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.
The Great Rebalancing: State and local government fiscal challenges
Earlier this week, Federal Reserve Bank of Atlanta President Dennis Lockhart spoke in West Palm Beach, Fla., about the current phase of American economic history, which he termed the "Great Rebalancing." (In his remarks, Lockhart noted that he borrowed this term from a reference to the economic recovery in Britain.) Lockhart sees three rebalancing processes now under way: rebalancing of consumption and savings, regulatory rebalancing, and fiscal rebalancing. With regard to the latter, he noted that
"Spending cuts have begun at all government levels, and some improvement in revenues is now being reported. The extent of cuts is being discussed, quite literally, as we speak."
While, as Lockhart noted, it is too early to determine the outcome of overall fiscal rebalancing at the national or state level, we can look at public sector employment at the state and local levels to see where some of this rebalancing currently is taking place. State and local employment data through February show that the number of public sector workers (excluding federal employment) has been on the decline for some time, while private sector employment is increasing.
With regard to improvements in revenues, the data are more clear. Looking at the states in the Southeast, revenues are indeed on the upswing.
A recent report by the Nelson A. Rockefeller Institute of Government, written by Lucy Dadayan, senior policy analyst, and Donald Boyd, senior fellow, confirms that
"After the deepest recession since the Great Depression, most states are now on the gradual road to tax revenue recovery."
President Lockhart's view that fiscal rebalancing lies mostly ahead of us is confirmed by the Rockefeller Institute authors, as they caution that
"Broad state fiscal conditions remain fragile. The longer-term outlook is still ominous due to record revenue declines during the Great Recession, spending trendlines still pointing upward, and unemployment rates remaining nearly double their prerecession levels, to name a few. While some economic indicators signal improvement in overall conditions, fiscal recovery for the states typically lags a national turnaround and is likely to take several years."
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department
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Sixth district sales tax collections increased notably in October
State coffers across the Sixth District may have breathed a small sigh of relief in October as sales tax collections rose notably in all Sixth District states. Sales tax collections are often a good indicator of general retail activity, but they are also vital revenue sources for cash-strapped states that continue to feel the lagging fiscal effects of the recession. Table 1 shows how much each Sixth District state depended on its sales tax revenues last year.
When comparing October 2010 data to same month in 2009, Georgia saw the largest gain in sales tax collections (10.4 percent, on a three-month moving average) (see the chart). This is peachy news for the state, as roughly one-third of all taxes collected in Georgia last year were from its sales tax. Florida saw a smaller year-over-year percentage increase in October (2.4 percent) (see table 2), but the state could have appreciated that gain more, as sales tax collections made up almost 77 percent of all taxes collected last year in the Sunshine State.
While the last few months of sales tax data have shown a slow-but-encouraging growth trend, state departments of revenue have little else to be cheering about in terms of each state's overall fiscal picture. Table 3 shows budget gaps for fiscal year 2011 and projected gaps for fiscal year 2012 for each Sixth District state; it also serves as a solemn reminder that while states may be through the worst of the recent recession, there's still a long way to go before they're out of the woods.
Note: Fiscal years are July through June except in Alabama, where the fiscal year is October through September. Data for all 50 states are available through the Wall Street Journal.
Monthly updates on state tax revenues are available on the Atlanta Fed's state government finance page.
By Mark Carter, an analyst in the Atlanta Fed's research department
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Recent Atlanta Fed polls show home sales remain weak
The Federal Reserve of Atlanta's monthly poll of regional residential real estate brokers saw home sales continue a weak trend in October on a year-over-year basis, unchanged from September. The majority of brokers reported that sales declined from September to October, with more Florida contacts reporting significant declines than in the prior month (see chart 1). Florida brokers continued to report that the moratorium on foreclosures—imposed by several banks concerned with legal problems over foreclosure paperwork—stalled sales. Outside of Florida, little impact appeared elsewhere in the Southeast.
Southeastern homebuilders reported that new home sales continued to soften in October on a year-over-year basis, and close to two-thirds reported year-over-year declines (see chart 2). The majority of builders reported that sales in October were flat to slightly down compared with September sales.
Early reports on October home sales in the Southeast indicate that home sales growth continued to weaken on a year-over-year basis (see chart 3). Comparisons, however, are against strong growth levels last year as buyers rushed to take advantage of the initial federal housing stimulus.
Reports from Southeastern brokers indicated that home inventories were slighty ahead of the year-earlier levels (see chart 4). Fifty percent of brokers reported that inventory in October was up from a year earlier. The Orlando Regional Realtors Association reported that overall home inventories declined 2 percent from a year earlier; however, the single-family home inventory was up 5 percent from a year earlier. Similary, the Greater Nashville Association of Realtors reported that total available inventory was down 2 percent from last year while single-family home inventory was almost 1 percent ahead of the year-earlier level. Reports from Southeastern home builders indicated that new home inventory remained below the year-earlier level.
Southeastern brokers and home builders indicated that home prices were little changed in October although they continued to report downward pressure on home prices from foreclosures across the region.
The outlook among Southeastern contacts remained weak in October (see chart 5), but declines moderated somewhat, which is in contrast to reports of weakening buyer traffic among both builders and brokers. The outlook was largely buoyed by Florida brokers.
Note: October poll results are based on responses from 113 residential brokers and 54 homebuilders and were collected Nov. 1–10, 2010.
The housing poll's diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. Positive values in the index indicate increased activity, while negative values indicate decreased activity.
By Whitney Mancuso, a senior analyst in the Atlanta Fed's research department
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