Beige Book: Warming Economy Accompanies Spring’s Thaw
Eight times a year, each of the 12 Reserve Banks gathers anecdotal information on current economic conditions in its district through reports from Bank and branch directors and interviews with key business contacts, economists, market experts, and other sources. Their findings are reported in the Summary of Economic Conditions, also known as the Beige Book. The report is published on the Federal Reserve Board of Governors' website about two weeks prior to each Federal Open Market Committee meeting.
The first sentences of the national summary and each Bank's report often receive much attention because the lead sentence tends to summarize economic conditions in that region.
Here is a compilation of the first sentence of the national summary and each Reserve Bank’s report:
- National: Reports from the twelve Federal Reserve Districts suggest economic activity increased in most regions of the country since the previous report. (A previous SouthPoint post also mentioned the weather’s effect on overall economic conditions.)
- Boston: The First District economy continues to expand moderately, according to business contacts, although growth rates vary across sectors and firms.
- New York: Economic activity in the Second District rebounded since the last report, as the harsh winter weather abated.
- Philadelphia: Aggregate business activity in the Third District grew at a moderate pace during this current Beige Book period.
- Cleveland: On balance, economic activity in the Fourth District declined slightly in the past six weeks.
- Richmond: The Fifth District economy expanded moderately since our last report.
- Atlanta: On balance, the Sixth District economy expanded at a modest pace from mid-February through March.
- Chicago: Growth in economic activity in the Seventh District picked up in March, and contacts generally maintained their optimistic outlook for 2014.
- St. Louis: Business activity in the Eighth District has declined slightly since our previous report.
- Minneapolis: The Ninth District economy continued to grow at a moderate pace since the last report.
- Kansas City: The Tenth District economy grew moderately in March, and most contacts were optimistic about future activity.
- Dallas: The Eleventh District economy grew at a moderate pace over the last six weeks.
- San Francisco: Economic activity in the Twelfth District continued to improve moderately during the reporting period of mid-February through early April.
As you can see, almost all districts are experiencing the same level of economic activity.
Here are some notable highlights from the Atlanta Fed's contribution to the Beige Book:
Consumer spending and tourism
- District merchants reported an uptick in activity from mid-February through March following sluggish sales in January, which were widely attributed to the severe winter weather. Light motor vehicle sales grew modestly during the time period.
- Hospitality contacts in areas negatively affected by the adverse winter weather saw improvements in activity.
Real estate and construction
- Brokers reported home sales were mixed. Inventory levels continued to fall on a year-over-year basis, and the majority of contacts reported that home prices remained ahead of the year-earlier level.
- The majority of builders reported that construction activity and new home sales were ahead of the year-earlier level. The majority of contacts continued to report modest home price appreciation.
- District brokers noted that demand for commercial real estate continued to improve. Construction activity continued to increase at a modest pace from last year.
- Manufacturers reported increased activity across the region from mid-February through March. Significant improvements were cited in production and new orders.
Banking and finance
- Bankers noted an increase in loan demand.
- District payroll growth remained constrained from mid-February through March.
Prices and wages
- Nonlabor input costs increased very slowly, with a few noted exceptions, including rising costs for developed land, construction materials, and food. Profit margins remained tight across most industries as contacts continued to report very little pricing power.
- Contacts continued to indicate little wage pressure outside of some high-skilled positions.
The next Beige Book will be published June 4.
By Shalini Patel, an economic policy analysis specialist in the Atlanta Fed's research department
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The Graying of the Sunshine State’s Labor Force
Business contacts throughout the region have expressed, through the Atlanta Fed’s Regional Economic Information Network (REIN), a growing concern with an aging population and a shortage of qualified and interested younger candidates to fill positions vacated by retirees. A recent presentation spotlighted this trend in Florida. The report “Florida’s Economic Future & the Impact of Aging” by Florida’s Office of Economic and Demographic Research (EDR) notes that “population growth is the state’s primary engine of economic growth, fueling both employment and income growth.” The presentation reports two main concerns for the state: one is an aging population and a shrinking pool of workers, and the other is a growing need for services, natural resources, and infrastructure as the state’s overall population increases.
Florida’s population has grown from 15.9 million in 2000 to 18.8 million in 2010, a nearly 18 percent increase, and it is forecast to grow to 23.6 million by 2030. The population growth adds concerns for not only current older Floridians but also for future older residents, who will help further the demographic trend of an aging population and a labor force whose growth is slowing.
