SouthPoint

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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.


11/20/2014


Music City Is Playing Your Song

Nashville has long been synonymous with country music, and the local economy is closely tied to the music industry. It's not unusual to see a country music star dining in a restaurant or showing up at a local music club for a jam session. In short, music looms large over many aspects of life and culture here. But you might ask, what exactly is the music industry's economic impact on Nashville? Good question! Let's explore.

Music touches several sectors of the Nashville economy. Banking, construction, and hospitality all benefit from the music industry. The Nashville Chamber of Commerce put together a thorough study on the music industry's economic impact. The study revealed that Nashville stands toe to toe with—and in many ways surpasses—New York and Los Angeles for having a fully self-reliant music industry, which in layman's terms means you can write, record, produce, promote, finance, and distribute music without ever leaving the city. Of course, music starts with musicians, singers, and songwriters, but today's music business requires specialized talents that go beyond the stage. Creative, technical, and managerial skills are abundant in the Nashville metropolitan statistical area (MSA). The chamber's study found that relative to Nashville's size, the amount of talent in the music industry at all levels of the process is extraordinary.

The local music industry employs a vast array of people across a correspondingly vast array of sectors. In 2012, according to the chamber's study, the Nashville MSA employed almost 3,000 artists and musicians with an average annual pay of more than $85,000. Music publishing employed almost 1,500 people, with an average annual pay of nearly $75,000. The list goes on and on, including musical instrument manufacturing, musical supply stores, record stores, record production, radio networks, and recording studios. It's almost impossible to tell where the employment influence of the music industry begins and ends. Many jobs are directly related to music, but others are indirectly related and not classified in a way that shows up in a study of employment in the music industry. All in all, the chamber's study indicated that the density of activity in Nashville's music industry is some 10 times greater than New York or Los Angeles, and even greater than cities such as Atlanta, Austin, and New Orleans. Core music industry employment per 1,000 people exceeds all other U.S. cities by a large margin.

The chamber of commerce's report also found that some 56,500 people's employment was tied to the music industry, resulting in labor income of over $3.2 billion and contributing almost $5.5 billion to the local economy, with a total output of almost $10 billion, a large portion of the Nashville MSA's $85 billion gross domestic product.

But what about other areas of the economy that benefit from the music industry's contributions? According to a July 2013 article from the Atlantic CityLab, industries such health care, transportation, and food service benefit greatly. The article pointed out that work in Nashville's full-service restaurants has grown 10 percent since 2009, and the entertainment industry can be credited for a good bit of that growth. The article also pointed out the multiplier effect the music industry has on local employment. For every 10 jobs created in the music industry, another 52 positions are created in the broader economy.

Needless to say, the music industry is important to the Nashville region. Whether it's the entertainment talent, the history, or the culture, music thrives here. So put on your cowboy boots, your cowboy hat, and blue jeans. Nothing says "Welcome to Nashville" more. We are not called Music City USA for nothing!

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch

November 20, 2014 in Employment, Entertainment, Jobs, Nashville, Tennessee | Permalink

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11/13/2014


Signs Point Up for Regional Manufacturing

Have you ever noticed all the signs in the world around you? They are everywhere. Many of them can prompt some deep thought. For instance, I was recently driving to work one morning, and three deer ran out in the road in front of me. Luckily, I didn't hit them, but it made me wonder: Who decides where to put deer crossing signs? How do they know a deer wants to cross the road right there?

Speaking of signs worth your attention, the signs for southeastern manufacturing are pointing up, according to the latest Southeast Purchasing Managers Index (PMI), which was released on November 6. The report suggests that things look pretty strong, and digging into the report, one could conclude that things are even stronger than they initially appear.

The Atlanta Fed's research department uses the Southeast PMI (produced by the Econometric Center at Kennesaw State University) to track manufacturing activity in the Southeast. The survey analyzes current conditions in the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The Southeast PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends in new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.

