The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.
The blog's authors include staff from the Atlanta Fed’s Regional Economic Information Network and Public Affairs Department.
Postings are weekly.
Regional employment improves slowly
Atlanta Fed President Dennis Lockhart noted in a May 15 speech in Atlanta that:
"I expect GDP growth for the rest of this year and over the next couple of years to be in the range of 3 to 4 percent annually. I expect growth of consumer and business spending to be sustained, reflecting increased confidence in the durability of the recovery."
He recognized that despite the ongoing recovery, national unemployment remains unacceptably high and only slow improvements are expected:
"Unfortunately, recovery has been too slow so far to reduce unemployment meaningfully. Over the next two years, I expect a gradual decline in unemployment."
The U.S. Bureau of Labor Statistics released April employment data for individual states last week, and the reports for Sixth District states reflect President Lockhart's concern. The District unemployment rate (derived from the sum of the six states' labor forces and the total number of unemployed) decreased to 10 percent in April, down 0.2 percentage points from March. Unfortunately, all District states continue to have unemployment rates higher than the national unemployment rate with the exception of Louisiana. In addition, unemployment rates decreased only in Florida and Georgia, while they increased in a bit in Alabama, Mississippi, and Tennessee. Louisiana's unemployment rate was unchanged in April. Importantly, the labor force total for the region grew at its fastest pace since December 2007, an encouraging sign that those that had given up hope of finding a job have restarted their job searches. The table below shows the change in Sixth District states’ unemployment rates from March to April.
In addition to expecting only slow improvement to unemployment rates, President Lockhart does not see a return to prerecession employment levels any time soon:
"At the gradual pace I'm expecting, it could take up to three years to get employment back to prerecession levels."
Since the region lost more jobs on a percentage basis than the United States as a whole, we can expect that it may take longer for states in the Sixth District to rebound to prerecession levels. The U.S. as a whole saw total employment levels decline 6.3 percent during the recession, while the region saw a drop of 8.5 percent. Total U.S. employment has risen 1.4 percent during the recovery, while the states of the Sixth District have seen total employment bounce back at a slower pace, at 1 percent. The chart below shows total employment in the United States and the total of Sixth District states, indexed to January 2007 = 100.
Looking at April state reports for payroll employment growth, the data are positive, as all six District states logged increases.
While we are headed in the right direction, it will—as President Lockhart said—take years to get to where we were before the recession, both nationally and regionally.
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department, and Sandra Kollen, a senior analyst in the Atlanta Fed’s research department
TrackBack URL for this entry:
Listed below are links to blogs that reference Regional employment improves slowly:
Logistics in the Southeast, part 2: Supply chain challenges and opportunities
Back in February, I blogged here about a conference, "Freight in the Southeast—Moving Our Region's Business." It is increasingly obvious that the movement of goods both in the Sixth District and throughout the county is critical to commerce and the strength of the economy. Given the challenges we face domestically as a result of the Mississippi River flooding, and internationally as a result of the disaster in Japan, the timing seems right to circle back to the topic of logistics.
Earlier in the year, the Retail Industry Leaders Association (RILA) held its annual logistics conference, which it bills as "the largest single gathering of supply chain decision makers from retail and consumer product companies." Input and feedback from conference participants supplement information the Atlanta Fed receives from members of its trade and transportation advisory council, which is composed of industry leaders and experts from throughout the Sixth District.
Takeaways from the conference are too numerous to list, but a few stand out:
- The nation's top retailers are rethinking their customer sales and delivery models. While Internet purchases are increasing as a share of total sales, retailers recognize that the way online sales are made is also in transition—from the desktop to mobile devices.
- Growth in online sales is expected to be five times that of traditional, in-store sales and could amount to 15 percent of total sales by the end of the decade.
- Sellers that rely on "old-school" approaches will miss out on a rapidly growing slice of the consumer pie.
