SouthPoint

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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.


07/16/2015


Southeast Manufacturing Rebounded in June

The Southeast Purchasing Managers Index (PMI) report, released on July 5, showed that manufacturing activity in the Southeast rebounded from a less-than-spectacular May. If you'll recall, May's PMI reading was heading in the wrong direction. The overall index had fallen to its lowest level this year, and new orders and production also appeared to be falling, but June's Southeast PMI got us back on the right track.

The Atlanta Fed's research department uses the Southeast PMI to track regional manufacturing activity. The Econometric Center at Kennesaw State University produces the survey, which analyzes current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. An index reading above 50 indicates expanding activity, and a reading below 50 indicates contracting activity.

The PMI index rose 2.7 points in June to 55.1 from May's 52.4 (see the chart). Most of the subindexes indicated positive movement as well, particularly new orders and production.

  • The new orders subindex rose 9.3 points to 55.3, after falling into contractionary territory in May.
  • The production subindex increased 8.9 points compared to the previous month and now reads 57.9.
  • The employment subindex declined 3.0 to 57.0.
  • The supplier deliveries subindex decreased 3.4 points to 52.6.
  • The finished inventory subindex increased 1.6 points to 52.6.
  • The commodity prices subindex fell 1.4 points and now reads 52.6.

Se-purchasing-managers

The rise in the overall index is welcome news, but even more welcome are increases in the new orders and production subindexes. The new orders subindex is the most forward-looking indicator in the survey. When new orders fall, it generally suggests that future demand for manufacturing products may be weakening and future production may be lower. As a result, employment levels at manufacturers could also decline. It would normally take several months of subpar activity for this to occur, and a one-month drop is nothing to get excited about. Still, it is always nice to rebound quickly. June's report will hopefully set the stage for a strong third quarter.

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch

July 16, 2015 in Inventories, Manufacturing, Purchasing, Southeast | Permalink

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06/17/2015


Southeast Manufacturing Dips in May

National manufacturing activity hasn't been particularly strong so far this year. It hasn't been particularly horrible mind you, but there hasn't been much to get excited about, either. Southeastern manufacturing activity—until recently—has been a different story. The Southeast purchasing managers index (PMI) and the Institute for Supply Management's national index both indicated that southeastern activity had been outpacing national activity in each of the first four months of 2015. I hate to throw cold water on the strong numbers, but according to the latest PMI report, released on June 5, that trend may be reversing.

The Atlanta Fed’s research department uses the PMI to track manufacturing activity in the Southeast. The survey, produced by the Econometric Center at Kennesaw State University, analyzes current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates contracting activity.

The Southeast PMI has averaged a 57.9 reading so far in 2015, compared with a 52.4 for the national index. However, the May Southeastern PMI's overall index fell 5.2 points from April to 52.4, clocking in below the national index for the first time in four months (see the chart).

Se-purchasing-managers

The index remained above the 50 threshold for expansion, but the subindexes of the May report contained some disconcerting numbers:

  • The new orders subindex fell 11.0 points to 46.0.
  • The production subindex decreased 16.0 points compared with the previous month and now reads 49.0.
  • The employment subindex declined 1.0 to 60.0.
  • The supplier deliveries subindex increased 3.0 points to 56.0.
  • The finished inventory subindex decreased 1.0 points to 51.0.
  • The commodity prices subindex rose 9.0 points and now reads 54.0.

The 11-point fall in the new orders subindex was discouraging since it is the most forward-looking indicator of future activity. The new orders subindex has seen large one-month fluctuations in the past. For instance, it fell 27 points last December only to rebound 23.4 points the following month. So it could be a one-month aberration. Let's hope so. The 16-point fall in the production subindex was also an abnormally large fall, but—like new orders—it has happened before. Optimism for future production also decreased from April to May. When asked for their production expectations during the next three to six months, only 38 percent of survey participants expected production to be higher going forward, compared with 46 percent in April. The good news is that the employment subindex registered a strong reading, which is a good indication that manufacturers are still adding to their payrolls. So even though production outlooks have come down, firms still seem to expect that they will need employees to work more hours in the future, which could be a good sign for employment.

