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.
Charting Employer Sentiment in the Southeast
In a recent speech, Atlanta Fed President Dennis Lockhart remarked, "Overall, there was more improvement in labor markets in 2014 than in any other year of the recovery. Employment conditions are improving, and improving faster, and prospects of continued progress are encouraging moving into the new year."
Although President Lockhart was referring to national labor market conditions in his speech, his assessment holds true for the Southeast as well. In 2014, the Atlanta Fed's Regional Economic Information Network (REIN) staff polled business contacts across the Southeast both at the beginning of the year and the end to get a sense of their hiring plans for the year ahead. Polling our contacts twice allowed REIN to gauge whether business hiring plans had changed during the course of the year, and we shared the January results with you. Fast-forward to last November, when we approached our contacts to ask the same set of questions. We were pleasantly surprised to see that the results were more upbeat.
The survey was conducted from November 10–19 and resulted in a total of 303 responses from a wide variety of firm types and sizes. In this post, we want to share the results as well as some comparisons over time.
The survey's first question asked contacts whether they expect to increase employment, leave employment unchanged, or decrease employment in 2015. The results showed that 59 percent of respondents said they planned to increase employment levels over the next 12 months; up from 46 percent in January and the highest reading in the six times we've conducted this survey. Another 31 percent indicated they planned to leave employment levels unchanged; down from 44 percent in January and the lowest reading since we began asking these questions in 2011. The remaining 10 percent of participants planned to decrease payrolls; unchanged from the beginning of the year. As the chart below shows, a noticeable shift in sentiment took place from January, when we last asked this question. It appears that firms that said they would leave employment levels unchanged are now saying they would increase employment.
Focusing on the 59 percent of firms that indicated that they planned to increase employment, we asked them to give us the top three motivating factors driving their decision. The most frequently cited reasons were similar to past results. The majority of firms cited high expected growth of sales as the most important reason for increasing employment. For the second most important factor, two selections garnered similar levels of response: current staff was overworked, and the firm needed skills not currently possessed by existing staff. Finally, the third factor was improvement in the firm’s financial position (see the chart).
Conversely, we also wanted to learn the top three factors restraining hiring. Similar to January, firms' primary concern remained their need to keep operating costs low. Other frequently selected reasons were the firms' inability to find workers with the required skills and uncertainties related to regulations or government policies. What stood out this time was that a larger share of firms said that they were unable to find workers with required skills: 13.8 percent in January compared with 21.0 percent in November. Also, fewer contacts said that expected sales growth was low: 15.2 percent in January compared with 9.7 percent in November. Additionally, uncertainty about health care costs subsided; a smaller share of firms noted this factor as a reason for not hiring (see the chart).
In short, it's clear that employment levels in the Southeast should improve this year, which is exactly what we said this time last year. Were we correct for 2014? Now that we have data in hand, let's see. According to the latest employment data from the U.S. Bureau of Labor Statistics, the district averaged 38,800 net payrolls per month for 2014, up from 33,600 net payrolls a month in 2013. So our contacts did, in fact, increase payrolls like they said they would last year. Let's see what happens this year!
By Shalini Patel, a REIN director in the Atlanta Fed's research department
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Employment Momentum Grows in Florida and the Retail Sector
The U.S. Bureau of Labor Statistics published October 2014 state-level labor market data on November 21. For Sixth District states, a couple of factors stood out. First, after several months of anemic job growth, Florida employers added lots of jobs. In fact, Florida contributed 61 percent of October's net payrolls to the region. Second, although job gains were solid in a number of sectors, retail shined with 13,300 jobs added on net across the District, a figure that represents nearly half of the 27,100 jobs added to the sector in the entire United States in October. These regional retail job growth data confirm what the folks in our Regional Economic Information Network described earlier this month in their recap of economic intelligence gathered from business contacts across the Southeast: retailers anticipate strong holiday sales, and this anticipation translated into robust seasonal hiring in the retail sector in October.
