The story for 2011 was one of an economy struggling to rebound. The Southeast economy made some progress, but several persistent hurdles kept the region from achieving more robust growth.
The challenges facing the Southeast economy are not unlike those facing the nation, explains Atlanta Fed assistant vice president Michael Chriszt in "The Southeast Struggles to Recover," featured in the fourth quarter 2011 issue of EconSouth. However, some of them are especially stubborn, he writes, noting in particular the "persistent decline in construction and development."
In the years leading up 2007–09 recession, population growth played a significant role in supporting the region's booming economy, especially its real estate sector. But as population growth lagged in recent years, the real estate sector has suffered. It's not all cloudy skies in the real estate sector, however. Waning interest in homeownership has created more demand for apartments, which has led to a decline in vacancy rates and strong performance in the region's multifamily real estate market.
Louisiana is a bright spot in the region for real estate. Not only is its housing market outperforming the rest of the region, but also three of the state's metro areas—Alexandria, Houma, and New Orleans—made it onto the National Association of Homebuilders' "improving" list in September.
Real estate weakness is affecting other important sectors, including the manufacturing of residential and commercial building materials. But from a wider perspective, the manufacturing sector's performance is more mixed, Chriszt writes. For instance, auto production in the Southeast has rebounded from the supply chain disruptions that hampered the industry earlier this year. Other well-performing manufacturing industries include the producers of equipment for high-tech and for energy extraction and production.
All of these factors—the good and the bad—affect labor markets. Chriszt cites a recent speech by Atlanta Fed President Dennis Lockhart, in which he described the national job situation as "treading water" and noted that "the weak pace of growth in output since the end of the recession has translated to only modest net job creation." This statement is true also for the Southeast, Chriszt writes, although job gains in the region somewhat lag the national trend.
As for what will happen in 2012, Chriszt writes that President Lockhart and most Atlanta Fed directors and business contacts expect the economy to improve at a modest pace. The gross domestic product growth rate will likely accelerate slightly in 2012 to the 2–3 percent range.
To read more about the region's economic bright spots and risks, read the full story in the latest issue of EconSouth, available online or in print.