We should remember that the overall index still indicated expansion in manufacturing. Hopefully, as the summer heats up, so will manufacturing activity. I hate to throw cold water on our hot streak, but this time of year, a little cold water can feel good.

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch

June 17, 2015 in Employment, Manufacturing, Southeast | Permalink

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04/16/2015


Southeast Manufacturing: Solid as an Oak

When I was a kid, I spent a few fall afternoons cutting and splitting firewood with my older brother. I must say that I didn't care for the process at all. It was hard work, and I have much respect for people that carry on the time-honored tradition. I learned quickly that there were certain types of wood you wanted to stay away from. Oak was one of them. Now, I am ashamed to say that I didn't pay close attention when collecting tree leaves for science class, but I always knew when I was trying to split a piece of oak. As a matter of fact, when I would come across a piece of oak, I preferred to skip over it. Oaks are strong and stately trees and no fun at all to split. The March Southeastern purchasing managers index (PMI) report, released on April 6, reminded me of my ill-fated attempts to split oak. It is one tough piece of wood.

The Atlanta Fed's research department uses the Southeast PMI to track regional manufacturing activity. The Econometric Center at Kennesaw State University produces the survey, which analyzes current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.

The March Southeast PMI's overall index declined slightly from February, falling 2.5 points to 58.0 (see the chart). However, the index has remained above the 50 threshold for expansion 14 out of the last 15 months. It also averaged a solid 58.0 during the first quarter.

  • The new orders subindex fell 6.6 points to 56.9.
  • The production subindex decreased 2.9 points compared with the previous month and now reads 61.8.
  • The employment subindex declined 9.2 to 57.8. The March report indicated that manufacturing payrolls have now grown for 18 consecutive months.
  • The supplier deliveries subindex increased 1.2 points to 54.9.
  • The finished inventory subindex increased 5.2 points to 58.8.
  • The commodity prices subindex rose 4.8 points and now reads 40.2.

Southeast Purchasing Managers Index

Optimism for future production also increased in March. When asked for their production expectations during the next three to six months, 53 percent of survey participants expected production to be higher going forward, compared with 46 percent in February.

Much of the recent national manufacturing data have been weak. In March, the industrial production report indicated that manufacturing output increased 0.1 percent during February, but output had declined in the previous two months. New orders for core capital goods also declined for the sixth consecutive month in February and the March ISM index, although still indicating expansion, fell to its lowest reading since May 2013. Some analysts believe cold weather and the strong dollar are affecting overall manufacturing activity.

Despite the recent weak national numbers, southeastern manufacturing appears to be holding strong...just like the oak trees I tried to split as a kid. If you've never split wood—and especially a piece of oak—try it sometime. I doubt it will make your top-five list of things to do. Oak is one tough piece of wood.


April 16, 2015 in Employment, Inventories, Manufacturing, Productivity, Southeast | Permalink

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03/12/2015


Southeast PMI Surges in February

The Southeast purchasing managers index (PMI) report was released on March 5, and it indicates that any lingering effects from the late 2014 manufacturing slowdown have abated. If you recall, the December Southeast PMI dipped into contraction territory, but it has rebounded nicely since. The PMI index has risen 14.9 points since December and now sits at its highest reading since April 2014.

The Atlanta Fed's research department uses the Southeast PMI to track southeastern manufacturing activity. The Econometric Center at Kennesaw State University produces the survey, which provides an analysis of current conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates contracting activity.

The Southeast PMI's overall index rose 4.9 points to 60.5 in February (see the chart). The subindexes also suggest some positive future developments:

  • The new orders subindex rose to 63.4, a 6.0 point increase over January and a 29.4 point increase over the last two months.
  • The production subindex increased 3.5 points over the previous month and now reads 64.6.
  • The employment subindex rose 7.8 points over January to 67.1, indicating that manufacturing payrolls grew for the 17th consecutive month.
  • The supply deliveries subindex increased 1.8 points from the previous month to 53.7.
  • The finished inventory subindex increased 5.5 points compared with January.
  • The commodity prices subindex fell 1.7 points and now reads 35.4.