In 2010, Florida was one of seven states whose median age was over 40; at 17.3 percent, it is the state with the largest percentage of population age 65 or older. Of the nation’s top ten cities with the highest percentage of population age 65 or older, four are in Florida: Clearwater at 19.8 percent, Hialeah at 19.1 percent, Cape Coral at 17.0 percent, and Miami at 16.0 percent. Two years later, in 2012, the median age in Florida rose to 41, with six counties reporting a median age of 50 and older. Demographers expect Florida’s older population to nearly double between 2010 and 2040 (see the chart).
Supporting concerns expressed by REIN contacts, the EDR research reports that as approximately 4.8 million baby boomers are set to retire between 2011 and 2029, the share of workers to retirees will shrink. The chart below depicts the growth in population in the group ages 45 to 64 years (roughly speaking, the baby boomer cohort) since 2000, but it also shows a decline in residents ages 44 and younger, one reason for a declining potential labor force. This change in the composition of the population will cause the current ratio of three taxpaying workers to each retiree to decline to two to one by 2030.
The EDR also expects additional ramifications including weaker economic growth rates, potential upward pressure on wages to attract and retain skilled workers, and a growing retirement-age population, which could lead to a decline in consumer spending and changes in investment patterns. The EDR is also concerned about problems filling labor-intensive jobs such as firefighters, police officers, and construction workers. In addition, jobs will likely require increasingly specialized skill sets as technology advances.
By Marycela Diaz-Unzalu, an economic and financial education specialist in the Miami Branch of the Atlanta Fed
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Regional Payroll Growth Rebounds in February
According to last week's regional and state employment report from the U.S. Bureau of Labor Statistics (BLS), Sixth District states added 34,000 payrolls on net, and the unemployment rate declined to 6.4 percent in February. These data follow a much bleaker January report, which indicated that the District shed payrolls for the first time in about a year and a half, losing 20,700 jobs. The new February data are definitely a step in the right direction and perhaps signal that the region's labor markets are getting back on their feet after a few months of slower job growth, a pattern not uncommon over the last few years. Not surprisingly, we've seen a similar pattern during the last few months in the national data as well (see the chart).
However, despite the more positive aggregate Sixth District payroll figure for February, Florida was the primary driver of payroll growth, while Georgia and Mississippi continued to shed jobs.
Florida added 33,400 payrolls on its own over the month. In fact, Florida saw the third-largest gain of any state in the nation in February, following only California and Texas. Payroll growth in Florida was driven by the construction sector (up 7,200 new payrolls over the month), retail (up 7,000), education and health sectors (up 5,300), and leisure and hospitality (up 3,900).
As for other District states, Tennessee experienced a modest gain in payrolls in February, adding 6,900 jobs. Tennessee's payroll growth over the month was primarily concentrated in professional and business services (up 5,100). Louisiana and Alabama respectively added 1,900 and 200 jobs, while Mississippi (down 2,200 payrolls) and Georgia (down 5,800) continued to shed payrolls (see the chart).
The aggregate unemployment rate for the Sixth District declined from 6.5 percent to 6.4 percent in February. Four out of the six District states experienced declines in their unemployment rates and Florida's rate remained unchanged, despite Florida seeing the second-largest one-month increase in that state's labor force on record (up 58,400). The only District state that saw an increase in its unemployment rate in February was Alabama, where the rate of unemployment increased from 6.1 percent to 6.4 percent during the month. This increase comes as Alabama saw the largest-ever one-month increase in its labor force, excluding the temporary hiring boost from the 2010 census. Of the roughly 12,600 additional labor force participants in Alabama from January to February, about 6,800 were unemployed. Of Florida's 58,400 new labor force participants, only about 4,500 were unemployed (see the table).
Want to find out how many jobs it would take to lower the unemployment rate in any of the 50 states? Check out the Atlanta Fed's State Jobs Calculator.
The next regional and state employment report from the BLS reflecting March data will be released April 18.
