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.
New Orleans Area Optimistic Heading into 2015
During the last couple of months, the Regional Economic Information Network team from the New Orleans Branch of the Atlanta Fed was in contact with more than 30 business leaders to gauge sentiment about current and anticipated economic conditions in the region (which covers central and south Louisiana and Mississippi, south Alabama, and the Florida Panhandle to Apalachicola). The optimism and confidence that our contacts expressed over the last few quarters continued and was in fact more prevalent this time. Although contacts' expectations in previous months were for "slow and steady" growth, many business leaders now feel assured about their outlook for a pickup in growth in 2015.
In particular, we continue to receive upbeat reports about the tourism sector. This time, the message came from the Florida Panhandle again, where it was mentioned that tourism was growing into a year-round business, supported largely by an emergence of international travelers rather than the typical wintertime snowbirds. Retail contacts were also very positive, especially about holiday sales in November but also about a notable general sense of improving consumer sentiment. Another sign of strength in the region was commercial real estate, which was reported as robust across Louisiana, particularly for retail, multifamily, and office space leasing and development.
Employment and labor markets
Generally, contacts continued to report positive net hiring in response to increases in demand, though they didn't report acceleration from previous months. We continue to receive reports about firms' efforts to use automated solutions to reduce staffing or conduct optimization studies to enhance efficiency while reducing costs. Once again, contacts noted major challenges filling certain skilled positions, such as trades workers, engineers, truck drivers, and information technology professionals—a predicament business contacts have expressed for more than a year.
Costs, wages, and prices
For several months now, contacts have reported some cost pressures with little pricing power. In most cases, firms have been able to increase prices only after a competitor successfully does so or when contracts are up for renegotiation. Regarding the declining price of oil, energy industry representatives shared their view of the impact on their industry, which they indicated would initially affect smaller players (described in a recent SouthPoint post). In addition, a few contacts noted that declining energy prices posed a risk to their 2015 outlook. For the first time in many months, a number of contacts reported across-the-board wage pressures, which were previously isolated to certain positions. Others indicated they expect to encounter pressure in 2015. Several firms we spoke with indicated they expanded merit program budgets in 2015, with most increases being in the range of 2.5 to 3 percent, though a few in the range of 3 to 5 percent. Though a number of firms reported they were investigating strategies to control compensation costs with tools such as performance-based incentives, health care contributions, and targeted salary increases—a trend we've noted over the last couple of quarters.
Availability of credit and investment
Access to capital and availability of credit remained a nonissue for the majority of our contacts, though some small firms indicated obtaining credit from traditional banks remained difficult because of qualification requirements. Banking contacts indicated that loan demand strengthened in the third quarter. Capital investment reports were consistent with the last few cycles, reflecting some expansion activity but mostly focused on efficiency or maintenance.
Although some contacts noted a bit of uncertainty about the outlook—including the declining price of oil, increased government regulations, and the strengthening U.S. dollar—contacts were overall positive and confident about 2015 expectations. What's your outlook for 2015?
By Rebekah Durham, economic policy analysis specialist in the Regional Economic Information Network at the New Orleans Branch of the Atlanta Fed
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WHAT WAS I THINKING?!?!
BLACK FRIDAY! Black Friday has historically been the day that retailers wait for all year long. It's the day when merchants hope to move from the red to the black column (hence the name). However, I as a consumer have often avoided going to the stores on this infamous day for two reasons: one, big crowds give me the heebie-jeebies, and two, I am usually working the day after Thanksgiving—doing regional economic analysis but also preparing the Jacksonville Branch for the upcoming holiday season.
As I sit here penning this post, I am steeling myself for what lies ahead: I have to brave the crowds today, Black Friday 2014, to purchase a few last-minute items to complete the holiday transformation of the branch. When I decided to go on this shopping trip with my colleague, Barb, neither of us realized what kind of day it would be...goodness, what were we thinking?!
So, we put on our armor and headed out into the madness. Here are a few pictures I took of what we encountered just trying to get to the store and find a parking space.
