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The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.

The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.

Postings are weekly.


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08/20/2015


It's Mostly Sunny in Florida

20130910-0498-jacksonville
Jacksonville, Florida. Photo by Kendrick Disch

In a February SouthPoint post about economic conditions in north and central Florida, we reported that our contacts' optimism in late 2014 had carried into the new year. Since then, the Regional Economic Information Network team at the Jacksonville Branch has noted an overall improvement in activity and continued positive sentiment.

General business conditions continue firming
Feedback throughout the winter months was quite upbeat. Most contacts felt that an improving economy and labor market were driving growth. In early spring, although feedback remained positive, the messages became more mixed, with some contacts indicating a plateau in growth—most notably, transportation and retail contacts cited challenges from severe weather in various markets. However, bankers noted reasonable momentum with consumers and businesses; real estate contacts saw robust activity with increasing sales and prices at all price points; and homebuilders and commercial construction firms noted much stronger levels of activity. Tourism remained vibrant. Though the consumer inched along, restaurants reported revenue increases that they believe were the result of lower gas prices influencing discretionary spending. As spring progressed, activity continued along an upward, albeit slow, trajectory.

By midsummer, a small number of contacts reported demand was flat, and transportation contacts reported that activity—especially related to the movement of energy-related materials—declined notably since the first quarter. However, a majority of other contacts noted improved activity. Some began to add to capacity to meet increased demand—and, more importantly, anticipated future demand.

Employment largely stable
Throughout the first part of 2015, contacts continued to indicate no major problems in filling jobs outside of information technology (IT), accounting, compliance, and truck drivers. Staffing levels across firms generally remained steady, with some adding to headcount. Those hesitant to add staff turned to contingent labor (such as contract staff or temps) to meet demand. In late spring, we began to hear about increased turnover at many levels, and recruiting and retention appeared to be getting tougher. In central Florida, tourism contacts cited concerns of potential worker shortages as a result of a very low regional unemployment rate and increased construction attracting available labor.

Labor, nonlabor costs and price pressure surfacing
By March, mentions of mounting wage pressures at all job levels surfaced. Though not universally reported, numerous contacts said they were beginning to increase starting salaries, which they noted will eventually ripple through higher levels of staff to maintain internal pay equity and retain talent. Wages increased for engineers, truckers and technicians, and IT specialists. Into the summer, stories of referral and signing bonuses, customized perks, and other benefits enhancements for both recruitment and retention became more common.

Feedback on health care costs continued to be mixed. Health care costs for most increased at a pace greater than overall inflation, though companies continued to try to minimize the increases by changing plan designs or by sharing more of the cost with employees.

Overall, concerns about nonlabor costs were muted. Some mentioned lower energy and fuel costs have offset increases in other input costs.

The ability to raise prices varied among industries. However, a number of contacts indicated pricing power had improved, though the magnitude of price increases was limited. Generally, though, margins were edging up.

Credit, investment remain available
Throughout the first half of the year, credit was readily available and banking contacts reported increased activity. Many companies, especially small businesses, continued to deleverage even in the low interest rate environment, and many larger firms reported funding investments internally. Lenders reported increases in mortgage refinances as rates dipped, and they noted improved home equity levels. Auto lending was described as extremely strong.

Almost without exception, retail contacts noted expansion activity and further growth plans, all the result of expectations for stronger consumer spending. Real estate agents indicated that appraisal issues improved, and buyers, even the self-employed, generally faced little trouble financing home purchases. Stories regarding business investment were mixed between outlays for deferred projects and spending for new demand. This year, it's become clear that there is less hesitation about investment.

Business outlook mostly bright
Though we heard a couple of references to a cloudier outlook during the next two to three years as we approach another presidential election, collectively—and as recently as July—most REIN contacts and board members were as positive about current activity and future expectations as we have seen since the recession.

What's is in store for Florida in the second half of the year? Stay tuned.

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

August 20, 2015 in Economic conditions, Economy, Employment, Florida, Inflation, Labor Markets, Prices, Unemployment | Permalink

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05/19/2015


Seeking the Slack

Where is the excess slack in the labor force?

Last week, the April Employment report from U.S. Bureau of Labor Statistics reported that the unemployment rate (U-3) edged down slightly to 5.4 percent (after rounding) over the prior month, which is well below the high of 10.0 percent in late 2009. Despite this encouraging improvement, wage growth remains low, and many agree that slack remains in the labor market. The consensus of the Federal Open Market Committee (FOMC) has been that more progress can be made, as noted in the Chair’s press conference in March. One factor we have been paying particular attention to here at the Atlanta Fed is excess slack in the labor market captured in the U-6 unemployment rate, which includes the unemployed, those who are working part-time but would prefer full-time employment (part-time for economic reasons, or PTER), and those who have stopped looking for work during the last 12 months but were willing to work (marginally attached).

