05/10/2013
Expansion in Regional Manufacturing Continues
Manufacturing contacts in the Southeast region reported continued expansion for the fourth consecutive month, as reflected in the Southeast Purchasing Managers Index (PMI).
The Southeast PMI, produced by the Econometric Center at Kennesaw State University, provides an analysis of the most current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The index is based on a survey of representatives from companies in those states regarding trends and activity of new orders, production, employment, supplier delivery time, and finished goods. A reading on this index above 50 represents an expansion in the manufacturing sector, and a reading below 50 indicates a contraction.
This positive trend for manufacturing activity came as a pleasant surprise as the Institute of Supply Management (ISM) Manufacturing Index reported two consecutive drops in the national PMI, suggesting manufacturing growth to have slowed nationally. While Southeast PMI is not a subset of the national index, both measure a mix of similar components by surveying purchasing managers.
The Southeast PMI experienced less than a point increase in April compared with March. Although this increase over the prior period is minimal, the overall index reflected the highest level since May 2012 at 55.5, which is 5.5 points above the of 50-point benchmark. Increases in indices of new orders, production, and employment drove this growth, and each of these components was substantially above its respective measure in the national PMI.
Production experienced the most significant jump of the survey components, with an increase of 5.7 points from March to April, ending at 61.2. Employment jumped 4.1 points during the same period to 57.8. While new orders reflected a much smaller increase of 0.4 points, this minimal increase brings the submeasure to 57.8, well above the expansion benchmark (see the chart).
Of survey participants, 43 percent expect production to be higher in the next three to six months, versus 33 percent for the prior survey period. Although this is not the highest level of optimism reported this year by survey participants, those following the industry welcome these positive sentiments while watching to see if the region will continue to outperform national manufacturing activity.
By Amy Pitts, a senior Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch
May 10, 2013 in Alabama, Employment, Florida, Georgia, Louisiana, Manufacturing, Mississippi, Southeast, Tennessee | Permalink
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04/25/2013
Beige Book: Southeast, U.S. Exhibiting Similar Trends
The Summary of Commentary on Current Economic Conditions by Federal Reserve District—commonly known as the Beige Book—is a report is published by the Federal Reserve eight times a year. Each Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector.
Below is a comparison of the national summary and the Atlanta Fed's portion of the report, which was released on April 17:
Overall economic conditions
- National: Reports from the 12 Federal Reserve Districts suggest overall economic activity expanded at a moderate pace during the reporting period from late February to early April.
- Atlanta: Sixth District business contacts reported that economic activity continued to advance at a modest pace.
Outlook
- National: Outlooks among respondents remained optimistic across sectors and Districts, with growth mostly expected to continue at the same or a slightly improved pace.
- Atlanta: Reports across sectors were generally positive, and expectations for the coming months remained optimistic.
Consumer Spending
- National: Consumer spending grew modestly, and firms in some Districts cited higher gasoline prices, expiration of the payroll tax cut, and winter weather as factors restraining sales growth.
- Atlanta: Retail reports were mixed, with some retailers citing improved sales and others feeling the pinch from a constrained consumer.
Tourism
- National: Travel and tourism expanded across most reporting Districts, boosted by both business and leisure travel.
- Atlanta: Hospitality contacts reported healthy activity in both leisure and business travel.
Real estate
- National: Most Districts said residential and commercial real estate improved markedly since the last report. Home prices were rising in many areas of the country.
- Atlanta: Homebuilders and brokers experienced further improvements in sales and prices of new and existing homes, and inventories continued to decline on a year-over-year basis. Commercial contractors noted a strong year to date as construction levels improved from late last year.
Manufacturing
- National: Most Districts noted increases in manufacturing activity since the previous report.
- Atlanta: Overall, manufacturing activity remained positive as new orders and production increased.
Banking
- National: Loan demand was steady to slightly up in most Districts.
- Atlanta: Loan demand remained steady, according to bankers.
Employment
- National: Employment conditions remained unchanged or improved somewhat.
- Atlanta: Payrolls continued to grow at a tepid pace as firms remained reluctant in hiring, in part because of uncertainty over fiscal policy and health care reform.
Prices
- National: Aside from reports of increases in home prices and residential construction materials, price pressures remained mostly subdued across Districts.