Well, I'm happy to report that Barb and I survived our shopping excursion! But I'm also delighted to discuss the survival of retailers, since a successful Black Friday is vital to the retail industry. According to the National Retail Federation's (NRF) Thanksgiving Weekend Expectations survey, approximately 140 million shoppers were likely to take advantage of deals during the Thanksgiving weekend. Of this number, 67.6 million shoppers said they would actually shop, and 72.5 million would take a wait-and-see attitude to judge whether the deals offered were worth the trip to the stores. The NRF also noted that merchants would have to come up with amazing deals to induce consumers to spend, given that retail has been so heavily discounted since the start of the recession.
So what was the condition of the consumer going into this past holiday weekend? According to third quarter results from the New York Fed's Report on Household Debt and Credit, household debt and mortgage balances were up and credit for auto loans and credit cards increased, all pointing to more freely spending households.
Personal savings rate data from October represent further evidence that the consumer is willing to spend. According to the U.S. Bureau of Economic Analysis, the personal savings rate is personal saving (disposable personal income less personal outlays) as a percentage of disposable personal income. Prior to the release of October data, the savings rate appeared to show people saving more. However, revised data indicate that the savings rate has remained about the same since the beginning of the year, September's rate was revised down from 5.6 percent to 5.0 percent (see the chart). It would appear that people are not saving as much as previously thought, which bodes well for retailers.
We have heard from some District contacts that the lower gasoline prices have freed up some discretionary dollars, with consumers taking advantage of the extra cash in their pockets, which benefits retailers. Although the consumer seems to be well positioned to spend, how they feel matters as well. We can gauge this by looking at consumer confidence measures such as the Conference Board's present situation survey and the University of Michigan's current economic conditions survey. However, these surveys represent different points of view. The Conference Board is interested in the consumer's opinion of overall economic conditions as they relate to businesses and jobs, and the University of Michigan focuses its attention on the individual's current condition as it relates to his or her household. For the purpose of this post, let's examine the individual consumer's stance on current conditions. The University of Michigan's current economic conditions index rose from 98.3 points in October to 102.7 in November, the highest it's been since July 2007 (see the chart). It appears that the consumer is feeling pretty good these days.
So how does all this suggest consumers' greater willingness to spend? Let's look at it this way: Personal debt is rising; people are saving less; people are spending; and retail sales are (hopefully) up.
Now that Black Friday has come and gone, the NRF has released its preliminary results, which show the number of shoppers dropped this year. Given that Black Friday still draws the biggest crowds of the Thanksgiving weekend—and the weekend also includes Small Business Saturday and Cyber Monday—it should be interesting to see what the retail sales data (released on January 14, 2015) say about the success of the holiday weekend.
Until then, Season's Greetings, everyone—and happy shopping!
By Christine Viets, a senior Regional Economic Information Network analyst in the Jacksonville Branch of the Atlanta Fed
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Employment Momentum Grows in Florida and the Retail Sector
The U.S. Bureau of Labor Statistics published October 2014 state-level labor market data on November 21. For Sixth District states, a couple of factors stood out. First, after several months of anemic job growth, Florida employers added lots of jobs. In fact, Florida contributed 61 percent of October's net payrolls to the region. Second, although job gains were solid in a number of sectors, retail shined with 13,300 jobs added on net across the District, a figure that represents nearly half of the 27,100 jobs added to the sector in the entire United States in October. These regional retail job growth data confirm what the folks in our Regional Economic Information Network described earlier this month in their recap of economic intelligence gathered from business contacts across the Southeast: retailers anticipate strong holiday sales, and this anticipation translated into robust seasonal hiring in the retail sector in October.
A summary of the payroll and unemployment data for Sixth District states sheds more light on recent activity.
Payrolls flex some muscle
Employers in all Sixth District states except Mississippi added to payrolls: 56,600 jobs were added on net (see the chart). Florida dominated aggregate net gains in October, adding 34,400 jobs on net. Most of these gains came from the leisure and hospitality sector (up 9,300). Big contributors to Florida gains also included the educational and health services (up 9,000), professional and business services (up 6,100), and goods-producing sectors (up 5,100). (The good-producing sector was up 6,200 payrolls from construction alone but was reduced by losses in manufacturing.)
The sectors with payroll additions varied by state, though gains in the trade, transportation, and utilities sector were prevalent, with 16,800 net jobs added. Gains in this sector were dominated by retail trade (see the chart), which was the only sector tracked by all states that added jobs in every Sixth District state in October. This increase is typical for October, as retailers gear up for the holidays.
Employment momentum in the retail sector has been building for most of the region's states for a few months now (see the chart).
