June 25, 1984
The pace of economic growth is continuing to slow in the Southeast. For the first time in several months, job growth did not outrun labor force increases and the unemployment rate stabilized. However, a number of industries remain quite strong, including some textiles, paper, and the full gamut of auto-related manufacturing. Consumer spending, and especially auto sales, is growing briskly, but signs of weakness are surfacing in housing and related markets. Mortgage commitments and lending activity at financial institutions have weakened. Tourism is showing growth from a year ago, but attendance has been far below expectations at the New Orleans' World's Fair. Excessively dry, hot weather again threatens southeastern farm incomes.
Employment and Industry
The unemployment rate in the District edged upward to the nation's
rate in April after declining in each of the five preceding months.
Florida's unemployment rate increased in both April and May, after
posting its lowest rate in nearly a decade in March. A slowdown in
construction and production for national defense weakened Florida's
labor market. Softening housing demand has adversely affected
construction employment in much of the region and cut the demand for
lumber used by building materials and furniture industries.
Reorganization of the Tennessee Valley Authority and a scaling down
of construction of power-generating facilities have trimmed that
government agency's employment in the region. In Georgia. 500 jobs
have been lost from the closing of denim-producing textile mills due
to shifting consumer demands.
Despite the softening of overall labor market indicators, some industries are quite strong and prospects for others are improving. Some segments of the textile industry, notably carpets, are performing well, and the paper industry is operating a 45-48 hour workweek, thanks to a high volume of orders and backlogs. Booming new-car sales have induced a lengthening of the workweek and spurred investment spending at plants supplying the automobile industry. Tire plants are currently on a seven-day workweek and one major manufacturer is purchasing new tire machines in a large modernization program. Moreover, employment at Nissan's plant in Tennessee is expected to expand by 1,000 over the next 12 months with the addition of a car assembly line to its truck assembly operation. By summer's end, 21 of Florida's 22 phosphate mines will be back in production and most workers will have been recalled. Improving oil demand and sharply lower drilling costs brighten prospects for increased activity in the energy sectors of Louisiana, Alabama, and Mississippi. Summer hiring of teenagers, spurred by the Job Partnership and Training Act and private sector initiatives, has been accompanied by a shortage of applicants for available jobs in the fast-food and hospitality industries.
Consumer Spending
According to a poll of merchants, May's retail sales were up over
April and year-earlier levels. The region's sales outpaced
comparable increases nationally as well. New-car sales in the
District were booming in May, although the rate of increase trailed
the nation because of the above-average growth of regional sales in
1983. Atlanta and wine other metropolitan areas continue to be very
fast-growing markets. Reports of weakness are confined to rural
areas where farmers remain under financial stress. Non-auto
retailers report that seasonal items such as summer apparel, ceiling
fans, lawn mowers and other outside tools, and garden furniture are
top-selling items. Merchants are ordering fall and winter
merchandise with the expectation that sales for the remainder of the
year will be healthy.
Construction
Single-family building permits rose 2 percent in April after
seasonal adjustment while the nation's permits dropped 3 percent.
Alabama and Mississippi, both late to recover from recession, posted
the highest growth rates within the District. However, reports from
Birmingham indicate a recent sharp reduction in home sales and
construction activity. At the same time, Jackson home builders
report that a special state financing program for selected home
buying is helping them maintain a steady pace of construction.
Districtwide, reports from building materials suppliers who
experienced heavy sales activity earlier this year now indicate a
leveling off or decline in unit sales. Falling prices for lumber
also foreshadow a housing construction slowdown.
Nonresidential construction declined by one-fifth in April after rising by more than one-half from February to March. Alabama, Florida, and Louisiana construction slipped most, by 25-30 percent. Birmingham developers report declines in all nonresidential construction, and the completion of large commercial construction projects associated with the World's Fair has slowed activity in New Orleans. Continued rapid growth of nonresidential construction in Atlanta, Nashville, and Orlando mark this region's pockets of strength. Although the planning horizon of developers in these areas has shortened recently, most are going ahead with projects whose planned completion dates are well over a year away.
Financial Services
Unadjusted bank data for May show a decline in the growth of lending
activity in the Southeast for the second consecutive month despite a
recovery in bank deposit growth from the usual tax-related
withdrawals of April. Business and real estate loan growth in May
was noticeably weaker than in April while consumer lending increased
slightly. Mortgage commitments at the region's savings and loan
institutions declined in April. Overall, financial institutions in
the Southeast report high levels of liquidity and reasonably good
loan demand, but the growth of demand has not kept pace with the
growth of deposits.
Tourism
New Orleans' World Fair drew an average of 35,000 visitors per day
in its first month of operation, or 1.25 million, well below the
70,000 cited as the break-even attendance average. High prices,
delayed construction, and adverse publicity concerning its financing
problems have particularly limited attendance by visitors who live
within a three-hour drive to the Fair. The low attendance prompted
Fair officials to lower the price of season passes by one-third to
lure more local and nearby visitors, but daily attendance is still
below the break-even level. Neighboring states are benefiting from
long-distance tourists on their way to the Fair. Most southeastern
visitor centers are enjoying growth in the number of registrations.
Air traffic and lodgings industry figures also indicate an increased
amount of travel in the Southeast. Southeastern air traffic is up in
almost all airports. Atlanta's airport reversed a three-month
decline in passenger volume with a 2 percent increase in April.
Agriculture
With favorable weather, District crop farmers are likely to earn
higher revenue in 1984 as a result of higher prices and increased
plantings. However, dry, hot weather is now plaguing some of the
region and, in the absence of a PIK program this year, losses could
be heavier than in 1983 if drought continues. In the meat sector, an
expected expansion of poultry production will lift total revenue in
the poultry industry. For pork and beef producers, high feed costs
and continuing low livestock prices have resulted in losses; planned
production cutbacks that are proportionately larger than the
expected price increases should shrink livestock revenue from a year
ago.