EconSouth (First Quarter 2000)

Recent events and trends from the six states of the Sixth Federal Reserve District
Paper Manufacturing Alabama
The performance of the paper and pulp industry continues to improve. Kimberly-Clark announced plans to invest $82 million in a tissue plant located in Mobile. Additionally, workers who were previously laid off are being called back to work as the company ramps up production.
A moderate amount of speculative commercial construction is either planned or under way in Birmingham, where the leasing market is expected to remain strong this year. Bulk warehouse space is in strong demand, with occupancy rates around 97 percent.
Ogihara America Corp., a producer of automobile body panels and the largest supplier to Mercedes-Benz’s Tuscaloosa plant, is undertaking a $35 million expansion of its Birmingham facility. The expansion was prompted by contracts from two other auto makers.

Some hotels and motels and cruise ships were adversely affected by tourists’ Y2K concerns, but advance bookings for February through April 2000 are reportedly strong. Twelve new hotels are scheduled to open in Miami this year, adding almost 2,500 rooms to the market.
A Chinese delegation recently toured Florida’s citrus fields and facilities to look at how the industry controls fruit-fly infestations. The delegation expressed interest in purchasing the state’s grapefruit and citrus products. An agreement could be finalized soon and would reportedly allow state growers to send the first shipment of a $150 million-a-year deal to the virtually untapped Chinese market.
Residential markets have slowed in much of the state, with sales of existing homes notably weaker than a year ago. Construction of single-family homes has also declined in most areas.
Fruit Picker
Cargo Airplane Georgia
Lockheed-Martin confirmed that Italy has ordered more C-130J transports, produced in Marietta, and that deals with Kuwait and Denmark are under way. The Pentagon also approved buying two dozen C-130Js over the next five years. The firm continues to lay off workers, however, with the elimination of 800 additional positions.
Corporate downsizing by the Coca-Cola Co. is resulting in the loss of 2,500 of the company’s 6,200 jobs in Atlanta. BellSouth announced that it will eliminate approximately 1,300 of the company’s 21,000 jobs in Atlanta.
The Atlanta office market remains strong. Construction of both office and industrial space is expected to slow. Experts anticipate another strong year for retail construction, featuring new shopping centers developed near malls and the expansion of major anchors in malls.
Oil and natural gas prices remain at strong levels. According to the Louisiana Department of Natural Resources, the number of active rigs in areas under state jurisdiction continued to decline in 1999 as more firms invested resources into the outer continental shelf in the Gulf of Mexico. The seasonally adjusted rig count in Louisiana rose from 146 in December 1998 to 164 in December 1999, its highest level since August 1998, when the count was 172.
The volume of general cargo exports passing through the port of New Orleans in 1999 was down 5 percent from 1998, but export values posted small gains. Through late 1999, imported steel, the port’s most valuable commodity in terms of revenue and local jobs, was down 40 percent from very high 1998 levels. This decline is national in scope and related to anti-dumping restrictions imposed on steel imports.
Oil Rig
Ship Builders Mississippi
The job market on the Mississippi Gulf Coast remains tight. Recent job fairs in the area are attracting numerous firms, including casinos, hospitals and fast food establishments, which are all seeking new workers.
Ingalls Shipbuilding in Pascagoula has signed a final contract for two Aegis destroyers, ensuring job security for the facility’s 10,500 employees.
During 1999 Mississippi’s seasonally adjusted unemployment rate ranged from 4.3 percent to 5.3 percent. December’s unemployment rate of 5.3 percent was about equal to the 5.2 percent rate in December 1998. Nonfarm payroll employment fell by 0.3 percent from the third through the fourth quarter of 1999, with weakness appearing mostly in the manufacturing sector. The finance and service sectors posted job growth during the same period.
Saturn shut down its small car plant in Spring Hill for about one week in January to install equipment for the new SUV line. Sales of Saturn’s small cars have been slow, down 14 percent from a year ago because of sluggish demand.
High-tech companies continue to expand in the region. Dell announced that it would include manufacturing of its Inspiron model notebook PCs at its middle-Tennessee operation. Previously, only desktop computer manufacturing and a technical support center had been scheduled for that plant.
The state government continues to discuss ways to balance its budget. The governor has proposed a 3.75 percent flat income tax, while the legislature has recommended instituting a 1 percent sales tax on some currently untaxed items and cutting state spending.
Compiled by the regional section of the Atlanta Fed’s research department

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