A summary of the payroll and unemployment data for Sixth District states sheds more light on recent activity.
Payrolls flex some muscle
Employers in all Sixth District states except Mississippi added to payrolls: 56,600 jobs were added on net (see the chart). Florida dominated aggregate net gains in October, adding 34,400 jobs on net. Most of these gains came from the leisure and hospitality sector (up 9,300). Big contributors to Florida gains also included the educational and health services (up 9,000), professional and business services (up 6,100), and goods-producing sectors (up 5,100). (The good-producing sector was up 6,200 payrolls from construction alone but was reduced by losses in manufacturing.)
The sectors with payroll additions varied by state, though gains in the trade, transportation, and utilities sector were prevalent, with 16,800 net jobs added. Gains in this sector were dominated by retail trade (see the chart), which was the only sector tracked by all states that added jobs in every Sixth District state in October. This increase is typical for October, as retailers gear up for the holidays.
Employment momentum in the retail sector has been building for most of the region's states for a few months now (see the chart).
District gains in the professional and business services sector were also sizeable, with 13,100 jobs added. Momentum in this sector has been building in district states (see the chart). However, two states subtracted jobs from this sector in October: Louisiana (down 1,200) and Mississippi (down 1,500).
A few other facts about the Sixth District's October payrolls and sectors are noteworthy:
- Alabama added 2,200 jobs on net. The leisure and hospitality (up 3,200) and professional and business services (up 1,400) sectors were the top contributors. The biggest losses occurred in the government (down 1,500); trade, transportation, and utilities (down 600); and financial activities (down 500) sectors.
- In Florida, aside from job gains mentioned above, payrolls fell in the information (down 2,100) and financial activities (down 100) sectors.
- Employers in Georgia added 11,600 jobs on net. The largest gains occurred in trade, transportation, and utilities (up7,900, with 4,700 of those payrolls from wholesale trade) and professional and business services (up 5,400). The biggest losses came from government (down 3,200) and financial activities (down 1,200).
- Louisiana added 1,200 payrolls on net, most of which came from the trade, transportation, and utilities (up 1,500) sector. That sector was up 2,900 from retail trade, reduced by losses in wholesale trade) and educational and health services (up 1,200) sectors. The biggest losses occurred in leisure and hospitality (down 2,600) and professional and business services (down 1,200).
- Mississippi was the only district state to subtract payrolls from the aggregate district figure. The largest losses came from the professional and business services (down 1,500) and government (down 700) sectors. The only gains occurred in the educational and health services (up 1,300), leisure and hospitality (up 500), and trade, transportation, and utilities (up 400) sectors.
- Tennessee employers increased payrolls by 7,900 on net. The largest increases occurred in the trade, transportation, and utilities (up 3,500) and professional and business services (up 2,900) sectors. The biggest losses occurred in educational and health services (down 700) and leisure and hospitality (down 400) sectors.
Regional unemployment declines, if only slightly
The aggregate district unemployment rate was 6.6 percent in October, a decline of 0.2 percentage point from September (see the chart).
The rate fell in all states except for Louisiana, where it increased to 6.2 percent from 6.0 percent the previous month and was the sixth straight month of an increasing unemployment rate in that state. As I reported last month, this isn't necessarily a bad thing in the short run, since the state added jobs yet appears to have increased its labor force participation rate.
The unemployment rate fell in all remaining District states. Alabama's rate fell 0.3 percentage point in October to 6.3, its lowest rate in nine months. Florida's rate fell 0.1 percentage point to 6.0 percent, the lowest it's been in more than six years. The unemployment rate in Georgia fell for the second month in a row, to 7.7 percent in October from 7.9 percent in September. Though Georgia's unemployment rate declined, it had the highest rate in the United States in October for the third month in a row, at 7.7 percent. Mississippi's rate declined 0.1 percentage point to 7.6 percent, the lowest it's been in six months. In Tennessee the unemployment rate was 7.1 percent, a 0.2 percentage point decline from September.