District gains in the professional and business services sector were also sizeable, with 13,100 jobs added. Momentum in this sector has been building in district states (see the chart). However, two states subtracted jobs from this sector in October: Louisiana (down 1,200) and Mississippi (down 1,500).
A few other facts about the Sixth District's October payrolls and sectors are noteworthy:
- Alabama added 2,200 jobs on net. The leisure and hospitality (up 3,200) and professional and business services (up 1,400) sectors were the top contributors. The biggest losses occurred in the government (down 1,500); trade, transportation, and utilities (down 600); and financial activities (down 500) sectors.
- In Florida, aside from job gains mentioned above, payrolls fell in the information (down 2,100) and financial activities (down 100) sectors.
- Employers in Georgia added 11,600 jobs on net. The largest gains occurred in trade, transportation, and utilities (up7,900, with 4,700 of those payrolls from wholesale trade) and professional and business services (up 5,400). The biggest losses came from government (down 3,200) and financial activities (down 1,200).
- Louisiana added 1,200 payrolls on net, most of which came from the trade, transportation, and utilities (up 1,500) sector. That sector was up 2,900 from retail trade, reduced by losses in wholesale trade) and educational and health services (up 1,200) sectors. The biggest losses occurred in leisure and hospitality (down 2,600) and professional and business services (down 1,200).
- Mississippi was the only district state to subtract payrolls from the aggregate district figure. The largest losses came from the professional and business services (down 1,500) and government (down 700) sectors. The only gains occurred in the educational and health services (up 1,300), leisure and hospitality (up 500), and trade, transportation, and utilities (up 400) sectors.
- Tennessee employers increased payrolls by 7,900 on net. The largest increases occurred in the trade, transportation, and utilities (up 3,500) and professional and business services (up 2,900) sectors. The biggest losses occurred in educational and health services (down 700) and leisure and hospitality (down 400) sectors.
Regional unemployment declines, if only slightly
The aggregate district unemployment rate was 6.6 percent in October, a decline of 0.2 percentage point from September (see the chart).
The rate fell in all states except for Louisiana, where it increased to 6.2 percent from 6.0 percent the previous month and was the sixth straight month of an increasing unemployment rate in that state. As I reported last month, this isn't necessarily a bad thing in the short run, since the state added jobs yet appears to have increased its labor force participation rate.
The unemployment rate fell in all remaining District states. Alabama's rate fell 0.3 percentage point in October to 6.3, its lowest rate in nine months. Florida's rate fell 0.1 percentage point to 6.0 percent, the lowest it's been in more than six years. The unemployment rate in Georgia fell for the second month in a row, to 7.7 percent in October from 7.9 percent in September. Though Georgia's unemployment rate declined, it had the highest rate in the United States in October for the third month in a row, at 7.7 percent. Mississippi's rate declined 0.1 percentage point to 7.6 percent, the lowest it's been in six months. In Tennessee the unemployment rate was 7.1 percent, a 0.2 percentage point decline from September.
So once again, collectively, the Sixth District states' labor market showed continued strengthening in October, particularly the state of Florida and the retail sector.
Hopefully, this progress continues for the month of November. We'll see when the data are released on December 19.
By Rebekah Durham, economic policy analysis specialist in the New Orleans Branch of the Atlanta Fed
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Auto Sales Accelerating
"My pappy said 'Son, you're gonna drive me to drinkin' if you don't stop drivin' that hot rod Lincoln.'"
—Charley Ryan, 1958
Automobiles have loomed large in the American experience since Henry Ford's Tin Lizzie—the fabled Model T—first rolled off the assembly line in 1908. Back in the 1940s and 1950s, a favorite pastime of American youth was hot-rodding (or so I've been told by my much, much older siblings). Cars have inspired countless songs, including Charley Ryan's "Hot Rod Lincoln" and "Beep, Beep," a tempo-changing ditty from 1958 about a Nash Rambler and a Cadillac. And in the 1973 movie American Graffiti, who can forget the iconic 1932 Deuce Coupe driven by John Milner or Toad's 1958 Impala? It was all about the cars!
And it appears consumers feel pretty much the same way. The one shining star throughout this recovery in the wake of the Great Recession has been the growth in unit sales of motor vehicles. I think it's safe to say that folks are buying new rides; it's just that simple. Although retail sales have been growing modestly, motor vehicle sales have been one of the driving forces (OK, yes—pun intended) behind the upward movement seen overall.