- Atlanta: Prices remained stable and most firms continued to report having relatively little pricing power.
Based on these comparisons, the southeastern economy appears to exhibit trends similar to the rest of the nation.
The next Beige Book will be published June 5.
By Shalini Patel, an economic policy analysis specialist in the Atlanta Fed's research department
April 25, 2013 in Beige Book, Economic Growth and Development, Employment, Manufacturing, Prices, Real Estate | Permalink
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04/15/2013
Regional Manufacturing Remains Positive in March (and in the Longer-Term View)
Southeastern manufacturers reported expanding factory activity for the third consecutive month in March, according to the Econometric Center at Kennesaw State University. The increase in overall regional manufacturing activity reported from February to March was not as substantial as the prior two periods, but this sector continues to be one of the brighter spots in the economy. The southeastern Purchasing Managers Index (PMI) reading in March was 5.2 points above the expansion benchmark of 50 and is at its highest level since May 2012. The continued strength in manufacturing activity in the region was a result of an increase in all southeastern PMI components except for finished inventory. Of the six states that make up the Atlanta Fed’s region, four reported activity to be expanding, with Tennessee and Georgia showing the highest activity levels.
In addition, the manufacturing outlook remained healthy as well, although the March survey showed that the percentage of southeastern manufacturing contacts who expect production to be higher in the next three to six months was a bit lower than the past few months. Thirty-three percent expect production to be higher in the next three to six months, versus 45 percent for February. Still, the index level for the outlook remains a very healthy 61.
Employment data also show that the manufacturing sector is growing. Since its trough in February 2010, total manufacturing employment in the region had risen by 65,600, or 4.5 percent, a welcome sign after the manufacturing sector experienced significant job losses during the recent recession.
Recent studies also offer encouraging news for the long-term outlook of the manufacturing sector. A recent report by Capital Economics, an independent macroeconomic research company, addressed onshoring and current conditions in the manufacturing sector that could lead to a potential renaissance. In part, it said:
The offshoring boom does appear to have largely run its course but there is, as yet, little evidence of any significant onshoring. Nevertheless, with US labour costs becoming relatively more competitive, domestic energy prices falling and new technologies being developed, the medium-term outlook for the US manufacturing sector is brighter than it has been for a long time.
While many plants remain shuttered or are producing well below capacity, changes are expected to come over the next decade. Harold Sirkin, a partner at Boston Consulting Group, provides supporting comments for onshoring trends in his report Made in America, Again. Huffington Post provides support of the onshoring trend in an article, Why Onshoring High-tech Manufacturing Jobs Makes Economic Sense.
Looking more closely at the region, the latest Economic Report to the Governor, from the University of Tennessee's Center for Business and Economic Research, addressed the emergence of advanced manufacturing, which is leading to changes in the types of workers manufacturers are looking to hire:
There is no simple definition of advanced manufacturing, but it generally entails the integration of technology and sophisticated labor skills to the manufacturing process. Advanced manufacturing in principle could apply to any manufacturing firm in any sector of the economy. Robotics and additive manufacturing such as 3D printing are good examples of advanced manufacturing processes in practice.
Surveys of manufacturing activity, data regarding employment levels, and longer-term studies all point to a healthy rebound and continued expansion in the region’s manufacturing sector.
By Amy Pitts, a senior Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch
April 15, 2013 in Employment, Manufacturing, Productivity, Southeast | Permalink
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03/15/2013
Regional Manufacturing Continues Its Slow but Steady Climb; Can It Continue?
Contacts in the Southeast reported an incremental gain in regional manufacturing activity for the third consecutive month in February. Increases in new orders, production, employment, and finished inventory contributed to the highest Southeast Purchasing Managers Index (PMI) index reading since May 2012.
If you follow this blog regularly, you know that the Southeast PMI is one of the data tools we employ at the Atlanta Fed to track manufacturing activity in the region. The index is produced by the Econometric Center at Kennesaw State University and provides an analysis of the most current market conditions for the manufacturing sector in Georgia, Florida, Alabama, Tennessee, Mississippi, and Louisiana. The index is based on a survey of representatives from companies in those states regarding trends and activity of new orders, production, employment, supplier delivery time, and finished goods. A reading on this index above 50 represents an expansion in the manufacturing sector, while a reading below 50 indicates a contraction.
