01/19/2012
Georgia on my mind (again)
You wouldn't think a breakfast talk about economics would be all that interesting. Not true. Yesterday morning, I participated in a monthly breakfast seminar hosted by a local group aptly called "Eggo-nomics." The discussion was about the current state of Georgia's economy.
I'm not saying that my presentation was all that enthralling, but the questions and comments from the participants certainly were interesting. Of the several questions I received, the most common centered on the theme of why Georgia's economy continues to lag other parts of the country.
As it so happens, these questions mirrored one that was posed to Atlanta Fed President Dennis Lockhart in a recent interview with the Atlanta Journal-Constitution. He was asked, "Certain areas of the country, like the Northeast, are recovering faster than the Southeast. Why?" Here is President Lockhart's response:
"I get the question frequently: 'How is the Southeast doing relative to the rest of the country?' And my answer is, broad generalization, a little worse than the national averages. Not dramatically worse, just a little worse. And I use unemployment as an example. The unemployment rates for the six states we follow here, with the exception of Louisiana, are above the national average.
"Those rates have been coming down, just as the rate nationally has been coming down. But there is a lagging picture for Georgia and for most of the Southeast. You can explain some of the cause by looking at the exposures in the bust which were real estate-oriented, the dramatic slowdown in construction and the number of people put out of work who were in the construction trades.
"And to some extent in banking [many of the problems stemmed from] the dependence on real estate lending in many banks.
"If you want to step back even further, you had a couple of decades of in-migration, particularly Atlanta. You have to build houses to hold the people who migrate here, so real estate construction was a big thing. They come and get jobs; they need office buildings in which to work. So commercial real estate is a big thing and when that turns negative, it creates a problem that is more difficult than in the Northeast service-industry contraction."
SouthPoint has reported on this topic and will continue to dig into reasons behind Georgia's lagging recovery.
Mike Chriszt, an assistant vice president in the Atlanta Fed's research department
January 19, 2012 in Georgia, Outlook | Permalink
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11/18/2011
The long climb ahead
A colleague of mine here at the Atlanta Fed is an expert rock climber. I'm not talking about scaling some indoor wall, but real rock climbing—Rocky Mountain–type rock climbing. I don't know how she does it. I thought about trying it once several years (and several pounds) ago, but after about three seconds of deep contemplation I chickened out. Probably the smartest decision of my life, seeing how I'm rather clumsy and afraid of heights…
Anyway, maybe it's a stretch to compare my colleague's rock climbing expeditions to what the states of the Sixth District are doing in terms of trying to climb back to where they were with regard to prerecession employment levels. Regardless, it's a useful analogy.
Here's a disturbing fact: Georgia is the only state in the nation that has not seen any recovery in total employment. In other words, only in Georgia is employment still declining—the Peach State has not even begun to climb yet. Here's another troubling detail: Florida has farther to climb to recover the jobs it has lost than any other state in the nation save one. Let me explain.
The first column in the table below shows the percent change in total employment by state from each state's peak employment level before the recession to its trough, or the point at which employment stopped declining. The second column shows the percent change in total employment from the trough to September 2011, the latest month that state-level data are available. As you can see in the chart, Georgia is the only state in the nation that does not have a positive reading in the "trough to present" column, meaning that the current level of employment is at its low point.
The third column simply measures the difference between the two. I call this the "Assuage Gauge"—a positive number means that the current level of total employment has recovered and is above its prerecession level. In other words, the higher the number, the more the employment situation has been alleviated. A state with a negative reading indicates that the employment level is still below its prerecession peak. In looking at the states of the Sixth District, Florida has a very weak reading in its Assuage Gauge. In fact, only Nevada has a poorer reading.
Back to my original analogy: Georgia has not even started its climb, and when Florida looks up at where it needs to go to get back to where it was in terms of total employment, its climb is incredibly steep. Alabama has a long way to go, Mississippi and Tennessee are a bit farther along, and Louisiana is getting close to the summit.
SouthPoint has discussed the Southeast's lagging recovery over the past year, noting in our September 30 post that "the driving force behind the region's economic growth was population gains, which in turn ignited development and, in the case of Florida and Georgia in particular, overbuilding in both residential and commercial space." Let's look a bit more broadly.
Atlanta Fed President Dennis Lockhart has spoken about the nation's lagging employment recovery on several occasions, most recently in Washington, D.C., where he discussed the important role new businesses play in job creation. In late September in Jacksonville, Florida, President Lockhart noted that
"In terms of job creation, we appear to be treading water. Basically, the weak pace of growth in output since the end of the recession has translated to only modest net job creation. Modest gains in the private sector have been partially offset by ongoing losses in the public sector. As a result, there has been little progress in bringing down the high rate of unemployment."