Light vehicle sales continued rising in June, reaching a postrecession high of 16.9 million units (the seasonally adjusted annual rate; see the chart).
This growth can also been seen when looking at consumer credit outstanding. Consumer credit is debt that a consumer enters into with the intent of making an immediate purchase. There are two types of consumer credit: revolving and nonrevolving. Let's look for a moment at nonrevolving credit, which is defined as an installment loan in which the amount borrowed (plus interest) is repaid at set intervals for the life of the loan. As the chart below shows, nonrevolving credit has been growing over roughly the same period as vehicle sales, which is not surprising when you consider that vehicle loans account for roughly 40 percent of this type of credit.
According to the U.S. Census Bureau, automobile sales declined 0.2 percent in June. However, a year-over-year comparison shows that vehicle sales increased 7.0 percent (see the chart). The consensus among our regional auto dealer contacts have indicated they've seen a steady increase in year-to-date sales and are expecting "sales for the remainder of the year to be fairly robust."
Historically, auto sales fluctuate quite a bit. But as you can see, the chart above supports the claim that vehicle sales have shown strong growth compared with total retail sales since the end of the recession. These data provide insight into consumer spending trends. Although this is just one data series in a long list of economic indicators we follow, I think it's fair to say this one gives a better understanding of consumer behavior.
So we'll keep our eye on this indicator. And remember, "Beep-beep, beep-beep. His horn went beep-beep-beep."
By Chris Viets, a REIN analyst in the Atlanta Fed's Jacksonville Branch
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The Growing Gulf Coast: Good Signs despite Low Sales
The weather is not the only thing about to heat up along the Gulf Coast. The economy is warming up as well, according to the Regional Economic Information Network’s (REIN) contacts. The REIN team in the Atlanta Fed’s New Orleans Branch reaches out to leaders from large and small businesses from all sectors of the economy and to representatives from community groups along the Gulf Coast in order to gain a representative picture of regional economic conditions, which, by the way, appears to be markedly improving. Since mid-April, we’ve held 15 one-on-one interviews, one roundtable with a mix of business leaders, our branch board meeting, and we also attended several conferences.
According to our contacts, business sentiment has picked up. Most of them were optimistic about near-term (three to six months) and medium-term (two to three years) growth and were more confident in their outlook than in the recent past. Of contacts who indicated they were experiencing second quarter growth, approximately half believed the growth was a rebound from an unusually weak first quarter, with the other half attributing it to a modest increase in economic strength.
Burgeoning capital investment was a consistent recent theme. A lack of “visibility”—or a firm’s ability to confidently predict future business conditions—was not reported as a significant inhibitor of capital investment. Nearly every contact shared information about merger and acquisition (M&A) activity or capital expenditure projects under way or planned for 2014. Most projects involved expansion to meet growing demand, including constructing new facilities and upgrading existing ones, although several projects involved new product offerings. Consistent with the recent trend along the Gulf Coast, much of the increased investment stemmed from the energy sector. However, we noticed investment picked up in other industries, such as in education and medical services.
Business contacts also reported that spending on consulting services for leadership development and organizational culture training increased. The addition of new leaders, M&A activity that resulted in conflicting organizational cultures, and the recession-era deferral of discretionary spending generated a surge in demand for these services.
Residential real estate across the Gulf Coast picked up marginally since mid-April. The median residential home sale was around $200,000, though inventories were low. Homes in coastal Alabama’s high-end market (over $600,000) were slow to move, and a lack of high-end inventory in coastal Mississippi led to increased construction in that market. In past months, we heard reports of an increase in raw land deals along the Florida Panhandle, and similarly, a recent reemergence of raw land deals was reported in coastal Alabama, often 50 percent bank-financed with fully collateralized loans. Commercial construction also resurfaced in parts of the region.
Unfortunately, the general optimism was not shared by all sectors. Regional retail contacts shared dampened expectations for the second quarter. Some admitted to difficulty adjusting to a shopping landscape increasingly dominated by the internet, which forced big-box retail stores to rethink sales strategies and reevaluate store locations and sizes and in some cases led to resurgence in the redevelopment of shopping centers.
