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The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.

The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.

Postings are weekly.


November 4, 2014

Heading into Fall, Florida's Recovery Continues

In an August SouthPoint post about economic conditions in north and central Florida, we stated that the sentiment of our contacts during the summer had been the most upbeat since before the recession. Since then, the Jacksonville REIN team has met with more than 50 business contacts, and it was very clear that the optimism was ongoing.

Contacts were upbeat as revenues and volumes increased. Demand for residential purchase mortgages met expectations, and residential lot development had made a comeback since the recession. Activity in multifamily real estate was robust, commercial loan activity improved, and office space absorption increased.

Employment and labor markets
Employment levels remained relatively flat for most, but some larger firms added to headcount. Complaints about difficult-to-fill positions persisted, though there was little evidence of contacts aggressively raising pay to attract talent. For some financial institutions, the increased availability of full-time positions in the marketplace has created turnover of part-time staff such as tellers. In addition to the usual difficult-to-fill positions (information technology, accounting, and compliance and risk), we heard stories of challenges filling lower level, low-skill positions in industries such as hospitality. In the Space Coast region, there were reports of overall shortages of workers.

Costs, wages, and prices
Most contacts indicated that nonlabor inputs have increased at about the rate of inflation. However, commodities like resins, plastics, and aluminum are expected to remain fairly flat for the foreseeable future. Construction costs in our area have reportedly stabilized, and fuel prices have lowered considerably. Food costs, particularly proteins, are up compared with last year.

Anecdotes about 2015 health care premiums were mixed, as increases ranged from less than 1 percent to as high as 20 percent. Many companies indicated that they plan to change benefit structures, raise deductibles, alter prescription plans, and eliminate dependent coverage (and so on) in an effort to avoid significantly increasing the proportion that employees pay as a result of worries about talent acquisition and retention. Others are moving ahead with shifting some measure of any increases to employees.

Most contacts reported moderate wage pressures for technically skilled positions. Some reported increased starting salaries for some lower-level jobs such as call center positions, and some are forced to offer more to attract those with internet or digital media skills. Most contacts continued to budget merit increases in the range of 2.5 to 3 percent.

Availability of credit and investment
Access to capital and availability of credit continued to be a nonissue for the majority of our contacts, but some small organizations continued to struggle for funds. Banking contacts reported strong loan demand for purchase mortgages in addition to new construction loans, refinances, home improvement loans, consumer loans, and increases in commercial loans. Reports of capital expenditures including major port expansions, health care facility construction projects, and merger and acquisition activity were widespread across the region.

Business outlook
Some contacts mentioned downside risks to the outlook, including the outcome of today's election, increased government regulations, and—most recently—worries about weakness internationally and the resulting market volatility that crept up in mid-October. Generally, however, contacts reported an expectation for higher growth in the short and medium term.

Tell us: What's your outlook for growth for the rest of 2014 and into the next year?

By Chris Oakley, regional executive, and Sarah Arteaga, REIN director, both at the Atlanta Fed's Jacksonville Branch

August 6, 2014

Sunnier Times in the Sunshine State

During the most recent cycle of the Federal Open Market Committee (which ran from June 19 to July 30), the Atlanta Fed’s Regional Economic Information Network (REIN) team at the Jacksonville Branch talked with more than 30 Florida business leaders, including branch directors, about economic conditions. As one who has been involved with the REIN program since its inception in 2008, I can attest that, while “slow and steady” remains a theme in this economic recovery, the sentiment of our contacts over the past two months has been the most upbeat since before the recession.

General business conditions
Almost all firms reported increases in business activity. Two design/build firms indicated robust demand and reasonably strong pipelines, including a strengthening in industrial and office development. For the first time, we heard of some speculative building in the commercial sector from three different contacts. Housing continued its slow improvement, though several contacts used the word “bumpy” to describe activity. The appetite for auto purchases continued, as a recent SouthPoint post discussed, with lenders citing robust auto-lending activity. Some banks also reported that consumers are now slowly adding to outstanding credit card balances.

Employment and hiring
Labor markets tightened as the number and types of difficult-to-fill positions increased. In addition to highly skilled positions that are normally a challenge to fill (including information technology and engineering), contacts shared frustrations with filling midlevel positions such as analysts. In construction, finding subcontractors and skilled laborers was harder than normal. However, one contact saw a 20 percent annual increase in revenue as clients resumed a normal hiring pace.