Southeast Purchasing Managers Index

Optimism for future production fell in February. When asked for their production expectations during the next three to six months, 46 percent of survey participants expected production to be higher going forward, compared with 61 percent in January. The good news is that no survey respondents expect production to be lower than their current levels during the same time period.

The change in energy prices and severe winter weather are just a couple of challenges manufacturing faces. Some isolated reports of reduced orders from manufacturers closely tied to the energy sector have emerged, but on the other hand, the drop in oil prices has other contacts saving money on fuel costs. However, most contacts in the Southeast have expressed little direct energy-related effect on their business activity. Judging by the February PMI report, southeastern manufacturing is holding strong. We'll see if the positive momentum sustains into spring.


March 12, 2015 in Economic conditions, Economic Indicators, Inventories, Manufacturing, Prices, Productivity, Southeast | Permalink

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02/13/2015


Southeastern Manufacturing Sees No Shadow

In a January SouthPoint post, I suggested that winter posed problems for manufacturing last year, and after the release of December's lackluster Southeast Purchasing Managers Index (PMI) report, it appeared that 2015 might get off to a slow start as well. Then the really disconcerting news hit: America's favorite groundhog saw its shadow on February 2, predicting six more weeks of winter. Would this event affect southeastern manufacturing going forward? According to the January Southeast PMI report, released on February 6, the answer was a resounding no!

The Atlanta Fed's research department uses the Southeast PMI to track manufacturing activity in the Southeast. Econometric Center at Kennesaw State University produces the survey. It provides an analysis of current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.

After contracting in December for the first and only time in 2014, the Southeast PMI bounced back with vigor in January (see the chart). The overall reading rose 10.0 points over December to 55.6 and saw a healthy rise in most subindexes.

  • The new orders subindex rebounded 23.4 points over December, seeing the subindex increase to a solid 57.4 reading.
  • The production subindex also saw a significant gain over last month, rising 21.1 points to a 61.1 reading.
  • The employment subindex rose 5.3 points over December and remained in expansionary territory for the 16th consecutive month, suggesting that manufacturing payrolls continue to grow.
  • The supplier deliveries subindex increased 1.9 points from the previous month to 51.9.
  • The finished inventory subindex fell 1.9 points compared with December. The 48.1 reading suggests that inventories may be slightly below optimal levels, and production could ramp up in the near term as a result.
  • The commodity prices subindex continued its slide, falling another 5.0 points compared to last month.

Se-purchasing-managers

Optimism was at healthy levels in January as well. When asked for their production expectations during the next three to six months, 61 percent of survey participants expected production to be higher going forward.

The January report was a nice reversal from the December data and provides a strong start to 2015. Hopefully, the momentum will carry over to the entire year. Although we love Punxsutawney Phil as much as anyone, we hope his weather forecast doesn't hamper manufacturing activity. So far in 2015, there are no shadows in the Southeast.

By Troy Balthrop, a senior Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch

February 13, 2015 in Manufacturing, Southeast | Permalink

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01/15/2015


O Manufacturing, Is Winter Thy Enemy?

While in high school, I really enjoyed studying Shakespearean literature. Not because I liked the plays so much, but because I enjoyed trying to speak Shakespearean. It became a go-to move when I was trying to aggravate my mother. "Mom, would thee please passeth the potatoes ere I starve to death?" My mother would look at me with complete exhaustion but would always pass the potatoes.

While mulling over the data from the December Southeast purchasing managers index (PMI) report released on January 5, I was reminded of last winter and a Shakespeare quotation. A partial line from his play As You Like It read, “Here shall he see no enemy but winter and rough weather” (act 2, scene 5). If you remember, last winter’s weather caused problems for manufacturing activity across much of the country. According to the Southeast PMI, December had been a lackluster month for regional manufacturing activity for several years, and 2014 was no different.

The Atlanta Fed’s research department uses the Southeast PMI to track regional manufacturing activity. The Econometric Center at Kennesaw State University produces the survey. It provides an analysis of current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.