Bracing for the boom
The employment picture was heartening, with nearly all of our contacts implementing hiring plans. In fact, a few contacts who took steps to reduce employment to “lean and mean” levels during the recession and early recovery admitted they were not so sure the decision was advantageous, and recently they saw productivity increase significantly once they added workers. However, the continued shortage of skilled labor has many contacts worried that some project start dates may be pushed back as they struggle to find qualified people.
Most contacts continued to report isolated wage pressures for skilled labor, medical services, and professional jobs, though some expressed they are bracing themselves for significant wage pressure in the coming months as the economy picks up.
The chatter about plans to increase prices in recent months materialized into reports of price increases, yet contacts admitted the increases were challenging and required a great deal of negotiating.
Overall, the Gulf Coast economy appears to be rising out of the recessionary fog and shedding the winter frost. The picture across most industries was definitively positive, with reports of large investment projects, hiring plans, and price increases.
By Adrienne Slack, vice president and regional executive; Rebekah Durham, economic policy analysis specialist; and Harrison Grieb, economic intern, Regional Economic Information Network, all in the New Orleans Branch of the Atlanta Fed
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Is Florida Finally Beginning to Flourish Again?
In March, we shared the view of our contacts in the Regional Economic Information Network (REIN) in north and central Florida. Those contacts described modest but sustained growth in activity in the first quarter of the year. That sentiment continued as winter turned into spring, with reports of increasing activity and greater optimism for continued growth during the remainder of the year.
Since mid-March, the REIN team in the Atlanta Fed’s Jacksonville Branch held 13 one-on-one interviews, one roundtable with a mix of business leaders, a Trade and Transportation Advisory Council meeting (recently summarized), as well as our branch board meeting. Although meeting participants noted acquisitions as a primary growth engine for most firms, some firms are expanding capacity to meet improving demand. Community banks are reporting increased commercial activity as bigger banks trim lines on small businesses. Though loan demand is still relatively soft, our contacts characterized clients as somewhat more confident, which bodes well for future lending activity. One banker cited noteworthy increases in credit card usage and home equity loans.
Retail contacts continue to express concerns about low-income consumers but note that the slowly improving labor market is resulting in somewhat more spending. In central Florida, contacts noted strong spending by more affluent consumers, including foreign visitors who are seeking high-end retail and dining. Robust home sales and price appreciation, accompanied by declining lender-mediated sales, were widely reported. Commercial construction is on the rise, especially in sectors such as health care, manufacturing, apartments, and higher education.
A focus on cost-cutting along with productivity-enhancing efforts continues. As one chief executive officer put it, “People are the last thing we’ll invest in.” Another company has committed to keeping its general and administrative expenses flat, which will result in support staff cuts to offset the increased cost of technology investments and health care. Two other large contacts noted significant reductions of full-timers to avoid having to provide health care coverage and to “be more in line with the industry.” We increasingly hear more about firms restructuring employee health plans and benefits to reduce costs to the company, including shifting more cost burden to the employee, restricting eligibility for spouses who may have access to insurance elsewhere, and adding risk-based surcharges.
Education contacts noted that the ability to place graduates seeking work has improved. Stories abound regarding difficult-to-fill positions (truck drivers, IT, accounting, etc.), and reports of a willingness to increase starting salaries are mixed. Generally, there were few reports of wage pressures mounting (outside of the trucking industry). The news on input prices remains relatively quiet.
Our contacts noted that qualified mortgage rules—and regulations more generally—have the potential to affect the housing recovery. A mortgage and refinance company has cut the majority of its workforce as refinance volume diminishes but noted that current regulations are making first mortgages, especially to the self-employed, “nearly impossible” to issue. Two other small-banking contacts indicated they have discontinued providing residential mortgages. However, two residential real estate contacts did not indicate any major concern about clients’ abilities to obtain mortgage loans.
At the April meeting of the board of directors of the Jacksonville Branch, we asked board members whether the current and near-term environment reflects an economy that is growing at a 2 percent rate or one that is growing at 3 percent. The majority view activity now and in the coming year to be more closely aligned with a 3 percent growth rate. The board members feel that the biggest potential impediment to growth is related to the consumer, as many people continue to struggle and consumer confidence remains lower than before the recession (see the chart).
