Econsouth (Fourth Quarter 2006)
Southeastern Economy to Grow Modestly in 2007
Economic indicators are positive
Posthurricane employment growth in the state more than offset the approximately 22,000 jobs lost because of the hurricane. In addition, the state's unemployment rate, while still high at 7.4 percent for the third quarter, is down from the peak of over 9 percent in the last quarter of 2005 and is close to prehurricane levels.
The initial rebuilding phase boosted payrolls in the construction industry by approximately 10 percent over the year. Other sectors, such as retail trade and transportation services, have also experienced solid growth since Katrina. Although employment in the leisure and hospitality industry has not reached prehurricane levels, there have been steady gains as the coastal casinos reopened and the number of visitors increased.
The state had real per capita income growth of 3.3 percent for the first half of the year, slightly higher than the national growth rate. Incomes were bolstered in part because of the increase in both public and private transfer payments, including unemployment insurance, federal disaster relief, and insurance payouts. The increased income led to a strong year for consumer spending, which state revenues reflected. Through October 2006, Mississippi's sales tax revenue grew about 16 percent compared with 6 percent the prior fiscal year. As the replacement of destroyed household items and the spending associated with rebuilding and repairs have been significant contributors, this level of growth is not likely to be sustained. However, the level of spending should remain elevated through 2007.
Rebuilding dominates real estate
Areas such as Hattiesburg have experienced a posthurricane surge in housing demand. However, reports from the Jackson area suggest that demand for housing farther away from the coast has moderated over the year. Rebuilding in the coastal area has significantly boosted residential construction in the state, with the number of single-family building permits up by 27 percent year-to-date through the thrid quarter. In contrast, the increase in multifamily construction permits was a more modest 7 percent. The rebuilding of the Mississippi coast's housing stock should continue for the next several years. However, impediments to the recovery include the higher cost of homeowners' insurance and uncertainty about the nature of flood zone requirements in a few areas.
The rebuilding of nonresidential structures along the Gulf Coast began in earnest early in 2006. Infrastructure and road and bridge repairs have dominated, but other commercial construction projects have also made headway. For instance, the coast's casino operators pushed to quickly complete repairs and renovations so they could reopen. But, partly because of shortages of construction workers, other businesses have been slower to rebuild. Going forward, commercial construction will continue to be a strong catalyst for growth along the Gulf Coast, which should boost Mississippi's economy in the process.
Services and tourism regain footing
From August to September 2005, Mississippi lost approximately 12,000 jobs in service-providing industries because of the hurricane, but by September of 2006 employment had rebounded to be around 10,000 higher than the prestorm level. This performance was supported by strong growth in the retail trade industry and reflects the increased spending associated with the posthurricane recovery.
Employment in professional and business service industries, which grew by about 4 percent in 2006, appears to have been less affected by the hurricane than other industries.
Employment in the state's leisure and hospitality industries has not fully recovered from the devastation Hurricane Katrina caused, but the trend in recent months suggests that the industry is gaining momentum. Before the storm came ashore, the 12 casinos on the Gulf Coast employed about 15,000 people. Some reports suggest that by the end of the 2006, employment will be close to 13,000 at the 10 casinos expected to be back in business by then.
The recovery of the Gulf Coast casinos is reflected in their improving revenues (see the chart). In addition, the state's casinos on the shores of the Mississippi River have been able to maintain their revenues as the coastal casinos reopened. The outlook for the coast's tourism industry is bright as the casinos reopen, infrastructure and amenities are improved, and vacation accommodations are rebuilt.
Manufacturing relatively steady
Overall employment in Mississippi's large manufacturing sector held relatively steady in 2006, although performance was highly varied across the sector. For instance, wood product manufacturing saw significantly increased payrolls because of the posthurricane rebuilding. However, little growth occurred in the state's large transportation equipment sector in 2006 partly because of lower-than-expected sales of vehicles made at Nissan's Canton facility.
As with the rest of the nation, Mississippi's manufacturing sector will likely struggle to add jobs in 2007. While posthurricane rebuilding will continue to be an important source of demand for the wood products industry, the decline in residential construction nationally will result in lower shipments to other regions. Also, continuing a decade-long trend, payrolls are expected to decline in labor-intensive industries that face overseas competition. However, employment in the shipbuilding industry should be boosted as Ingalls Shipyard in Pascagoula received new defense contracts.