Labor and input costs
Contacts reported seeing wage pressures in their organizations. For example, demand for truck drivers that one firm described as “significant” led to a 33 percent pay increase since the beginning of 2014. One retail contact reported wage increases for maintenance positions as the “construction boom in the area lures these workers away.” Most contacts previously noted merit programs of between 2–3 percent. However, for the first time, several contacts discussed plans for more aggressive increases of 4–5 percent. Regarding health care, most anticipate premiums to continue growing significantly, and many have self-insured to mitigate rising costs.

Most contacts described nonlabor input cost increases as benign. Although the cost of some construction-related materials was a cause for concern earlier this year, most of this volatility has dissipated. While most contacts do not claim much pricing power, some companies are seeing improved margins as they are able to push through increases in the form of higher sales prices.

Credit and investment
Contacts at medium and large companies noted that while credit is readily available, many are still risk-averse and avoiding taking on debt, relying instead on cash flow or internal reserves to fund projects. Companies that do borrow are undergoing “rigorous but rational underwriting.” One construction contact said that many of his larger clients are no longer just catching up from the recession but are now willing to take risk and invest in adding capacity. A bank also reported more risk-taking among customers, especially in commercial real estate and equipment leasing. At the consumer level, real estate agents and lenders referred to qualified mortgages as something of an impediment to mortgage loan activity, but they generally viewed the more rigorous process as worth the effort to reduce risk.

Since June, the consensus from REIN contacts at the Jacksonville Branch was largely positive. Overall demand conditions have improved, though some expressed concerns about regulatory impact. Some contacts specifically mentioned dissipating headwinds as a reason for increased investment, including one contact who sees enough improvement in the economic environment that the company has changed its strategy from diversification to more rapidly expanding its footprint with aggressive new revenue goals.

Does this jibe with what you, our readers, are seeing? As always, your thoughts are welcome.

By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch

July 3, 2014

Separating Out Job Groups in the Sixth District

There’s been a lot of discussion about the decline of jobs considered to be “mid-skilled” during the last several years. A recent Regional Economic Press Briefing prepared by our friends at the New York Fed took another look at this important issue. They aggregate occupations into three skill categories: higher-skill, middle-skill, and lower-skill professions. The specific occupations of each category are outlined in the following chart:

Southpoint_2014-07-03A

Using data from the U.S. Bureau of Labor Statistics’ Occupational Employment Statistics dataset, we were able to decompose the Sixth District states’ labor markets using the same skill categories that the New York Fed used.

Both the higher-skill and lower-skill categories grew from 2007 to 2013, and the middle-skill group shrank for both the United States and Sixth District. The proportion by which the middle-skill group’s share shrank during the time period was roughly similar for the nation and Sixth District, with the difference between the two differences being less than 1 percentage point. Yet more interesting, we were able to compare how these groups’ compositions have changed prior to and following the recession for each Sixth District state. You can see a state-by-state decomposition in the following chart:

Florida, Georgia, and Tennessee all saw their share of their middle-skill jobs shrink by roughly 4 percentage points during the time period, while Alabama’s share of middle skill jobs decreased by about 3 percentage points. The middle-skill groups in Louisiana and Mississippi, often the outliers in Sixth District data, shrank by the smallest amounts during the time period 2007–13, roughly by 2 percentage points. However, Louisiana’s share of higher-skill occupations was the only one not to expand from 2007 to 2013. The shrinking share of middle-skill jobs in that state was almost solely the result of a growing share of lower-skill jobs.

To understand how the data in the chart above came about, we can look at changes in the composition of these groups (higher-, middle-, and lower-skill groups) by state during both the recession and recovery. The first chart below shows that the middle-skill groups took a particularly hard hit across the nation and District in the previous recession...

Southpoint_2014-07-03C

...while those middle-skill jobs have been the most sluggish to come back, both across the nation and the Sixth District, as the following chart shows:

Southpoint_2014-07-03D

By Mark Carter and Sandra Ghizoni, both senior economic analysts in the Atlanta Fed’s research department


June 20, 2013

Rebuild and Reshape

Nearly eight years ago, Hurricane Katrina devastated the Louisiana and Mississippi Gulf Coast. Most of the city of New Orleans was flooded in its wake, and the loss of life and property was tremendous. Having lived through these events, I can look back at the last eight years and feel the pride at what my city has accomplished since Katrina.