The most successful retailers of tomorrow will be those who recognize the need for a multi-channel strategy (stores, catalogs, and the Web with purchases being made in person, over the phone, online via desktop, smart phone, tablet, etc.). This transition creates both challenges and opportunities. The number one challenge is the alteration of the supply chain: logistics providers become responsible for delivery of the goods ordered and may well be the only face-to-face contact the customer has with the "store." Outsourced providers of such services and the quality of their work can make or break the perception that the customer has of the shopping experience.
Shortly following the conference, I had a personal experience that made me circle back to some of what I had learned at the RILA conference. My wife and I ordered a new headboard (online) from a national merchandiser that features furniture and other housewares. The item was received damaged and because the delivery had been outsourced, requiring extensive communication with the seller's customer relations team. Ideally, this would have been resolved with the delivery folks acting as representatives for the retailer. In our situation, the ideal was not achieved—we still await replacement of the damaged item and, of course, the seller will be out the cost of the replacement and shipping. Perhaps this is an example of one of those supply chain opportunities—the creation of a seamless customer experience. Regardless of where the purchase is made (in store, via catalog, over the Internet, etc.) and how the purchase is delivered (picked up, delivered by store personnel, delivered by a third party, etc.), the future belongs to those retailers who recognize the criticality of the supply chain and incorporate the responsibility into their marketing department. The message was clear to me: the transaction doesn't conclude once the sale is made, but rather once the customer has taken final delivery of the purchase and is fully satisfied.
Opportunities exist for third-party logistics providers. As the conference emphasized, being able to contribute to an exemplary customer experience will place top service providers in a competitively advantageous position. As consumers change buying approaches and delivery expectations, successful partnerships between retailers and those transporting and delivering purchases will become critical.
By Chris Oakley, vice president at the Atlanta Fed and Jacksonville Branch regional executive
TrackBack URL for this entry:
Listed below are links to blogs that reference Logistics in the Southeast, part 2: Supply chain challenges and opportunities:
Southeast housing update: Polls show existing home sales softened in April
As noted in Atlanta Fed President Dennis Lockhart's speech last week, "The housing sector impacts economic growth in two basic ways—one direct and one indirect." Because of its importance we continue to closely monitor developments in our region.
Last week, the National Association of Realtors released first quarter 2011 existing home sales numbers by state, confirming brokers' recent reports on sales activity in the Southeast. Sales in the Southeast increased 4 percent during the first quarter compared with a year earlier. Sales were boosted by strong sales gains in Florida, up 17 percent, while declines in the remainder of the region moderated. Nationally, sales over the same period were down nearly 1 percent, an improvement following a 21 percent year-over-year decline during the fourth quarter.
The Federal Reserve of Atlanta's most recent monthly poll of regional residential real estate brokers indicated sales weakened across the region on a year-over-year basis in April; however, the majority of Florida brokers continued to report gains. Once again, Florida contacts report distressed sales, with cash buyers driving the market.
Southeastern home builders continued to report that new home sales and construction remained at anemic levels in April. More than half of builders reported that sales and construction were down from weak levels a year earlier. Interestingly, half of the Alabama builders we contacted did not respond to our questionnaire, presumably the result of the recent damage sustained by the tornadoes that hit the state on April 27.
Despite slightly weaker sales reports in April, contacts did indicate that home inventory levels eased somewhat on a year-over-year basis. The Orlando Regional Realtors Association reported that available inventory in its MSA continued to decline in April as well. It reported the number of new listings continued to steadily decline, also noting that the Orlando market had a 4.8-month supply of homes in inventory. The Greater Nashville Association of Realtors reported that inventory was down slightly in April from a year earlier, and months' supply continued to move more toward a balanced market.
Southeastern brokers indicated that home price declines eased in April. Reports from builders, meanwhile, indicated new home prices were little changed, with most continuing to report declines.
Southeastern brokers reported stronger buyer traffic in April while builders continued to note that buyer interest weakened.