Below is a chart showing the U-3 unemployment rate (depicted in blue) and the U-6 rate (in red). The difference between the two is often referred to as “the gap,” and this area shaded below in light red represents the excess slack in the labor force. Between 2000 and 2008 the gap averaged 3.7 percentage points but then rose to a high of 7.3 percentage points during the recession. Since late 2011, the gap has declined and was 5.4 percentage points in April, but it remains well above the usual amount of excess slack in the labor force experienced earlier in the decade. Earlier analysis by my Atlanta Fed colleague Pat Higgins identified a significant connection between U-6 and the subdued wage growth the economy has experienced in recent years.

Civilian-unemployment

Just as the U-3 unemployment rate varies widely across states, so too does U-6.

Below is a map that shows where the gap between U-6 and U-3 was greatest during the first quarter of 2015. States shaded in red have a gap higher than the United States overall, and states with a lower-than-average gap are shaded in green.

Twenty-one states are shaded red, and they are mostly concentrated along the West Coast, the Southeast, and the Great Lakes region. The gaps were largest in Arizona, Nevada, and California, respectively—the so-called Sand States—where the housing boom and bust were most dramatic.

The gap was below the U.S. average in 29 states and Washington, DC. Notably, the central part of the country is shaded green. The smallest gap is in North Dakota, South Dakota, and Wyoming, states that have benefited in recent years from a boom in mining activity or energy extraction.

Of course, a large or small gap relative to the U.S. average does not tell us if the gap is unusual. For example, the red states in the chart also tend to be states whose U-3 rate and U-6 rate are also above the U.S. averages.

A way to get a sense of whether the gaps are abnormally high is to compare the gap on a state-by-state basis with that state's average gap prior to the Great Recession. (Here, I use data from 2003 to 2007 to create a prerecession baseline for each state.) As the map below shows, most states remain above their prerecession average gap and are shaded red, although a few exceptions are shaded green and sit slightly below the prerecession average. Nevada and Arizona's gaps remain stubbornly high and actually worsened in the latest quarter.

Clearly, many states have a ways to go to attain the average labor market conditions they experienced prior to the Great Recession.

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

May 19, 2015 in Employment, Labor Markets, Recession, Unemployment | Permalink

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04/10/2015


The Fruits of Our Labor

February 2015 state-level labor market data from the U.S. Bureau of Labor Statistics (BLS) for Sixth District states was solid—on aggregate. Overall, the region contributed 45,900 net payrolls in February, which was 17 percent of the nation's 264,000 payrolls. The combined unemployment rate of District states declined 0.1 percentage point to 6.1 percent. In fact, the unemployment rate fell in all six states, which hasn't occurred in almost two years.

While it's important to look at the aggregate picture when thinking about labor market performance for the entire District, it's also meaningful to hone in on the drivers of that performance. Although the drivers are largely related to the sheer size of the labor force, in the case of February's job growth in Sixth District states, just two states contributed to the bulk of February's job gains (see the chart).

Georgia-payroll-contributions-from-retail

Georgia and Florida carry the weight of job growth
February was a standout month for the Peach State. With 25,400 net payrolls added, Georgia supplied more than half of the jobs of all Sixth District states combined, and was the second largest contributor to job growth in the United States. This over-the-month jobs figure was the most the state added in four years, also crushing its 2014 monthly average of 12,200 net payrolls. Job gains were widespread, but the industries that contributed the most net payrolls in Georgia were retail (up 5,300) and accommodation and food services (up 5,500). In fact, both industries have almost steadily added jobs on net each month in Georgia over the past two years (see the chart).

Georgia-payroll-contributions-from-retail

Not too far behind the Peach State in February was the Orange State, with 19,700 net jobs added. The largest gains came from the government (up 4,800; local government payrolls were up 3,200), retail (up 4,200), and health care and social assistance (up 3,700) sectors. Over the past two years, the retail and health care and social assistance industries, in particular, have contributed solid gains in the state. In reality, Florida has been a consistent contributor to Sixth District jobs growth for several years (see the chart).

Contributions-to-change-net-payrolls-by-sixth-district-state

Where did the other states stand? In addition to Georgia's 25,400 and Florida's 19,700 payrolls in February, Mississippi contributed 3,500 net jobs. The remaining states subtracted from job growth: Louisiana (down 700), Tennessee (down 800), and Alabama (down 1,200).

Unemployment rate declines in all states
All six states in the District experienced a decline in the unemployment rate in February, which hasn't occurred in almost two years (see the chart). The aggregate figure was 6.1 percent, slowly approaching the national rate of 5.5 percent. February rates by state were as follows: Alabama 5.8 percent, Florida 5.6 percent, Georgia 6.3 percent, Louisiana 6.7 percent, Mississippi 7.0 percent, and Tennessee 6.6 percent.