New Orleans has rebuilt and continues to reshape itself. As reported in the University of New Orleans Metropolitan Report, the New Orleans metropolitan statistical area population has steadily increased to 89 percent of pre-Katrina levels, to approximately 1.2 million residents (see the chart). In addition, the New Orleans unemployment rate in first quarter 2013 was at 6.4 percent, well below the national average, with major employment gains across several sectors of the region’s economy.

Louisiana and New Orleans region have taken advantage of post-Katrina opportunities, spurring entrepreneurs and business incubators such as Idea Village and becoming a mecca for talented young people moving to the region with jobs trending toward information services. A recent Forbes article ranked New Orleans as the number-one “brain magnet” in the United States in February 2011.

New Orleans is known for many things, including an affordable cost of living, low operating costs for businesses, state tax credits for leading industries, and the quality of life that young entrepreneurs seek. NOLA (as it is called by locals) also leads the state in tourism, hosting national events such as the 2013 Super Bowl, the 2013 Woman’s Final Four, and the annual traditions of Mardi Gras and Jazz Fest, which attract international crowds. Meanwhile, NOLA’s resurgence can be seen in rising commercial construction led by the robust biomedical industry, and urban renewal is driving residential development.

Louisiana and New Orleans have been very busy attaining accolades, and their growth and accomplishments contribute to the Southeast economy. Examples include:

  • April 2013: Bloomberg ranked New Orleans/Metairie/Kenner among the top 12 boomtowns in the country.
  • May 2013: Forbes ranked New Orleans the third-best city for the growth of information technology jobs (publishing, software, entertainment, data processing, and gaming).
  • May 2013: The Louisiana Small Business Development Center (SBDC) Greater New Orleans Region was named the top SBDCs in the nation, earning the U.S. Small Business Administration’s SBDC Excellence and Innovation Award.
  • May 2013: The Southern U. S. Trade Association and World Trade Center in New Orleans ranked Louisiana the number-five export state in the nation.
  • May 2013: A survey in Chief Executive Magazine ranked Louisiana the 11th-best state for business.

While the memories and lessons of Hurricane Katrina remain prominent in our minds, we all can share in the pride as the region continues to build a promising future.

By Gail Psilos, a director of the Regional Economic Information Network in the Atlanta Fed’s New Orleans Branch

November 4, 2014

Heading into Fall, Florida's Recovery Continues

In an August SouthPoint post about economic conditions in north and central Florida, we stated that the sentiment of our contacts during the summer had been the most upbeat since before the recession. Since then, the Jacksonville REIN team has met with more than 50 business contacts, and it was very clear that the optimism was ongoing.

Contacts were upbeat as revenues and volumes increased. Demand for residential purchase mortgages met expectations, and residential lot development had made a comeback since the recession. Activity in multifamily real estate was robust, commercial loan activity improved, and office space absorption increased.

Employment and labor markets
Employment levels remained relatively flat for most, but some larger firms added to headcount. Complaints about difficult-to-fill positions persisted, though there was little evidence of contacts aggressively raising pay to attract talent. For some financial institutions, the increased availability of full-time positions in the marketplace has created turnover of part-time staff such as tellers. In addition to the usual difficult-to-fill positions (information technology, accounting, and compliance and risk), we heard stories of challenges filling lower level, low-skill positions in industries such as hospitality. In the Space Coast region, there were reports of overall shortages of workers.

Costs, wages, and prices
Most contacts indicated that nonlabor inputs have increased at about the rate of inflation. However, commodities like resins, plastics, and aluminum are expected to remain fairly flat for the foreseeable future. Construction costs in our area have reportedly stabilized, and fuel prices have lowered considerably. Food costs, particularly proteins, are up compared with last year.

Anecdotes about 2015 health care premiums were mixed, as increases ranged from less than 1 percent to as high as 20 percent. Many companies indicated that they plan to change benefit structures, raise deductibles, alter prescription plans, and eliminate dependent coverage (and so on) in an effort to avoid significantly increasing the proportion that employees pay as a result of worries about talent acquisition and retention. Others are moving ahead with shifting some measure of any increases to employees.

Most contacts reported moderate wage pressures for technically skilled positions. Some reported increased starting salaries for some lower-level jobs such as call center positions, and some are forced to offer more to attract those with internet or digital media skills. Most contacts continued to budget merit increases in the range of 2.5 to 3 percent.

