EconSouth (First Quarter 2006)

Research Notes and News

Research Notes and News highlights recently published research as well as other news from the Federal Reserve Bank of Atlanta.

Georgia’s workforce benefited despite the IT bust
The rapid adoption of information and communication technologies in the United States during the 1990s led to unprecedented demand for information technology (IT) goods and services. This demand resulted in an analogous increase in employment in the IT-producing sector. But an IT bust in 2000, associated with a decline in business investment spending, caused a sharp decline in IT employment.

A recent working paper by Julie Hotchkiss, Melinda Pitts, and John Robertson explores whether workers migrated into the Georgia workforce to take advantage of the IT boom and whether workers in IT-producing industries (more than workers from other industries) left the state’s workforce during the bust.

The data for the analysis came from two sets of state administrative records compiled by the Georgia Department of Labor for the purposes of administering the state’s unemployment program. The data, from the period 1993–2003, allowed the authors a perspective on approximately 97 percent of the state’s workforce on nonfarm payrolls.

Their analysis shows that workers in the software and computer services industry were much more likely to have been absent from the Georgia workforce before the boom but were not more likely than workers from other industries to have left the state’s workforce during the bust. As a result, the authors note, the state experienced a net gain in worker human capital. They maintain that the results support policies that aim to attract industries that employ more high-skilled, educated workers.

Working Paper 2006-1
February 2006

Atlanta Fed chief describes strong U.S. economy
Despite weak growth in gross domestic product (GDP) in the fourth quarter of 2005, solid U.S. economic growth should continue, said Jack Guynn, president and chief executive officer of the Federal Reserve Bank of Atlanta. “I think the most likely path for the economy is sustained GDP growth with inflation and inflation expectations contained within acceptable bounds,” said Guynn, who was speaking at the opening of an exhibit on Southern capitalism at the Atlanta History Center.

Among the issues that Guynn said warranted attention were household and business spending in the face of higher energy prices and transitions in housing markets. Also, he noted, liquidity from accommodative credit markets could “boost the economic expansion and contribute to stronger-than-expected inflationary pressures.” Despite these concerns, Guynn believes the fundamentals of continued economic expansion are still in place.

Another factor Guynn discussed in his analysis of inflation and economic growth is globalization, which he described as a powerful but not fully understood development. In many ways, according to Guynn, our economy has entered uncharted waters when it comes to global imbalances, which may be one reason why many people feel uneasy about the economic outlook despite the mostly positive economic data.

Guynn noted that the Fed has taken significant steps to remove monetary policy accommodation and has been effective at signaling the direction and pace of future policy. He believes these actions made a favorable economic outcome much more likely. But, he added, “It’s important to recognize that our policy path over the coming period is somewhat less certain.”

Jack Guynn’s speech
March 2006

Survey shows debt service consumes more family income
The changes in personal finance patterns in the United States from 2001 to 2004 mean that more of a family’s income is directed toward servicing debt even with the decline in interest rates during the period. According to the findings of the Federal Reserve Board’s 2004 Survey of Consumer Finances, released in February 2006, three important shifts in consumer finances occurred during the survey period that underlie the changes observed in family net worth.

The first shift noted in the research is the strong appreciation of house values, coupled with an increase in homeownership nationwide. Second, the survey results noted a decline in direct and indirect ownership of stocks. And third, there was a clear shift in debt load, with a dramatic increase in the amount of family debt relative to total assets.

The Survey of Consumer Finances is conducted every three years. For the most recent survey, the median value of real (inflation-adjusted) family income before taxes showed an upward trend, increasing 1.6 percent. Median real family net worth also rose 1.5 percent from 2001 to 2004 while mean net worth rose 6.3 percent.

Unlike the broad and strong gains in net worth seen in the 1998 and 2001 surveys, however, the gains from 2001 to 2004 were more modest. The most recent survey indicates that the increase in wealth was clearest in the middle income group, while gains and losses across the full demographic spectrum were mixed.

The 2004 survey results are available at


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