Note: April poll results are based on responses from 86 residential brokers and 35 homebuilders and were collected May 2–11, 2011. The housing poll'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, a senior analyst in the Atlanta Fed's research department
TrackBack URL for this entry:
Listed below are links to blogs that reference Southeast housing update: Polls show existing home sales softened in April:
Manufacturing's ups and downs
You don't have to look hard these days to find a feel-good article about the resurgence of the U.S. manufacturing sector, and with reason: manufacturing is the strongest sector of the U.S. economy. While the economy grew 1.8 percent as a whole in the first quarter of this year, manufacturing shipments grew by over 5 percent while orders for manufacturing goods grew over 7 percent in the first quarter. Capital-intensive firms such as Caterpillar, the world's largest maker of earthmoving equipment, recently announced first-quarter earnings far above Wall Street expectations, and General Electric, the largest industrial group in the United States, announced a couple of weeks ago its outlook for growth is "very strong" Atlanta Fed chief Dennis Lockhart recently said the economic recovery was partially attributed to a rebound in manufacturing employment and production.
What's interesting, though, is that this manufacturing recovery is taking shape differently across the nation, with employment returning at varying velocity, differing by region. The Midwest/ Rust Belt is rebounding fastest employment-wise (led by Michigan), while the South mostly continued to shed manufacturing jobs, comparing the first quarter of 2010 to the first quarter of 2011. But the worst area tends to be the Northeast, where states like New York and New Jersey are faring worse in manufacturing employment than they were even in the first quarter of last year.
First, we should not take this chart into consideration solely for a full picture on manufacturing employment. While, yes, Michigan has added 27,400 manufacturing jobs to its payrolls over one year, it's critical to keep that in the context of the total number of jobs lost. (Hint:The losses are way more than this chart shows being added.) In December 2007, when the National Bureau of Economic Research marked the official recession's beginning, there were about 613,000 manufacturing employees in the state of Michigan. That number as of March 2011 is around 488,000. Given Michigan's embedded manufacturing infrastructure and large number of unemployed, skilled workers, it stands to reason that the state would be able to regain jobs faster than other states. It also helps that the big domestic automakers are doing well lately: Ford Motor Company recently announced its highest first-quarter earnings in 13 years.
Back in the Sixth District…
Georgia stands out in the South: it added about 6,400 jobs from the first quarter of 2010 to the first quarter of 2011, and while the gains in Louisiana have been small—500 jobs—at least it's in positive territory. All other Sixth District states are in the red—TN, LA, MS, and AL. What's going on in Georgia? And why are the other Sixth District states seemingly lagging behind in manufacturing employment?
One explanation is faster-than-average job growth along the I-85 corridor through West Point, Ga., and La Grange, Ga.
Kia Motors has definitely brightened the manufacturing employment outlook in southwest/west-central Georgia. Two weeks ago, the firm announced it would be accepting applications for 1,000 new positions as it gears up to begin production on the Optima, a midsize sedan. Production on the model will begin in the third quarter of 2011. These 1,000 new positions will be in addition to the 2,200 employees already at the facility. The Hyundai plant just across the state line in Montgomery, Ala., is also boosting employment for parts suppliers in Georgia. These two auto plants together have resulted in 7,000 indirect jobs in the parts-supplying business.
Feeling the multiplier effect from all of this new capital investment, tax revenues, and additional employment, the southwest/west-central region of Georgia is feeling spin-off growth in other sectors, public and private, including a new Wal-Mart distribution center. Columbus State University is also opening a branch campus in West Point, while Atlanta Christian College has plans to move there next year. West Point's mayor was recently cited as saying that since Kia opened its doors there, 38 new businesses have opened. Another plus for manufacturing employment in Georgia is the Center for Innovation for Manufacturing, based at Lanier Technical College. This center, along with a program called Quick Start, was responsible for retraining laid-off mill workers for production at the West Point Kia plant.
What about the other Sixth District states?
