January 28, 1986
The Southeast economy firmed up early this year, with strength in Georgia and Florida more than offsetting a stagnating Louisiana economy. District unemployment leveled off in October and November, partly due to late-year stability among textile and apparel jobs. Advances in single-family housing, industrial real estate development, and tourism bolstered the regional economy, while commercial construction imbalances and the farm sector weakened it. Slumping auto sales detracted from otherwise good consumer buying. Bank loan growth continued to slow.
Employment and Industry
November's unemployment rate remained unchanged from October at 7.3
percent, with four of the six District states registering rates
below those of a year ago. Louisiana's jobless rate has leveled off
near 11 percent, the highest in the Southeast. At the other extreme
was Florida's rate of 5.2 percent. Although the region's textile and
apparel industry has lost 15,400 jobs in the last year, employment
levels have recently stabilized. Tennessee furniture makers are
keeping inventories lean but are hoping that the weakening dollar
will reverse a rising tide of imports. Imported lumber has captured
49 percent of the market in Georgia, 56 percent in Florida, and 10
percent in Alabama, according to industry sources. More positively,
new defense contracts for ship construction are increasing
employment rolls in Louisiana and Alabama shipyards. in Florida, a
backlog of defense electronics orders is expected to stimulate
growth in the sector in spite of anticipated defense spending cuts.
The ambitious schedule of the space shuttle program (15 launches in
1986) will keep surrounding support industries on Florida's space
coast busy throughout the year.
Consumer Spending
District merchants reported flat-to-moderate sales gains for
Christmas and the first ten days of January, while year-end auto
sales slumped. Regional sales growth was strongest in Atlanta,
Birmingham, the central and southern parts of Florida, and western
Tennessee, while much of the region's weakness was in Louisiana and
Mississippi. Most merchants pasted higher profit margins in 1985
because inventory levels were better managed and increased price
promotions boasted sales. Year-over-year car sales in the Southeast
dropped in November and December after rising by 11 percent in both
the region and the United States in the first ten months of 1985.
Construction
Single-family residential and industrial activity improved, while
other southeastern real estate sectors are flat or show current
weakness. Atlanta and Tampa home sales in early January are reported
to be stronger than early last year. Atlanta buyer traffic, an
important indicator of near-future sales, is high for January.
Following heavy decline, Atlanta's multi-family building permits
increased over 1984 in September, October, and November as builders
rushed to acquire industrial development bond financing before year-
end. In Jackson, apartment building plans are extremely lean,
although absorption is good, causing rents to rise. In New Orleans,
apartment vacancy rates are approaching 25 percent, and rents have
declined by over 10 percent since last year. South Florida
condominium sales are weak, prices are falling, and repossessions
are accelerating, but, in central Florida, condo markets are
prospering on demand from middle income families.
Office construction continues to outpace leasing, even though incentives are liberally employed in most regional markets. Commercial developers cite uncertainty about future tax law changes as discouraging many investors. Rising vacancy rates are applying downward rent pressure in both Miami and New Orleans. But Atlanta real estate agents view the office market as strong in spite of its 16 percent vacancy figure. Retail construction is described as tentative in Orlando and Tampa, as new space is accumulating and leasing is sluggish. The Tampa and Nashville industrial markets seem set for expansion due to low vacancy rates and growing industrial bases locally.
Financial Services
Total lending activity at large District commercial banks continued
to grow, albeit at a slowing rate, throughout 1985. Southeastern
commercial bank stock prices took a roller coaster ride last year
but largely turned up in Alabama, Florida, and Mississippi in the
fourth quarter. Regional thrifts report increased mortgage sales in
the secondary market. Louisiana's sagging economy continues to be
reflected in its weakening financial services industry. For
Louisiana thrifts, regulatory net worth declined by 32 percent in
the third quarter of 1985.
Tourism
Last year ended on a fairly strong note for the Southeastern tourism
industry, and prospects for 1986 are deemed bright by those
contacted. Auto travel rose in December in Alabama and Florida after
falling in four of the six District states in November. Traffic was
up at most regional airports in November, but advance international
bookings are not as strong as earlier. Hoteliers in southeastern
convention cities report strong advance reservations. However, New
Orleans contacts foresee some tapering off by March. Southeastern
vacation travel in the first quarter, limited largely to Florida, is
expected to grow despite a mixed performance at the end of 1985.
Agriculture
Moderate price increases are occurring for most District crops as
supply pressures from harvest season surpluses recede somewhat. But
the gains are not sufficient to substantially improve farm income
prospects. Animal product industries continue to benefit from low
feed costs. Orange prices, high in recent years because of freeze-
reduced crops, have fallen substantially in past months as a result
of large inventories of processed products, ample imports from
Brazil, and prospects for increased Florida production. Growers
whose freeze-damaged groves are producing only partial crops face
especially severe income reductions.