So once again, collectively, the Sixth District states' labor market showed continued strengthening in October, particularly the state of Florida and the retail sector.
Hopefully, this progress continues for the month of November. We'll see when the data are released on December 19.
By Rebekah Durham, economic policy analysis specialist in the New Orleans Branch of the Atlanta Fed
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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
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Small Business Lending in the Sunshine State
No doubt, the lending environment has changed since 2007. Local bankers from the South Florida market discussed some of those changes at a roundtable event held last month at the Miami Branch of the Atlanta Fed. The discussion focused on small business lending activity and how the outlook and behavior of small business owners have evolved since the recession.
The bankers said they have a strong appetite for what they termed "qualified" small business loans and noted that they were competing against each other for good opportunities. This environment has helped put pressure on financial institutions to provide competitive loan terms for small business owners seeking credit. Most of the banks indicated that small business lending was part of a diversification strategy and an important component of their business. In a quarterly senior loan officer opinion survey conducted by the Federal Reserve Board in the second quarter of 2014, loan officers reported easing lending standards and some improvement in small business loan demand relative to a year before (see the chart).
The roundtable attendees agreed with the survey's findings and noted that the pool of qualified borrowers is currently limited but may expand as banks continue to review their underwriting standards in an improving economic environment.
Although all of the participating bankers were actively engaged in making small business loans, they did indicate that businesses were generally hesitant to take on additional debt and in general were behaving very conservatively. In discussing why business owners were taking on less risk, it was noted that the effects of the recession were still fresh, and most of the bankers felt that uncertainty about the future weighed on the minds of business owners. In addition, findings from the Atlanta Fed's survey of business inflation expectations indicate that business activity for smaller companies is improving but remains below normal levels (see the chart). One banker noted that rising interest rates would indicate to business owners that the economy was strengthening and that rising rates may, in fact, prompt further borrowing.
Credit qualification often ultimately comes down to the fundamentals. From a credit perspective, the bankers indicated that they heavily rely on the "five C's" of credit to help evaluate loan applicants: character, capacity, credit, collateral, and capital. The roundtable participants described "character" as one of the most important variables when they consider a request. Companies that weathered the recession were viewed more favorably because it demonstrated the ability to manage a business through difficult times. An owner who has personal credit issues will generally imply potential problems in managing the financial aspect of a business. The bankers cited adequate cash flow and a good balance sheet as important credit qualifications. The lenders noted that they also analyze how businesses position their balance sheets and expenses incurred by the company not related to the business.
Overall, the sentiment among the bankers at the meeting was positive, and for the remainder of the year, they expect continued improvement in lending to small businesses.
By Karen Gilmore, a vice president and the regional executive at the Atlanta Fed's Miami Branch, and Marycela Diaz-Unzalu, a Regional Economic Information Network analyst, also at the Miami Branch
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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
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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.
By John Robertson, a vice president and senior economist, and
Whitney Mancuso, a senior economic analyst, both of the Atlanta Fed's research department
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Southeastern States Mind the (Skills) Gap
During the past few years, we have heard from a significant number of regional business contacts about the challenges they experience filling certain positions and concerns about a skills gap facing the Southeast. We heard this from various industries, most often about engineering, construction, and IT jobs. The most recent Southeastern Insights mentions this widespread issue.
This skills shortage situation is not unique to the Southeast. The U.S. Chamber of Commerce Foundation published a state-by-state analysis last month measuring performance in a number of areas that contribute to economic prosperity. Their key conclusion reiterates our contacts’ concerns: that mounting skilled-labor shortages are on the horizon to such an extent that they may soon hinder economic growth. According to the study, the current skills gap dilemma is expected to grow substantially as baby boomers retire.
Fortunately, there’s a bright side: many states have recognized this situation and have taken steps to address the ostensibly approaching workforce crisis. Many of our contacts from both private and public sectors pointed to joint initiatives created by states and businesses designed to confront and abate the situation; which the U.S. Chamber of Commerce Foundation study says is essential to closing the gaps. Below is a sample, extracted from the study, of some of the efforts Sixth District states have taken:
- In 2013, the state launched a College and Career Ready Task Force charged with identifying ways to better prepare students for the workforce by training them in the skills demanded by growing industries across the state.
