07/07/2011
What a difference a year makes
The region's tourism sector continues to improve—nowhere more so than along the Alabama Gulf Coast, especially when we consider where we were last year on Independence Day:
The Mobile Press-Register's report from the Alabama coast on July 4, 2010, contained this passage:
"The sun shone, the sand glistened and the water was pleasant Sunday at Dauphin Island's public beach. There was only one thing missing from this otherwise perfect 4th of July: People.
"On the 76th day of the ongoing oil spill disaster, only a couple dozen visitors were at the beach at 1:30 p.m. on what is usually one of the busiest days of the summer."
The Associated Press coverage from the Alabama coast on July 4, 2011, contained this report:
"State officials are expecting a big week for tourism along Alabama's coast. … Promoters say almost all of the 17,000 condominiums and hotels in southern Baldwin County are full through the Fourth of July.
"The area's 2,500 camp sites also are occupied, and many guests are staying through next weekend."
More broadly, our contacts in the leisure and hospitality sector throughout the region continue to convey positive reports. From Miami Beach to Dollywood, tourist activity is up. As noted above, beachgoers are visiting the coasts. Attendance at festivals in Tennessee and New Orleans is well up from year-ago levels. The Federal Reserve's last Beige Book report from the Atlanta District noted that:
"Tourism activity improved further throughout the District. Occupancy and room rates were boosted by increases in both business and leisure travel. Convention and cruise bookings have increased as well. Overall, contacts in the travel industry remained optimistic."
The bottom line? People are taking vacations and spending at healthy levels.
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department
July 7, 2011 in Alabama, Beige Book, Gulf Coast, Oil Spill, Southeast, Tourism | Permalink
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06/21/2011
Studying the impact of tornadoes
On April 29, we wrote this about the devastation wrought by the late April tornadoes:
"Historically, the economic pattern of disasters sees initial losses as affected areas experience a slowdown in activity. The duration of the slowdown is tied to the extent of damage in economically important areas, and the duration of loss of services such as power and water. Recovery is driven largely by two factors—physical rebuilding of damaged and destroyed infrastructure and replacement of capital and household goods. As insurance checks are distributed and government aid is delivered, the economic recovery begins to take hold. Rebuilding infrastructure and replacement of capital and goods can stretch out several years, depending on the extent of the damage."
A recent study titled Preliminary Economic and Fiscal Impacts of the April 27, 2011 Tornadoes on Alabama by our friends Samuel Addy and Ahmad Ijaz at the University of Alabama's Center for Business and Economic Research reached a similar conclusion. Here are their overall conclusions:
"For the Alabama economy, the April 27 tornadoes will initially reduce GDP by $835 million to $1.3 billion or 0.5–0.7 percent, employment by about 5,600–13,200 jobs or 0.2–0.5 percent, state tax collections by $19.1–44.5 million or 0.2–0.5 percent, and local sales tax receipts by $4.4–10.2 million in 2011. Recovery activities (cleanup, assistance, and rebuilding) should pump $2.6 billion into the state economy in 2011 and $1.6–3.2 billion in 2012; state spending of about $80–100 million for cleanup in 2011 is expected. The federal government and insurance claims will fund most of the recovery. Cleanup and assistance should be completed in 2011, but rebuilding will continue into 2012."
The authors also note that the study does not take into account the "other very important quality of life factors such as lives lost, displacement, mental and physical health issues, and disruption to the lives of people who were not direct victims."
Driving home from Huntsville a couple of weeks ago, I went through the town of Rainsville, Ala. I was unaware of the tornado that ripped through that small town, but I'll never forget the aftermath. This past weekend I was in Ringgold, Ga., and saw similar damage. But the people of these towns are clearly resilient—cleanup was evident, and even some rebuilding was under way.
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department
June 21, 2011 in Alabama, Disaster recovery | Permalink
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05/04/2011
Coming to grips
As we gather more information on
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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
May 4, 2011 in Alabama, Recovery | Permalink
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04/29/2011
Tornado outbreak, heartbreak
We are all reeling here in the Southeast from Wednesday's tornado outbreak. If you haven't seen just how many touchdowns we had, take a look at this real-time map on MSNBC's website.