The Southeast PMI increased 2.8 points from January to February, resulting in a reading of 54.7. As explained above, this reading above 50 indicates expansion and is the highest Southeast PMI since the index hit 57.9 in May 2012. In February, new orders and employment reflected slight increases of less than a percent, 0.4 percent and 0.1 percent, respectively. Production increased 2.9 points while the most substantial increase was in the finished inventories category, which experienced an 11.2 point jump from the month prior to 59.4. The Southeast PMI registered a stronger reading than the national PMI for the first time since last September.
Looking ahead, those of us who follow the manufacturing industry will be anxious to see if this momentum will continue. Forty-five percent of survey participants, those who work in the industry, expect production to be higher in the next three to six months. Therefore, participants as whole do not appear as optimistic as the 57 percent who expected increases over the same time frame in January.
By Amy Pitts, a senior REIN analyst in the Atlanta Fed’s Nashville Branch
March 15, 2013 in Manufacturing, Southeast | PermalinkTrackBack
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02/13/2013
Regional Manufacturing Index Jumps in January
Reports from the Atlanta Fed's business contacts indicated that manufacturing in the Southeast improved in early 2013. In particular, information from auto producers and firms that produce goods for the energy sector remained positive.
One of the data tools we employ here at the Atlanta Fed to track manufacturing activity in the region is the Southeast purchasing managers index (PMI). The Southeast PMI is produced by the Econometric Center at Kennesaw State University and provides an analysis of the most current market conditions for the manufacturing sector in Georgia, Florida, Alabama, Tennessee, Mississippi, and Louisiana. The index is based on a survey of representatives from companies in those states regarding trends and activity of new orders, production, employment, supplier delivery time, and finished goods. A reading on this index above 50 represents an expansion in the manufacturing sector, while a reading below 50 indicates a contraction.
In January 2013, the Southeast PMI increased 5.5 points to a reading of 51.9—its highest level since last September (see the chart). All subindices logged increases as well, in particular new orders, production, and employment. New orders saw the most substantial increase, jumping 12.6 points from December to January to 55.3. Production rose 9.1 points to 50.9, and the employment measure recorded a 3.4 point rise to 51.8.
One of the most encouraging aspects of the January survey reflects the purchasing managers' outlook on production expectations over the next three to six months. While this question is not a component of the overall PMI, this information provides input from those closest to the industry on what activity is expected in the months ahead. Among survey participants, 57 percent expect production to be higher in the next three to six months, versus 47 percent from the prior survey period.
By Amy Pitts, a senior REIN analyst in the Atlanta Fed's Nashville Branch
February 13, 2013 in Manufacturing, Purchasing | Permalink
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01/09/2013
Regional Manufacturing Survey Ended 2012 with a Fizzle, but Could Start 2013 with a Bang
The Southeast Purchasing Managers Index (PMI), produced by the Economic Center at Kennesaw State University, ended 2012 with a reading of 46.4, which was practically unchanged from November's disappointing 46.2 result. A reading above 50 represents an expansion in the manufacturing sector, while a reading below 50 indicates a contraction.
Anecdotally, we heard from many of our manufacturing contacts that their order books had cooled late in the year, with several of them pointing to the economic uncertainties generated by the fast-approaching fiscal cliff. Indeed, the new-orders component of the regional PMI survey showed a disappointing monthly decrease of 3.7 points in December, to 42.6. The production component fell 2.7 points to 41.8 in December from November.
But here's where the data on orders and production diverge from the story told by some other components of the regional PMI survey. The employment component increased two-tenths of a point, to 48.4. Although the reading is still below 50, the increase may reveal that manufacturers see the slowdown in orders and production as temporary. In fact, the number of respondents that expect production levels to increase in the next three to six months jumped from 31 percent in November to 47 percent in December, causing the outlook measure of the regional PMI to reach 66.4.
There are other reasons to believe that the late-2012 fizzle in the Southeast PMI may not be telling the whole story.
- Autos remained a strong sector in December. Preliminary data for the month showed rather healthy levels of auto output for most U.S.-made brands that have facilities in the Southeast.
