Moderator: Welcome to Southeastern Economic Perspectives, an occasional podcast from the Federal Reserve Bank of Atlanta. I'm Jean Tate and the following comments discuss economic activity in the Southeast. Michael Chriszt, an assistant vice-president responsible for the Regional Economic Information Network, joins me.
Michael Chriszt: Thank you, Jean.
Moderator: Economic activity in the region appeared to slow over the summer. Have conditions improved over the last couple of months, and what's the general outlook?
Chriszt: Jean, that's a really interesting point. We're looking at the numbers coming in from the spring and what our business contacts were telling us, and there was a definite sense of optimism, growing optimism, in the spring and early summer, and that really started to taper off in summer and early fall. And what we've seen over the last couple of months is general stabilization, I think, is the best way we can describe it. Another way that I've described it in the past is to say that I think we've all breathed a collective sigh of relief that the whole idea that the economy was slowing down and approaching another recession has been taken off the table. I think people are much more confident going forward.
That said, I'd still characterize us as being in more of a stabilization mode. The economy in the Southeast, based on what our business contacts are telling us and some of the data that's out—actually we have October employment data came out today and showed that the states in the Sixth District added close to 30,000 jobs in October—not a stunning rate of growth and employment, but positive nonetheless. So I think this theme of stabilization is one that I would use to best describe what is happening in the last couple of months.
Going forward, I think this is the theme that we're likely to see moving into 2011—slow growth, continued stabilization in some of the areas of the economy in the region that have been quite weak—construction and manufacturing, for example. But slow growth in such sectors as leisure and hospitality and business services, we expect that to continue going forward.
Moderator: Well, going back to the employment numbers, when you mentioned the slow growth and other employment indicators, can you talk a little bit about what the outlook is for the employment growth? Are there any specific sectors that are looking better than others?
Chriszt: Health care definitely. When we look back at the recession, health care services was one area of the economy in the Southeast, and in the country as a whole, that didn't lose any jobs, they kept right on growing. As a matter of fact, if you go back to the point when the national recession began in December of 2007, health care jobs in the Southeast have grown by close to 12 percent since December of 2007, and there's really no other sector that even comes as far as that goes.
Leisure and hospitality has been one of the brighter spots over the last several months. Despite the oil spill in the Gulf of Mexico, we have seen some tourism-related employment increase (close to 2 percent) in the Southeast over the last several months. Business services, professional business services have increased about 2 percent. And, actually, retail spending and logistics are a couple of other areas of the economy that are doing a little bit better.
Moderator: So let's talk a little bit about housing and construction. Nationally, construction is kind of lagging still. Is that the case in the Southeast as well?
Chriszt: Unfortunately, yes. We just conducted our latest survey of homebuilders and Realtors throughout the Southeast, and they're telling us once again that they are seeing a deceleration in already very low sales activity. There's very little new construction that is under way. The real estate sector continues to work out of some very serious problems, and that's of course spilled over into the financial services as well. We talked a minute ago about employment. Financial services employment is down in the Southeast over 13 percent over the last couple of years. And other sectors of the economy are starting to add jobs very slowly, but financial services is one that hasn't stopped declining as far as job losses go.
But the broader message with regard to real estate is that we are seeing ongoing weakness in sales and construction on the residential side and also on the commercial side, some very soft markets there as well, so very high vacancy rates and low levels of construction in commercial.
Moderator: Well, another indicator that people often look at are holiday sales, and as we come up on the holiday season, can you give an outlook for retail sales? Are consumers expected to be as cautious as they were last year?
Chriszt: I think cautiousness is one of those themes that we keep on coming back to, and it's probably what we're going to see over the holidays. That said, when we compare spending expectations to very low levels in 2008 and 2009, 2010 is expected to be above those very low levels of activity. Our retailers that we talk to in the Southeast are modestly optimistic with regard to holiday sales. The National Retail Federation does an Annual Holiday Sales Expectation Report, and they are predicting that holiday sales will be up about 2, 2.5 percent this year over some very low levels last year.
But I think consumers are being very cautious, they're being very picky, looking for deals and sales. And I think that when you open up your newspaper this Thanksgiving, you're going to see a lot of fliers that are vying for consumers' attention, even more than we have seen in the past several years.
Moderator: Thanks for talking with me, Mike.
Chriszt: Always a pleasure, Jean.
Moderator: Again, we've been listening to Atlanta Fed research team member Michael Chriszt provide insight into the Southeastern economy. This concludes our Southeastern Economic Perspectives podcast.
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