I was particularly surprised to see Tennessee in the red, after having read several headlines that talk of the Volkswagen plant in Chattanooga, new parts suppliers, Nissan's battery production facilities, etc. But as our neighbors at the St. Louis Fed show here, several years of losses in manufacturing employment will take a while, if ever, to be made up in Tennessee. However, if you look at Tennessee employment year over year, you can see the state's beginning to make some net job additions compared to a year ago. Mississippi is not as fortunate to date, as plant closings and downsizings continue to outpace job creation. Manufacturing employment in Mississippi over the first quarter of this year shed in the range of about 2 percent to 2.5 percent each month.
Alabama is down about 300 manufacturing jobs comparing the first quarter of 2011 with the first quarter of 2010, but comparing March 2011 with March 2010, it's actually up about 800 jobs. Alabama is also feeling some of the economic impact of the I-85 corridor expansions and anticipates new positions opening up at its Lincoln, Ala., Honda facility. Within the state, northeast Alabama lost about 1.7 percent of its manufacturing employees over the last 12 months, while southeast Alabama has added about 1.4 percent to its pool of manufacturing workers.
Florida lost about 2.9 percent of its manufacturing jobs from March 2010 to March 2011. Florida's manufacturing sector is based largely on electronics manufacturing, printing and publishing, and fabricated metals manufacturing, industries which have had less-than-desirable employment dynamics over the last year. For a silver lining, Tom Dubin, president of Manufacturers' News, recently had this to say:
"Florida's industrial sectors continue to be affected by the housing bust and the recession. However, losses have slowed considerably, and the state's investments in innovative technologies are helping the recovery take hold."
We'll keep watch for next week's regional employment report for an update.
By Mark Carter, an analyst in the Atlanta Fed's research department
TrackBack URL for this entry:
Listed below are links to blogs that reference Manufacturing's ups and downs:
Lessons from past weather disasters
We've been thinking more about the impact of the April 27 tornado outbreak and how the recovery is taking shape.
We are drawn to comparisons to Hurricane Katrina—not the impact on New Orleans, because that event was singular as a result of the flooding, but the impact on the Mississippi Coast, where damage was catastrophic and, apart from the storm surge, the area experienced no flooding.
A report prepared in August 2008 by the Gulf Coast Business Council, titled Mississippi Gulf Coast 3.0 Three Years after Hurricane Katrina, reported that:
"Construction and rebuilding not only stabilized the economy on the Mississippi Coast in the months after the storm, but also propelled [sales tax] revenues to new highs; in fact, the entire State of Mississippi saw a boom."
Marianne Hill, senior economist with the Mississippi Institutions of Higher Learning (IHL), wrote in December 2005 issue of Mississippi Economic Review and Outlook:
"As 2005 draws to a close, recovery efforts are focused on debris removal and clean-up, provision of assistance and services to Coast residents, resolution of insurance claims, and reconstruction planning. Within a few months, reconstruction efforts will be able to move ahead at full steam. Already most homeowners and businesses are back in the area, settling insurance claims, repairing damage and restarting operations."
In the June 2006 report, she wrote:
"The destruction caused by Hurricane Katrina last summer set back economic activity in the state, but the tremendous inflows of assistance since the disaster have boosted sales, employment and tax revenues. Although the task of rebuilding after such devastation is frustratingly slow by its very nature, the recovery effort is moving forward. Economic indicators show clearly that progress is being made."
Like the Mississippi coast in 2005, assistance is arriving to hard-hit areas of Alabama. I was struck by weekend reports of the help that was flowing into Tuscaloosa. A story on Tuscaloosanews.com reported that up to 10,000 people had come to the city to help.
"LaDonnah Roberts, coordinator for Tuscaloosa Area Volunteer Resources, said that number doesn't take into account the hundreds more who are working with organizations like Samaritan's Purse and churches that were not required to register this weekend.
" ‘We estimate that since the storm, we've probably seen 10,000 total volunteers come into the city,' Roberts said."
