EconSouth (Fourth Quarter 2008)
EconSouth (Fourth Quarter 2008)
The Southeastern Economy in 2009
Employment Takes a Tumble
In 2008, on the heels of two years of weak growth, employment in the Southeast declined for the first time in five years as a result of troubled financial markets and a weak economy. Collectively, the Southeastern states lost more than 235,000 net jobs in 2008 through the third quarter, according to data from the U.S. Department of Labor. The rate of job loss is currently the same as that experienced during the 2001 recession.
Employment in the Southeast represents about 15 percent of U.S. employment and is characteristic of national employment trends. So a recovery of jobs in the region is critical to both the region's and nation's economic outlook.
Not just Florida anymore
Georgia, like Florida, had enjoyed notable job growth for several years, especially in the construction and services sectors. Only six other states, including Florida, added more jobs than Georgia between 2003 and 2006. In 2008, however, Georgia experienced the fourth-largest job losses in the nation, after Florida, California, and Michigan. Georgia's job losses have been broad based, occurring in almost every sector, most notably in manufacturing, construction, and financial activities. During the third quarter of 2008, job losses in the service and government sectors accelerated significantly. The decline in service jobs is on par with 2001 recessionary levels.
Although moderate, employment growth in Mississippi and Alabama held up for most of 2008. After the third quarter, though, Alabama and Mississippi saw payrolls begin to decline. In Louisiana, employment remained positive in 2008, but the rate of growth was much lower than during the period of recovery from Hurricane Katrina. In Tennessee, the rate of job creation turned negative in the spring of 2008 as most sectors lost jobs.
The unemployment rate in the Southeast began to rise in the spring of 2007. A spike occurred in the second quarter of 2008, around the time job losses accelerated. The unemployment rate in the region as a whole, as well as in Florida, Georgia, and Tennessee, is now at the highest level since the 1991 recession. The region's unemployment rate remained at or above the national average for most of 2008.
Employment takes multiple hits in 2008
Government sectors in the Southeast, and elsewhere in the nation, began shedding jobs because declining consumer spending was squeezing tax revenue collections. Consumer spending averaged a 2.7 percent monthly decline in 2008 through the third quarter in part because of the rapid rise in commodity prices, such as food and energy.
Employment in the services sector suffered in 2008 and is no longer offsetting losses in goods-producing industries. For most states in the region, annual growth in services employment is at or below 2001 recession levels.
Louisiana suffered additionally from the 2008 hurricane season. Approximately 20,000 job losses can be linked to Hurricane Gustav, which hit the U.S. Gulf Coast on Sept. 1, 2008. In September, Louisiana reported its largest number of monthly job losses since 2005, after Hurricane Katrina, but regained some of these jobs in October.
Job losses in the Southeast accelerated throughout 2008. Losses in payroll employment more than quadrupled in the first two quarters of 2008 and jumped another 23 percent in the third quarter. In October initial unemployment claims in the region as a whole were up more than 60 percent relative to the same month a year earlier. Even more troubling, continuing unemployment claims also trended upward, indicating that individuals are having difficulty finding work. The labor force shrank considerably in Georgia, Alabama, and Mississippi, suggesting that some people have become discouraged about seeking work (see chart 2).
Looking ahead to 2009
Because of the uncertain economic outlook, many businesses are hesitant to hire or make new investments. Seasonal hiring should be soft this winter. The surge in initial and continuing unemployment claims late in 2008 is a portent that the jobless will continue to have difficulty finding work in 2009.
Although the labor markets felt a pinch from this year's financial crisis, the full impact on employment is likely yet to come. Moody's Economy.com forecasts that employment in Southeastern states will continue to decline through part of 2009. Recovery in the labor market will be key to the region's economic outlook in 2009. Even as credit markets ease and confidence is restored, jobs must be restored for consumer spending and economic growth to improve.