By Mark Carter, a senior economic analyst in the Atlanta Fed's research department
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An Economic Perspective from North and Central Florida
Over the course of the six weeks between the January and March Federal Open Market Committee meetings, my colleague Chris Oakley, the regional executive of the Atlanta Fed's Jacksonville Branch, and I met with 17 business leaders from across north and central Florida, as well as with members of our branch board of directors, to gain a broad perspective on current economic conditions.
Overall, most contacts indicated that that the stronger pace of activity experienced in the latter part of last year either has been sustained or should resume as the weather improves. (Unlike the rest of the country, Florida has been relatively untouched by the adverse winter weather. However, our contacts with a national footprint or those who experienced delayed parts deliveries, like manufacturing, construction, and food services, have noted disruptions in activity as a result of bad weather in certain markets.)
Designers and builders of both large and small enterprises noted a pick-up, especially in manufacturing, health care, and financial services, with one firm reporting a record backlog of projects due to organic growth and acquisitions. Other areas of strength for the state included tourism, housing construction, port activity, and an increasing number of retirees choosing Florida as their new home. On the flip side, banker contacts continued to be disappointed with a lack of loan demand among small business clients, but "tire kicking" appeared to have increased along with expectations for a higher level of activity this year. Restaurant contacts indicated worries about middle- and low-income consumers, whose disposable incomes are challenged with low wage growth and adjusting to increased health care premiums.
Florida has experienced a stronger rebound in new home permits than the nation since the beginning of 2014 (see the chart). Conversations with business contacts reflect this trend. Some residential home builders indicated that they are building spec homes with confidence that the properties will sell; one custom builder reported that his spec homes have been selling at 98 percent of the asking price. Banker contacts noted price increases as a result of both reduced real estate owned inventories on their books and a shortage of developed lots for new home construction. On the credit side, bankers reported that available credit now appears to have achieved some equilibrium with real estate demand. It was also noted that demand for rental property remains robust as some previous homeowners who lost their homes during the downturn have indicated no interest in owning another home and will continue to rent, at least in the near term.
Feedback regarding the labor market was mixed. We heard several stories about the inability to fill construction jobs, especially high-skilled positions. One contact speculated that this lack of talent could eventually result in a greater proportion of construction taking place in factory-like settings with only assembly occurring in the field, allowing for the use of greater automation in manufacturing components. Staffing contacts noted postrecession high levels of openings, and those workers with unique skills (often I.T. or accounting-related) were in the driver's seat and were able to dictate working conditions and have some leverage in compensation negotiations. A large manufacturer found success in partnering with Florida's universities and military veteran placement services to ensure an adequate supply of engineers and other high-skilled workers.
A good amount of discussion about increased labor costs focused on health care benefits, with sources sharing anecdotes about annual increases as high as 20 percent. A majority of contacts indicated they are passing along or sharing premium increases with employees. We also heard stories of companies reducing or discontinuing benefits for family members who might otherwise qualify for benefits elsewhere. Further, it was emphasized, especially among lower-wage, service-oriented companies, that the individual mandate of the Affordable Care Act is resulting in a larger number of eligible employees electing coverage, which is also driving up costs for the employer. A large design-build firm noted increased labor costs among its subcontractors, and a real estate rental firm indicated a "fair amount of wage pressure" for higher-level employees, such as property managers. In the government sector, both at the county and municipal levels, contacts commented on a resumption of wage increases among their constituents, the first for most since the recession.
With regard to nonlabor costs, developed land and construction material costs were both noted as concerns among construction contractors. Restaurant contacts expect food costs to rise about 4 percent this year, consistent with what they experienced in 2013, with increasing meat prices driving the rise. Banker contacts continued to point to rising regulatory and compliance costs. Overall, there appears to be more of an appetite for attempting to push through input cost increases through pricing, though the consensus is that any increase would be conservative.
So, overall, the takeaway from all of these anecdotes is that it's more of the same. While uncertainties are fewer and farther between than in the past couple of years, the outlook in the northern half of Florida appears a little less cloudy and even laced with cautious optimism. For a wider viewpoint on the economy across the Southeast, see the Atlanta Fed's latest Southeastern Insights.
By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch
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Half Empty or Half Full?
The U.S. Bureau of Labor Statistics (BLS) uses two monthly surveys to gauge the health of the labor market, both nationally and at the state level. For the Sixth Federal Reserve District, which survey you focus on in January might say a lot about your own preference for optimism or pessimism. Payrolls contracted in every Sixth District state in the state establishment survey; however,every Sixth District state’s unemployment rate declined in the state current population survey, with the exception of Alabama’s, which remained unchanged at a rate safely below the district and national rates of unemployment.