The PMI increased to 56.5 in October, which was a 1.5 point increase over September (see the chart). Some notable highlights:

  • The new orders subindex remained especially strong in October, registering 64.4, which is a 3.4 point increase over September's 61.0. New orders have averaged a solid 60.7 for the year.
  • The production subindex increased significantly to 67.3 during October, 8.3 points higher than September's reading of 59.0.
  • The employment subindex fell 2.2 points from the previous month. October's reading of 54.8 still indicates that manufacturing payrolls are increasing.
  • The supplier deliveries subindex rose 3.8 points during October, indicating that delivery of inputs is slowing as a result of high demand.
  • The finished inventories subindex fell 5.7 points compared with September and sits at 41.3. The fall in finished inventories suggests that inventory levels are lower than the previous month and could lead to higher orders in the near future.
  • The commodity prices subindex fell to 51.0, a 2.0 point decrease from September.
Southeast Purchasing Managers Index

When asked for their production expectations over the next three to six months, only 21 percent of survey participants expect production to be higher, down from 50 percent in September. According to the survey, 19 percent of survey respondents expect production to be lower than their current production levels. Those responses imply that 60 percent expect production to stay at current levels.

So to recap: The PMI indicates that regional manufacturing has seen strong new orders and production, employments levels are expanding, demand for inputs could be slowing deliveries, inventory levels are falling, commodity prices are essentially flat, and most purchasing managers are expecting to remain at their current levels of production. Although the low production expectations for the next three to six months prevent it from being a perfect set of conditions, they collectively indicate strong manufacturing activity in the near future. Just as with the deer crossing signs, I'll be paying close attention.

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch

November 13, 2014 in Economic conditions, Employment, Inventories, Manufacturing, Prices, Productivity, Southeast | Permalink

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11/07/2014


South Florida Maintains Momentum

In a SouthPoint post in August, I discussed improving economic conditions in South Florida. This momentum is continuing into the last quarter of 2014, with business activity generally strong and some new developments in business investment.

From mid-September to the end of October, business contacts for the Miami Branch of the Atlanta Fed continued to indicate improving business sentiment in the region. Economic activity and overall demand reflect steady growth. One exception to this steadily improving performance is the real estate market, which remains a very active sector in South Florida, with prices continuing to increase.

Employment and labor markets
Business contacts continued to report a concern with a skill-set gap between job seekers and available job opportunities. Contacts across several sectors report difficulty finding skilled labor for specialized positions in technology, mathematics, engineering, management, and lending. In a few sectors, the labor market was reported as tightening.

Contacts in the hospitality industry discussed how the tourism sector's expansion has resulted in job growth. The application of technology has reduced the need for some labor resources. However, creating "experiences" for travelers still requires a human touch, thus the need for additional workers as the sector expands and new venues come online. The part-time to full-time employee ratio has remained stable for some time in this sector, with contract workers being used for specific projects. (Speaking of tourism, industry contacts continue to report construction of new hotels, sports venues, and other attractions, in addition to the renovation of restaurants, hotels, and convention centers.)

Costs, prices, and wages
Business contacts reported some increases in costs, primarily in rent, total compensation, and commodities. Increases in construction costs were mainly associated with increasing land and labor costs. Rising commodity prices were affecting the ability to increase prices and improve profit margins. Contacts reported that—with the exception of the real estate and food services sectors—passing through price increases has met with little success, although many contacts have attempted to raise prices or are considering doing so in the near future.

The commercial real estate rental market remains quite active. Real estate professionals are reporting that as a result of a shortage of industrial space, landlords are able to increase rents, spurring an increase in average asking rents.

Contacts continue to report increasing wage pressures for specific skilled labor. Rising health care costs have been described as a significant concern that is driving total compensation costs up. The reports were mixed as to the percentage of increases, although most said increases ranged between 10 percent and 20 percent. Some contacts are absorbing these costs rather than increasing wages, and others have passed on some or all of the cost to the employee.

Availability of credit and investment
Banking sector contacts all reported being well capitalized, though small businesses noted continued credit constraint. Contacts in regional banking expect the combination of traditional and nontraditional structures (for example, supply-chain financing and accounts receivable purchases) to gain momentum through the end of the year and into 2015.

The number of reports of investments and capital expenditures increased. South Florida real estate companies indicated little slowdown in foreign capital moving into the market. The prevailing perspective is that the United States still offers a strong safe haven.