- We have also heard that construction-related manufacturing activity was ramping up in response to the slow, but steady, improvement in homebuilding and renovations.
- Energy-related manufacturing is going strong. Not only is the actual production of energy products doing well, but the industrial goods needed to extract, refine, and transport these goods is also strong.
So perhaps the message is that while the headline PMI number is unimpressive, and the forward-looking new-orders component was particularly disappointing, all the news is not bad for manufacturing.
By Michael Chriszt, a vice president in the Atlanta Fed's research department
January 9, 2013 in Manufacturing | Permalink
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11/15/2012
Dalton Resilience
Whenever I have the privilege of speaking in public, I do my homework on the area I'll be visiting. Preparing for the series of speaking engagements I had in Dalton on November 13 was a sobering endeavor. With an employment decline of over 23 percent, no other metro area in the region has suffered more during the recession than Dalton. While the rest of the region has been slowly adding jobs, Dalton saw its total level of employment decline until June of this year. Dalton's unemployment rate is nearly 4 percentage points above the national rate and home prices were still falling through the second quarter—to levels last seen in 2001.
In the Center for Economic Research and Entrepreneurship's (CERE) publication "Business Analytics," Dr. Robert Culp wrote:
"The dramatic drop in income in Whitfield County [where Dalton is located] is the result of heavy dependence on flooring companies located in the area. These companies, like any that depend upon the housing market, suffered significant decreases in sales, hitting profits and employees very hard. The area has suffered mass layoffs and little business expansion, resulting in the highest unemployment rate in the state. While it can be hoped that housing prices will recover in Whitfield County, until its manufacturing sector recovers or new businesses locate in the area, indications are that Whitfield County's home market is years away from recovery."
Dr. Culp hit the nail on the head. Dalton's troubles are clearly tied to the decline in housing. With the collapse of new home construction witnessed during the recession, demand for floor coverings—a dominant industry in the "Carpet Capital of the World"—declined substantially.
Just how bad is it? Looking at our "Assuage Gauge," which compares the percent of employment lost during the economic downturn to the increase in employment during recovery, Dalton has the farthest to go to regain its prerecession employment levels of any metro area in the region.
| % Change Peak to Trough |
% Change Trough to Present |
Assuage Gauge |
|
| Dalton, GA | –23.3 | 2.0 | –21.3 |
| Morristown, TN | –15.9 | 0.0 | –15.9 |
| Ocala, FL | –16.8 | 2.7 | –14.1 |
| Ft Myers-Cape Coral, FL | –16.6 | 3.0 | –13.7 |
| Bradenton-Sarasota, FL | –15.1 | 1.9 | –13.2 |
| –13.2 | 0.5 | –12.7 | |
| Brunswick, GA | –15.9 | 3.6 | –12.4 |
| Naples-Marco Island, FL | –18.1 | 6.8 | –11.3 |
| West Palm Beach, FL | –12.2 | 1.0 | –11.2 |
| Rome, GA | –12.8 | 1.6 | –11.2 |
| Punta Gorda, FL | –13.0 | 2.8 | –10.3 |
| Sebastian-Vero Beach, FL | –13.7 | 3.4 | –10.2 |
| Deltona-Daytona Beach, FL | –11.7 | 1.6 | –10.2 |
| Dothan, AL | –10.7 | 0.5 | –10.2 |
| Ft Lauderdale, FL | –11.5 | 1.6 | –9.9 |
| Melbourne-Palm Bay, FL | –10.6 | 0.7 | –9.8 |
| Pensacola, FL | –10.5 | 0.9 | –9.6 |
