Regional Update (October-December 1996)
Regional Update (October-December 1996)
|Index||Southeastern economic indicators|
Mississippi Set to Emerge from Its Post-Boom Hangover
|Mississippi Set to Emerge from
Its Post-Boom Hangover
The problem with booms is that they don't last. Even in the absence of an explicit bust, a post-boom economy will look anemic if it simply returns to its long-term growth path. This is where Mississippi spent most of 1996. The coming year should see continued strength in the service sector. The initial surge-and-retreat associated with casino start-ups is mostly over. Indeed, the success of the gambling industry is now resulting in investments intended to make casino sites final tourist destinations. The growing gambling industry should further strengthen construction and services employment and might help wholesale and retail trade slightly next year. However, manufacturing will continue to ail.
Outlook healthy for services
ississippi services employment continued to post moderate growth in 1996, up nearly 3 percent from the third quarter of 1995 through the third quarter of 1996, sparked largely by the state's burgeoning casino gambling industry. Employment in the lodging industry, however, fell by about 4 percent during the period after posting double-digit gains in both 1994 and 1995.
A series of new hotels linked to casinos slated to open in 1997 should help boost employment in the state's hotel and lodging industry. Health and hospital service employment also grew this year by 4.7 percent and should continue to expand into the new year with continued employment growth.
Tourism: gambling will continue to be the driving force
Mississippi's casino establishments continue to boost the entire economy, with the state now the third-largest gambling market in the country behind Nevada and New Jersey. And gambling revenues are expected to increase further in 1996 and 1997, the result of newly added facilities.
The addition of the Imperial Palace and the Golden Nugget's Beau Rivage to Mississippi's gambling industry is expected to add over $500 million in development to the state's economy. In addition, the opening of the Grand Casino this year capped another $500 million in investment and has spurred development of three new hotels, a mall, and a new convention center all set for 1997. On the back of this casino development, expansion of ancillary facilities (such as hotels and retail shops) to service the customers has been phenomenal. And other gambling operations are scheduled to join the market, having received recent approval for future developments.
Bigger and better roads and expanded air service are already in the pipeline or up and running. Much of the roadway development is being funded by gaming taxes (about 25 percent of state revenue from gaming taxes is now earmarked to improve roads and highways in counties with casinos or adjacent counties with roads heavily traveled by casino traffic). Department of Transportation officials say that every county with a casino has at least one project.
Recently added daily jet service to the Mississippi Gulf Coast is also expected to greatly enhance convention sales and tourism. In addition, Casino Air Link, an airline offering scheduled flights from Florida cities, should further boost the number of gambling visitors.
Mississippi's manufacturing sector, large by U.S. standards, with over 20 percent of total nonfarm employment, weakened in 1996. Manufacturing employment fell by 5.7 percent from the third quarter of 1995 through the third quarter of 1996. This weakness is expected to continue next year.
Most of the decline can be traced to nondurables industries, where apparel employment fell by 12 percent over the year. Offshore production is proving more cost-effective to some producers and will continue to result in layoffs and plant closures in the state.
For certain market niches, however, the news isn't bad. For example, U.S. producers in the high-tech, capital-intensive production of denim fabric appear to be enjoying a comparative advantage. Burlington Mills is taking advantage of this opportunity and has begun a $55 million upgrade of its denim plant in Stonewall, Mississippi. This upgrade is to replace projectile looms with computerized air-jet looms, increasing the capacity of the mill by 60 percent.
Durables industries such as electrical equipment and transportation equipment also weakened over the year. However, Ingalls Shipyards, in Pascagoula (the state's largest private sector employer)after enduring years of fluctuations of government contractshas been awarded a U.S. Navy contract valued at nearly $1 billion for the construction of Aegis-class Destroyers. This contract should help ensure stable payrolls for several years to come.
The lumber and wood and furniture industries (with about 20 percent of Mississippi's manufacturing employment), posted little job growth in 1996, and the new year does not bode particularly well for these industries, especially if national residential construction slows as expected.
The chemical and plastics industry is expected to continue to do well in 1997. Wellman Inc. will invest $313 million, and eventually employ 750, in the first phase of a new project in Bay St. Louis. The project is designed to produce polyester resin used in soft drink bottles and other containers.
Mississippi's top export commodities are pulp and paper, textile and apparel, and food products. The state's paper industry is a typical example of an industry in which exports are establishing a fairly solid base. As a capital-intensive industry, state producers are constantly upgrading plants to face environmental and market challenges here and abroad. Currently, industry leaders are discussing a "strategic alliance" with Japanese producers to use non-wood fiber (kenaf) in the production of paper products. The growing trend of export expansion should continue in 1997, as the state's international markets continue to open and grow.
Declines in residential construction, moderate growth in commercial construction expected
The single-family home market slowed moderately this year and should continue to grow at a slower pace next year. The same trend of slower growth rates was observed in both housing permit numbers and existing home sales. However, construction and sales remain at healthy levels. In the third quarter single-family permits fell to the still-impressive growth rate of 11.9 percent compared with a regional average of 2.6 percent.
Within the Jackson market single-family permits followed the state trend of slower growth, falling below the year-ago level in the third quarter. In contrast, the Biloxi-Gulfport area experienced strengthening growth rates this year, with no signs of a slowdown evident. Homebuilding in Mississippi should keep slowing in the coming year, posting moderate growth rates.
Multifamily construction activity remained healthy during 1996 but fell below the prior year's level. Moderate declines in construction should persist during the coming year, largely because the surge of gambling-related migration is essentially over.
Commercial construction growth carried on at a moderate pace during 1996. Speculative construction among all sectors remains limited, although more is anticipated next year. Markets continue to tighten, as evidenced by falling vacancy rates, in many parts of the state. The outlook for Mississippi's commercial sector remains positive in 1997. Construction is expected to grow moderately, although not at the peak rates seen during the advent of gambling.
Broilers are Mississippi's number one agricultural product in terms of receipts. Exports to Russia and the Pacific basin helped the poultry industry to a very strong year in 1996. Prospects are for ongoing growth in agricultural exports as consumer countries' incomes rise, with many forecasts being revised upwards.
This year's Mississippi cotton crop yield is forecast to improve over the disastrously low levels of 1995. However, last year's insect and weather-stunted low yields helped drive cotton prices up. Now with increased imports and higher yields, prices are expected to fall. While yields may return to more normal levels, acreage will remain reduced in the coming year.
Mississippi's soybean yield is expected to be above the five-year average, in spite of some weather and insect-related problems. However, because of a decline in acreage, total harvests will be about 1.75 million acres, which represents a 3 percent decline from last year. The improved yields may reverse the acreage loss, making 1997 a good year for Mississippi soybeans.
Rice yields are also up significantly over 1995's levels, with this year's yields approaching 1994's record of 5,900 pounds per acre. This is a marked improvement over last year's result of 5,400 pounds per acre. Total acreage in Mississippi was down 24 percent at 218,000 acres, while national acreage is down 211,000 acres from last year. This reduction in supply is having a positive effect on prices and should serve to stabilize output in the coming year.