- New and expanding businesses can get workforce development services through the Alabama Industrial Development Training program, which offers services to businesses in need of skilled workers, including preemployment selection and training, leadership development courses, and third-party process improvement assessments.
- The Alabama Technology Network provides skills training for the manufacturing and high technology workforce. The network connects businesses to the portfolio of training resources and programs provided by the state’s colleges and universities, offering services through regional centers.
- The Go Build Alabama initiative works to attract talented workers to construction and skilled trades.
- Quick Response Training enables new and expanding businesses in need of training to partner with community colleges and other educational institutions in the state to develop and deliver workforce training programs.
- The Incumbent Worker Training program supports training the existing workforce to enhance and maintain competitiveness.
- The Career and Professional Education Act guides Florida’s efforts to diversify its economy and develop a more skilled workforce by encouraging collaboration among education, industry, workforce, and economic development stakeholders from across the state.
- In early 2014, the state approved a $44.7 million Science Learning Center on the University of Georgia’s South Campus, providing state-of-the-art facilities aimed at expanding the pipeline for students in science, technology, engineering, and math (often referred to collectively as STEM).
- Groundbreaking also took place for the Georgia BioScience Training Center, which will support training for companies that choose to locate within the state. Georgia Quick Start, the state’s job training program, will build and operate the state-of-the-art biotech training center.
- Via the Small Business Employee Training Program, employers can receive up to $3,000 to defray the costs of off-the-shelf training programs for an existing employee.
- The Louisiana Workforce Commission established Workforce Partners to recognize businesses that have committed to building a “job ready” workforce in the state through support and training.
- The Strategies to Empower People program provides access to job training, job readiness support, vocational education programs, and a variety of other skills-development services for those receiving government assistance.
- The Workforce Investment Network consists of more than 60 training and employment centers around the state where employers and job seekers can access services like training, job postings, on-the-job training programs, employment screening services, and job placement assistance.
- The Mississippi Development Authority also maintains a team of workforce specialists who work with colleges, businesses, workforce development professionals, and other stakeholders to identify resources useful to a particular business. The authority also builds partnerships to pursue needed training services.
- The University of Mississippi maintains a Professional and Workforce Development program, offering online enrichment courses, certification programs, and outreach services, bringing tailored training programs directly to the employer.
- The Tennessee Job Skills grant program offers support to technology companies that create “high-skill, high-wage” jobs, reimbursing eligible costs incurred in training development implementation.
- Entrepreneurs in need of quick turnaround in receiving support for training costs can make use of the state’s Job Based Training Reimbursement program, which provides support within the first 90 days after a new job is created and training starts.
- The FastTrack Job Training Assistance Program offers employers state support to cover costs for classroom instruction, on-the-job training, training-related travel, training vendors, and development of training materials and programming.
Sixth District states appear to be on a solid track to address skills gap challenges, combining investment in training, education, and business assistance as a long-term workforce development strategy. Time will tell if the investment pays off (we should know sooner rather than later, as boomers are expected to start retiring in droves).
To learn more about states’ efforts, as well as their rankings across five policy areas—talent pipeline, exports and international trade, technology and entrepreneurship, business climate, and infrastructure—check out the U.S. Chamber of Commerce Foundation’s study. There’s also a nifty interactive map you can use to view state rankings and data easily.
By Rebekah Durham, economic policy analysis specialist in the Atlanta Fed's New Orleans Branch
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Separating Out Job Groups in the Sixth District
There’s been a lot of discussion about the decline of jobs considered to be “mid-skilled” during the last several years. A recent Regional Economic Press Briefing prepared by our friends at the New York Fed took another look at this important issue. They aggregate occupations into three skill categories: higher-skill, middle-skill, and lower-skill professions. The specific occupations of each category are outlined in the following chart:
Using data from the U.S. Bureau of Labor Statistics’ Occupational Employment Statistics dataset, we were able to decompose the Sixth District states’ labor markets using the same skill categories that the New York Fed used.