| Anniston-Oxford, AL | –11.9 | 2.5 | –9.4 |
| Gainesville, FL | –9.3 | 0.0 | –9.3 |
| Birmingham-Hoover, AL | –9.2 | 0.0 | –9.2 |
| Lakeland-Winter Haven, FL | –10.9 | 1.8 | –9.1 |
| Tuscaloosa, AL | –10.5 | 1.5 | –9.0 |
| Cleveland, TN | –9.7 | 1.3 | –8.4 |
| Gadsden, AL | –9.6 | 1.4 | –8.2 |
| Montgomery, AL | –9.7 | 1.6 | –8.1 |
| Decatur, AL | –11.6 | 3.6 | –8.0 |
| Valdosta, GA | –10.5 | 2.7 | –7.8 |
| Tallahassee, FL | –8.6 | 1.4 | –7.2 |
| Albany, GA | –9.5 | 2.6 | –7.0 |
| Panama City, FL | –7.1 | 0.1 | –7.0 |
| Tampa-St Pete, FL | –11.2 | 4.4 | –6.8 |
| Jackson, TN | –9.2 | 3.0 | –6.2 |
| Jacksonville, FL | –9.2 | 2.9 | –6.2 |
| Auburn-Opelika, AL | –7.2 | 1.0 | –6.2 |
| Alexandria, LA | –9.4 | 3.3 | –6.2 |
| Memphis, TN | –8.8 | 3.0 | –5.8 |
| Orlando, FL | –9.4 | 4.0 | –5.5 |
| Atlanta, GA | –8.3 | 3.3 | –5.0 |
| Macon, GA | –8.2 | 3.3 | –4.9 |
| Mobile, AL | –7.4 | 2.5 | –4.9 |
| Miami, FL | –8.8 | 4.1 | –4.7 |
| Augusta, GA | –5.6 | 0.9 | –4.7 |
| Chattanooga, TN | –9.4 | 4.9 | –4.5 |
| Savannah, GA | –7.8 | 3.4 | –4.4 |
| Florence-Muscle Shoals, AL | –6.6 | 2.2 | –4.4 |
| Johnson City, TN | –6.6 | 2.2 | –4.4 |
| Athens-Clarke, GA | –9.8 | 5.5 | –4.3 |
| Huntsville, AL | –5.4 | 1.3 | –4.1 |
| Jackson, MS | –5.1 | 1.7 | –3.4 |
| Gulfport-Biloxi, MS | –6.3 | 2.9 | –3.4 |
| Kingsport-Bristol, TN | –6.5 | 3.2 | –3.3 |
| Monroe, LA | –5.8 | 2.7 | –3.1 |
| Baton Rouge, LA | –4.6 | 1.7 | –2.9 |
| Shreveport, LA | –6.2 | 3.4 | –2.8 |
| Columbus, GA | –4.9 | 2.1 | –2.7 |
| Hattiesburg, MS | –8.4 | 6.0 | –2.4 |
| New Orleans, LA | –5.2 | 2.9 | –2.3 |
| Houma-Thibodaux, LA | –8.1 | 5.8 | –2.3 |
| Nashville, TN | –6.6 | 5.0 | –1.5 |
| Gainesville, GA | –12.2 | 10.9 | –1.3 |
| Warner Robins, GA | –3.2 | 1.9 | –1.3 |
| Hinesville-Fort Stewart, GA | –10.4 | 9.4 | –1.0 |
| Knoxville, TN | –6.2 | 5.8 | –0.4 |
| Clarksville, TN | –6.4 | 6.7 | 0.3 |
| Lafayette, LA | –12.6 | 14.3 | 1.6 |
Source: U.S. Bureau of Labor Statistics and Atlanta Fed calculations
Unfortunately, the idea that Dalton will regain all the jobs lost in the floorcovering sector is unlikely. As macroblog wrote on September 20:
The paper "The Trend is the Cycle: Job Polarization and Jobless Recoveries" by Nir Jamiovich and Henry Siu focuses on a related but distinct long-term phenomenon in the U.S. labor market: job polarization. This refers to the fact that the U.S. labor market increasingly consists of low- and high-paying jobs with relatively few middle-income jobs. While this ongoing change has been noted by other researchers, Jaimovich and Siu show that this long-term evolution has not been occurring at a slow and steady rate but rather has been concentrated during aggregate downturns. They argue that the recent phenomenon of jobless recoveries is simply a reflection of the fact that these are the periods in which middle income jobs are disappearing, never to be brought back.
So, with all this in mind I traveled to Dalton fully expecting to find a city depressed and its people disheartened. What I found was quite the opposite. In discussions with dean of the business school at Dalton State College, Dr. Larry Johnson, and students and professors there as well as business and community leaders from the Dalton area, I found a vibrant spirit of resilience and realism. Businesses were diversifying, community leaders were actively engaged in attracting new business, and Dalton State College was taking critical steps to prepare their students for the future. Along those lines, the college broke ground on a new science building the day before my visit.