The bad news first
January was not a banner month for Sixth District payroll growth; in fact, the District kicked off the year with some relatively lousy labor market figures, according to new data out this week from the BLS. Last year, the Sixth District averaged about 33,600 new payroll jobs per month, but during the month of January alone, Sixth District states lost an aggregate 24,400 payrolls. On net, the Sixth District has not had a negative monthly payroll figure since July 2012, when the District lost about 3,900 payrolls, and to see a one-month loss the size of January’s, you’d have to look back to September 2010, when the Sixth District was still brushing itself off in the aftermath of the recession. (For reference, the largest one-month decline for the Sixth District as a whole was in May 2009, when 126,900 payrolls were cut across Sixth District states.)
However, to keep January’s payroll data in perspective, these one-month blips have not been unheard of throughout the recovery, and state and regional data from the BLS tend to be much noisier than the headline national figures that come out on the first Friday of every month. In fact, each year since 2010, we’ve seen incoming regional data grow a bit softer early on in the year, a phenomenon referred to previously by SouthPoint, various other media outlets, and on a few occasions by Atlanta Fed President Dennis Lockhart as a “spring swoon.” (Previously, these “swoons” have come a bit later in the year; maybe it’s seasonal adjustment procedures at the BLS, and maybe it’s because of other reasons.) Though one month of negative payroll data is not in itself a trend by any means, the last four months of data from the BLS do seem to show a pattern (see the table).
Where and to what degree?
All six states in the Sixth District shed payrolls in January. Alabama had the largest decline in payrolls among Sixth District states in January, losing 8,200 payrolls during the month. Louisiana had the second-largest decline, dropping 6,900 payrolls. Mississippi payrolls dropped by 4,000, and payrolls in Florida (down 2,600) and Tennessee (down 2,100) fell by similar amounts. Georgia shed the fewest number of payrolls in January, giving up 600 payrolls, on net.
A couple of patterns seemed to emerge across state lines in January. Most notable are very large declines in retail industry payrolls (see the table). Employment in health care and social assistance also appeared to suffer in January.
Retail me not
A decline of 10,900 payrolls in one sector, in one state, in one month (as the table above shows Florida experienced) warranted a call to our friends at the BLS. I was told that January is typically a weak month for hires, and the retail sector is particularly sensitive to seasonality. Retailers are usually coming off the much busier holiday season and are beginning to wind down staffing levels. Though the BLS strives to account for this in its seasonal-adjustment procedures, it’s virtually impossible to correct for all of it, especially in such a volatile economic and meteorological environment. (Even Florida had a colder winter than usual. While we were digging ourselves out of the epic—for us—snow storms in Atlanta, a friend in Miami reported temperatures “down into the upper 60s” and needing a light jacket in January.)
To get a greater level of detail on which kinds of retailers in Florida were letting go of the most jobs, we have to use data that are not seasonally adjusted. On a nonseasonally adjusted basis, the scary-looking payroll figure (a decline of 10,900) seen above becomes a jaw-dropping 34,000 decline, though much of this drop is the result of standard holiday employees leaving temporary positions (see the table).
But unemployment rates are headed in the right direction…
Despite a decline in payrolls from every state across the District in January, state unemployment rates continued their slow downward crawl in all District states, with the exception of Alabama, which remained unchanged for the month at 6.1 percent (see the chart). It’s not uncommon for the two surveys to appear to be at odds with one another. The payroll survey is of employers—or “establishments”—and the household survey is (more intuitively) a survey of households; that is, of individuals. Both surveys attempt to measure employment. However, since it is necessary to speak to actual people (as opposed to speaking to a “business”) to determine the rate of unemployment for a given area, the unemployment rate is derived from the household survey. But since these are both surveys that are only able to capture responses from a small sample of people, disagreements between the two occur. (Unemployment rates can also decline while payroll growth is weak or negative because of a declining labor force, but that wasn’t the case this month. Four out of six District states actually saw increases in their labor force—Louisiana and Mississippi were the exceptions, and their labor forces only shrank by 2,000 and 300 people, respectively.)