Both the higher-skill and lower-skill categories grew from 2007 to 2013, and the middle-skill group shrank for both the United States and Sixth District. The proportion by which the middle-skill group’s share shrank during the time period was roughly similar for the nation and Sixth District, with the difference between the two differences being less than 1 percentage point. Yet more interesting, we were able to compare how these groups’ compositions have changed prior to and following the recession for each Sixth District state. You can see a state-by-state decomposition in the following chart:
Florida, Georgia, and Tennessee all saw their share of their middle-skill jobs shrink by roughly 4 percentage points during the time period, while Alabama’s share of middle skill jobs decreased by about 3 percentage points. The middle-skill groups in Louisiana and Mississippi, often the outliers in Sixth District data, shrank by the smallest amounts during the time period 2007–13, roughly by 2 percentage points. However, Louisiana’s share of higher-skill occupations was the only one not to expand from 2007 to 2013. The shrinking share of middle-skill jobs in that state was almost solely the result of a growing share of lower-skill jobs.
To understand how the data in the chart above came about, we can look at changes in the composition of these groups (higher-, middle-, and lower-skill groups) by state during both the recession and recovery. The first chart below shows that the middle-skill groups took a particularly hard hit across the nation and District in the previous recession...
...while those middle-skill jobs have been the most sluggish to come back, both across the nation and the Sixth District, as the following chart shows:
By Mark Carter and Sandra Ghizoni, both senior economic analysts in the Atlanta Fed’s research department
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Are We There Yet?
If you’ve been reading the U.S. Bureau of Labor Statistics’ monthly Regional and State Employment and Unemployment press releases lately (and really, who hasn’t?), you may have noticed that Florida has been mentioned as one of the states with the fastest payroll growth. (In April, Florida had the third-largest payroll gain of any state in the nation, adding 34,000 payrolls across the state; this gain trailed only Texas, which added 64,100, and California, which gained 56,100 payrolls.) Indeed, during the last few months, the state’s payroll growth seems to have shifted into the next gear (see the chart).
Florida has added just about 100,000 payrolls from January through April (97,900, to be exact), which seemed like a nice even number for an economic analyst to tear apart. Almost a third of Florida’s new payrolls so far in 2014 have come in the leisure and hospitality sector (see the chart). The professional and business services sector accounts for a little more than another quarter of the year-to-date job gains.
But still, a good bit left to go...
However, although the pace of payroll growth appears to be picking up for the state (and for the entire Sixth District as well; more on that shortly), in terms of the number of jobs there’s still quite a ways to go just to get back to where the state was prior to the recession. Florida’s payrolls peaked in March 2007 at just over 8 million; by December 2009, that figure was down to about 7.1 million. Incorporating April’s 34,000 new payrolls, the state sits at just shy of 7.8 million payrolls (see the chart).
Between Florida’s last peak in payrolls and the level in April 2014, the state’s payroll gap is 274,000. Coincidentally, with eight months left in this year, if Florida’s payroll growth for the rest of 2014 continues at or slightly better than April’s pace, the state could ring in 2015 with a new level of peak employment.
For the Sixth District as a whole, the region is still down 444,000 payrolls from peak employment in March 2007, when the District had about 20.1 million payrolls. If April’s pace of aggregate District payroll growth (an increase of 62,400) held for the remaining eight months of the year, the Sixth District would also have a new level of peak employment by New Year’s Day.
Other highlights of the state employment report
Sixth District states added 62,400 payrolls during April, with 34,000 of those coming from Florida. Georgia had the second-largest gain within the Sixth District by adding 14,600 payrolls. Louisiana and Mississippi each added just under 5,000 payrolls (4,700 and 4,900, respectively), with Mississippi seeing its second month, with more than 4,000 jobs added each month since the U.S. Census surge in employment in 2010. Tennessee added 2,400 new payrolls, and Alabama saw 1,800 new payrolls.