Unemployment-rates-for-us-sixth-district-states

Keeping an eye on developing trends
I'll be paying attention to future data to spot this year's trends in regional labor market indicators and report back here.

Photo of Rebekah DurhamBy Rebekah Durham, economic policy analysis specialis t in the Regional Economic Information Network at the New Orleans Branch of the Atlanta Fed

April 10, 2015 in Florida, Georgia, Labor Markets, Southeast | Permalink

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02/12/2015


Southeastern Labor Market Continues Strengthening

December 2014 state-level labor market data from the U.S. Bureau of Labor Statistics reflected a strengthening labor market among Sixth District states, with a declining aggregate unemployment rate and solid job gains.

Unemployment rates decline, albeit modestly
The aggregate district unemployment rate in December was 6.2 percent, a 0.2 percentage point decline from the previous month and 0.5 percentage point lower than a year ago. Although higher than the 5.6 percent national figure, the aggregate rate continues to trend down. In fact, Florida matched the national unemployment rate in December and Alabama came very close (see the chart).

Unemployment-rates

The unemployment rate declined in nearly all southeastern states. Alabama's unemployment rate fell to 5.7 percent, and Florida's rate declined to 5.6 percent, the lowest level in nearly seven years for both states. At 6.9 percent, Georgia's unemployment rate continued on a downward path, as did Tennessee's, with an unemployment rate of 6.6 percent. For the second month in a row, Mississippi had the highest unemployment rate in the United States with 7.2 percent, a distinction the state has taken turns owning with Georgia since June 2014.

In Louisiana, the unemployment rate rose again (for the eighth straight month) to 6.7 percent in December. What's going on there? As I've mentioned a few times (here, here, and here), increases in the labor force are the driver of unemployment rate increases in the state, as opposed to people actually losing jobs on net. This isn't a bad thing, especially considering the state added more than 6,000 jobs in December (I'll discuss that shortly). Louisiana just added more people looking for work than the number of people who found work, hence the increase in unemployment. In fact, from January to December 2014, Louisiana's labor force grew by 4.8 percent (while the number of employed grew by just 2.8 percent). An increase like 4.8 percent may not seem like a big number, but when you look at the national figure of 0.4 percent during the same period, Louisiana's labor force growth stands out. National data released last week for the month of January told a similar story: the unemployment rate ticked up 0.1 percentage point to 5.7 percent from 5.6 percent in December, yet much of this increase can be attributed to labor force gains that outpaced gains in employment.

Payrolls also see modest growth
On net, the District added 47,400 jobs in December, and every state experienced positive job growth (see the chart). This contribution makes up 19 percent of the national payroll contribution of 252,000. On aggregate, the industries that contributed the most net jobs in the Sixth District were professional and business services (up 9,800), health care (up 8,300), and accommodation and food services (up 5,200).

Here are some key state-by-state payroll facts from the December report:

  • Alabama added 1,000 net payrolls. Much of the state's contributions were reduced by losses in the professional and business services sector (down by 2,400).
  • Florida added 12,700 jobs on net, mostly from the professional and business services (up 5,800) and health care (up 4,900) sectors.
  • Georgia contributed 14,100 net payrolls. Gains were widespread, yet the sector contributing the most jobs was health care (up 3,100).
  • Louisiana added 6,200 net payrolls. Gains were widespread in this state as well, though the biggest contributor was the accommodation and food services sector (up 1,600).
  • Employers in Mississippi added 900 net payrolls. Gains in the professional and business services sector (up 1,100) were reduced by losses in other sectors.
  • Tennessee employers added 12,500 net payrolls. The largest increases occurred in the goods-producing (up 5,300) and retail trade (up 2,400) sectors. employers added 12,500 net payrolls. The largest increases occurred in the goods-producing (up 5,300) and retail trade (up 2,400) sectors.

Contributions-to-change

Overall, the report was a sign of improving labor market conditions across the Sixth District states, a trend we hope to see continue into 2015.

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

February 12, 2015 in Alabama, Labor Markets, Louisiana, Southeast, Unemployment | Permalink

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I'm curious what caused the increase in the Louisiana labor pool? Is it an influx of people relocating to LA? More high school graduates? College graduates that are not looking out of state for employment? Long-term unemployment benefits not being renewed? It is interesting that the rate is an order of magnitude higher than the national figure? If the national figure is only 0.4%, what states are soooo low to counter the 4.8% from LA?
Enjoyed your article!!!

Posted by: Ron Bowlin | 02/17/2015 at 09:39 AM

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02/09/2015


A New Year, a Better Economy?

The optimism expressed by the Jacksonville Branch's contacts in north and central Florida in the latter half of 2014 continued through the holidays and into early 2015. Conditions were described as quite good, and the majority of contacts reported strengthening demand across multiple sectors. Further, reported headwinds for current and future activity decreased noticeably.

