April 14, 2009
Moderator: Welcome to Southeastern Economic Perspectives, an occasional podcast from the Federal Reserve Bank of Atlanta. The following comments provide insight into employment trends in the Southeast. Michael Chriszt, an assistant vice president responsible for the Regional Economic Information Network, and Menbere Shiferaw, an analyst who specializes in the Sixth District, will discuss employment in the District. Thank you for joining me, Mike and Menbere.
Michael Chriszt: Our pleasure
Menbere Shiferaw: Glad to be here.
Moderator: Menbere, what are the business contacts saying about labor market conditions in District states? Are their observations consistent with the numbers?
Shiferaw: Yeah. Whatever reports that we get from business contacts are pretty consistent with the official employment data. There've been a lot of reports saying that worker demand is low, also some increase in layoffs, as well as weak hiring. There've also been reports that businesses are taking a lot of cost reduction measures, such as reducing workweeks or reducing hours and cutting wages. One of the things I actually wanted to note is the official employment numbers don't typically take into account underemployment, meaning a worker might be employed, but they could have less hours, lower wages, or you could have a very skilled worker working unskilled job or a person that had a senior-level position working an entry-level position. And all of these things are not taken into account in the official numbers, so sometimes you can say official numbers kind of understate the true conditions of the labor markets. But whatever reports that we get from business contacts, all of these things are mentioned, so it's good to keep that in mind.
Chriszt: If I could just add one point to what Menbere said: One of things that we're picking up from our business contacts is also that they have made a number of cuts, but they are prepared to make additional cuts if the economy doesn't stabilize within the next few months. So, that is one of the downside risks that we're looking at with regard to the overall outlook for the Southeast.
Moderator: So what is the outlook for employment in our District going forward?
Shiferaw: From what we've seen in the data, and also from what we've heard from contacts, there are really no signs of near-term easing in the labor markets. Initial unemployment claims for the first two weeks of March show that initial claims are up in each District state compared to the same period last year. They're up at least 80 percent compared to last year in every District state. So this is some sort of indication that when the March employment numbers come out that they might also be weak. Also, anecdotal data from business contacts, like I mentioned before, mention that worker demand is low, and a lot of them have also mentioned that there are no expectations to increase hiring in the near term. And like Mike mentioned, many are prepared to make additional wage cuts or more layoffs if economic conditions don't improve.
Chriszt: If I could jump in real quick: One of the things to keep in mind when we look at employment numbers is that they are known as what we call a lagging indicator, meaning that businesses make adjustments to their labor force in reaction to overall economic conditions. So, going forward, we can actually see the economy start to turn around well ahead of any real gains in the labor markets going forward. So when we see the recovery start to develop we'll probably see the employment numbers develop after that point.
Moderator: Could you give a little bit of insight into why the job loss is more severe at the District level than at the nation, and should we be concerned by these numbers?
Chriszt: That's a great question. The best way to look at this is maybe by looking at two individual sectors. The first, of course, is construction. We mentioned a moment ago the significant job losses here in the Southeast in the construction sector, and that's tied to the fact that the housing sector's doing much worse here in the Southeast than it is in most other parts of the country. Housing prices have declined significantly, especially in Florida. They're also down in Georgia and in other areas as well, and as a result of the slowdown in housing, the big boom that we saw in construction employment in the mid-decade has really tapered off and declined since then. So one of the reasons is construction.
Another reason that, I think, sort of flies under the radar sometimes is a very large sector of the economy that encompasses many jobs, called professional business services. And this is things like architects, lawyers, and just lot of business services employment that have tended in the Southeast to stabilize some losses in the goods sectors, meaning construction and manufacturing. And what we're seeing that, in this recession, this sector has declined as well. I mentioned that we're down 7 percent year over year, over 8 percent since the recession began. And that's one of the reasons why things here in the Southeast, as far as employment goes, is doing a bit worse than other areas of the country.
Shiferaw: And if you step back and also look at the overall job decline, job decline in the District started a couple of months before the decline at the nation. The recession began December of '07, but the District had already started losing jobs a month or two before versus the nation. And you can see that other parts of the nation, such as New York, North Carolina, and Indiana are starting to see an acceleration in job losses that our District has already been seeing for the past several months.
Chriszt: Jean, one thing—maybe just to add a little perspective and maybe conclude with this thought—most of the conversation so far has been pretty negative, and it's a direct reflection of what the numbers show. But some of the comparisons that we make are compared to a year ago or since the recession began. If we look farther back we saw similar job losses in the recession of the early '70s, recession of the early 1980s. So what we're seeing now in the Southeast, and for the U.S. as a whole, isn't unprecedented. It's a severe recession to be sure, but it's things that we've experienced before and we've gotten out of before.
Moderator: Thanks for joining us and talking to us about the employment numbers, Mike and Menbere.
Shiferaw: Glad to be here.
Chriszt: My pleasure.
Moderator: Again, we've been listening to Atlanta Fed regional research team members Michael Chriszt and Menbere Shiferaw provide insight into employment trends in the Southeast. This concludes our Southeastern Economic Perspectives podcast. Thanks for listening, and please return for more podcasts. If you have comments, please send us e-mail at podcast@frbatlanta.org.