Alabama was hardest hit. Lesley McClure, our regional executive in the Birmingham office, penned a note to members of the branch's board of directors outlining the Fed's response to the tragedy:
"First let me say that I hope each of you, along with your families and friends, are safe. I know everyone is consumed with coping with the aftermath of the disaster, but I wanted to reach out to you to let you know what the Fed is doing now and what we can do to assist in the future.
"The Federal Reserve's response to a disaster is twofold—short term and long term. Our short-term response does not provide relief for critical needs such as housing, food, etc. However, our ability to put cash on the ground is key as power outages create situations where retailers may only be able to accept cash due to the inability to conduct electronic payments. Psychologically, access to cash is very important. The Atlanta office extended its cash ordering hours on Thursday and did receive several late cash orders. They are committed to being available for weekend payouts if needed.
"For longer-term needs, we have staff in our Community and Economic Development group with experience in supporting the rebuilding of homes and the challenges associated with financing, under-insurance, etc. They can advise local governments on what to expect regarding housing development and infrastructure in the wake of disaster. They can work with non-profits to educate them on how to establish information centers for families seeking assistance with rebuilding."
Although much less important at this stage, we are monitoring the impact from an economic point of view. Economic disruptions will be significant in the short term as power and water services remain interrupted in several areas.
Damage from the region's tornado outbreak April 27 will run into the hundreds of millions of dollars and could cross the $1 billion mark, according to first-take estimates from the insurance industry. That said, it will be weeks before anyone can deliver reliable estimates. Part of the reason for uncertain estimates stems from the fact that many areas have experienced extended power outages, which could mean that firms without physical damage may be able to collect on policies that cover business interruptions.
Historically, the economic pattern of disasters sees initial losses as affected areas experience a slowdown in activity. The duration of the slowdown is tied to the extent of damage in economically important areas, and the duration of loss of services such as power and water. Recovery is driven largely by two factors—physical rebuilding of damaged and destroyed infrastructure and replacement of capital and household goods. As insurance checks are distributed and government aid is delivered, the economic recovery begins to take hold. Rebuilding infrastructure and replacement of capital and goods can stretch out several years, depending on the extent of the damage.
As our thoughts and support go out to our friends and neighbors that are coping with these events, we'll continue to reach out to affected communities and monitor the economic impact of the April 27 tornadoes.
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department
April 29, 2011 in Alabama, Disaster recovery | Permalink
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01/05/2011
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 story is much the same for the region:
"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
January 5, 2011 in Alabama, Florida, Georgia, Louisiana, Mississippi, Outlook, Southeast, Tennessee | 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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04/08/2010
LEARNing, Part II
Last week marked the second gathering of the Atlanta Fed's Local Economic Analysis and Research Network (LEARN). We discussed three of the presentations in our previous post. This time around we'll discuss the other lectures from our conference.
Mississippi's outlook was presented by state economist and assistant commissioner of institutional research for the Mississippi State Institutions of Higher Learning, Dr. Philip Pepper. He noted that although the state felt the brunt of the recession later than most states in the region, its recovery will closely track that of the nation as a whole. That said, Dr. Pepper highlighted the fact that average growth during economic expansions has decelerated over time, and that he felt that growth in the United States and Mississippi will be below the long-term average for the foreseeable future. Job growth in particular will be anemic in Mississippi, he reported, and state revenue growth will be slow coming out of the recession as consumers remained cautious.
Dr. Dek Terrell from Louisiana State University's (LSU) Division of Economic Development and Forecasting noted that Louisiana also was a latecomer to the recession and has not suffered as much as other Southeastern states. Job losses began in the spring of 2009 but have mounted since. The inflow of federal dollars and rebuilding from Hurricane Katrina helped stem the recession's tide for a while, and the state's energy sector held up well, mainly because of industrial construction related to the petrochemical industry.
