Regional Update (April-June 1996)

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Cover Story - Florida and Georgia Find Jackpots With Lotteries

Base Closing Woes Don't Materialize

Base Closing Woes
Don't Materialize

he closings and reductions of military bases in the Southeast (a) wreaked economic havoc throughout the region, (b) stalled economic growth, or (c) had little impact on the overall regional economy?

Three years ago, many Southerners were sure the answer would be "a." But economic signs suggest that the answer is "c." The doom and gloom just haven't materialized.

In fact, the economy has continued to grow, jobs have been created, and unemployment has remained low throughout the military downsizing.

The trend is not isolated to the southeastern region. Even in California, where a much larger number of jobs were on the line, the reductions and closings have not had the severe impact originally predicted for the region.

In the beginning

At the end of the Cold War, the United States started paring back its military facilities, mostly the ones overseas. But in 1993 the Pentagon proposed major reductions that would affect personnel in the United States. States with a high percentage of military personnel began to fear the worst.

After studying the effect of three California base closings from 1992 to 1995, however, Rand's National Defense Research Institute issued a report in February that concluded that the feared consequences did not emerge.

"Though the closures had noticeable effects, they were relatively localized and have been at least partly offset by other economic factors," the report said.

The authors noted that they did not intend to minimize the individual hardships that the out-of-work personnel and communities experienced, but they concluded that the overall impact was neither catastrophic nor as severe as had been predicted.

Effects on the Southeast

The Southeast's experience with base closings and reductions should be even less severe than California's experience. The Southeast simply doesn't have the same concentration of military bases.

In fact, civilian jobs related to the military accounted for only 0.84 percent of the total payroll employment in the Southeast in 1993. The original estimate by the Department of Defense of total jobs that would be lost over the multiyear phase-in of reductions was 24,500 for the Southeast. But fewer than 7,000 of those jobs were military-related civilian jobs.

Despite the reductions, each of the states in the Fed's Sixth District—which consists of Alabama, Florida, Georgia, and parts of Louisiana, Mississippi, and Tennessee—has experienced healthy year-over-year gains in payroll employment from 1993 to 1995. (See table.) And unemployment in the region averaged 5.6 percent in 1995.

The key to countering the impact of military-related job losses has been job creation. While each state in the district lost some military-related jobs, each also has experienced much greater job growth in other sectors.

For example, a net of about 150,000 jobs were created in Georgia in 1995 alone while only about 800 military-base and military-base-related civilian jobs had been eliminated in the state as of 1995. The base closings and reductions are being phased in over several years.

Florida posted the highest level of jobs created, with more than 200,000 net jobs in 1995. It has lost about 340 military-related civilian jobs.

Alabama has lost the most military jobs—more than 8,500. But it had nearly 45,000 net jobs created in 1995 alone.

Not surprisingly, Mississippi, the smallest state in the district, had the smallest number of jobs created in the region, with nearly 20,000 net jobs created and about 2,500 military jobs lost. That still left the state many more jobs created in one year than have been lost overall.

Louisiana saw more than 50,000 jobs created in 1995 and about 100 lost as of the end of 1995; Tennessee created nearly 80,000 and lost 1,300 in 1995.

Adjusting to the change

New civilian uses are being found for the closed bases.

Recognizing the need to facilitate the conversions, federal and state governments are streamlining regulatory processes where they can. And the Department of Defense offers base transition assistance, including outplacement, relocation, education, retraining, planning, and technical help.


Base closings in the Southeast have directly involved only a small portion of the region's labor force. Whatever their broader impact on employment, it has been overwhelmed by job growth from other sources. Though the closings may have been hard on the individuals involved, the effect on the overall economy has not been severe.

Payroll Employment by State, 1993-95
(thousands, with year-over-year percent change)
1993 Percent Change 1994 Percent Change 1995 Percent Change
Alabama 1,716.7 2.5 1,758.5 2.4 1,803.3 2.5
Florida 5,571.5 4.0 5,799.4 4.1 6,000.5 3.5
Georgia 3,108.7 4.1 3,265.5 5.0 3,416.1 4.6
Lousiana 1,658.5 1.9 1,722.1 3.8 1,774.4 3.0
Mississippi 1,000.2 4.4 1,055.5 5.3 1,075.2 1.9
Tennessee 2,328.3 3.7 2,422.7 4.1 2,502.3 3.3
Source: Federal Reserve Bank of Atlanta using data from the U.S. Bureau of Labor Statistics.