The charts below highlight the divergence between public and private sector employment growth. We use the methodology of "employment momentum," which is a tool to gauge the relative strength of direction of employment. For example, if a data point shows a positive percent change in its short-term measurement (the three-month percent change) and a positive percent change in its longer-term measurement (the year-over-year percent change), we can say that momentum is strong. Data points showing this pattern are in the "Expanding" quadrant. Figures with both short- and long-term negative percent changes are seen as reflecting weak momentum and fall in the "Contracting" quadrant. Those deemed as "Slipping" show a positive long-term percent change, but the short-term measurement has turned negative. "Improving" reflects a negative long-term percent change, but a positive short-term movement.
Each point in the charts represents a state, and the states of the Sixth District are labeled. Two things jump out. First, as President Lockhart noted, public sector employment is much weaker than private sector employment. Only six states fall in the "expanding" quadrant for government employment, and only two states have private sector employment that falls in the "lagging" quadrant. The other is that Georgia not only has lagging government sector employment, but it is only one of two states with lagging private sector employment. Any way you cut it, the employment situation in Georgia and Florida is pretty lousy. The Atlanta Fed's macroblog has investigated the national employment picture for some time. To look more closely at employment trends and other data series for the states in the Sixth District, please see our State Data Digests. We update these on a monthly basis, so check back for updates.
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department
November 18, 2011 in Employment, Florida, Georgia | Permalink
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09/14/2011
A view from the Coastal Empire
We have posted about several of our university contacts in our Local Economic Analysis and Research Network (LEARN) over the years. Most publish regular updates on their state or local economies, which have proven very valuable in our understanding of how the economic recovery is progressing across the region.
One such publication is the Coastal Empire Economic Monitor, written by Dr. Michael Toma and his staff at Armstrong Atlantic State University's Center for Regional Analysis. For those of you who may not know what the Coastal Empire refers to, or where Armstrong Atlantic State University is, I'll give you a few hints:
- Money Magazine named this city #8 on its list of top places to retire.
- Paula Deen cooks there.
- Its port is one of the fastest growing in the country.
- It is often ranked as #1 on lists of the most haunted cities in America.
- It is on a coast.
Give up? The answer is Savannah, Georgia.
I'm not writing to plug the town, although it is one of my favorites in the region. I have visited Savannah and its region, but most of what I know about the area's economy I learn from Mike Toma and his report. Here are a few points from his latest reading on the Coastal Empire economy:
"The region's economy continued its slow recovery for the sixth consecutive quarter. The pace of expansion dipped, as compared to the first quarter, mimicking the nationwide slowdown in economic growth.
"The Coastal Empire leading economic index significantly improved during the second quarter of 2011. This consolidates and extends the modest improvement in the forecasting index during the past nine months. The forecasting index is pointing toward more apparent improvement in economic conditions in early 2012, while the remainder of 2011 should feel modestly better than the year's first half."
Below is the graph that shows the coincident and leading indicators for the Coastal Empire economy:
Dr. Toma concludes his assessment of the Savannah area economy by noting:
"Economic growth in the remainder of 2011 will not be particularly impressive, but should outpace growth in the first half of the year. The current expectation is conditions will show more improvement in early 2012."
This assessment is not unlike what Atlanta Fed President Dennis Lockhart sees for the U.S. economy as a whole. Late last month he spoke about his outlook in Lafayette, Louisiana:
"On a national level, the negative effects of the unusual forces that restrained the economy in the first half of this year have diminished. For example, auto production that was disrupted by shortages of supply parts from Japan has bounced back.
"While the risks have increased, I do not expect a recession. In my view, there is sufficient fundamental strength in the economy for a modest cyclical recovery to proceed while the process of necessary structural adjustments moves along. I believe the unemployment rate will come down very gradually over time."
The message here is that Savannah's challenges are not unlike those facing the rest of the country.
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research
department
September 14, 2011 in Georgia, Outlook | Permalink
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04/05/2011
Employment in the Sixth District improves in February
Payroll employment in the Sixth District improved in February, following several weak months. All states in the district added jobs in February, led by Florida and Georgia, the district's two largest labor markets. Across the nation, 35 states increased payroll employment in February.
In the district's largest labor market, Florida's education and health care sector gained 11,400 jobs in February while construction added 4,400 jobs. Industries that also contributed to the monthly gain in Florida were manufacturing, information services, and other services. A recent SouthPoint post gave a more detailed look at employment in southwest Florida. Accounting for the bulk of February's job gains in Georgia were the trade, transportation, and utilities industries, which added 6,900 jobs, and construction, which added 5,000 jobs. Payroll gains in the other Sixth District states over the month were spread among several industries.
Meanwhile, household survey data from the U.S. Bureau of Labor Statistics showed that the unemployment rates in the district were little changed in February. The unemployment rate decreased in two district states—Florida and Georgia—and increased in three states—Louisiana, Mississippi, and Tennessee. Florida's unemployment rate continues to be the highest rate in the district and the third highest in the nation. All Sixth District states except Louisiana have unemployment rates above the national unemployment rate of 8.9 percent.