Overall, South Florida business contacts continue to report positive activity, and an optimistic outlook prevails in the near term.

By Marycela Diaz-Unzalu, a senior Regional Economic Information Network analyst at the Atlanta Fed's Miami Branch

November 7, 2014 in Employment, Florida, Labor Markets, Real Estate | Permalink

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11/04/2014


Heading into Fall, Florida's Recovery Continues

In an August SouthPoint post about economic conditions in north and central Florida, we stated that the sentiment of our contacts during the summer had been the most upbeat since before the recession. Since then, the Jacksonville REIN team has met with more than 50 business contacts, and it was very clear that the optimism was ongoing.

Contacts were upbeat as revenues and volumes increased. Demand for residential purchase mortgages met expectations, and residential lot development had made a comeback since the recession. Activity in multifamily real estate was robust, commercial loan activity improved, and office space absorption increased.

Employment and labor markets
Employment levels remained relatively flat for most, but some larger firms added to headcount. Complaints about difficult-to-fill positions persisted, though there was little evidence of contacts aggressively raising pay to attract talent. For some financial institutions, the increased availability of full-time positions in the marketplace has created turnover of part-time staff such as tellers. In addition to the usual difficult-to-fill positions (information technology, accounting, and compliance and risk), we heard stories of challenges filling lower level, low-skill positions in industries such as hospitality. In the Space Coast region, there were reports of overall shortages of workers.

Costs, wages, and prices
Most contacts indicated that nonlabor inputs have increased at about the rate of inflation. However, commodities like resins, plastics, and aluminum are expected to remain fairly flat for the foreseeable future. Construction costs in our area have reportedly stabilized, and fuel prices have lowered considerably. Food costs, particularly proteins, are up compared with last year.

Anecdotes about 2015 health care premiums were mixed, as increases ranged from less than 1 percent to as high as 20 percent. Many companies indicated that they plan to change benefit structures, raise deductibles, alter prescription plans, and eliminate dependent coverage (and so on) in an effort to avoid significantly increasing the proportion that employees pay as a result of worries about talent acquisition and retention. Others are moving ahead with shifting some measure of any increases to employees.

Most contacts reported moderate wage pressures for technically skilled positions. Some reported increased starting salaries for some lower-level jobs such as call center positions, and some are forced to offer more to attract those with internet or digital media skills. Most contacts continued to budget merit increases in the range of 2.5 to 3 percent.

Availability of credit and investment
Access to capital and availability of credit continued to be a nonissue for the majority of our contacts, but some small organizations continued to struggle for funds. Banking contacts reported strong loan demand for purchase mortgages in addition to new construction loans, refinances, home improvement loans, consumer loans, and increases in commercial loans. Reports of capital expenditures including major port expansions, health care facility construction projects, and merger and acquisition activity were widespread across the region.

Business outlook
Some contacts mentioned downside risks to the outlook, including the outcome of today's election, increased government regulations, and—most recently—worries about weakness internationally and the resulting market volatility that crept up in mid-October. Generally, however, contacts reported an expectation for higher growth in the short and medium term.

Tell us: What's your outlook for growth for the rest of 2014 and into the next year?

By Chris Oakley, regional executive, and Sarah Arteaga, REIN director, both at the Atlanta Fed's Jacksonville Branch

November 4, 2014 in Economic conditions, Employment, Labor Markets, Outlook, Prices, Recovery, Southeast | Permalink

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10/08/2014


Regional Jobs, Unemployment Rate Show Increases

In the latest edition of Southeastern Insights, my colleagues in the Atlanta Fed's Regional Economic Information Network (REIN) conveyed that most regional business contacts' staffing levels increased over the past couple of months. The recent release of state-level labor market data from the payroll survey produced by the U.S. Bureau of Labor Statistics supports these anecdotal reports.

Payroll survey
Nearly all Sixth District states added new payrolls in August. In total, the region added 51,100 net jobs, following 38,200 new payrolls in July (revised up from 27,100). Florida was among the top job contributors in the nation, adding 22,700 new payrolls in August. The only job losses in the Sixth District occurred in Mississippi, which subtracted 4,600 (see the chart).

