EconSouth (Second Quarter 2002)

Recent events and trends from the six states of the Sixth Federal Reserve District
Alabama Alabama
Hyundai announced that it will build a $1 billion plant near Montgomery. The facility, scheduled to open in 2005, will employ about 2,000 people and have the yearly capacity to build 300,000 sedans and sport-utility vehicles. The automaker could receive incentives worth $253 million from state and local governments and private interests.
A large lumber and wood products facility was running at 100 percent capacity in April to keep up with strong demand from the residential construction market. Weak commercial markets, however, continue to plague many suppliers.
A favorable development for poultry exporters this year has been the opening of the Cuban market for Southern poultry. Through February, poultry shipments to Cuba leaving from the Mobile customs district totaled $4.2 million.

Florida hospitality workers who lost jobs after Sept. 11 are finding new prospects as central Florida’s major theme parks hire approximately 4,000 workers in anticipation of healthy summer tourism.
Although Florida’s Gulf Coast tourism has shown signs of a rebound, industry leaders are not so optimistic for the summer. While domestic markets are nearly back to normal, international bookings are low because European economies remain weak and many Europeans are leery of U.S. travel.
Southeast ports experienced a 4 percent export decline in early 2002, concentrated mainly in south Florida. Most of Miami’s decline in export values resulted from fewer shipments to Latin America. South Florida’s fall in exports was partially offset by improving shipments of agricultural products, autos and oil drilling equipment out of Tampa, Savannah and New Orleans.
Georgia Georgia
Several technology companies are starting to hire more workers, especially in the information technology departments of larger corporations, to help finish big-dollar projects put on hold last fall. But some telecommunications firms recently announced more layoffs.
In the Atlanta office market during the first quarter, more sublease space was added, rental rates were down, and incentives such as free rent and higher build-out allowances were common. Analysts expect little new construction over the next 12 months.
Producers of healthcare equipment note increasing new orders, production and shipments as demand from the medical industry grows.
At Lockheed’s Marietta plant, which makes transports and fighter jets, 2,700 workers ended a seven-week strike and accepted a deal that promises wage increases over three years and limited job protection.
Harrah’s Entertainment Inc. said that in the first quarter of 2002 its New Orleans casino made money for the company for the first time. Revenue on a year-over-year basis at the state’s 14 riverboats was down 3.4 percent, however.
Louisiana’s rig count increased in early April as prices for Louisiana crude and natural gas rose. According to state sources, the reduction in oil supply by OPEC countries since March, the economic recovery, and expected summer vacation demand have been the main reasons for the state’s rising prices.
The vacancy rate in New Orleans’ class A commercial real estate was 10.5 percent in the first quarter of 2002 while the nation’s office vacancy rate was 14.2 percent. Limited exposure to the high-tech industry may have bolstered New Orleans’s commercial real estate market compared to other cities.
Mississippi Mississippi
Although Russia’s ban on U.S. poultry exports officially ended April 15, export shipments have been delayed because the Russian government has required shippers to reapply for import permits. Industry estimates are that the sales recovery and easing of high inventory problems could last into summer.
The state’s tax commission numbers show that casino gross gaming revenues increased in the first quarter compared to the previous year. Industry spokesmen attributed the strength of the gaming market to the fact that most of the state’s gamblers live within driving distance of the casinos.
The U.S. Navy recently awarded Northrop Grumman Ship Systems in Pascagoula a $1.3 billion contract for the construction of a new Wasp-class assault ship, which will reportedly be the most advanced in the fleet. Ingalls Shipyard has produced seven Wasp-class ships.
The popularity of the new Altima sedan has required the addition of an extra hour to each daily shift at Nissan’s assembly plant in Smyrna. In May the Altima assembly line will reportedly go from working one Saturday a month to two to keep up with growing demand.
The direct office vacancy rate in Nashville increased to 15.6 percent in the first quarter from 14.9 percent in the prior quarter. Absorption was negative and lease rates moderated slightly. An improvement in market conditions is expected in about six months as sublease space is absorbed.
New orders have spurred Peterbilt Motor Co. to rehire about 300 workers and more than double production at its heavy truck plant in Madison, reversing a string of layoffs and production slowdowns. The plant makes highway tractor- trailers that sell for as much as $100,000.
Compiled by the regional section of the Atlanta Fed’s research department

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