The Sixth District aggregate unemployment rate ticked down to 6.4 percent in April, a result of declines in Florida, Mississippi, and Tennessee. Rates of unemployment stayed the same in Georgia (7.0 percent) and Louisiana (4.5 percent) and ticked up in Alabama (from 6.7 percent to 6.9 percent; see the chart).
The next regional and state employment and unemployment report will be released Friday, June 20.
By Mark Carter, a senior economic analyst in the Atlanta Fed’s research department
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Is Florida Finally Beginning to Flourish Again?
In March, we shared the view of our contacts in the Regional Economic Information Network (REIN) in north and central Florida. Those contacts described modest but sustained growth in activity in the first quarter of the year. That sentiment continued as winter turned into spring, with reports of increasing activity and greater optimism for continued growth during the remainder of the year.
Since mid-March, the REIN team in the Atlanta Fed’s Jacksonville Branch held 13 one-on-one interviews, one roundtable with a mix of business leaders, a Trade and Transportation Advisory Council meeting (recently summarized), as well as our branch board meeting. Although meeting participants noted acquisitions as a primary growth engine for most firms, some firms are expanding capacity to meet improving demand. Community banks are reporting increased commercial activity as bigger banks trim lines on small businesses. Though loan demand is still relatively soft, our contacts characterized clients as somewhat more confident, which bodes well for future lending activity. One banker cited noteworthy increases in credit card usage and home equity loans.
Retail contacts continue to express concerns about low-income consumers but note that the slowly improving labor market is resulting in somewhat more spending. In central Florida, contacts noted strong spending by more affluent consumers, including foreign visitors who are seeking high-end retail and dining. Robust home sales and price appreciation, accompanied by declining lender-mediated sales, were widely reported. Commercial construction is on the rise, especially in sectors such as health care, manufacturing, apartments, and higher education.
A focus on cost-cutting along with productivity-enhancing efforts continues. As one chief executive officer put it, “People are the last thing we’ll invest in.” Another company has committed to keeping its general and administrative expenses flat, which will result in support staff cuts to offset the increased cost of technology investments and health care. Two other large contacts noted significant reductions of full-timers to avoid having to provide health care coverage and to “be more in line with the industry.” We increasingly hear more about firms restructuring employee health plans and benefits to reduce costs to the company, including shifting more cost burden to the employee, restricting eligibility for spouses who may have access to insurance elsewhere, and adding risk-based surcharges.
Education contacts noted that the ability to place graduates seeking work has improved. Stories abound regarding difficult-to-fill positions (truck drivers, IT, accounting, etc.), and reports of a willingness to increase starting salaries are mixed. Generally, there were few reports of wage pressures mounting (outside of the trucking industry). The news on input prices remains relatively quiet.
Our contacts noted that qualified mortgage rules—and regulations more generally—have the potential to affect the housing recovery. A mortgage and refinance company has cut the majority of its workforce as refinance volume diminishes but noted that current regulations are making first mortgages, especially to the self-employed, “nearly impossible” to issue. Two other small-banking contacts indicated they have discontinued providing residential mortgages. However, two residential real estate contacts did not indicate any major concern about clients’ abilities to obtain mortgage loans.
At the April meeting of the board of directors of the Jacksonville Branch, we asked board members whether the current and near-term environment reflects an economy that is growing at a 2 percent rate or one that is growing at 3 percent. The majority view activity now and in the coming year to be more closely aligned with a 3 percent growth rate. The board members feel that the biggest potential impediment to growth is related to the consumer, as many people continue to struggle and consumer confidence remains lower than before the recession (see the chart).
The old proverb goes, “No matter how long the winter, spring is sure to follow.” One could apply this adage to the Great Recession and the long recovery and ask: Has an economic “spring” finally sprung? We’ll be keeping tabs as the year plays out.
By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch
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