Availability of credit and investment
Access to capital and availability of credit continued to be a nonissue for the majority of our contacts, but some small organizations continued to struggle for funds. Banking contacts reported strong loan demand for purchase mortgages in addition to new construction loans, refinances, home improvement loans, consumer loans, and increases in commercial loans. Reports of capital expenditures including major port expansions, health care facility construction projects, and merger and acquisition activity were widespread across the region.

Business outlook
Some contacts mentioned downside risks to the outlook, including the outcome of today's election, increased government regulations, and—most recently—worries about weakness internationally and the resulting market volatility that crept up in mid-October. Generally, however, contacts reported an expectation for higher growth in the short and medium term.

Tell us: What's your outlook for growth for the rest of 2014 and into the next year?

By Chris Oakley, regional executive, and Sarah Arteaga, REIN director, both at the Atlanta Fed's Jacksonville Branch

August 6, 2014

Sunnier Times in the Sunshine State

During the most recent cycle of the Federal Open Market Committee (which ran from June 19 to July 30), the Atlanta Fed’s Regional Economic Information Network (REIN) team at the Jacksonville Branch talked with more than 30 Florida business leaders, including branch directors, about economic conditions. As one who has been involved with the REIN program since its inception in 2008, I can attest that, while “slow and steady” remains a theme in this economic recovery, the sentiment of our contacts over the past two months has been the most upbeat since before the recession.

General business conditions
Almost all firms reported increases in business activity. Two design/build firms indicated robust demand and reasonably strong pipelines, including a strengthening in industrial and office development. For the first time, we heard of some speculative building in the commercial sector from three different contacts. Housing continued its slow improvement, though several contacts used the word “bumpy” to describe activity. The appetite for auto purchases continued, as a recent SouthPoint post discussed, with lenders citing robust auto-lending activity. Some banks also reported that consumers are now slowly adding to outstanding credit card balances.

Employment and hiring
Labor markets tightened as the number and types of difficult-to-fill positions increased. In addition to highly skilled positions that are normally a challenge to fill (including information technology and engineering), contacts shared frustrations with filling midlevel positions such as analysts. In construction, finding subcontractors and skilled laborers was harder than normal. However, one contact saw a 20 percent annual increase in revenue as clients resumed a normal hiring pace.

Labor and input costs
Contacts reported seeing wage pressures in their organizations. For example, demand for truck drivers that one firm described as “significant” led to a 33 percent pay increase since the beginning of 2014. One retail contact reported wage increases for maintenance positions as the “construction boom in the area lures these workers away.” Most contacts previously noted merit programs of between 2–3 percent. However, for the first time, several contacts discussed plans for more aggressive increases of 4–5 percent. Regarding health care, most anticipate premiums to continue growing significantly, and many have self-insured to mitigate rising costs.

Most contacts described nonlabor input cost increases as benign. Although the cost of some construction-related materials was a cause for concern earlier this year, most of this volatility has dissipated. While most contacts do not claim much pricing power, some companies are seeing improved margins as they are able to push through increases in the form of higher sales prices.

Credit and investment
Contacts at medium and large companies noted that while credit is readily available, many are still risk-averse and avoiding taking on debt, relying instead on cash flow or internal reserves to fund projects. Companies that do borrow are undergoing “rigorous but rational underwriting.” One construction contact said that many of his larger clients are no longer just catching up from the recession but are now willing to take risk and invest in adding capacity. A bank also reported more risk-taking among customers, especially in commercial real estate and equipment leasing. At the consumer level, real estate agents and lenders referred to qualified mortgages as something of an impediment to mortgage loan activity, but they generally viewed the more rigorous process as worth the effort to reduce risk.

Since June, the consensus from REIN contacts at the Jacksonville Branch was largely positive. Overall demand conditions have improved, though some expressed concerns about regulatory impact. Some contacts specifically mentioned dissipating headwinds as a reason for increased investment, including one contact who sees enough improvement in the economic environment that the company has changed its strategy from diversification to more rapidly expanding its footprint with aggressive new revenue goals.

Does this jibe with what you, our readers, are seeing? As always, your thoughts are welcome.

By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch

July 3, 2014

Separating Out Job Groups in the Sixth District

There’s been a lot of discussion about the decline of jobs considered to be “mid-skilled” during the last several years. A recent Regional Economic Press Briefing prepared by our friends at the New York Fed took another look at this important issue. They aggregate occupations into three skill categories: higher-skill, middle-skill, and lower-skill professions. The specific occupations of each category are outlined in the following chart:

Southpoint_2014-07-03A

Using data from the U.S. Bureau of Labor Statistics’ Occupational Employment Statistics dataset, we were able to decompose the Sixth District states’ labor markets using the same skill categories that the New York Fed used.