Contributions to Change in Net Payrolls by Sixth District State

The bulk of new jobs in the Sixth District came from goods-producing industries such as construction and manufacturing, with 25,200 jobs added on net. Florida alone contributed 10,600 of these jobs, with 6,100 added to the construction sector. Georgia added 7,900 goods-producing jobs, with 5,500 added to the manufacturing sector.

Gains in the professional and business services industry were also fairly widespread, with Sixth District states adding 15,500 payrolls to the sector in August. Only two sectors subtracted payrolls: leisure and hospitality (down 1,300 payrolls) and financial activities (down 200). Though neither sector subtracted payrolls in all states, most of the leisure and hospitality job losses occurred in Florida, which shed 5,800 payrolls, and most financial activities job losses were in Georgia, which lost 1,800 payrolls on net.

However, similar to my post last month about July's regional labor market data, jobs increased on aggregate in Sixth District states in August. However, the unemployment rate increased.

Household survey
The aggregate unemployment rate for the Sixth District ticked up to 6.9 percent in August from 6.7 percent in July (see the chart). In three of the six District states—Georgia, Louisiana, and Tennessee—the unemployment rate continued its upward trend (now for four straight months). Georgia had the highest unemployment rate among the states in August, at 8.1 percent, a notable 0.4 percentage point increase from 7.7 percent in July. Mississippi's unemployment rate, though still one of the highest in the nation, declined for the first time in four months in August to 7.9 percent, from 8.0 percent in July.

Contributions to Change in Net Payrolls by Sixth District State

So why did the report reflect an increase in jobs and a rise in the unemployment rate? Though there is some ambiguity about a rising unemployment rate accompanying decent employment growth, one possible explanation is that the number of people looking for work increased more than the number hired. The labor force participation rate (LFPR) is an indicator that supports this notion. In fact, the data show that the LFPR increased in most Sixth District states during the last couple of months. Perhaps recent improving trends in labor market conditions made people more confident in their ability to find employment, thus encouraging them to look for jobs.

The next release of state-level labor market data will be October 21. We'll have to wait and see if this trend continues.


October 8, 2014 in Economic conditions, Employment, Southeast, Unemployment | Permalink

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09/02/2014


Jobs Increase (But So Does Unemployment)

The most recent state-level labor market data from the U.S. Bureau of Labor Statistics were mixed, with one report noting an increase in employment and another indicating a rise in unemployment.

Payroll survey
Last month the Sixth District states added 27,100 net new payrolls, matching the revised June figure and just slightly below the 2014 monthly average of 28,600 net new payrolls. The only state that subtracted payrolls was Florida, which shed 1,600 payrolls (see the chart).

Contributions

Most of the District gains came from the construction sector (up 12,100), which corresponds with the results of the Atlanta Fed's most recent poll of southeastern business contacts engaged in commercial construction (we recently discussed that poll's results). Other major regional payroll contributors were leisure and hospitality (up 6,700) and education and health services (up 6,500). Two sectors—government employment and manufacturing—subtracted payrolls from total District figures. Government (down 11,100) was the only sector where payrolls declined in all states, and most of the decline came from local government. Regional manufacturing also declined by 1,600 payrolls, but Florida represented most of the District's manufacturing loss, shedding 2,900 jobs.

Household survey
On the other hand, last month's unemployment data told a different story in the Sixth District. Although the aggregate unemployment rate ticked up 0.2 percentage points to 6.7 percent in July, three of the six states in the Atlanta Fed's district (out of a total of seven nationally) had fairly notable increases. Georgia's unemployment rate increased to 7.8 percent from 7.4 percent in June, Louisiana's increased to 5.4 percent from 5.0 percent, and Tennessee led the nation with the largest month-over-month increase: one-half of a percentage point, rising to 7.1 percent in July (see the chart). In all three of these states (plus Mississippi), the unemployment rate rose for the third straight month. Mississippi had the highest unemployment rate in the nation in July (at 8.0 percent), and Georgia had the second-highest rate at 7.8 percent. This steadily increasing unemployment across states bears watching as we enter autumn.