Of Sixth District states, Louisiana had the lowest unemployment rate in January. There, the unemployment rate fell a half percentage point to reach 4.9 percent. Alabama’s rate of unemployment remained at 6.1 percent over the month, and Florida’s dropped 0.2 percentage point to reach 6.1 percent.
Three states still have unemployment rates higher than the Sixth District aggregate rate of unemployment, which fell to 6.5 percent in January. Tennessee tied with Louisiana in January for the largest drop in its unemployment rate, falling a half of a percentage point to reach 7.2 percent. Georgia’s unemployment rate ticked down slightly to reach 7.3 percent, while Mississippi continued to have the highest unemployment rate in the Sixth District, despite its rate falling 0.3 percentage point to reach 7.5 percent in January.
The next regional and state employment and unemployment report, reflecting data for February, is scheduled to be released next Friday, March 28, at 10:00 a.m. The next national employment report is scheduled the following Friday, April 4, at 8:30 a.m.
If you want to stay abreast of the latest Federal Reserve research and publications surrounding regional and national labor markets, as well as a host of other topics, you can check out the Atlanta Fed’s newly searchable Human Capital Compendium, which puts you at the forefront of developments related to labor markets and workforce development across all 12 Reserve Banks.
By Mark Carter, a senior economic analyst in the Atlanta Fed’s research department
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Has Regional Manufacturing Weathered the Storm?
The weather has been a sore topic among manufacturing contacts across the nation this year, and the Southeast is no different. Inclement winter weather has been extreme and widespread in 2014, but hopefully it is close to being over. Production has been slowed across much of the nation as employees were unable to travel to work and supply deliveries to manufacturing facilities were delayed. The Institute for Supply Management (ISM) specifically identified the weather as having an adverse impact on manufacturing activity in January and February. However, the latest Southeast purchasing managers index (PMI) suggests that maybe the South has weathered the storm.
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. The survey asks representatives from various manufacturing companies about trends and activities in new orders, production, employment, supplier delivery time, and finished inventories.
The February PMI increased 5.4 points over January and represents a healthy overall increase, considering the harsh weather conditions (see the chart). The new orders subindex rebounded strongly in February with an increase of 10.0 points to 59 points. The production subindex also had a solid increase of 7.1 points to 55.0. New orders and production had both been contracting in late 2013 and early 2014, so the increases last month were a welcome development. The employment subindex decreased 3.2 points from January’s 55.2. The supplier delivery times subindex and finished inventories subindex both increased during the month, and the prices subindex fell 7.6 points compared with January.
Looking ahead, manufacturing contacts are not as optimistic as they had been in recent months. When asked for their production expectations, only 46 percent of survey participants expect production to be higher in the next three to six months. That expectation is in stark contrast to January when 62 percent of survey respondents expected higher production over the same timeframe.
Hopefully the weather was only a temporary headwind for manufacturing activity. As the mercury begis rising and snow stops falling on the roadways, maybe manufacturing activity will strengthen in March. Then Old Man Winter can go on a nice, long, sunny vacation.
By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch
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Tennessee’s Auto Industry: Pitfalls and Potholes
The automotive industry in Tennessee is one of the big drivers of the state’s economy. Nissan established its first U.S. manufacturing facility in Smyrna in the early 1980s, and auto-related investments have grown in the state ever since. General Motors opened a plant in Spring Hill in 1990, and Volkswagen opened its Chattanooga plant in 2011. These three facilities collectively employ more than 12,000 workers, a total that doesn’t include the vast amount of automotive suppliers that call Tennessee home. Currently, Tennessee is the largest employer of auto-industry workers in the South.
Coming out of the Great Recession, Tennessee is now well positioned to continue its standing as a competitive destination for the automotive industry. In October 2013, the Brookings Institute produced a report titled “Drive! Moving Tennessee’s Automotive Sector Up the Value Chain.” The report pointed out the Volunteer State’s various advantages in the auto industry, which included its geographic location, strong transportation infrastructure, and favorable cost structure.
The report also shared some interesting employment numbers. For example, Tennessee’s share of auto-manufacturing employment in North America increased to an all-time high of 3.3 percent by the end of 2012. Also, more than 12 percent of all jobs created in Tennessee since the recession are related to the auto industry. Needless to say, carmaking is important to the state’s economic health.
