EconSouth Outlook: Economy on the Road to Recovery
While the U.S. economy began its recovery in 2002, the country’s economic engine is not yet firing on all cylinders. According to the fourth quarter issue of the Atlanta Fed’s EconSouth, the economic recovery from the 2001–02 recession has been slower than typical of post–World War II business cycles in the United States. In a typical recovery, pent-up demand on the part of consumers helps fuel production, but in the current recovery, consumer response appears to be more muted. There is little pent-up demand for goods and services because real spending on both housing investment and consumer durables grew throughout the recession as interest rates fell. Additionally, stock market equity values remain well below pre-recession levels.
The Southeastern economy continued to outperform the nation’s as the economic recovery gained traction in 2002. But the negative effects of the recent recession will continue to be felt in some areas of the Southeast in 2003.
Alabama’s manufacturing sector has been sluggish in its return to growth, but continued vigor in residential real estate markets and a step-up in service industries should point to positive economic performance in 2003. In Florida the service sector should pick up steam in 2003, and the state’s health care sector will likely continue to grow at a faster pace than the nation’s because of the state’s large senior population.
The outlook for Georgia, with metropolitan Atlanta accounting for 55 percent of the state’s employment, will depend significantly on the prospects of a turnaround in Atlanta’s economy. Louisiana’s large oil extraction industry pulled back as a result of lower oil prices in 2002. The possibility of disruptions in the overseas oil supply if military action occurs in the Middle East could boost the state's oil field activity and related industries.
For Mississippi, new auto plants and defense-related production will likely add to payrolls in 2003, but some of the state’s labor-intensive manufacturing industries will probably continue to move jobs offshore. Finally, the outlook for Tennessee’s economy is positive for 2003, especially if it is able to sustain the solid growth in the service sector that it seems to have achieved during 2001 and 2002.
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