Unemployment_rates

We'll see what story (or stories) August data tell us when the next regional employment release comes out on September 19.

Photo of Chris Viets By Rebekah Durham, economic policy analysis specialist in the New Orleans Branch of the Atlanta Fed

September 2, 2014 in Employment, Labor Markets, Recession, Southeast, Unemployment | Permalink

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08/22/2014


Southeast Commercial Construction Update: Activity Up from Last Year

At the national level, total nonresidential construction spending fell 2.78 percent between May and June but increased 4.6 percent from the year-earlier level. Because nonresidential construction projects tend to take place over longer time horizons, it’s useful to aggregate the data by quarter to smooth out their short-term volatility. Doing so reveals that nonresidential spending increased slightly (just shy of 2 percent) between the first and second quarters of 2014 and that it increased by 6.7 percent from the second quarter in 2013.

Does the Southeast commercial construction picture align with the national one? The Atlanta Fed polls southeastern business contacts engaged in commercial construction each quarter to track and better understand regional trends in construction activity. The latest poll results appear to echo the national story, suggesting that a pickup in commercial construction activity was sustained through the second quarter of 2014.

Most respondents indicated that the pace of nonresidential construction activity in the Southeast was either ahead of the year-earlier level or remained unchanged from the year-earlier level. All contacts reported that the pace of multifamily construction had increased from year-earlier levels (see the charts).

Pace of Nonresidential Construction Activity versus a Year Ago Pace of Multifamily Construction Activity (units) versus a Year Ago

Several comments from respondents help to illustrate these trends:

  • “More projects to go after in all markets, but competition is still very intense.”
  • “Multifamily supply continues to grow at a strong pace.”
  • “For the first time in six years we are beginning to see much larger projects in the healthcare, commercial and industrial markets.”
  • “Apartment construction remains at a high level and brings concerns that the market will become overbuilt. Each month it seems there are more announcements for new apartment projects.”

Half of all respondents reported that backlog was greater than the year-earlier level; the other half indicated that backlog was similar to the year-earlier level. Although this response represents a drop from the last two quarterly measures of 89 percent and 76 percent, it is still an indication that the pipeline of future activity remains fairly robust.

The number of respondents reporting that the amount of available credit met or exceeded demand continued to increase from earlier reports. Sixty-eight percent of contacts in the second quarter 2014 indicated that credit was sufficient, compared with 60 percent the previous quarter and 57 percent one year earlier (see the chart).

How available do you perceive commercial construction finance to be in your market?

The majority of contacts reported that they plan to increase hiring during the next quarter. Seventy-five percent of contacts in the second quarter 2014 reported that they were planning to do modest to significant hiring, slightly down from 79 percent the previous quarter but up from 57 percent one year earlier (see the chart).

Hiring Plans for Next Quarter versus This Quarter

Compared with a year earlier, more contacts (roughly one out of three) indicated that they were having a difficult time filling positions (see the chart).

Difficulty Filling Positions versus a Year Ago

All contacts reported some degree of upward pressure on labor costs. Sixty percent of contacts indicated that their labor costs had increased more than 3 percent from year-earlier levels. A growing share reported labor cost increases of 6 percent or more (see the chart).

Labor Costs versus a Year Ago

The next poll will open on October 6, 2014. If you are a commercial contractor and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.

Note: Second quarter 2014 poll results were collected July 7–16, 2014 and are based on responses from 20 business contacts. Participants of this poll included general contractors, subcontractors, lenders, developers, and material fabricators with footprints of varying sizes across the Southeast.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department


August 22, 2014 in Construction, Economic conditions, Economic Indicators, Employment, Labor Markets, Real Estate, Southeast | Permalink

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08/06/2014


Sunnier Times in the Sunshine State

During the most recent cycle of the Federal Open Market Committee (which ran from June 19 to July 30), the Atlanta Fed’s Regional Economic Information Network (REIN) team at the Jacksonville Branch talked with more than 30 Florida business leaders, including branch directors, about economic conditions. As one who has been involved with the REIN program since its inception in 2008, I can attest that, while “slow and steady” remains a theme in this economic recovery, the sentiment of our contacts over the past two months has been the most upbeat since before the recession.