After indicating expansion every month this year, the overall PMI fell below the 50 threshold for expansion in December (see the chart). All underlying variables in the December PMI report fell except for finished inventories. In some cases the decreases were significant. The PMI decreased to 45.6, which was a 12.7 point drop compared with November.

  • The new orders subindex fell below the 50-point threshold for expansion for the first time since January, decreasing 27.0 points compared with the previous month.
  • The production subindex fell 19.8 points compared with November, also falling below the 50-point threshold for expansion.
  • The employment subindex fell 10.6 points from November but remained in expansionary territory for the fifteenth consecutive month.
  • The supply deliveries subindex decreased 7.3 points from the previous month to 50.0, which represents no change in activity.
  • The finished inventory subindex inched up 1.2 points compared with November and now also reads 50.0.
  • The commodity prices subindex fell to 42.0, a 10.4 point decrease compared with November.

Southeast-purchasing-managers

However, optimism rose in December versus November. When asked for their production expectations during the next three to six months, 66 percent of survey participants expected production to be higher going forward.

Is it just coincidence that winter began and manufacturing activity slowed? One could point to several other factors for the decrease. Maybe the strong dollar is reducing manufacturing exports, or maybe the fall in oil prices is affecting production activity. It’s still too early to know for sure. Based on optimism for future production, let’s hope it was just a one-month anomaly. The Atlanta Fed will be watching—or in my best Shakespeare, "we shalt be watching."

By Troy Balthrop, a senior Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch

January 15, 2015 in Manufacturing, Southeast | Permalink

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12/10/2014


Has Southeast Manufacturing Found Some Optimism?

Have you ever lost your car keys? How about your wallet? I hate looking for things. I was never one to enjoy an Easter egg hunt. It's maddening when I can't find something. Lately in SouthPoint, I've been searching for a little optimism coming from the manufacturing sector. Following a string of strong reports from the Southeast purchasing managers index (PMI), optimism among manufacturers in the Southeast deteriorated significantly in October. According to the October PMI report, only 21 percent of manufacturers expected production levels to be higher during the next three to six months, down 29 percentage points from the prior month's reading. I was wringing my hands trying to figure out whether the weakness in October was an anomaly or a sign of something deeper. So did the November report disappoint me? No: the November Southeast PMI report, released on December 5, indicated that optimism is back.

The Atlanta Fed's research department uses the Southeast PMI to track regional manufacturing activity. Produced by the Econometric Center at Kennesaw State University, the survey analyzes current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.

Most underlying variables in the November PMI report were generally positive (see the chart). Despite decreases in the new orders and production subindexes, the PMI increased to 58.3 in November, which was a 1.8 point rise compared with October.

  • The new orders subindex decreased 3.4 points from October but remained above 60.0 points for the third consecutive month with a reading of 61.0.
  • The production subindex fell 7.6 points compared to the previous month, but similar to the new orders subindex, it remained close to 60.0 points, registering 59.8.
  • The employment subindex rose significantly, increasing 9.8 points over October. November's 64.6 is the highest reading for the employment subindex since June 2013.
  • The supplier deliveries subindex rose 2.5 points over October. The rise suggests that purchasing agents are experiencing longer wait times to receive materials they ordered.
  • The finished inventory subindex rose 7.4 points compared with October and now reads 48.8. The rise completely reversed last month's fall of 5.7 points.
  • The commodity prices subindex rose to 52.4, a 1.5 point increase compared with October.

SE-Purchasing-Managers

As I mentioned above, optimism rose significantly in November over October levels. When asked for their production expectations over the next three to six months, 51 percent of survey participants expected production to be higher in that period.

Along with the strong Southeast PMI reading, the national PMI also continued to register strong readings, reaching 58.7 points in November. (Note that the Southeast PMI is not a subset of the national PMI.) Now that optimism is back on the right track, manufacturing looks to close out 2014 on a strong note. And most importantly, I don't have to keep looking for optimism.