Also from LSU, Dr. David Dismukes, associate director and professor at the Center for Energy Studies, shared with conference participants how the expansion of the natural gas sector has benefited Louisiana's economy. The discovery and extraction of new gas resources have been the result of the application of new technologies, Dr. Dismukes said. A total of $2.4 billion in new business sales in Louisiana in 2008 were created by Haynesville Shale activity, resulting in approximately $3.9 billion in additional household earnings (much of this from lease and royalty payments) and 32,742 jobs.
Georgia's outlook was not as rosy, according to Dr. Jeffrey Humphreys, director of the Simon S. Selig, Jr. Center for Economic Growth at the University of Georgia. He noted that Georgia will continue to suffer from its heavy exposure to the real estate downturn. The economy is geared toward new residential and nonresidential development. Going into this recession, Georgia had an outsized construction industry and a huge supply of residential and nonresidential properties and a high concentration of manufacturing industries closely allied to construction. The overdependence on development meant the financial crisis did much more damage to Georgia's banks than to the nation's. Dr. Humphreys concluded that Georgia's economy will underperform the national economy until real estate and construction stabilize, sometime in 2011.
Presentations from the LEARN conference can be found on our Web site.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research departmentApril 8, 2010 in Alabama, Florida, Tennessee | Permalink
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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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09/16/2009
Comparing recessions in the Southeast (part two)
Last week we looked at how employment levels in the Sixth District states during the current downturn compared with previous deep recessions. Basically, we are trying to determine if the current downturn is deeper and/or longer than past recessions in terms of its effects on nonfarm payroll employment. In last week's post, we showed that the current decline in nonfarm payroll employment has been deeper than the employment declines in the 74–75 and 81–82 recessions. In addition, the current downturn has lasted longer. This week we will see if that holds true for individual states in the region.
For this analysis, we use data from the U.S. Bureau of Labor Statistics, indexing total employment in each state of the Sixth District to a beginning value of 100. We start the time series six months prior to the peak in regional employment, with zero representing the month when employment levels peaked.
For Alabama, the current downturn in employment is a bit deeper than the 74–75 and 81–82 periods, but the decline appears to be leveling off. Employment took 18 months to return to the previous peak in the 74–75 period, and 26 months in the 81–82 episode. Currently, Alabama is 19 months past peak employment. The state has lost 105,000 jobs since the last peak, meaning that if it does not add that many jobs during the next seven months (which would bring the index level back to 100 in the chart) the current employment downturn will be the longest as well.
Florida's employment decline is already longer and deeper than previous experiences. The state is 28 months into the downturn whereas previous declines lasted 16 and 18 months, and the index number is well below the 74–75 trough.
Georgia's current experience looks much like that of the 74–75 downturn. The current index number is a bit below that trough reached in 1975, making the current decline the deepest for Georgia. Whether or not this current episode becomes the longest downturn remains to be seen; it took Georgia 35 months to return to its previous peak in the 1970s episode, and we are in the 19th month of decline for the current period. The state would have to add more than 250,000 jobs during the next 16 months for this current period not to become the longest employment downturn.
Comparisons for Louisiana are difficult because of the unique nature of its economy. The employment downturn in the 1980s lasted from late 1981 until mid-1993—138 months—in large part because of the structural decline in energy-related employment. Another factor making comparisons tricky for Louisiana is that employment levels in the current period have been supported by ongoing rebuilding efforts and repopulation in the wake of Hurricane Katrina.
Looking at Mississippi, it's tempting to conclude that the current downturn in employment will not be the deepest or the longest. Employment appears to be stabilizing one-and-a-half years into the decline and at a level above the 74–75 and 81–82 episodes.
In Tennessee, employment hit the previous low point reached in the 74–75 downturn. However, the uptick seen in the most recent month (July) is tied to a large increase in government employment associated with federal stimulus spending, so we cannot read too much into this as a sign of leveling off. Regardless, the state would still have to add more than 140,000 jobs during the next eight months for the current downturn not to become the longest.
For most states in the region, the current period is or most likely will represent the longest and deepest employment downturn when compared with previous post-war declines. We will continue to monitor employment trends in the Southeast coming out of this recession and keep you posted on significant developments.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
September 16, 2009 in Alabama, Employment, Florida, Georgia, Louisiana, Mississippi, Recession, Southeast, Tennessee | Permalink
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