Both the higher-skill and lower-skill categories grew from 2007 to 2013, and the middle-skill group shrank for both the United States and Sixth District. The proportion by which the middle-skill group’s share shrank during the time period was roughly similar for the nation and Sixth District, with the difference between the two differences being less than 1 percentage point. Yet more interesting, we were able to compare how these groups’ compositions have changed prior to and following the recession for each Sixth District state. You can see a state-by-state decomposition in the following chart:

Florida, Georgia, and Tennessee all saw their share of their middle-skill jobs shrink by roughly 4 percentage points during the time period, while Alabama’s share of middle skill jobs decreased by about 3 percentage points. The middle-skill groups in Louisiana and Mississippi, often the outliers in Sixth District data, shrank by the smallest amounts during the time period 2007–13, roughly by 2 percentage points. However, Louisiana’s share of higher-skill occupations was the only one not to expand from 2007 to 2013. The shrinking share of middle-skill jobs in that state was almost solely the result of a growing share of lower-skill jobs.

To understand how the data in the chart above came about, we can look at changes in the composition of these groups (higher-, middle-, and lower-skill groups) by state during both the recession and recovery. The first chart below shows that the middle-skill groups took a particularly hard hit across the nation and District in the previous recession...

Southpoint_2014-07-03C

...while those middle-skill jobs have been the most sluggish to come back, both across the nation and the Sixth District, as the following chart shows:

Southpoint_2014-07-03D

By Mark Carter and Sandra Ghizoni, both senior economic analysts in the Atlanta Fed’s research department


June 20, 2013

Rebuild and Reshape

Nearly eight years ago, Hurricane Katrina devastated the Louisiana and Mississippi Gulf Coast. Most of the city of New Orleans was flooded in its wake, and the loss of life and property was tremendous. Having lived through these events, I can look back at the last eight years and feel the pride at what my city has accomplished since Katrina.

New Orleans has rebuilt and continues to reshape itself. As reported in the University of New Orleans Metropolitan Report, the New Orleans metropolitan statistical area population has steadily increased to 89 percent of pre-Katrina levels, to approximately 1.2 million residents (see the chart). In addition, the New Orleans unemployment rate in first quarter 2013 was at 6.4 percent, well below the national average, with major employment gains across several sectors of the region’s economy.

Louisiana and New Orleans region have taken advantage of post-Katrina opportunities, spurring entrepreneurs and business incubators such as Idea Village and becoming a mecca for talented young people moving to the region with jobs trending toward information services. A recent Forbes article ranked New Orleans as the number-one “brain magnet” in the United States in February 2011.

New Orleans is known for many things, including an affordable cost of living, low operating costs for businesses, state tax credits for leading industries, and the quality of life that young entrepreneurs seek. NOLA (as it is called by locals) also leads the state in tourism, hosting national events such as the 2013 Super Bowl, the 2013 Woman’s Final Four, and the annual traditions of Mardi Gras and Jazz Fest, which attract international crowds. Meanwhile, NOLA’s resurgence can be seen in rising commercial construction led by the robust biomedical industry, and urban renewal is driving residential development.

Louisiana and New Orleans have been very busy attaining accolades, and their growth and accomplishments contribute to the Southeast economy. Examples include:

  • April 2013: Bloomberg ranked New Orleans/Metairie/Kenner among the top 12 boomtowns in the country.
  • May 2013: Forbes ranked New Orleans the third-best city for the growth of information technology jobs (publishing, software, entertainment, data processing, and gaming).
  • May 2013: The Louisiana Small Business Development Center (SBDC) Greater New Orleans Region was named the top SBDCs in the nation, earning the U.S. Small Business Administration’s SBDC Excellence and Innovation Award.
  • May 2013: The Southern U. S. Trade Association and World Trade Center in New Orleans ranked Louisiana the number-five export state in the nation.
  • May 2013: A survey in Chief Executive Magazine ranked Louisiana the 11th-best state for business.

While the memories and lessons of Hurricane Katrina remain prominent in our minds, we all can share in the pride as the region continues to build a promising future.

By Gail Psilos, a director of the Regional Economic Information Network in the Atlanta Fed’s New Orleans Branch