By Troy Balthrop, a senior Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch

December 10, 2014 in Manufacturing, Southeast | Permalink

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11/13/2014


Signs Point Up for Regional Manufacturing

Have you ever noticed all the signs in the world around you? They are everywhere. Many of them can prompt some deep thought. For instance, I was recently driving to work one morning, and three deer ran out in the road in front of me. Luckily, I didn't hit them, but it made me wonder: Who decides where to put deer crossing signs? How do they know a deer wants to cross the road right there?

Speaking of signs worth your attention, the signs for southeastern manufacturing are pointing up, according to the latest Southeast Purchasing Managers Index (PMI), which was released on November 6. The report suggests that things look pretty strong, and digging into the report, one could conclude that things are even stronger than they initially appear.

The Atlanta Fed's research department uses the Southeast PMI (produced by the Econometric Center at Kennesaw State University) to track manufacturing activity in the Southeast. The survey analyzes current conditions in the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The Southeast PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends in new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.

The PMI increased to 56.5 in October, which was a 1.5 point increase over September (see the chart). Some notable highlights:

  • The new orders subindex remained especially strong in October, registering 64.4, which is a 3.4 point increase over September's 61.0. New orders have averaged a solid 60.7 for the year.
  • The production subindex increased significantly to 67.3 during October, 8.3 points higher than September's reading of 59.0.
  • The employment subindex fell 2.2 points from the previous month. October's reading of 54.8 still indicates that manufacturing payrolls are increasing.
  • The supplier deliveries subindex rose 3.8 points during October, indicating that delivery of inputs is slowing as a result of high demand.
  • The finished inventories subindex fell 5.7 points compared with September and sits at 41.3. The fall in finished inventories suggests that inventory levels are lower than the previous month and could lead to higher orders in the near future.
  • The commodity prices subindex fell to 51.0, a 2.0 point decrease from September.
Southeast Purchasing Managers Index

When asked for their production expectations over the next three to six months, only 21 percent of survey participants expect production to be higher, down from 50 percent in September. According to the survey, 19 percent of survey respondents expect production to be lower than their current production levels. Those responses imply that 60 percent expect production to stay at current levels.

So to recap: The PMI indicates that regional manufacturing has seen strong new orders and production, employments levels are expanding, demand for inputs could be slowing deliveries, inventory levels are falling, commodity prices are essentially flat, and most purchasing managers are expecting to remain at their current levels of production. Although the low production expectations for the next three to six months prevent it from being a perfect set of conditions, they collectively indicate strong manufacturing activity in the near future. Just as with the deer crossing signs, I'll be paying close attention.

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch

November 13, 2014 in Economic conditions, Employment, Inventories, Manufacturing, Prices, Productivity, Southeast | Permalink

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10/16/2014


Southeastern Manufacturing Continues to Expand

The return of fall has not cooled down manufacturing in the Southeast. The Southeast Purchasing Managers Index (PMI), which was released October 5, indicated expansion in the manufacturing sector for the ninth consecutive month.

The Atlanta Fed's research department uses the Southeast PMI to track manufacturing activity in the Southeast. The Econometric Center at Kennesaw State University produces the survey. It provides an analysis of current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 points indicates that manufacturing activity is expanding, and a reading below 50 points indicates that activity is contracting.

The Southeast PMI fell slightly to 55.0 points in September. The index was only 1.7 points lower than August and still solidly above the 50 threshold for expansion (see the chart). The new orders subindex registered a nice increase, and the employment subindex rose, but all other subindexes fell during the month.

  • New orders: The new orders subindex increased 4.5 points over August's levels and has now climbed 15.7 points during the last two months.
  • Production: The production subindex decreased. September's 59.0 reading was 1.2 points below August but was still well into expansionary territory.
  • Employment: The employment subindex inched up 0.5 points compared with the previous month. The employment subindex has now indicated expansion for 12 consecutive months.
  • Supply deliveries: The supplier deliveries subindex declined 3.6 points during September, indicating that manufacturers are receiving their inputs slightly more quickly.
  • Finished inventory: The finished inventories subindex decreased 8.6 points compared with August. The fall completely reversed the previous month's gain of 8.4 points. The subindex is now below 50, implying that purchasing managers are not as concerned about a buildup of inventory levels.
  • Commodity prices: The subindex measuring input price pressures moved down to 53.0, a 5.3 point drop from the previous month.

