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The Federal Reserve

2008 Annual Report pdf logo PDF version

Tough Times: The Southeastern Economy in 2008

Little in the way of good news

Introduction
Employment
Real Estate
Banking and Consumer Spending
Energy, Tourism, and International Trade
Manufacturing and Agriculture
Little Good News
Economic Crisis Timeline
 
A Day in the Life

Photo of Mark CraigMark Craig
Director, Credit and Risk Management Department


In 2008 the southeastern economy struggled with many of the same problems that plagued the nation at large—financial market turmoil, housing market and credit crises, rising food and energy costs, and job losses. Indeed, when the United States officially entered recession in December 2007, according to the National Bureau of Economic Research, the Southeast's economy dipped below its worst performance during the past two recessions, as measured by the Atlanta Fed's D6 Factor (chart 7). Based on twenty-five monthly data series, the D6 Factor is a composite indicator of economic activity in the six southeastern states.

As the national and global economies worsened through 2008, so did the region's. After falling lower in December 2007 than the lows recorded during the 1991 and 2001 recessions, the D6 Factor index tumbled an additional 3.1 points through December 2008.

Economic factors that had buoyed the region's economy in previous years began to crumble. Southeastern employment in 2008 fell for the first time in five years, and by the third quarter the unemployment rate was at its highest level since the 1991 recession.

Chart 7
The D6 Factor
Chart 7: The D6 Factor
Note: The D6 Factor is an index of southeastern economic trends. A negative value indicates that economic conditions are weak. The growth rate is normalized to zero.
Source: Federal Reserve Bank of Atlanta

Some housing markets showed signs of stabilizing late in the year, but a fast recovery appeared unlikely. Tourism and exports, two relative bright spots in 2008, may fare less well if the strengthening of the dollar and the global economic slowdown that began late in 2008 continue. On the upside, plans for expansion in auto and aerospace manufacturing should help bolster the Southeast's economy in 2009.

Economics is often called the dismal science, and that epithet was especially deserved in 2008. In the Southeast as elsewhere, 2008 was as dismal economically as any year in recent memory. Neither the Atlanta Fed economists nor most others foresee a quick rebound from this recession. Yet the core resilience of the U.S. economy combined with the regenerative capacity of the financial system should ultimately carry us through these trying times.

 

REIN gets to the roots of the Southeast economy

The Atlanta Fed took a significant step in 2008 to strengthen the Bank's contribution to the nation's monetary and economic policymaking: the establishment of the Regional Economic Information Network, or REIN.

Created to enhance the Atlanta Fed's knowledge of the Southeast's economy, REIN has two components—an online repository of southeastern data and analysis, updated monthly, and the Local Economic Analysis and Research Network (LEARN).

Photo of a shipping portThose elements make REIN a natural extension of the regional Federal Reserve Bank's historic mission to feed independent and diverse economic intelligence into the nation's monetary policymaking process. In many ways, the Sixth Federal Reserve District is particularly well suited to take advantage of regional information gathering: It is populous, with 46 million residents; it is geographically large; and it is economically diverse, from tourism in Florida and New Orleans to professional services in Atlanta to automotive manufacturing in Alabama. That diversity makes it reasonably representative of the national economy.

What's happening now
By extending its reach deeper into local economies throughout the Southeast, the Atlanta Fed gains a better sense of what might show up weeks or months later in official statistics. Timeliness is especially important during an economic downturn because statistical evidence of a turnaround often does not emerge until well after recovery has begun.

REIN filters information to the bank's Atlanta headquarters through a structure built geographically—with a presence at each of the Atlanta Fed's five branch offices—and around particular industries.

The Atlanta Fed's Regional Executive at each branch office convenes a regional advisory council. The councils, some convening in 2008 and some to begin work in 2009, are assembled around an important local industry, and participants provide insight from their business experience and contacts. The regional advisory councils and the offices running each are energy, New Orleans; trade and transportation, Jacksonville; tourism, Miami; agribusiness, Birmingham; small and midsize entrepreneurial business, Nashville; and health care, education, and labor, Atlanta.

The Atlanta Fed's Regional Executives are key players in REIN. As the mission of the branches has evolved, the Regional Executive's duties have also transitioned from an operational role centered on running the branch to a position more concerned with gathering economic intelligence and representing the Federal Reserve Bank of Atlanta.

Photo of a high-rise apartment buildingThe five Regional Executives work closely with their branch board of directors, cultivate business contacts in their communities, deliver speeches, and generally serve as the face of the Atlanta Fed in their respective areas. In this way, the Regional Executives help the Reserve Bank serve its constituencies on a more personal level and at the same time gain insight into how businesses affect and are affected by the economy.

Under the auspices of REIN, the Regional Executives have become part of the Atlanta Fed's Research Department. To stay abreast of economic and business data and trends, the Regional Executives spend considerable time exchanging ideas and information with the Reserve Bank's analysts and economists.

REIN also brings greater structure to the Reserve Bank's monthly surveys of businesses. These include industry-focused questionnaires answered by home builders, real estate agents, retailers, and manufacturers. While the surveys are not new, REIN has helped to increase the number of participants and made it easier to assimilate the information the surveys produce on moods and expectations in the marketplace.

LEARN keeps Fed's ear to the ground on campus
Another component of the REIN initiative is LEARN, a forum for academics and researchers with detailed knowledge of local economies in the Southeast. The aim of LEARN is to create a nexus for discussing and exchanging ideas on research, methodologies, and current economic developments.

Through LEARN, the Atlanta Fed deepens its relationships with university economists and researchers and establishes a more systematic means of incorporating their research and expertise into monetary and economic policymaking.

Ultimately, REIN generates raw material for the vital work of formulating monetary policy. At the meetings of the Federal Open Market Committee, each Reserve Bank president makes a presentation about conditions in his or her region. With the advent of REIN, Atlanta Fed President Dennis Lockhart approaches those sessions armed with even more nuanced and textured grassroots intelligence.