General business conditions
Almost all firms reported increases in business activity. Two design/build firms indicated robust demand and reasonably strong pipelines, including a strengthening in industrial and office development. For the first time, we heard of some speculative building in the commercial sector from three different contacts. Housing continued its slow improvement, though several contacts used the word “bumpy” to describe activity. The appetite for auto purchases continued, as a recent SouthPoint post discussed, with lenders citing robust auto-lending activity. Some banks also reported that consumers are now slowly adding to outstanding credit card balances.

Employment and hiring
Labor markets tightened as the number and types of difficult-to-fill positions increased. In addition to highly skilled positions that are normally a challenge to fill (including information technology and engineering), contacts shared frustrations with filling midlevel positions such as analysts. In construction, finding subcontractors and skilled laborers was harder than normal. However, one contact saw a 20 percent annual increase in revenue as clients resumed a normal hiring pace.

Labor and input costs
Contacts reported seeing wage pressures in their organizations. For example, demand for truck drivers that one firm described as “significant” led to a 33 percent pay increase since the beginning of 2014. One retail contact reported wage increases for maintenance positions as the “construction boom in the area lures these workers away.” Most contacts previously noted merit programs of between 2–3 percent. However, for the first time, several contacts discussed plans for more aggressive increases of 4–5 percent. Regarding health care, most anticipate premiums to continue growing significantly, and many have self-insured to mitigate rising costs.

Most contacts described nonlabor input cost increases as benign. Although the cost of some construction-related materials was a cause for concern earlier this year, most of this volatility has dissipated. While most contacts do not claim much pricing power, some companies are seeing improved margins as they are able to push through increases in the form of higher sales prices.

Credit and investment
Contacts at medium and large companies noted that while credit is readily available, many are still risk-averse and avoiding taking on debt, relying instead on cash flow or internal reserves to fund projects. Companies that do borrow are undergoing “rigorous but rational underwriting.” One construction contact said that many of his larger clients are no longer just catching up from the recession but are now willing to take risk and invest in adding capacity. A bank also reported more risk-taking among customers, especially in commercial real estate and equipment leasing. At the consumer level, real estate agents and lenders referred to qualified mortgages as something of an impediment to mortgage loan activity, but they generally viewed the more rigorous process as worth the effort to reduce risk.

Since June, the consensus from REIN contacts at the Jacksonville Branch was largely positive. Overall demand conditions have improved, though some expressed concerns about regulatory impact. Some contacts specifically mentioned dissipating headwinds as a reason for increased investment, including one contact who sees enough improvement in the economic environment that the company has changed its strategy from diversification to more rapidly expanding its footprint with aggressive new revenue goals.

Does this jibe with what you, our readers, are seeing? As always, your thoughts are welcome.

By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch

August 6, 2014 in Economic conditions, Employment, Florida, Health Care, Jobs, Labor Markets, Recession, Recovery | Permalink

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07/22/2014


A Closer Look at Progress in Selected Southeastern Labor Markets

The U.S. Bureau of Labor Statistics compiles unemployment rates at the county level, which allows a glimpse of how local labor markets are performing. The interactive map of the Southeast below depicts the progress across the region since the second quarter of 2009, which the National Bureau of Economic Research defines as the end of the most recent recession.

Areas in southern Louisiana stand out as having had low unemployment even in 2009, thanks in large part to the strength of the energy sector and continued post-Katrina development. Fast-forward to 2014, and we also see considerable improvement in other areas. But some parts of the Southeast are still struggling with high unemployment.

Although the map shows improvement since the end of the recession, it doesn’t show whether we are back to normal, or even what “normal” looks like. Are local labor markets as strong as they were before the recession? Drilling down a bit more, we separated counties into two categories: those defined as a metropolitan statistical area (MSA) by the U.S. Census Bureau, and those not defined as an MSA. Those counties within an MSA are typically more urban and densely populated, and non-MSA counties tend to be more rural and less populated. In the chart below, we have calculated the unemployment rate for both MSA and non-MSA counties. The size of the bubble represents the size of the labor force, and the solid lines show the national average unemployment rate in each of the two time periods.