The Brookings report also pointed out some competitive challenges and pitfalls the state will need to navigate in the coming years:
- Cost pressures: Input costs continue to rise, as does the consumer’s demand for greater value. Production increases in low-wage countries will continue to add pressure, even though the labor-cost gap between U.S. locations and low-cost countries is closing.
- Demographics and workforce: Technology advances have made the automotive-manufacturing workplace much more sophisticated. The challenges to find an adequately trained workforce will be a constant challenge.
- Technology: The entire automobile production system and product line will require constant technological upgrades to keep pace with changing regulatory requirements. For innovations to be effective, they will need to reach far into the automaking supply chain.
The Brookings report also suggested that the state lacks a strategic approach to maintaining a business-friendly environment for advanced industries. For example, Tennessee ranks in the bottom fifth of states in terms of tax competitiveness for new research-and-development firms and labor-intensive manufacturing.
The report also indicated that holes exist in Tennessee’s workforce-development programs. The state falls short in literacy, numeracy, and educational attainment, gaps that complicate the state’s ability to ensure the availability of an educated workforce for the auto industry. Also pointed out in the report was the state’s lack of research and development activity in the auto sector. The state also lacks a fertile technology network that caters to auto-sector suppliers, particularly the smaller ones.
Despite all these factors, the future for Tennessee’s auto industry looks bright. The state has momentum and the necessary resources to adapt to future challenges. Tennessee has the continent’s broadest automaking supply chain, a huge advantage in today’s auto-manufacturing environment. Past success does not guarantee future performance, but hopefully Tennessee can avoid the potholes on the road ahead.
By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch
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Stop, Look, and Listen
We here at the Birmingham Branch of the Atlanta Fed talk to a lot of folks about Alabama’s economy. But when I say we talk, what I should say is we stop and listen, and our contacts have plenty to say.
Recent conversations with Alabama contacts do not indicate accelerated hiring levels in our state. Dennis Lockhart, president of the Atlanta Fed, was recently in town speaking to the Birmingham Rotary and had this to say about December’s national jobs report:
It came in at a 74,000 net gain. A number closer to 190,000 was expected. My reaction—and that of many of my colleagues—was to "look through" the December jobs report and assume the economy remains on the higher growth track enjoyed in the second half of 2013.
Note: President Lockhart was in Birmingham on Wednesday, February 5, two days before the release of the January jobs data, which were better than December but not as large as hoped. (The economy added 113,000 jobs in January 2014.)
In that context, I took a look at Alabama’s employment numbers and found that job gains have occurred in each of the last three months, with December showing a gain of 4,800 jobs in Alabama (see the chart).
A deeper look at payroll employment in Alabama shows that although leisure and hospitality and education and health care jobs have surpassed prerecession levels, other sectors have not fared as well, particularly the information and construction industries (see the chart).
And though we know that job losses occurred throughout the state, all of Alabama’s metro areas have slowly begun to rebound. The Auburn-Opelika and Tuscaloosa areas—both home to large state universities—have regained the level of jobs that were lost during the recession (see the chart).
Finally, pulling back to take a more historical perspective, the Alabama employment situation, while improving, has not reached prerecession levels (see the chart).
On a bright note, there are definitely some positive hiring stories, most recently in the automotive sector. And although we continue to hear stories of shortages for certain skilled laborers, we also hear about creative ways Alabama employers and educators are partnering to update and align training with the skills that are needed for jobs today and in the future.
The number of jobs regained since the recession ended is only one of many ways to assess the health of the labor market. On a national level, the Atlanta Fed looks at many facets and has developed an interesting (and regularly updated) visual depiction that gives a much broader view: our labor market spider chart.
Meanwhile, here at the Fed, we will continue to supplement our analysis of state and national economic data by listening to what people are telling us about their own experiences.
By Teri Gafford, a Regional Economic Information Network director in the Atlanta Fed’s Birmingham Branch
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Atlanta Fed Survey Highlights Regional Employment Plans for 2014
Given that the Federal Reserve’s dual mandate calls for maximizing employment, it shouldn’t surprise anyone that we continuously ask ourselves questions about labor market conditions. But we also ask our contacts. For the third year in a row, we reached out to our Regional Economic Information Network and asked the same questions regarding their employment plans for the year. The survey was conducted during January 6–10 and resulted in 554 responses. The sample represented a wide variety of firm types and sizes, and we want to discuss the results here.