The old proverb goes, “No matter how long the winter, spring is sure to follow.” One could apply this adage to the Great Recession and the long recovery and ask: Has an economic “spring” finally sprung? We’ll be keeping tabs as the year plays out.
By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch
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Half Empty or Half Full?
The U.S. Bureau of Labor Statistics (BLS) uses two monthly surveys to gauge the health of the labor market, both nationally and at the state level. For the Sixth Federal Reserve District, which survey you focus on in January might say a lot about your own preference for optimism or pessimism. Payrolls contracted in every Sixth District state in the state establishment survey; however,every Sixth District state’s unemployment rate declined in the state current population survey, with the exception of Alabama’s, which remained unchanged at a rate safely below the district and national rates of unemployment.
The bad news first
January was not a banner month for Sixth District payroll growth; in fact, the District kicked off the year with some relatively lousy labor market figures, according to new data out this week from the BLS. Last year, the Sixth District averaged about 33,600 new payroll jobs per month, but during the month of January alone, Sixth District states lost an aggregate 24,400 payrolls. On net, the Sixth District has not had a negative monthly payroll figure since July 2012, when the District lost about 3,900 payrolls, and to see a one-month loss the size of January’s, you’d have to look back to September 2010, when the Sixth District was still brushing itself off in the aftermath of the recession. (For reference, the largest one-month decline for the Sixth District as a whole was in May 2009, when 126,900 payrolls were cut across Sixth District states.)
However, to keep January’s payroll data in perspective, these one-month blips have not been unheard of throughout the recovery, and state and regional data from the BLS tend to be much noisier than the headline national figures that come out on the first Friday of every month. In fact, each year since 2010, we’ve seen incoming regional data grow a bit softer early on in the year, a phenomenon referred to previously by SouthPoint, various other media outlets, and on a few occasions by Atlanta Fed President Dennis Lockhart as a “spring swoon.” (Previously, these “swoons” have come a bit later in the year; maybe it’s seasonal adjustment procedures at the BLS, and maybe it’s because of other reasons.) Though one month of negative payroll data is not in itself a trend by any means, the last four months of data from the BLS do seem to show a pattern (see the table).
Where and to what degree?
All six states in the Sixth District shed payrolls in January. Alabama had the largest decline in payrolls among Sixth District states in January, losing 8,200 payrolls during the month. Louisiana had the second-largest decline, dropping 6,900 payrolls. Mississippi payrolls dropped by 4,000, and payrolls in Florida (down 2,600) and Tennessee (down 2,100) fell by similar amounts. Georgia shed the fewest number of payrolls in January, giving up 600 payrolls, on net.
A couple of patterns seemed to emerge across state lines in January. Most notable are very large declines in retail industry payrolls (see the table). Employment in health care and social assistance also appeared to suffer in January.
Retail me not
A decline of 10,900 payrolls in one sector, in one state, in one month (as the table above shows Florida experienced) warranted a call to our friends at the BLS. I was told that January is typically a weak month for hires, and the retail sector is particularly sensitive to seasonality. Retailers are usually coming off the much busier holiday season and are beginning to wind down staffing levels. Though the BLS strives to account for this in its seasonal-adjustment procedures, it’s virtually impossible to correct for all of it, especially in such a volatile economic and meteorological environment. (Even Florida had a colder winter than usual. While we were digging ourselves out of the epic—for us—snow storms in Atlanta, a friend in Miami reported temperatures “down into the upper 60s” and needing a light jacket in January.)
To get a greater level of detail on which kinds of retailers in Florida were letting go of the most jobs, we have to use data that are not seasonally adjusted. On a nonseasonally adjusted basis, the scary-looking payroll figure (a decline of 10,900) seen above becomes a jaw-dropping 34,000 decline, though much of this drop is the result of standard holiday employees leaving temporary positions (see the table).
But unemployment rates are headed in the right direction…
Despite a decline in payrolls from every state across the District in January, state unemployment rates continued their slow downward crawl in all District states, with the exception of Alabama, which remained unchanged for the month at 6.1 percent (see the chart). It’s not uncommon for the two surveys to appear to be at odds with one another. The payroll survey is of employers—or “establishments”—and the household survey is (more intuitively) a survey of households; that is, of individuals. Both surveys attempt to measure employment. However, since it is necessary to speak to actual people (as opposed to speaking to a “business”) to determine the rate of unemployment for a given area, the unemployment rate is derived from the household survey. But since these are both surveys that are only able to capture responses from a small sample of people, disagreements between the two occur. (Unemployment rates can also decline while payroll growth is weak or negative because of a declining labor force, but that wasn’t the case this month. Four out of six District states actually saw increases in their labor force—Louisiana and Mississippi were the exceptions, and their labor forces only shrank by 2,000 and 300 people, respectively.)