Last week, we wrote about the small Alabama town of Hackleburg, which was devastated on April 27. Looking at how rural areas recover from natural disasters is an important part of the story. Bob Neal, emergency and fire safety coordinator from Mississippi IHL's finance and administration arm, recognized the difference in delivery of assistance between rural and non-rural areas. He wrote in the December 2005 issue of Mississippi Economic Review and Outlook (cited above) that:
"Rural places receive disaster aid more slowly than urban places because they are more thinly populated and, generally, more difficult to access after a disaster. There is little that can be done to alleviate or mitigate these two fundamental factors affecting disaster aid delivery. People who live in rural places must simply accept the fact that disaster aid will reach them more slowly than in urban places. Rural places also receive less disaster aid than their urban cousins. Providing disaster assistance in rural places is more expensive. Fixed costs of providing aid are spread over fewer people and transportation costs are greater."
We also wanted to share a paper I came across researching the topic. It's an (as far as we can tell) unpublished thesis written in 2009 by a doctoral candidate from Texas Tech University, Maribel Martinez. In her paper, titled "Economic analysis of the tornado impact upon two communities," she notes that:
"Research on the short-term and long-term economic effects after a tornadic event is sparse, especially for small to mid-size communities. These communities often lack the political and economic influence of larger cities when it comes to preparing and recovering from an event. Although large metropolitans may have more population at risk, large urban areas often have the resources, training, and funds to deal with hazards and disasters."
Martinez looks at the impact of tornados on two smaller communities—Clovis, N.M., and Tulia, Texas, that were hit on March 23, 2007, and April 21, 2007, respectively. Her conclusions are:
"The people in the community came together along with many others from surrounding communities to help in the cleanup process. Debris was cleared within the week....
Those businesses that sustained major damage not only to the structure but inventory as well, took longer to recover, between two to nine months....
"Research showed that when businesses are hit by a tornado, some experienced demand surge. This included auto repair shops and service firms such as insurance agents. Others continued to operate or recovered quickly by changing locations or operating out of their homes. However, establishments in sectors such as manufacturing/dairy/retail sustained longer lasting periods of business interruption."
We'll continue to monitor the recovery in both densely populated and rural parts of the Southeast in future posts.
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department
TrackBack URL for this entry:
Listed below are links to blogs that reference Lessons from past weather disasters :
Insight from our Energy Advisory Council
The Federal Reserve Bank of Atlanta's Energy Advisory Council met at the New Orleans Branch a few weeks ago. The Energy Advisory Council is one of five such councils that are part of the Atlanta Fed's Regional Economic Information Network (REIN). Others include agriculture, trade and transportation, travel and tourism, and small/emerging business. The Energy Advisory Council consists of representatives from upstream and downstream production firms, utility companies, and manufacturing/fabrication companies.
Part of the meeting focused on the recent increase in oil prices, and council members discussed the causes and sustainability of higher energy costs. The conclusion was that the price increases were largely the result of higher demand and the increased potential of supply issues, the latter being most affected by recent unrest in the Middle East. Longer-term, members agreed that Gulf of Mexico energy production may not reach its potential. They noted that although 10 offshore drilling permits have been approved since the expiration of the moratorium on deepwater drilling in the Gulf of Mexico, only one was for new exploration. The other permits were issued to resume operations that had been shut down during the moratorium.
Another focus of the meeting was the crisis at the nuclear plant in Japan and the possible repercussions this event may have for the U. S. nuclear power industry. Currently, council members noted, the new nuclear facilities being approved and built have an advanced design, which does not require electricity to cool an overheating reactor, but uses gravity instead. The advanced designs will have other redundant backups as well. In addition, the oversight of existing nuclear plant operations will likely become even more stringent. With the government's current push for clean energy, members agreed that a slowdown in permitting new facilities is not likely.
