Regional Update (October-December 1998)
Regional Update (October-December 1998)
Although Gambling Boom Ends, Mississippi's Economy Is Stable
Boom Ends, Mississippi's
Economy Is Stable
ississippi's economic performance in 1998 showed that the boom associated with the start-up of the state's gambling industry is clearly over.
The huge surge in construction and service sector employment associated with this boom tailed off in 1998. Mississippi's manufacturing employment was stable in 1998. On a year-over-year basis, however, Mississippi experienced modest overall payroll growth, although the state lagged behind both the Southeast and the nation.
Now that the state's gaming industry is well established, the relatively large percentage of the labor force that already has been drawn into the industry limits the potential for further dramatic expansion. Also, with the national economy projected to slow in 1999, the state's service sector expansion will taper. As a result of international financial concerns, trade may be problematic for the state's producers. Construction in the state should moderate in 1999, reflecting the continuing falloff from the casino boom. On balance, however, there is little reason to expect any sort of dramatic change for Mississippi in 1999.
Service Sector Should Remain Stable
Employment in Mississippi's service sector grew 1.3 percent from the third quarter of 1997 through the third quarter of 1998. Although down from an average of slightly over 5 percent growth for the previous two years, services added nearly 3,700 jobs to the state's payrolls in 1998. Growth in hotel and lodging employment slowed in 1998. Health and hospital service employment also slipped in 1998 following moderate growth in 1997. Employment in this industry should see a good but lower growth rate in 1999, following in line with the general growth in the aging population.
The $600 million Beau Rivage casino and hotel plans to open in Biloxi in early 1999, but labor shortages will persist for the casino expansions on the Gulf Coast. The 29 casinos regulated by the state employ over 33,800 workers and generate about $2 billion in annual revenue. The new year will bring less expansion in the state's important gaming sector. But lodging receipts from hotels linked to casinos and gaming revenues will likely continue to grow unless a slowing in the national economy changes consumers' spending patterns.
Manufacturing Outlook Weighs Ups and Downs
Employment in Mississippi's manufacturing sector was little changed from the third quarter of 1997 through the third quarter of 1998. Flat factory payroll growth in 1998 was nevertheless a marked improvement from declines in the previous two years.
Of the durable goods sectors, transportation equipment led job growth, posting notable gains in 1998. The state's furniture and fixture industry also registered good job gains on the strength of the strong national housing market.
The nondurable sector weakened over the period, with most of the losses posted in the pulp and paper and apparel industries. Although job losses in apparel were significant, they were less severe than average losses of about 3,000 workers the previous two years.
The state's factory sector should slow in 1999. Although the transportation equipment component will continue to get a boost from military shipbuilding contracts, a slowing national economy may crimp consumer spending plans for big-ticket items such as furniture. Unless Asian markets improve dramatically, an oversupply of pulp and paper and lackluster export demand for lumber and wood will adversely affect some of the state's plants.
The good news for Mississippi is that demand for deep-water offshore drilling rigs is stimulating investment activity in the state. Seven drilling platforms are undergoing renovation or repairs at the Pascagoula shipyards. The largest new industrial development in Mississippi's history, the $400 million Wellman Inc. Pearl River plant that produces resin used to make plastic bottles, already has expansion plans that would make the investment more than $1 billion.
Large military contracts include a $1.8 billion contract to build two Aegis destroyers at Ingalls Shipbuilding in Pascagoula. Capital investment announced by new and expanding facilities in Mississippi during the first six months of 1998 increased by more than $270 million from the same period in 1997.
Trade Picture Broadening for Mississippi
In 1997 more than one-third of Mississippi's exports went to Canada, Russia and Japan. The state's exports by industry group were concentrated in 1997; over 40 percent of Mississippi's international sales were in chemicals, poultry and paper products. In 1998, however, gains in industrial machinery/computers and electrical and electronic equipment were offset by lower shipments of farm products, chemicals and paper products. Recent state exports to Japan and Brazil were off sharply, but these losses were more than offset by increases in exports to Mexico, Canada and Europe.
On balance, Mississippi exporters have done well despite the adverse economic developments in some of the state's main trading partners. An interesting aspect of the state's recent trade developments has been the collapse of poultry exports to Russia. The state's sizable export business to this country dropped from $600 million in 1996 to about half that in 1997 and to almost nothing in 1998. These events were prompted by the deterioration of the Russian economy, which made short-term credit problematic.
After experiencing slightly negative permit growth during 1997, single-family construction rebounded in the state in 1998. For the third quarter of 1998, growth in permits for single- family homes was 6.2 percent measured year over year. This rate, however, was well below the national rate. Permit growth was especially strong in the Biloxi area during the first half of 1998. Existing home sales were strong as well. In 1999 construction activity will remain healthy but will likely moderate somewhat from 1997's surge during the casino boom.
Commercial construction in Mississippi as measured by square footage declined during the first quarter of 1998 when compared to the first quarter of 1997 but improved in subsequent quarters. By the third quarter, year-to-date growth was far above national levels. As it has for the last several years, the Biloxi-Gulfport area experienced especially strong growth during 1998.
Agriculture Remains Stable
Chicken broilers represented Mississippi's number one agricultural cash source in 1997 at $1.2 billion. As of the beginning of the fourth quarter of 1998, 504 million broiler-type chicks were hatched an increase of 1.7 percent over 1997. Steadily growing domestic demand should help partly offset any decreased broiler exports to Asia and Russia in the coming year. In fact, broiler revenues should increase slightly as prices for whole birds are currently projected to be at a record high in 1999.
Cotton ranked as the state's second largest agricultural cash source in 1997 at $624 million. Total cotton acreage declined 5.7 percent to 915,000 acres from 1997 to 1998. Yields dropped from 901 to 787 pounds per acre, so total production fell 17.6 percent to 1.5 million bales in 1998. Nationally, total cotton production is forecast to be down 30 percent 13.2 million bales from 1997's levels. This drop should put upward pressure on prices and thus help offset the decline in Mississippi's total production.
Soybeans are the state's third-largest crop in terms of cash receipts. Overall soybean acreage dropped from 2.1 million acres in 1997 to 2 million in 1998. Yields also fell from 31 to 27 bushels per acre. These developments led to a drop in total production of 18 percent in 1998. With soybean yields nationally projected to be the third-highest on record and total production forecast to be 2 percent above last year, total soybean revenues should fall in Mississippi in the coming year.