Surveying the Economy in 2012

December 2012

Tom Heintjes: Welcome to the Federal Reserve Bank of Atlanta's EconSouth Now podcast. Today, we're joined by Chris Cunningham, a research economist in the Atlanta Fed's research department. He'll be speaking about the regional economy. Thank you for joining us today, Chris.

Photo of Chris CunninghamChris Cunningham: Hi, Tom. Thanks for having me.

Heintjes: Chris, how did the region's economy perform in 2012? Would you characterize it as better than 2011, and if so, why?

Cunningham: Well, certainly the economy did do better than in 2011, but that wasn't a high bar to clear. 2011 had some particular struggles. First, we were coming off the downside of the fiscal expansion that came with the stimulus bill. And then we had a pretty serious stall in the summer of 2011, and so I'm going to attribute that to uncertainty over the debt ceiling. Whereas performance in 2012 started off pretty well, it stalled a little bit in the fall, but a more muted process than we observed in 2011.

Heintjes: Right. Well, in looking back at 2012, Chris, how would you say the region's economic performance compared to the rest of the country?

Cunningham: Well, the Southeast performed worse than the rest of the country in 2012. Our unemployment rate has remained higher than the country as a whole, and our job growth was slower, and there are several reasons for that, not all that we can point to. One, the Southeast is continuing to struggle with weakening banks—I think 20 percent of all bank failures were in Georgia through the crisis—and we have yet to have any bank formation, which probably means there is tighter credit, [and it's] harder for businesses to expand or start up.

Two, we had some exposure to the agricultural crisis this year resulting from the drought. While, ironically, our soybean and corn producers have done pretty well as their competitors in the Midwest suffered exceptionally under the drought conditions, our poultry and livestock, which actually represents a relatively larger share of our agricultural production, were really harmed by those price increases in feed stocks.

And, of course, other sectors that have traditionally been strengths of the Southeast remain under pressure. There has been much less migration to the Southeast as there was in the aughts, and sectors in servicing and providing homes for migrants from the Northeast and the Midwest is a sector that is never going to come back the way it was.

Ironically, going forward we have seen some strength in house prices—coming off of zero—and that has had some beneficial affect that is arguably the brightest sign we have seen in the Southeast, both in terms of house prices stabilizing and even growing, and new starts in some of the better submarkets within metro areas. We've also seen strengths in professional services and manufacturing.

Heintjes: What are some of those bright spots?

Cunningham: Ironically, housing is the sector that was dead so long that we are now seeing some life in it. Prices look like they are stabilizing in most of the districts in the Southeast. We are seeing some new home building. It's concentrated; certain submarkets within a metro area—the good school district, the close-in neighborhoods—seem to be becoming more desirable. We are even hearing talk of restarting the land development process, where if you had asked me in '09 or 2010 in the bottom of the real estate market, it looked like we were going to have lots for the rest of our lives to build on. So that's a positive and welcome change.

Heintjes: Are there other sectors that performed strongly in 2012?

Cunningham: Oil and gas has, obviously, been a strong sector for a few years now, and so Louisiana has done well. Within the Southeast, professional services, some transportation—those sorts of services and trades that don't require a big up-front investment—seem to have done better in 2012.

Heintjes: Chris, which geographic areas performed best within the region in 2012, and what drove activity there?

Cunningham: Georgia has had the strongest recovery within the Southeast followed by Louisiana, and that has to do with some of the sectors we just talked about—oil and gas in Louisiana, and professional services—transportation, and trucking in Georgia. Manufacturing as well; manufacturing has shown some recovery, and that has benefited Georgia in particular.

Heintjes: Chris, let me ask you about your outlook for the region in 2013 if I can get you to take out your crystal ball. What in particular do you see as upside and downside risks?

Cunningham: Well, I try to avoid predictions, but if you put me on the spot: We obviously have a great deal of uncertainty to get through in terms of the fiscal cliff as it has been coined. Assuming some type of resolution, either now or in the near/early part of 2013, there is some evidence that there is a lot of investment and hiring waiting on the sidelines. So if that is resolved and resolved in a way that doesn't withdraw too much spending or add too much taxes too quickly, there is some chance that we could see a pretty good 2013. Dennis Lockhart, the president of the Federal Reserve Bank of Atlanta, has had to give his predictions and I would trust that forecast over my own. And I think his prognosis is probably the safest one to go with—that we should see steady and maybe somewhat strengthening improvement in 2013.

Heintjes: Hopefully words to live by. Well, Chris, I want to thank you for sharing your time and especially your insights with us.

Cunningham: Happy to be here, Tom.

Heintjes: Again, we've been speaking today with Chris Cunningham of the Atlanta Fed's research department. This concludes our EconSouth Now podcast on the regional economy.

For more information, please see the fourth-quarter 2012 edition of EconSouth. On our website,, you can read our articles about the regional, national, and international economies. Thanks for listening, and please return for more podcasts. If you have comments, please send us email at