April 9, 1975
The District economy continues its adjustment to its steep economic decline. Layoffs and temporary plant closings are still reported in many parts of the District. Attempts at inventory realignment are most often cited by businessmen as the reason for these layoffs. Some companies have already made adjustments and are beginning to hire back workers. Capital spending cancellations may be near an end, since few cutbacks were reported in the past month. Construction activity in the residential area remains bleak because of the large housing overhang in many areas, particularly in multifamily structures. Construction is likely to lag instead of lead any general economic recovery. Reports from many parts of the District again confirm the surprising tourist boom.
Layoffs continue, but are now being matched by rehires in many parts of the District. Several paper mills have closed their doors temporarily. A Florida paper plant closed its craft mill for a two-week period in mid-March because of economic conditions. About 600 workers were idled. A Louisiana paper company has also laid off a number of workers temporarily in an attempt to work off inventories. A huge Louisiana aluminum and chemical plant has temporarily furloughed workers in order to bring inventories in line with demand. A Tennessee chemical plant is also laying off around 250 workers because of inflated inventories. Textile firms have not yet recovered. Textile plants in southeast Tennessee and in Georgia continue to operate with reduced work forces and shortened workweeks. The Alabama Power Company has recently released nearly 1,800 people and has let another 700 jobs go unfilled. The biggest portion of those released were construction workers.
Steel fabricators are beginning to feel the drop in demand for their products. One fabricator is slashing prices to move inventories. The company's representative indicates that he can buy raw steel at about two-thirds the price of last year.
Many businesses are now reporting prospects as looking up. Apparently inventories have moved back in line for these companies. In Tennessee, appliance and furniture manufacturers are beginning to call back workers. In fact, one report from an eastern Tennessee furniture manufacturer indicates that production schedules have been increased to replenish inventory stocks. The lumber industry has been hard hit by the economic decline, but a number of people in the industry think that the slump in sales and prices has bottomed out and that a recovery, while it will be slow, is now in sight. Recalls in auto assembly plants in the Atlanta area have given some strength to that area's economy. Several local area economists have mentioned that they are besieged by calls from businessmen wondering when the turnaround in their particular industries will be over. An optimistic interpretation of this development might be that businessmen will actively expand production and employment as the first concrete signs of recovery develop. This might aid the economic rebound.
This is the first time in several months that there were no reports of further cutbacks or cancellations in capital spending plans. In fact, several new developments have been announced. These include: A $35-million ammonia plant in Mississippi; a $30-million oil storage capacity expansion plant in Louisiana; and a $10-million addition to a Louisiana chemical plant. In Mississippi, $2.5 million provided from the Emergency Employment Appropriations Act has been allocated for the Tennessee-Tombigbee Waterway Project. It is estimated that an additional 1,000 construction workers will be brought in by the end of the year to work on this project. It has been cited as the largest earth-moving project ever to be undertaken in the continental U. S. Several other smaller plants have been announced, and new contracts let for District manufacturers.
Everyone seems set for a pickup in housing activity which has not as yet developed. The forces behind the housing picture are mixed within the District. Reports indicate that funds are much more readily available as large savings inflows occur at S&Ls. However, the housing overhang, partly among multifamily units, remains substantial. The apartment and condominium market seems to be the most overbuilt, particularly in the southeast Florida area. The issuance of building permits for new dwelling units is the lowest since these areas became known as Standard Metropolitan Areas. However, at least in single-family housing, there are some signs of improvement. One large Florida home builder has cut prices by as much as 10 percent in order to stimulate sales. Atlanta's largest condominium builder has recently reduced prices on selected units; within 10 days most of these units sold. A representative of the New Orleans area S&L industry says that half of the inventory of new houses at the beginning of the year is now sold.
Mortgage rates have apparently declined more sharply in this area than in other parts of the District. The tax credit for the purchase of new homes was mentioned by only one director. He expected little stimulation for home building from this credit. One final note of optimism was viewed by a South Florida banker, who thought that the stock of unsold condominiums in this area, which are now available for sale, is generally smaller than realized. Many units are tied up in litigation and will have to be refurbished before they are sold, and other units will have to be completed. As a result, the condominium situation is not as serious as believed. Reports from District bankers, however, generally indicate that single-family housing is most likely to recover much more quickly than most multifamily construction.
The tourist boom continues. The previously reported tourist boom in Florida has buoyed retail sales in the area; apparently, the boom is more general, however. Reports from the New Orleans area indicate that, within the last three months, tourist and convention business has been well above normal. Downtown New Orleans hotels are running at about 70 percent occupancy rates. Tourism is again flourishing in Tennessee, also. Registrations at Tennessee welcome stations are nearly 10 percent above levels of 1973—the last good tourist year. Camping business is also booming. A recent camping show held in Atlanta produced record sales volumes of camping items. A recent boat show in the Orlando, Florida area produced sales in the first day which exceeded the whole week of the show in 1974.