More generally, council members discussed rising commodity costs being felt throughout the industry, especially with regard to steel (see the chart). They agreed that higher raw materials costs will eventually be passed through to oil and gasoline prices.
Also among the notes from the meeting:
• Activity in the utility sector is up as measured by electricity sales, with the industrial sector showing positive activity, but weakness persists in the residential and commercial markets.
• The introduction of horizontal drilling and liquefaction has changed the natural gas industry, both from the supply and demand side. Supply has increased as a result of the development horizontal fracturing, and demand has increased in part because of the high cost of petroleum.
Input from our Energy Advisory Council and other advisory councils helps us gain insight into economic developments in key industries and sectors in the region's economy. Since developments in these important areas of economic activity influence the broader economy, this insight is a key part of our overall assessment of economic activity in the nation as a whole.
By Kate Glover, Regional Economic Information Network analyst at the New Orleans Branch of the Atlanta Fed
TrackBack URL for this entry:
Listed below are links to blogs that reference Insight from our Energy Advisory Council:
Coming to grips
As we gather more information on
From a macroeconomic standpoint, our job is to analyze the potential impact on overall economic activity. We continue to do this by talking to our business contacts in the larger affected areas such as Tuscaloosa, Birmingham, and Huntsville. As we noted in our previous post, we anticipate that disruptions of the April 27 tornado outbreak will be temporary and do not pose a threat to the broader economic recovery under way in the region. Power is being restored, and the cleanup is under way. We expect that disruptions to production, transportation, and general business activity to be short-lived in most areas. Neighborhoods where the devastation was significant will, of course, take longer to recover.
So we think we have a pretty good handle on how this event will play out on a macroeconomic scale: short-term losses will be largely offset by longer-term recovery and rebuilding activity, a pattern that tends to apply to natural disasters' impact on overall economic activity.
What I don't have a handle on—and can never hope to come to grips with—is the human cost. I didn’t lose any family or friends. My home was not damaged. In most ways April 27 was just another day for me. But something is different.
My wife told me about a story she heard on NPR about how Hackleburg, a small town in northwest Alabama, was practically wiped out, and how residents there are coping. (See the follow-up NPR story on the town and a video shot from a helicopter surveying the damage.) Hackleburg is one of dozens of small towns that face an arduous path to recovery. I have not really thought about that aspect until I read the story. I still don't know how to think about their plight.
Then I saw something that brought April 27 more into focus for me. I came across an aerial photograph of the track of the Tuscaloosa tornado. I noticed it passed within blocks of the apartment complex where my daughter lived when she was in school there. I can only imagine what people are going through. I don't have a clue how the people of Hackleburg will manage.
It had always been a dream of mine to go storm chasing—to maybe take my sons on what I pictured to be an adventure of sorts. I wanted to take pictures of a tornado, see it up close. Not anymore. I never want to see a tornado. Ever.
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department
TrackBack URL for this entry:
Listed below are links to blogs that reference Coming to grips:
- O Manufacturing, Is Winter Thy Enemy?
- New Orleans Area Optimistic Heading into 2015
- Florida's Job Report Shines Bright
- Will Retail Sector Maintain GDP Momentum?
- A Timely Talk with Energy Professionals
- A Closer Look at Earnings in the Southeast
- Has Southeast Manufacturing Found Some Optimism?
- WHAT WAS I THINKING?!?!
- Southeast Commercial Construction Continues Gathering Steam
- Employment Momentum Grows in Florida and the Retail Sector
- January 2015
- December 2014
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- Banks and banking
- Beige Book
- Business Cycles
- Commodity Prices
- Consumer Savings
- Data Releases
- Disaster recovery
- Economic conditions
- Economic Growth and Development
- Economic Indicators
- Fiscal Policy
- Gulf Coast
- Health Care
- Holiday Sales
- Labor Markets
- Local Economic Analysis and Research Network (LEARN)
- Monetary Policy
- Natural Disasters
- New Orleans
- Oil Spill
- Real Estate
- Sales Tax