Of Sixth District states, Louisiana had the lowest unemployment rate in January. There, the unemployment rate fell a half percentage point to reach 4.9 percent. Alabama’s rate of unemployment remained at 6.1 percent over the month, and Florida’s dropped 0.2 percentage point to reach 6.1 percent.
Three states still have unemployment rates higher than the Sixth District aggregate rate of unemployment, which fell to 6.5 percent in January. Tennessee tied with Louisiana in January for the largest drop in its unemployment rate, falling a half of a percentage point to reach 7.2 percent. Georgia’s unemployment rate ticked down slightly to reach 7.3 percent, while Mississippi continued to have the highest unemployment rate in the Sixth District, despite its rate falling 0.3 percentage point to reach 7.5 percent in January.
The next regional and state employment and unemployment report, reflecting data for February, is scheduled to be released next Friday, March 28, at 10:00 a.m. The next national employment report is scheduled the following Friday, April 4, at 8:30 a.m.
If you want to stay abreast of the latest Federal Reserve research and publications surrounding regional and national labor markets, as well as a host of other topics, you can check out the Atlanta Fed’s newly searchable Human Capital Compendium, which puts you at the forefront of developments related to labor markets and workforce development across all 12 Reserve Banks.
By Mark Carter, a senior economic analyst in the Atlanta Fed’s research department
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Will the Ice Cause the Recovery to Lose Traction?
In the wake of two strong waves of unusually severe winter weather here in the Southeast—including enough ice here in Atlanta to all but shut down the roadways, even for the most experienced drivers—my colleagues and I have been spending some time looking into the possible implications of such disruptive weather for our economy.
Yesterday in his speech at Mercer University in Macon, Georgia, our boss here at the Atlanta Fed, Dennis Lockhart, pointed out that the recent spurt of unusually harsh winter weather is helping to cast a bit of a shadow on estimates of underlying economic conditions at the start of 2014:
Mixed incoming data on economic activity in December and January have raised concerns about whether the economy has traction at [the] faster growth pace [that we saw in the second half of 2013]. There appears to have been a slowdown. Weather effects may very well have dampened retail sales, auto sales, housing starts, manufacturing activity, and of course transportation, among others.
In fact, the REIN (Regional Economic Information Network) team at the Atlanta Fed reached out to our contacts across the Southeast to try to get a read on the impact of the winter storms on regional business activity. A strong majority of our manufacturing contacts confirmed weather-related disruptions as a result of the storms, as employees were unable to make it to work on icy roads. Reports indicated that overtime work or increased production would make up for the lost output during the outages in the weeks following the storm. In other words, though manufacturers did indicate that, on net, production for the first quarter would likely not be affected by the storms, the forward shift in the timing of that production may skew seasonally adjusted data for output and hours worked in the region downward in the first month or two of the year.
And it wasn't just manufacturers who reported a weather-related dip in activity. Reports from construction and agricultural contacts were mixed. Merchants in the region were more downbeat, reporting a decline in sales growth at the start of the year, which some contacts attributed to the unusual weather. Contacts in the fashion and apparel industry were particularly concerned about the implications of the storms on yearly earnings, noting that cold weather keeps shoppers inside and that even once the temperature picks up, it is unlikely that the increase in sales will be sufficient to make up for revenue lost during the cold spell.
All in all, it appears that the weather could certainly put some downward pressure on reports of economic growth for the first two months of 2014. The full impact of that effect—and how lasting the recent signals of softness will be—can only be assessed once we have more hard data in hand. President Lockhart summed up his views yesterday:
...the current quarter is difficult to read as an indication of the most likely story for the full year 2014 and first part of 2015. The recent mixed data could be just a temporary thing—as the weather explanation suggests—or something more fundamental going on. While I am tracking the numbers carefully, at the moment I think it's too early to draw a conclusion. Even though the first quarter this year may turn out to be soft, I am "looking through" the recent information to a full year of sustained higher growth. In that sense, my outlook remains optimistic for the full year.