The first question simply asked: Do you expect your firm to increase employment, leave employment unchanged, or decrease employment in 2014? A total of 46 percent of respondents said they planned to increase employment levels, similar to results from the previous two years. Another 44 percent indicated they planned to leave employment levels unchanged, a slight increase from a year ago and almost identical to two years ago. The remaining 10 percent of participants planned to decrease payrolls, down from 13 percent in January 2013 and nearly the same as reported in 2012 (see the chart).
Digging a little deeper by singling out the 46 percent of firms that indicated that they planned to increase employment, we then asked contacts to select the most important factors driving their decision. Participants were instructed to rank the three factors in order from 1 (most important) to 3 (third most important). The results largely mirrored our findings from previous years (see the chart).
A majority cited high expectations for sales growth as the most important reason. The second most often cited reason was the firm’s need for skills not possessed by existing staff. The third reason was that the firm’s current staff was overworked. However, in looking at totals across rankings, another frequently cited issue was improvement in the firm’s financial position.
On the flip side, we asked all participants to rank (in the same manner as the previous question) the three most important factors restraining hiring activity. Interestingly, in all three categories (first, second, and third most important), a majority selected the same factor: keeping operating costs low. Other frequently selected reasons were uncertainties related to health care costs, regulations, government policies, and expectations for low sales growth. These results were also similar to our findings from the previous two years (see the chart).
In a nutshell, we can see that employment activity remains constrained by some of the factors mentioned above. However, as the latest Southeastern Insights, reports, hiring should modestly expand. The latest data from the U.S. Bureau of Labor Statistics, which indicated that net monthly payroll growth for the district averaged 30,200 for 2013 (up slightly from 26,200 a month in 2012), strongly support our conclusion.
By Shalini Patel, an economic policy analysis specialist in the Atlanta Fed’s research department
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Are the Clouds Lifting in the Sunshine State?
Each month, the Atlanta Fed produces a Data Digest for each state in our district. Beyond providing an economic snapshot for each state, the Data Digest also breaks down the information by metro area or industry, where appropriate.
Florida’s latest Data Digest indicates that the state’s overall economic activity is improving. For example, a broad measure of economic performance—the Coincident Economic Activity Index, which the Philadelphia Fed compiles for all 50 states—has been steadily improving since 2010 and improved at a slightly faster clip than the nation since August 2013 (see the chart).
Looking at Florida’s labor markets, you can see that the state’s unemployment rate has improved from a peak of 11.4 percent in early 2010 to under 7 percent in November 2013 (see the chart). In addition, the state has regained more than half of the jobs that were lost during the downturn. The leisure and hospitality, education and health care, and retail trade sectors have more jobs today than prior to the downturn. Regarding the first sector, my Atlanta Fed colleague Gloria Guzman wrote in a previous SouthPoint post that the leisure and hospitality sector has been a significant contributor to Florida’s economic recovery. Meanwhile, employment in the manufacturing and construction sectors still has a long way to go before full recovering can be declared.
The University of Florida’s Bureau of Economic and Business Research reported that although consumer confidence is off its recession lows, improvement has stalled. Despite that slowing, Florida sales tax revenue continues to rebound (see the chart). The Florida Department of Revenue notes that sales tax has been positively affected by the healthy activity in the leisure and hospitality sector.
The Atlanta Fed’s monthly real estate poll of homebuilders and brokers has noted improving home prices, and other data confirm this trend in Florida. The state has experienced an improvement in home prices of 8.4 percent from November 2012 to November 2013, according to the Federal Housing Finance Agency. Furthermore, the S&P Case-Shiller home price index shows similar trends in Miami and Tampa (see the chart).
Our monthly real estate poll also showed a rebound in residential construction (see the chart). Data from the U.S. Census Bureau confirm this trend, although it is important to note that activity is well below the prerecession peak. Although we do not expect a return to 2005 levels of activity, the steady rebound in new home construction is another signal of the state’s overall economic recovery.
Florida’s economy is clearly moving in the right direction. The Atlanta Fed’s surveys as well as regular input from business leaders and economic data all point to a steady rebound.
By Marycela Diaz-Unzalu, an economic and financial education specialist in the Atlanta Fed’s Miami Branch
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