June 25, 1985
Indications have surfaced that southeastern economic activity has begun to slow but areas of strength still outweigh weaker sectors. Labor markets have shown little overall employment growth. Conditions have not improved for the region's import sensitive industries such as textiles and apparel where employment rolls continue to shrink. Consumer spending has been strong for seasonal goods and the outlook for new car sales is positive. Real estate activity has been diverse in recent months with real estate loan growth strengthening in parts of the region. Commercial building remains strong. However, total loan growth has begun to weaken at the region's large banks. Tourism is lackluster in some areas and the summer outlook is mixed. Despite continuing financial stress in agriculture, little acreage is being idled this year.
Employment and Industry
Labor market conditions have basically remained unchanged from the
last reporting period with the District unemployment rate hovering
around 8 percent. A notable exception was that Alabama's
unemployment rate moved to the single digit range for the first time
since June of 1981.
Alabama's recent employment growth is mainly attributable to job recalls in the steel industry and a booming construction sector. Construction employment is up over seven percent from last year. Shipbuilding has revived in the state; new defense related contracts portend still more job growth in the sector.
Imports continue to batter the region's textile and apparel industry. In Georgia alone, textile and apparel employment is down by 9,000 workers from a year ago. Spokesmen for the forest products industry note that market prices are stable and builders are buying. The strong dollar has slowed exports of the region's pulp and paper mills. Foreign imports have impacted coated paper products and new orders for packaging material have contracted resulting in excessive inventory accumulations.
The chemical industry is producing at a constant level, however, industry officials note a recent softening of product prices. Uncertainty about the terms of the new federal tax policy has held down oil and gas drilling activity in Louisiana.
Consumer Spending
Retailers in Alabama, Florida, Georgia and Tennessee reported sales
growth through May to be up approximately 10 percent over the
comparable period a year ago. Retailers in Mississippi reported
mixed sales activity while Louisiana reported activity below its
year-ago level. Strong sales of seasonal goods such as summer
apparel, home furnishings and gardening supplies were reported
throughout the region.
The outlook for car and truck sales remains bright in most parts of the region. Manufacturers' incentive programs aimed at both consumers and dealers also have been instrumental in boosting sales activity.
Financial and Construction
Housing markets in the Southeast have been mixed, in contrast to the
fairly consistent growth of only six months ago. While the Atlanta
and Nashville markets may have been stimulated by the continued
decline in mortgage rates, New Orleans, and Baton Rouge markets
remain depressed. A factor favoring residential activity has been
the intense rate competition between local mortgage lenders. Miami's
housing market has been slowing down and overbuilding is apparent.
New home prices in parts of the metropolitan area have been
declining. The condominium market continues to look bleak, with
unsold inventory at an all-time high of around 13,000 units.
Jacksonville, Fort Lauderdale, and Nashville are experiencing a further upswing in nonresidential building activity.
The Atlanta office space absorption figures are keeping up with their corresponding levels of a year ago, and demand is seen to be as strong as ever. Rents are rising in most markets despite falling occupancy rates, reflecting expectations of continued strong demand.
Large banks in the district have reported weakening growth in total loans for the past four consecutive months, relative to the same months of last year. Business lending, which showed virtually no increase from April to May, contributed significantly to the moderating growth of total lending.
Real estate lending, the strongest component of total loan growth, is responsible for much of the expansion of total loans from April to May.
Tourism
Conditions in the tourist industry are mixed. Most major vacation
destinations appear to be faring well, but other locations more
dependent on local visitors have experienced little or no growth,
especially in areas where local economic conditions are weak.
Lodging tax receipts for April showed healthy increases.
Attraction attendance has also shown disparate signs. State and national parks report excellent visitations thus far and, along with some private mountain attractions and resorts, are expecting healthy growth this summer. However, attraction attendance to date in Florida has been lackluster.
Agriculture
Abnormally dry spring weather in Florida has resulted in almost
150,000 acres of woodland being destroyed by fire. Most forests were
uninsured and the loss to owners wil1 amount to several million
dollars. Despite earlier concerns about farmers obtaining operating
credit, reports throughout the District indicate little acreage is
being idled. Various farm lenders have noted no substantive
increases in rejections of farm loan applications.