August 5, 1986
Overview
The southeastern economy continues to mark time. The unemployment
rate is steady with job gains about offsetting labor force growth.
Industrial activity is mixed with employment in most manufacturing
industries remaining soft, while trade and services employment
continues to register strong growth. Consumer spending, tourism, and
residential construction are also boosting the economy, while
commercial construction weakens and agriculture and mining
experience severe problems. The banking industry is performing well
even though there are problems in Louisiana.
Employment and Industry
Labor markets stabilized somewhat in May, with the region's
unemployment rate remaining unchanged from April at 7.8 percent
following three months of increases. Louisiana, Mississippi, and
Alabama continue to post unemployment rates significantly above the
national average, while Florida and Georgia again ranked well below
the nation.
Industry employment figures continue to show a mixed pattern. While overall employment in the textile and apparel industry continues to decline, carpet manufacturing is strong, and one large producer recently announced expansion plans. Defense spending continues to bolster employment throughout the region, but prime contractors report a fall-off in new contract awards. Lumber exports are increasing with European buyers of hardwoods again appearing in response to the decline in the dollar exchange rate. Less positively, industry sources report a recent slackening in demand for southern pine as a result of slowing housing starts.
Large oil firms continue to announce layoffs in Louisiana as oil- drilling activity steadily drops to new lows. Louisiana's rig count is now 60 percent lower than the severely depressed level of this time last year. Coal industry executives foresee more mine closings in Alabama primarily because of a drop in demand as energy users turn to lower-priced oil.
Consumer Spending
Year-to-date retail sales growth in the Sixth District is running
slightly ahead of the national rate with Birmingham, Nashville, and
Mobile registering the fastest growth among metropolitan areas. The
Atlanta market also remains strong, while, at the other extreme,
sales activity levels in energy-depressed New Orleans and Baton
Rouge continue to be dismal.
Sales of U.S.-made autos improved sharply in June as the weaker dollar, lower interest rates, and cheaper gas prices stimulated sales. Even so, sales for the first half of 1986 were below year- earlier levels, with Louisiana registering the largest percentage decline among District states.
Construction
After three consecutive monthly increases, single-family permits
fell in May in all District states. The performance of different
metropolitan area housing markets in the District varies widely,
however. For example, Miami and Atlanta builders and realtors
continue to report very active markets, with strong demand bidding
up home prices. Meanwhile, home prices are falling in the New
Orleans market, with out-migration of the jobless exacerbating
market weakness.
Commercial construction activity around the Sixth District remains disparate, and differences in construction vigor are widening. With a five-year supply of unleased office space, New Orleans remains the region's weakest office market, and developers there see little hope for improvement in the near future. In other places, such as Atlanta, Birmingham and Jacksonville, office markets are continuing to expand at a fast pace. Nashville is spearheading the region's growth of industrial construction, with warehouse construction booming as the Tennessee capital develops into a major distribution center. Retail construction is volatile in all District states.
Financial Services
The pace of year-over-year total loan growth at large commercial
banks increased in June compared to growth rates a year earlier, due
primarily to an increase in real estate lending. Respondents report
substantial refinancing of single-family mortgages. In Jacksonville,
however, commercial real estate lending is rising sharply.
Tourism
Declines in both the foreign exchange value of the dollar and
gasoline prices continue to boost travel to the Southeast. Increased
air fare competition also is making domestic travel more affordable.
Tourism in Florida, Georgia, and Tennessee is up strongly, with
central Florida faring especially well. Vacation travelers are
reportedly taking advantage of package tour promotions and making
multiple short distance and time trips instead of longer ones.
Agriculture and Non-Energy Mining
Severe heat and drought are wreaking havoc in southeastern
agriculture with withered crops and pastures, substantial losses of
poultry, and sharp increases in marketing of cattle. Costs of dairy
production are rising as feed becomes scarce. Georgia, Alabama, and
eastern Tennessee have suffered the most damage, while Louisiana,
Florida, most of Mississippi, and western Tennessee have had more
adequate soil moisture. The situation in Georgia is becoming
critical with an estimated $200 million in damage as of mid-July.
The Southeast's non-energy mineral industries are also experiencing trying times. Phosphate production is about 75 to 80 percent of capacity due to reduced international demand for fertilizer and substantial reductions in planted U.S. acreage. Granite quarries in Georgia are facing cut-backs in production due to shortages in water supplies.