January 27, 1982
The Sixth District's economy appears to be slowing. Retail sales have stalled due to inclement weather and slack labor markets. The construction sector continues to contract as the housing industry grinds to a halt. Unemployment insurance rolls are expanding; layoffs are mounting. A severe freeze destroyed large portions of citrus and vegetable crops and hampered livestock production.
Consumer Spending
Holiday sales were only fair in much of the
District, about the same as last year. Exceptions are Georgia and
Louisiana, where merchants noted substantial gains over 1980. Weak
sales, combined with heavy promotion expenses and pre-Christmas
discounting, continued to erode retailers' profits. Reports of fewer
return items in the post-Christmas period may confirm that buyers
were especially price and quality conscious. The recent severe
weather has slowed sales of many non-food items. Retailers expect
softer than normal sales, especially of low-quality goods, early in
the year because of the deepening recession. In response, they are
attempting to lower inventories.
Auto sales continue at severely depressed levels throughout most of the District. State auto dealers association representatives in some District states note that sales of large cars are holding up better than sales of small cars. Spokesmen attribute this to the stable-to- lower price of gasoline and to the small additional cost of buying desired features on larger cars. There are widespread reports that auto dealer bankruptcies and auto repossessions are trending upwards.
Financial and Construction
Interest rates continue to wreak havoc
with the real estate and construction industries. Across the
District, December sales of single family homes fell to half the
year-earlier level. Transferees are declining in number. The only
purchasers are those in high income brackets and/or two-income
families with no children. Lower and middle-income families have
been locked out of the market. Realtors claim that 85 percent of
financing involves assumable mortgages and/or owner financing. An
increasing number of sales come from actual and impending
foreclosures.
The apartment market is also severely affected. Many cities are experiencing severe drops in the apartment vacancy rates as potential home buyers wait out high interest rates. In other cities, low vacancy rates and construction cost factors have caused rent increases which in turn caused drastic increases in the apartment vacancy rates. Singles are doubling up or moving back home. The housing market effect on apartment vacancy and rental rates has varied considerably from city to city.
Most realtors are pessimistic about 1982. Customers cannot afford high interest rates and have concerns about job security. Realtor agencies are closing branch offices while independents are closing shop.
Employment and Industry
New applications for unemployment insurance
soared in Georgia from November to December as layoffs in the
automobile, construction, and carpet industries mounted. Some 1,500
federal government workers are expected to be laid off between
February and March, bringing to 2,000 the total number of federal
civilian jobs lost in Atlanta since October. Federal officials are
confident, however, that enough new jobs will be created in defense
to place these workers if they are willing to relocate.
Labor market conditions in Florida are healthy by national and regional standards. The inflow of migrants to the state has moderated somewhat due to the depressed national housing market. Florida's jobless rate has risen only slightly since the national recession began. On the other hand, unemployment rates are well above the national average in Alabama, Tennessee, Mississippi, and Louisiana. Unemployment insurance was extended for 13 additional weeks in Tennessee, with one in ten of the state's workers unemployed. Alabama's unemployment rate is around 12 percent and reports of layoffs suggest that higher rates are in the offing.
Although airlines have recently announced price increases for most domestic routes, fares to Florida vacation cities remain at cut-rate levels due to slack passenger traffic. Hotel managers in South Florida fear that publicity about their recent cold snap could have further adverse effects. Cruise ship travel is down, with Miami's port director predicting a dismal year. Corporate travel is also being reduced. The sluggish economy is affecting theme park attendance as families take trips closer to home. A spokesman for Walt Disney World-with the largest volume of visitors of any park in Florida-notes attendance figures down 8 percent from the same time last year. New promotional campaigns aimed at in-state residents have been undertaken.
Agriculture
In January, the southeast was nipped by severe freezes
that extended well into South Florida. Below-freezing temperatures
destroyed about 25 percent of the orange crop and 55 percent of
Florida's winter vegetables, according to preliminary (and disputed)
estimates of a federal agency. Sugar cane was also damaged, but most
of the crop can be salvaged if it reaches processing plants before
deterioration sets in. Some damaged oranges were also salvaged, but
the rapid return of warmer weather hastened spoilage.
Prices of orange juice have risen sharply since the freeze, but future increases may be held in check by relatively large stocks of juice in storage and the likelihood of increased imports of Brazilian juice. Retail vegetable prices are expected to rise at least 15 percent by March, as they did following a similar freeze a year ago.
Widespread snow and ice across most of the southeast increased feed requirements of livestock and slowed poultry production. Broiler prices have risen abruptly in January, reversing a decline of several months.