EconSouth - Fourth Quarter 2007

The Southeastern Economy in 2008

Employment Slows From Its Robust Growth

Photo of people standing in line
Photo courtesy of Federal Emergency Management Administration
Employment trends provide a key to 2008's outlook. In 2007, employment in the Southeast weakened, with Florida slowing the most. Because Florida employs 40 percent of the Southeast's workforce, movements in its labor market affect the entire region's outlook.

The Sunshine State clouds over
The third quarter of 2007 saw the lowest number of jobs created in the Southeast since the third quarter of 2003, excluding the Hurricane Katrina–influenced third quarter of 2005, and Florida is the culprit (see chart 1). Outside of the Sunshine State, net job growth has remained relatively steady once the large, Katrina-induced decline of the last half of 2005 and the subsequent rebound in the first quarter of 2006 are taken into account.

Importantly, for the last several years Florida has been a leader not only in regional employment growth but national employment growth as well. From the fourth quarter of 2003 through the fourth quarter of 2006, the state added new jobs at twice the national rate.

Consumer Spending
Real Estate

Only California added more jobs than Florida's 754,000 over that time period, and only Arizona, Idaho, Nevada, Utah, and Wyoming added jobs at a faster rate than Florida's 10.3 percent. But that growth rate is in the past. The average rate at which Florida added jobs dropped to just a third of a percentage point in the first three quarters of 2007. Another telling statistic illustrates Florida's employment slowdown: Between the fourth quarter of 2003 and the fourth quarter of 2006, one out of every 10 net new jobs created in the United States was in Florida, but in the third quarter of 2007, that ratio had slipped to one out of every 20.

The slowdown in payroll employment growth is widespread throughout Florida. All large metro areas in the state have seen a marked weakening in job growth. The pain has also spread across sectors. While construction employment growth slowed the most, manufacturing employment growth has also turned negative. In addition, the rate of growth in services employment has shrunk to about half its rate of two years ago.

Related Links
On the Web:
U.S. Bureau of Labor Statistics
U.S. Department of Labor

The rest of the region holds its own
Employment indicators held fairly steady in states outside of Florida through the first three quarters of 2007. Although payroll employment indicators remain positive, the trend has softened a bit over the past year. Net new job creation has slowed in most states.

In all Southeastern states except Georgia and Alabama, the rate of growth slipped during 2007 (see chart 2). In Georgia, services employment has grown modestly, offsetting a dropoff in construction and the ongoing decline in manufacturing jobs, and Alabama's rate of job creation has leveled off.

Louisiana and Mississippi's payroll employment recoveries have abated. Tennessee's rate of payroll employment growth has moderated, largely because of ongoing declines in manufacturing jobs and a slowdown in services employment growth. The deceleration in services stems from a drop in retail trade employment and a slowdown in net job creation in transportation and business services.

Chart 1
Changes in Total Southeast Employment, 2003–07
Chart 1 Changes in total southeast employment
Note: Data are through the third quarter of 2007.
Sources: U.S. Bureau of Labor Statistics and the Federal Reserve Bank of Atlanta

Unemployment rates for the Southeast states largely reflect trends in payroll employment. Although Florida's unemployment rate has increased notably since the beginning of 2007, Alabama and Georgia have experienced relatively steady rates of unemployment, with only a slight uptick in the third quarter of 2007. Louisiana and Mississippi have witnessed a marked decline in their unemployment rates; they are down from Katrina-related highs in 2005 and have been relatively steady in 2007.

Tennessee, despite a slowing of payroll employment growth, saw its unemployment rate decline in 2007. A coincident decline in the unemployment rate and glowing payroll growth can be attributed to a decline in the state's labor force. Tennessee experienced another such decline in the second and third quarters of 2007, which offset increases in the number of unemployed.

Looking ahead to 2008
Data on initial claims of unemployment insurance are a key indicator of near-term future labor market strength. In October, initial claims in Florida were up more than 20 percent from year-ago levels. Florida's unemployment rate also rose from 3.3 percent at the end of 2006 to 4 percent in the third quarter of 2007. The upward movement of both of these indicators shows that Florida appears to be headed for further weakness going into 2008.

For other Southeastern states, initial unemployment insurance claims accelerated in the third quarter of 2007 after dipping over the summer (see chart 3). Should this trend continue, it could indicate that labor markets outside of Florida are softening as well.

Chart 2
Employment Growth in Southeast States
Chart 2 Employment Growth in Southeast States
Sources: U.S. Bureau of Labor Statistics and the Federal Reserve Bank of Atlanta

Chart 3
Initial Unemployment Claims in 2007
Chart 3 Initial Unemployment Claims in 2007
Note: Data represent a four-week moving average.
Sources: U.S. Department of Labor and the Federal Reserve Bank of Atlanta