Dr. Benjamin Artz put it best in his article in CERE's "Business Analytics" when he wrote:
It is clear that, in order to succeed in the new economy that arose in the wake of the Great Recession, the [Dalton] region must at minimum focus on industry diversification and educational attainment. If it does so, the next decade may not be as devastating as the last.
If we can find such a great spirit in the hardest-hit metro area in the Southeast, there is good reason to be optimistic about the future.
By Michael Chriszt, a vice president in the Atlanta Fed's research department
November 15, 2012 in Employment, Housing, Manufacturing | Permalink
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07/18/2012
Atlanta Fed's Beige Book points to modest growth, rising caution
The Summary of Commentary on Current Economic Conditions by Federal Reserve District—commonly known as the Beige Book—is a report is published by the Federal Reserve eight times per year. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector.
Below is a summary of the Atlanta Fed's July 18 Beige Book:
Summary
- Reports from Sixth District business contacts indicated that economic activity expanded at a modest pace in June and early July. The outlook among most firms remained cautiously optimistic, although the majority of contacts acknowledged that risks were weighted to the downside.
Consumer spending and tourism
- District retail sales activity improved slightly in June and early July, but merchants reported that consumers remained very conservative.
- Tourism activity and business travel remained strong, and the outlook among contacts was positive for the rest of the year.
Real estate and construction
- District residential brokers indicated that home sales were flat to slightly higher compared with year-ago levels. Brokers also reported that the decline in inventories has helped stabilize home prices in many areas. The sales outlook among brokers remained positive with most anticipating continued modest year-over-year home sales gains.
- District homebuilders reported that new home sales and construction rose modestly compared with year-ago levels. Contacts noted that multifamily construction remained robust. The majority indicated that new home inventories declined further on a monthly and an annual basis. In the near term, homebuilders expect sales and construction to post modest gains compared with a year earlier.
Manufacturing and transportation
- Manufacturing contacts indicated that the pace of new orders and production growth remained positive but had moderated.
- According to railroad contacts, intermodal activity continued to strengthen. Double-digit increases in shipments of petroleum products, motor vehicles, and equipment were reported; however, movement of grain, metallic ores, and nonmetallic minerals declined.
Banking and finance
- Banking contacts noted some improvement in residential mortgage lending and auto loans continued to be a source of strength. Commercial and industrial lending remained soft.
Employment
- Regional employment growth remained positive but muted. Employers continued to cite uncertainty regarding future economic conditions as a reason for limiting hiring, and recent economic volatility appears to have exacerbated these anxieties.
- Contacts continued to note difficulty in finding qualified applicants for many highly technical positions. The skills mismatch problem has been especially hard on low-wage individuals, according to community and economic development contacts.
Prices and wages
- Firms responding in June to the Atlanta Fed's Business Inflation Expectations survey reported a decline in unit cost expectations for the second consecutive month. Survey respondents indicated that, on average, they expect labor and material costs to rise 1.7 percent over the next 12 months. That figure is down from 1.8 percent in May and 2.1 percent in April.
- Business contacts reported that lower prices for natural gas and refined oil products were reportedly providing some cost relief. Wage pressures remained modest, although some employers noted that they were increasing starting pay for workers with high-demand skill sets.
Natural resources and agriculture
- Contacts continued to report that investment in expanding and maintaining existing transportation infrastructure would be necessary to accommodate increases in domestic oil and natural gas production.
- Varying levels of drought conditions had expanded through much of the District, resulting in stress to some crops. However, the June tropical storm helped some areas.
The next Beige Book will be published August 29.
By Shalini Patel, a senior economic research analyst in the Atlanta Fed's research department
July 18, 2012 in Agriculture, Beige Book, Business Cycles, Employment, Manufacturing, Real Estate, Tourism | Permalink
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07/10/2012
Manufacturing sector cools off amid heat wave
Throughout the recovery, we've often been able to turn to the manufacturing sector for upbeat, or at least more optimistic, economic reports. However, the report on business conditions for manufacturers in June issued on July 9 from the Institute for Supply Management (ISM) was not one of those reports. The ISM's Purchasing Managers Index (PMI), an economic bellwether for the overall U.S. economy, gave up nearly 4 index points, declining to 49.7. Anything below 50 in the index is considered to indicate contraction within the manufacturing sector. Prior to June's report, the sector had been in an expansion mode for 36 consecutive months, according to the national survey of purchasing managers.