Se-purchasing-manager-index

Optimism among purchasing managers continued to rise during September. When asked for their production expectation over the next three to six months, 50 percent stated that they expect production to be higher, an increase from 44 percent in August. Only 18 percent of survey respondents expect their production to be lower.

The rise in new orders and strong production numbers bode well for manufacturing heading into the fourth quarter. The Southeast PMI has averaged a 56.6 reading so far this year. Conversely, the national PMI (produced by the Institute for Supply Management) has averaged 55.2. (I should note that the Southeast PMI is not a subset of the national index.) We'll be on the lookout for any changes in activity. After all, it's fall—the season of change.

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch

October 16, 2014 in Economic conditions, Economic Growth and Development, Manufacturing, Southeast | Permalink

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09/30/2014


What We Heard in Alabama

During the most recent Federal Open Market Committee cycle (which ran from July 31 to September 17), the Atlanta Fed's Regional Economic Information Network (REIN) team at the Birmingham Branch met with business leaders, including branch directors, to discuss economic conditions in Alabama.

General business conditions
Overall, REIN contacts in Alabama see continued slow growth during the next three to six months. We heard accounts of improvement in industrial manufacturing, and commercial construction contacts reported growing demand for office, industrial, and retail space. Contacts in the finance and professional service industries also reported growing demand. Although comments regarding headwinds had grown scarcer during the past few cycles, we heard more mentions of concerns over the effects of “unknowns” from the upcoming elections and international turmoil stemming from recent events in Ukraine and the Middle East.

Employment and labor markets
We heard mixed stories about future hiring plans, ranging from no plans to hire in the near term to substantial hiring plans on the horizon. The chart below illustrates both the short-term and long-term employment momentum by sector. Compared with a year ago, Alabama has seen employment expand in several sectors like manufacturing, construction, health care, private education, and business services. However, sectors such as retail, other services (including automotive repair, personal care services, and business and professional associations, among others), and state government saw momentum contract.

Employment_momentum

In August, Alabama payrolls increased month over month by a seasonally adjusted 8,400 jobs, on net. All sectors gained except retail, which posted a loss of 1,900 jobs, and federal government, which remained unchanged since July. Alabama has seen overall job growth in the last two months, and August's unemployment rate was 6.9 percent (see the chart).

Alabama

That rate is down 0.1 percentage point since July, but it's still higher than the national unemployment rate of 6.1 percent (see the chart).

Unemployment_rates

Costs, prices, and wages
In most cases, our contacts reported only modestly increasing input prices, with the exception of construction materials, which have reportedly risen. No contacts reported the ability to significantly raise prices broadly, but more are reporting passing along selective increases where they can. However, growing price pressure was noted in the transportation sector and with the exception of ocean shipping (which has excess capacity), other transportation segments have reached capacity, with prices consequently rising.

When the conversations shifted to wages, many of our contacts reported that although they are not planning to increase wages, they are carefully watching what other companies are doing. No overarching wage pressure was apparent, although there was mention of wage pressure being reported for select, high-skilled positions. Mostly, contacts reported continued modest pay increases.

Availability of credit and investment
Participants told mixed stories regarding investment plans. We heard reports of idled plants being brought back online and some talk of companies beginning to consider investments that would increase production capacity. However, we also heard some discussion about companies that had been investing through the downturn considering moderating investments. Additionally, several contacts noted continued challenges in obtaining financing for smaller builder/developer projects.

Our conversations will continue in Alabama, and we'll relay them to you in the future. In the meantime, what are you hearing?

Photo of Teri Gafford By Teri Gafford, a REIN director,


and Susan Remy, a REIN analyst, both at the Atlanta Fed's Birmingham Branch

September 30, 2014 in Alabama, Economic conditions, Manufacturing | Permalink

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