EconSouth - Fourth Quarter 2007
The Southeastern Economy in 2008
Manufacturing Declines Modestly
The region's manufacturing sector was a mixed bag in 2007 as housing woes and foreign competition squeezed many producers. But defense- and energy-related manufacturers enjoyed a strong year.
Employment in Southeastern factories declined 1.7 percent from the third quarter of 2006 through the third quarter of 2007. Durable goods production, which includes industries such as aerospace, transportation equipment, machinery, metals, lumber and wood, furniture, and building products, posted an employment decline of just over 1 percent during that same period in the Southeast. The region's nondurable industries posted a 2.6 percent decline.
Employment was also down in nondurable goods manufacturing, which includes the labor-intensive apparel industry, the textile industry, and food production, as well as industries such as paper, chemicals, and printing.
Housing woes carry over
Several other manufacturing industries shed jobs in 2007. Even employment in the region's vibrant automotive manufacturing industry could not sustain the pace of recent years in the face of anemic new car sales. For example, employment in Alabama's motor vehicle manufacturing segment actually declined by more than 2 percent in 2007 following double-digit advances in 2006. Sluggish demand led Hyundai Motor Co. to shut its auto plant in Alabama for 10 days during the fourth quarter. The 2007 paring back of operations at the General Motors (GM) plant in Doraville, Ga., decreased transportation equipment payrolls there, which are down more than 8 percent from a year ago. Last spring, GM's Saturn plant in Spring Hill, Tenn., laid off close to 2,400 workers for 18 months as the Saturn brand is phased out there. The plant will retool to produce other GM vehicles.
Defense building, energy provide good news
In Louisiana, large U.S. Department of Defense shipbuilding contracts helped stabilize employment, and producers of equipment to service the oil and gas industry reported increasing business on the strength of high oil prices.
New plants call the Southeast home
Foreign investment and new industries will also stimulate the region's industrial sector. For example, ThyssenKrupp broke ground in November on its $3.7 billion steelmaking complex near Mobile, Ala. The German steelmaker, whose plant will employ 2,700, chose Alabama and the state's projected $811 million incentive package after a yearlong search. Once operational in March 2010, the new facility will process carbon and stainless steel for manufacturers in the United States and throughout North America. According to the firm, the plant will serve several industries including automotive, construction, and household appliances.
In addition, Chinese construction equipment maker Sany Heavy Industry Co. Ltd. is spending $30 million to build its first North American assembly plant in Peachtree City, Ga. Construction on the first phase of the project will begin in the first quarter of 2008. Initially, the plant will employ 200 people, with the potential to employ 600 people over the next 10 years.
The University of Florida will build a cellulosic ethanol research and demonstration plant on Florida Crystals Corp.'s Okeelanta site. It will produce between 1 million and 2 million gallons of ethanol a year and will be the first plant of its kind in Florida. Range Fuels Inc. will construct a $225 million cellulosic ethanol plant in Soperton, Ga. The plant will be the first in the United States to manufacture this energy source for commercial use.
Looking ahead to 2008
Energy extractors and related firms, mainly clustered in Louisiana, will continue to benefit from strong energy demand. In Mississippi, PSL North America recently announced a new manufacturing plant that will produce steel pipe for use in natural gas pipelines. Continuing expansion of the industry and an aging infrastructure that needs replacing are stimulating strong demand for its product.
The depreciation of the U.S. dollar relative to other currencies suggests the region's manufacturers in industries such as aerospace products in Alabama, Florida, and Tennessee and machinery and scrap metal in Florida and Alabama will continue to enjoy strong demand for exports.
Lumber and building supply demand, as well as furniture and residential carpet production, may continue to post little growth if residential housing markets remain weak going into 2008. Georgia's important commercial carpet production segment, however, may get a boost from growth in the corporate office market.
Further layoffs could occur in the region's apparel manufacturing industry as companies shut down or move operations offshore to remain competitive. Apparel employment was down by double digits in Alabama as firms outsourced production and closed mills because of weak demand and foreign competition. The printing and publishing industry, which has significant payrolls in Tennessee and Florida, should continue to lose market share to electronic media.