Universities noted some challenges with enrollment, which—although negative for the schools—reflects a strengthening economy and an improving job market as prospective students lean toward employment rather than continuing education. Growth in new customer demand for utilities indicates people moving. Several financial institutions cited robust consumer lending, led by an increase in demand for auto loans. Some banks reported double-digit increases in credit card use by consumers. However, they described residential mortgage lending as soft, with inventories of both existing and new homes remaining low. Small business lending was characterized as very strong compared with the same period a year ago. Tourism in central Florida remained robust amid reports of record-setting attendance and revenue at some attractions, along with elevated occupancy rates at area hotels for the last half of 2014. Regarding holiday sales, contacts reported increases over year-earlier levels.

Employment and labor markets
Employment stories were mixed during the past couple of months. Some larger companies reported increases in staff, but others indicated that employment levels have shrunk as a result of efficiency and automation. Struggles to find talent continued to be widespread across higher-skilled jobs, including those in compliance, engineering, underwriting, and actuarial science. Some contacts suggested that some lower-skill jobs are also becoming more difficult to fill. In the Orlando area, service workers were in high demand to meet strong tourism activity, which has resulted in employee churn among employers in the hospitality, retail, and theme park/entertainment industries.

Labor and nonlabor costs and prices
Although few contacts reported wage pressures building, certain jobs continue to command higher salaries as competition for talent increased. For example, we heard that some firms are increasing wages to attract and retain accountants. Also, talented lawyers fresh out of law school seeking positions with large law firms are asking for, and getting, higher wages that not only cover the cost of living but help pay down college debt. However, contacts noted a change in the types of jobs where wage increases were evident, such as entry-level distribution center labor, and they expect that wage pressures will increase. Contacts reported offering a variety of other types of compensation, including performance-based incentive payouts, stock options, and equity increases to retain key employees. Increased offerings of "soft benefits," such as more time off and flex time, were also reported. Most contacts reported merit increases between 2 percent and 3.5 percent. Health care premium increases continued to be mixed across all contacts.

We continued to hear from a majority of contacts that nonlabor input cost increases appeared to be stable or slowing. Companies with contractual agreements of multiple years with customers were reporting some pricing power during renegotiations, although government and defense contractors reported very limited pricing power and have been forced to reduce costs to maintain margins.

Falling gas prices have had a positive effect, giving consumers in particular a psychological boost regarding spending. Travel and tourism contacts in central Florida reported increased passenger traffic and hotel occupancy. Others reported higher activity in auto sales, where product sales have shifted to trucks and SUVs in response to lower fuel prices.

Availability of credit/investment
Credit continued to be readily available for most large companies. Bank and credit union contacts indicated strong demand across most lines of business, with an increased interest in warehousing as the retail sector continued to increasingly use online fulfillment in addition to traditional brick-and-mortar stores. Other financial institutions reported significant improvements in the credit quality of consumers. Contacts cited examples of capital investments in IT (for efficiency and process automation), acquisitions, and infrastructure.

Business outlook
Contacts have expressed increased confidence in their outlook, and most are experiencing and expect further improvement. They cited few domestic headwinds outside of the unknowns related to oil's rapid price decline and the regulatory environment in banking and other industries. We continue to hear more about a possible resurgence of domestic manufacturing, with rising wages in Asia and the lower cost of energy in the Western Hemisphere, which could drive manufacturing to Mexico and to the United States during in the medium term. Contacts with a strong international presence didn't view the strengthening dollar as their biggest worry. Rather, they described demand challenges in certain markets and U.S. tax policy as more worrisome. Overall, contacts during the past three months were upbeat about economic conditions, with the majority forecasting higher growth during the short and medium term.

By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch, and Chris Oakley, regional executive at the Jacksonville Branch

February 9, 2015 in Economic conditions, Economy, Employment, Labor Markets | Permalink

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11/25/2014


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.

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

November 25, 2014 in Economic Growth and Development, Employment, Florida, Jobs, Labor Markets, Retail, Southeast | Permalink

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11/07/2014


South Florida Maintains Momentum

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

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

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

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

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

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

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

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

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

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

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

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

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11/04/2014


Heading into Fall, Florida's Recovery Continues

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

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

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

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

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

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

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

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

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

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

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

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09/02/2014


Jobs Increase (But So Does Unemployment)

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

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

Contributions

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

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

Unemployment_rates

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

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

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

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08/22/2014


Southeast Commercial Construction Update: Activity Up from Last Year

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

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

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

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

Several comments from respondents help to illustrate these trends:

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

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

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

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

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

Hiring Plans for Next Quarter versus This Quarter

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

Difficulty Filling Positions versus a Year Ago

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

Labor Costs versus a Year Ago

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

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

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


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

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