjusted monthly gain since February 2008. Another positive month of job growth should land Georgia in the Improving quadrant. Nevertheless, why is Georgia lagging other states in the region in terms of job growth? Is there a part of the state that is underperforming the rest, or is weakness concentrated in a particular sector?
Let's look at another momentum chart, this one focusing on the major Georgia metro areas:
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Most metro areas in Georgia have moved into the Improving quadrant. Notably, Atlanta—the state's largest metro area by far—has improving employment momentum (barely). A few smaller areas remain in the contracting quadrant. What stands out is the fact that nonmetro Georgia (derived by subtracting the total employment in all Georgia's metro areas from total state employment) is deep within the contracting quadrant. It appears that most of the state's metro areas are exhibiting either improving or close to improving employment momentum, while for nonmetro Georgia, weakness in job markets means that they remain entrenched in contraction territory.
By Michael Chriszt, an assistant vice president in the Atlanta Fed’s research department
June 9, 2010 in Economic Growth and Development, Employment, Georgia, Southeast | Permalink
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06/02/2010
A regional event, for now
In the short term, the Gulf oil spill has largely been a regional economic event. Gulf area aquaculture and tourism businesses have been affected, but for the spill to have national implications, the energy and transportation sectors would have to be interrupted. So far, energy production has not been disrupted and shipping facilities remain open and are operating normally.
Any interruption in oil production, imports or both would have a significant impact on supply. According to the U.S. Department of Energy, Louisiana produces 1.4 million barrels per day of crude oil (2010 average to date), accounting for 27 percent of all U.S. crude oil production. Each day, 6.1 million barrels of crude oil and petroleum products (2010 average to date) enter the country through the Gulf Coast, accounting for 48 percent of all U.S. crude and petroleum product imports.
An extension of the moratorium on new deepwater drilling has not affected prices. However, David Kotok of Cumberland Advisors pointed out in Part 6 of his "Oil Slickonomics" commentary that the longer-term implications of the oil spill hold important price influences.
"Our expectation is that the oil business is about to enter a period of intense scrutiny and regulation worldwide. It will confront higher cost structures and much more inspection and regulation. This will eventually be reflected in higher oil prices."
According to data from the Port of New Orleans, the Mississippi River remains open to maritime traffic, and no ship calls have been canceled because of the spill. Port statistics show that about 500 million tons of cargo passes through the Mississippi each year, and more than 6,000 ocean vessels annually move through New Orleans on the Mississippi River. Any disruption to these facilities would have an impact beyond the port as the flow of goods reaches well beyond Louisiana.
Of course, the longer the spill goes unabated, the greater the chances that the oil production and imports could be affected and port activity could be influenced. The opportunity for the oil slick to spread throughout the Gulf also increases daily, as do the chances that it may move out of the Gulf and up the East Coast. In terms of the geography affected by such events, the regional nature of the Gulf oil spill will become more national in proportion.
By Michael Chriszt, assistant vice president in the Atlanta Fed’s research department
June 2, 2010 in Alabama, Energy, Florida, Local Economic Analysis and Research Network (LEARN), Louisiana, Mississippi, Oil | Permalink
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