By Sandra Kollen, a senior economic analyst in the Atlanta Fed's research department
April 5, 2011 in Employment, Florida, Georgia, Unemployment | Permalink
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10/20/2011 at 10:08 PM
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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10/07/2010
Bioenergy and Georgia
Yesterday I saw a great presentation by Jill Stuckey, the director of Georgia's Center of Innovation for Energy. Its mission is to increase the production and use of renewable energy and alternative fuels in Georgia. The fact that state governments are supporting the application of green technologies is not surprising. In fact it would be more surprising if they were not. What I did find most interesting was just how well positioned Georgia is to become a major player in the biomass energy sector.
Jill noted that Georgia is second only to Oregon in forested land: nearly 25 million acres. (Alabama and Mississippi are also in the top five, highlighting the idea that the entire region is ripe for biofuel development.) In terms of privately owned forest land, Georgia ranks first in the nation. Largely because of this, she noted that Forbes ranked Georgia third in the United States for alternative energy potential.
Products that Georgia's Center of Innovation for Energy is supporting include wood pellets, which are burned to generate heat and electricity. There is currently quite a bit of interest in this product from Europeans as they strive to meet their renewable energy mandates. There have been 12 biomass-to-electricity projects announced in Georgia as well.
How sustainable can harvesting woodland for energy be over the long term? After all, nobody wants to lose their forests and it would not be very green to chop down all our trees. Jill pointed out that according to the Georgia Forestry Commission, the state's commercial timberlands grow 19 million tons more wood each year than is harvested, resulting in growth exceeding removals by 38 percent. So the current model does appear to be sustainable.
Another factor that positions Georgia as a potential leader in the biomass/biofuel sector is the partnerships being developed with universities to commercialize research. Any model for long-term development and sustainability needs a research component, and Georgia clearly gets that connection. Institutions such as Georgia Tech's Institute of Paper Science and Technology and the University of Georgia's Bioenergy Systems Research Initiative are contributing to the state's emerging leadership in this sector.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
October 7, 2010 in Energy, Forestry, Georgia | Permalink
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06/09/2010
Georgia on my mind
Determining the sustainability of the current recovery is an important topic here at the Atlanta Fed. Much depends on the rebound in labor markets-job growth and a decline in unemployment. Part of our overall strategy in determining labor market activity is, of course, to look at the data to identify in which areas are new jobs being created.
Let's look at the states of the Sixth District in geographic terms. The chart below shows what we call an "Employment Momentum" snapshot. We plot the longer-term trend in employment (the year-over-year percent change) along the horizontal x-axis against the short-term trend (the three-month average percent change) along the vertical y-axis. The size of the bubble represents the relative proportion of the measured area.
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Interpreting the chart is straightforward. When a state is performing well and new job creation has a lot of momentum, it will be located in the "Expanding" quadrant, signifying that both its long-term (year-over-year) and short-term (three-month average) measures are positive. When conditions begin to deteriorate, the short-term measure turns negative, but the longer-term measure remains positive, evidencing "Slipping" momentum. When an area has experienced sustained net job losses, both measures are negative, and it moves into the "Contracting" quadrant. When job growth returns, the area's short-term momentum turns positive while the longer-term measure stays negative. Then the area is experiencing "Improving" momentum.
Two observations stand out. First, Florida is clearly on the mend. Its momentum is squarely in the Improving quadrant. Second, Georgia is lagging and remains in the Contracting quadrant. Let's look into that.
The three-month average employment change in Georgia is negative, but the latest reading for April showed that Georgia gained 14,500 new net jobs-the state's first substantial seasonally adjusted monthly gain since February 2008. Another positive month of job growth should land Georgia in the Improving quadrant. Nevertheless, why is Georgia lagging other states in the region in terms of job growth? Is there a part of the state that is underperforming the rest, or is weakness concentrated in a particular sector?
Let's look at another momentum chart, this one focusing on the major Georgia metro areas:
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Most metro areas in Georgia have moved into the Improving quadrant. Notably, Atlanta—the state's largest metro area by far—has improving employment momentum (barely). A few smaller areas remain in the contracting quadrant. What stands out is the fact that nonmetro Georgia (derived by subtracting the total employment in all Georgia's metro areas from total state employment) is deep within the contracting quadrant. It appears that most of the state's metro areas are exhibiting either improving or close to improving employment momentum, while for nonmetro Georgia, weakness in job markets means that they remain entrenched in contraction territory.
By Michael Chriszt, an assistant vice president in the Atlanta Fed’s research department
June 9, 2010 in Economic Growth and Development, Employment, Georgia, Southeast | 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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It is a good news to all. I hope the employment rate remains steady as we can no longer afford the slump of the hiring industry as it will lead to recession.