By Laurel Graefe, Regional Economic Information Network director at the Atlanta Fed
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Retailers Heading into 2014 with Momentum
"Thank you...thank you very much."—Elvis Presley
Back in mid-December 2013, retailers appeared to be channeling Elvis Presley and the holiday song he popularized, "Blue Christmas," when preliminary holiday retail sales were somewhat disappointing. Well, y'all: Elvis has left the building! Compliments of heavy discounts, promotions, and last-minute deals, retailers ended the year with positive growth. Thank you...thank you very much.
According to the National Retail Federation, total retail sales increased 3.8 percent year over year, and nonstore sales (online and e-commerce sales) grew 9.3 percent.
The shopper—and her behavior—is interesting to follow. So why did I just refer to the shopper as "her"? Ask any retailer, you'll find that most shoppers are female. And in 2013, volatility seemed to be her middle name as her purchases fluctuated considerably. So let's take a look at her shopping behavior in core retail sales, which is a statistic that removes automobile sales, gasoline, and building materials. Core sales ended 2013 with the highest results since before the recession, in 2006 (see the chart).
Retailers did end the year on a positive note, even with the deep discounts and promotions. As I once heard a colleague say when describing data movement, "Anything above zero is good; below zero, bad."
So how is our shopper feeling in the wake of this past holiday season? According to the Conference Board's consumer confidence index, the consumer reported two consecutive months of strong confidence: In December, the index posted 77.5 points (revised), and in January, the index stood at 80.7 points. The Conference Board's present situation index and its expectations index presented further evidence in January that the consumer is feeling a bit better. The present situation index rose to 79.1 from 75.3, and the expectations index rose to 81.8 from 79.0 points.
We'll check in with shoppers next after Valentine's Day, when we assess that holiday's sales. So where will Cupid's arrow land? We'll know sometime in March. Until then, happy shopping!
By Christine Viets, a Regional Economic Information Network analyst in the Jacksonville Branch of the Atlanta Fed
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Retailers Channeling Elvis
Popularized by Elvis Presley in 1957, Blue Christmas laments feelings of missing someone during the holiday season. It could be said that, based on preliminary results, brick-and-mortar retailers are channeling Elvis as they too are missing someone this holiday shopping season...the consumer.
Merchants are experiencing a shortened holiday shopping season with Thanksgiving falling later in the month of November. With six fewer shopping days, retailers approached this season with deeply discounted merchandise in an effort to attract foot traffic on Black Friday, the day after Thanksgiving and the traditional start to the holiday shopping season. Many stores even opted to open on Thanksgiving to entice consumers to shop. However, the efforts appear to have fallen short of expectations as shoppers have been very cautious with their spending this year. According to the National Retail Federation, shoppers spent 2.9 percent less during the Thanksgiving weekend this year versus last year. Additionally, both the Conference Board’s (CB) and the University of Michigan’s (UM) consumer surveys indicated consumer confidence with current conditions decreased in November, and future expectations were mixed (CB decreased; UM increased slightly).
But all is not lost. E-commerce appears to be emerging as the shining star in the retail industry. Even though retailers may feel like it “won’t be the same dear, if you’re not here with me,” the expectations for Cyber Monday, the Monday after Thanksgiving, to be the busiest online shopping day of the year seem to have been proven true. Last year “showrooming” (consumers visiting brick-and-mortar stores and comparing prices on their mobile devices) posed a huge concern; however, this year retailers appear to be embracing the online shopper. With all indications that the consumer has become more comfortable purchasing items online using their smartphones and tablets, retailers decided to enhance their mobile sites by offering huge discounts, free shipping, and customized shopping experiences in order to drive sales to their own online sites. November’s retail sales numbers seem to support this. Although overall sales were up, nonstore retail (online) posted the largest gain. Other evidence that online shopping is the wave of the future is that of a major shipping company indicating double-digit percentage increases, year over year, in the volume of items processed during the Thanksgiving weekend.
So, will retailers “be so blue just thinking about you” over the 2013 holiday season? Will they at least meet their sales expectation or experience some growth? Only time will tell as there are only a few shopping days left.
By Christine Viets, a Regional Economic Information Network analyst at the Atlanta Fed’s Jacksonville Branch
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