In 2007, non-MSA counties in Georgia, Tennessee, and Mississippi had unemployment rates above the 2007 average, whereas all but Mississippi had MSA unemployment rates below the national average. In 2014, unemployment in non-MSA counties in Alabama, Georgia, Tennessee, and Mississippi was above the national average, and all but Georgia had MSA unemployment below the national average. So, above-average unemployment is generally more prevalent in non-MSAs than in MSAs, seemingly a persistent problem. (Florida and Louisiana are the two exceptions in the region, with average or below-average MSA and non-MSA unemployment rates before and after the recession.)

Another way to gauge labor market strength is to measure job growth. Generally speaking, unemployment and job growth move in opposite directions, although declines in labor force participation can also cause the unemployment rate to decline even without strong job growth. In the chart below, to view how MSA and non-MSA counties fared across states, we have plotted year-over-year employment growth in 2007 (prior to the recession) against growth for the year ending with the first quarter of 2014. Once again, the size of the bubble represents the size of the labor force in 2014. We see that across the region, employment growth was weakest among non-MSA counties in both periods, but employment growth was generally stronger among MSA counties in both periods (although only MSA counties in Florida and Louisiana experienced above average employment growth in 2007 and 2014).

The unemployment map demonstrates that labor market conditions have improved in most parts of the Southeast since the end of the recession. However, many smaller rural communities continue to struggle with higher levels of unemployment and weaker employment growth than their big-city neighbors.

Photo of John RobertsonBy John Robertson, a vice president and senior economist, and


Photo of Whitney MancusoWhitney Mancuso, a senior economic analyst, both of the Atlanta Fed's research department


July 22, 2014 in Employment, Jobs, Labor Markets, Recession, Southeast, Unemployment | Permalink

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07/10/2014


A Southern Slowdown in Manufacturing?

Manufacturing in the Southeast had been thriving in recent months. According to the Southeast Purchasing Managers Index (PMI) report, new orders, production, and employment at regional manufacturers had been strong since March. The latest PMI report, released on July 7, suggests that activity may be slowing down a little bit.

The Southeast PMI is produced by the Econometric Center at Kennesaw State University. A reading on the index above 50 represents an expansion in the manufacturing sector, and a reading below 50 indicates a contraction. The survey provides an analysis of manufacturing conditions for the region in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. Representatives from various manufacturing companies are surveyed regarding trends and activities in new orders, production, employment, supplier delivery time, and finished inventories.

The June PMI decreased 4.5 points compared with May. Although still boasting an overall reading of 55.3 points (which is not bad), the new orders and production subindex readings dropped. The new orders subindex fell 10.1 points from May to 59.4, and the production subindex fell 10.8 points to 56.6 compared with the previous period (see the chart). The readings are still firmly in expansion territory, but they don’t have the excitement of the high readings from previous months. The employment subindex also decreased 4.6 points from May’s 55.2. Manufacturing payrolls are still increasing, according to the PMI survey, but fewer companies may be adding employees.

Southeast Purchasing Managers Index

The supplier delivery times subindex increased 1.8 points during the month, suggesting that it is taking a little longer to receive inputs at manufacturing plants. The commodity prices subindex fell 10.0 points compared with May, which could be a sign that price pressures for materials may be easing.

Looking ahead, manufacturing contacts’ optimism concerning future production remains lackluster. When asked for their production expectations, only thirty-four percent of survey participants expect production to be higher in the next three to six months. The percentage of contacts expecting higher production has been falling in recent months.

So, is manufacturing activity slowing? It’s difficult to draw that conclusion over one month’s data. However, the sharp drop in new orders and production is hard to ignore. It’s important to remember that the overall PMI reading is still positive and is in line with June’s national index reading of 55.3 from the Institute for Supply Management. The Southeast PMI indicated that manufacturing activity had been sprinting down the track in recent months. Maybe it needed a breather, or maybe it pulled a hamstring. We’ll have to wait and see.

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch


July 10, 2014 in Employment, Inventories, Manufacturing, Productivity, Southeast | Permalink

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