On top of the national ISM report, a number of regional manufacturing surveys have also lent credibility to the ISM's national report. The one closest to home for us here at the Atlanta Fed is the Southeast PMI, produced by Kennesaw State University's Econometric Center. Though the Southeast PMI didn't slip into the territory that indicates contraction, it decelerated nearly 7 index points, reaching 51.3 in June.
Perhaps the most disappointing portion of the Southeast PMI report was that a key forward-looking subcomponent of the PMI—the new orders index—fell a sharp 9.6 index points in June. This drop put the new orders index at 48.5, shy of the 50-point benchmark indicating growth. The production subcomponent, a gauge of current manufacturing activity, dropped 10 index points to reach 53.7, the largest decline of any subcomponent in the June survey. However, the reading still indicates production growth.
Another interesting facet of these reports is that manufacturers report paying less for their inputs. Indexes measuring prices paid by manufacturers haven't seen readings this low since the National Bureau of Economic Research declared the recession over in 2009.
Similar regional surveys from the Federal Reserve Banks of New York and Richmond show that manufacturing activity cooled as temperatures heated up along the East Coast last month. This summer, I'm hoping that the temperatures cool down and the manufacturing sector heats up.
By Mark Carter, a senior economic analyst in the Atlanta Fed's research department
July 10, 2012 in Manufacturing, Southeast | Permalink
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05/18/2012
Manufacturing employment: A longer view
Manufacturing employment: A longer view
"Do you think the total manufacturing employment will ever catch back up to mid-1995?" That was a question that came into SouthPoint in response to our post earlier this month on the recent rebound in regional manufacturing. An excellent question—one we'll try to answer in this post.
First, a quick scan of the environment. According to data from the U.S. Bureau of Labor Statistics (BLS), total manufacturing employment in the six states of the Sixth Federal Reserve District (Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee) has declined by 863,900 over the 17 years since it peaked in March 1995—a decline of 36.6 percent. Percent change losses were greatest in Mississippi and Tennessee and comparably less severe in Louisiana. Alabama, Georgia, and Florida experienced declines in line with the regional average. For comparison, the nation as a whole saw a decline of 30.8 percent in manufacturing employment over the same period.
Looking deeper into more detailed data from the U.S. Bureau of Economic Analysis (BEA) at some sectors within manufacturing, jobs tied to nondurable production have declined just over 40 percent from 1995 to 2010 (the latest data available), more than the 27 percent decline in durables employment for the states of the Sixth District. Peering a little deeper in a sector that has been hardest hit in terms of job losses, employment related to textile production has declined by 328,000, a drop of 74 percent. For the nation as a whole, textile-related employment has declined just over 70 percent, which represents just over 1 million jobs in total.
Back to the question at hand: will manufacturing employment ever come back to 1995 levels? If there's one thing I've learned over the years it is never to say never, unless you are talking about my beloved Cleveland Browns making it to the Super Bowl. That said, it's difficult to see regional manufacturing employment growing by 863,900 under any reasonable timeframe.
This is not to say that manufacturing will not continue to be an important contributor to economic activity in the region. In fact, while manufacturing employment has declined, regional manufacturing output, as measured by looking at state GDP data from the BEA, has risen 42 percent from 1997 (the earliest date data available) through 2010.
The story here is clearly productivity. You need to visit only one of the region's auto production facilities to see this in action. Data from the BLS bear this out—nationally, output per person in manufacturing has risen over 80 percent from 1995 through 2011.
So, even if some of those manufacturing jobs we lost over the last two decades in sectors such as textiles are replaced by new manufacturing jobs in sectors that are expanding—like auto production—the number of people needed to produce goods today is much lower than in 1995. Employment levels may not return to 1995 levels, but because of productivity gains manufacturing output looks poised to continue to expand and have a positive impact on the region's economic health.
By Mike Chriszt, a vice president in the Atlanta Fed's research department
May 18, 2012 in Employment, Manufacturing | Permalink
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