A look into 2011
January is the time when economic forecasts for the new year percolate throughout the country. The general consensus is that the U.S. economic recovery will remain on track, and the Atlanta Fed's assessment is in line with this consensus. The latest issue of the Bank's quarterly publication EconSouth reviews 2010 and comments on the outlook for 2011. Here are some highlights from the national outlook:
"While the U.S. economy has been expanding for almost a year and a half, and a number of key fundamentals such as business investment and consumer spending have picked up, the recovery has not been strong enough to meaningfully reduce the unemployment rate…
"Lingering joblessness, along with weak income growth, lower housing wealth, and tight credit, are acting as headwinds to the economic recovery…
"The U.S. economy is not all doom and gloom, however. Business investment, a particularly bright spot, grew at a 20 percent annual rate during the first three quarters of the year. This theme of improvement in some areas and ongoing weakness in others illustrates the unevenness of the recovery and heightened uncertainty about future economic prospects."
"The Southeast economy in 2010 was marked by strength in some areas and continued weakness in others, with more of the same expected for 2011…
"The ailing real estate market has been a dark cloud over much of the Southeast economy. Florida's real estate market was especially hard hit, but it has also bounced back the strongest. Georgia has seen its share of real estate problems, which have hurt its banking sector. The state has the nation's most bank failures since the crisis began…
"Notwithstanding unprecedented cutbacks in production during the recession, regional vehicle manufacturing recovered in 2010. The region's production outlook is encouraging because of favorable consumer demand for products made here and additional plants that will expand production capacity in the coming year."
The issue also includes information on individual Southeast states:
"Alabama has shown some of the s strongest job growth among southeastern states, regaining in the first three quarters of 2010 about 18 percent of the jobs it lost in 2009. These job gains are reflected in one of the more dramatic drops in unemployment the region has seen since the recession. A fortunate implication of stronger job growth—and the greater spending expected to follow—is that Alabama is projecting the smallest state budget shortfall in the region for the current fiscal year. With the greatest share of pending stimulus projects among southern states, Alabama is poised for those projects to complement its current path of recovery.
"After suffering the hardest fall in real estate in the Southeast, Florida has seen the most dramatic recovery, with total residential sales through most of 2010 at 71 percent of their peak level seen in 2005. Florida is also experiencing its share of the relatively strong performance of manufacturing in 2010. Over the next few years, a drinkware manufacturer and a medical product manufacturer plan expansions there. Another boost to the state's economy in 2010 came from foreign travelers taking advantage of the weak dollar to visit the Sunshine State. On a more somber note, Florida is projecting one of the highest state budget shortfalls among southeastern states in the current fiscal year.
"Georgia holds the dubious honor of being home to the most bank failures in the United States since the banking crisis began and also faces the highest projected budget shortfall of the southeastern states for the current fiscal year. In spite of these financial challenges, farmers in the state have benefited from historically high cotton prices in 2010. In addition, biofuels have become big business in Georgia. The ready availability of privately owned forests has even attracted European manufacturing to the state to create jobs in the biofuel sector. The state has also topped others in the region in terms of tourism growth. Employment in that sector is growing at nearly twice the pace of tourism employment in the next fastest-growing state.
"With residential home sales at only 58 percent of their 2006 peak, Louisiana has the slowest-recovering real estate market among states in the region. On the upside, through the first three quarters of 2010, Louisiana regained the greatest percentage of jobs lost during 2009 (39 percent) and continues to enjoy the lowest unemployment rate among southeastern states. In addition, the announcement of a new facility producing electric and hybrid boats and other recreation vehicles in the state will further boost the region's growing green manufacturing sector. In spite of weak economic conditions, New Orleans once again saw record-breaking attendance at its many festivals and celebrations, including Mardi Gras.
"Mississippi has been slow in regaining jobs. Through the first three quarters of 2010, the state has regained only 7 percent of jobs lost in 2009. Only Georgia recovered a smaller share of lost jobs (less than 1 percent). On the other hand, Mississippi manufacturing is jumping on the green machine with the announcement of a start-up firm planning to manufacture energy-saving electrochromic windows and, over the next few years, the arrival of three biofuel plants.
"Tennessee is looking forward to when Volkswagen's automaking plant in Chattanooga begins production in 2011. The addition of the Leaf electric vehicle from Nissan, whose Smyrna manufacturing plant will be under construction through 2012, will add to the state's history of innovative automaking endeavors. The Volunteer State has enjoyed the fastest growth among southeastern states in personal income in 2010, resulting in one of the smallest projected shortfalls in state budgets in the region for the current fiscal year. The state is also one of the three leaders in the United States for clean technology jobs: 2010 saw the addition of hundreds of solar manufacturing jobs in Tennessee, and increased manufacturing of electric car–charging stations could produce further jobs in coming years. On the downside, flooding in 2010 devastated tourism in Nashville during the traditionally busy summer months."
By Michael Chriszt
Assistant vice president in the Atlanta Fed research department
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