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Economic ^
Review MM
FEDERAL RESERVE BANK OF ATLANTA
SPECIAL
ISSUE
The Southeast
in 1987
N O V E M B E R / D E C E M B E R 1986
LIBRA
m
s
'^mr
President
Robert P. Forrestal
Sr. Vice President and
Director of Research
Sheila L. Tschinkel
Vice President and
Associate Director of Research
B. Frank King
Financial Institutions and Payments
David D. Whitehead, Research Officer
Peter Abken
Larry D. Wall
Robert E. Goudreau
Macropolicy
Robert E. Keieher, Research Officer
Mary S. Rosenbaum
Thomas J. Cunningham
Jeffrey A. Rosensweig
Joseph A. Whitt, Jr.
Regional Economics
Gene D. Sullivan, Research Officer
William J. Kahley
Jon Moen
Joel R. Parker
W. Gene Wilson
Visiting Scholars
Russell Boyer
William Hunter
Public Information and Publications
Bobbie H. McCrackin, Director
Public Information
Larry J. Schulz, Public Information Coordinator
Linda Donaldson
Editorial
Harriette Grissom, Publications Coordinator
Melinda Dingler Mitchell
Ann L. Pegg
Graphics and Typesetting
Cheryl B. Birthrong
Steve Gelinas
Word Processing
Belinda Womble
Distribution
George Briggs
Vivian Wilkins
Ellen Gerber
The Economic Review seeks to inform the public
about Federal Reserve policies and the economic
environment and, in particular, to narrow the gap
between specialists and concerned laymen. Views
expressed in the Economic Review are not necessarily those of this Bank or the Federal Reserve
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ISSN 0732-1813
2
V O L U M E LXXI, NO. 9, NOVEMBER/DECEMBER 1986, E C O N O M I C REVIEW
Table of Contents
Economic Overview
4
Florida Stays Out Front
15
Georgia Takes Problems in Stride
27
Tennessee Challenges Ahead
37
Louisiana The Worst May Be Over
47
Alabama A Stronger Year Ahead?
61
Mississippi Mixed Prospects
69
Index for 1986
78
Statistical Summary
80
F E D E R A L RESERVE B A N K O F A T L A N T A
3
Economic Overview
What's in store for the Southeast in 1987? In this special issue of the Economic Review,
economists in the Atlanta Fed's regional section project growth patterns for each of the six
states in the Sixth District, which includes Alabama, Florida, Georgia, and parts of Louisiana,
Mississippi, and Tennessee. States are presented in descending order of population. Gene
Sullivan, coordinator of this issue and Research Officer in charge of the regional section,
offers an overview of economic prospects for the Southeast as well. The outlook for the
Southeast depends, of course, on national economic developments. These forecasts for
the region assume national growth about the same as last year's. They also anticipate a
shift in emphasis away from reliance on consumer spending as a source of strength
nationally and toward a more vibrant manufacturing sector stimulated by the dollar's
decline. Mary S. Rosen bau m, the Research Officer in charge of the Atlanta Fed's macropolicy section, provides a closer look at national developments that will affect the
economic tenor of the region.
4
NOVEMBER/DECEMBER 1986, E C O N O M I C
REVIEW
Prospects for the Southeast
In 1987 the Southeast could see a halt t o last
year's economic slowdown and perhaps even a
modest upturn, given the right balance of regional, national, and international developments.
How manufacturing and agriculture respond t o
the dollar's decline, the path of oil prices, the
degree of weakness in construction, and consumer spending nationwide will determine whether the region's economy picks up or continues at
the same pace as in 1986.
Regardless of the overall picture for the Southeast, any gains will be spread unequally across the
states in the region, and no one state or area is
likely t o produce a spectacular performance.
However, Louisiana's e c o n o m y should finally
bottom out after a three-year slide, and Alabama
is expected t o strengthen. Florida will probably
continue, but not improve on, its strong expansion of recent years, and Mississippi seems likely
to maintain its relatively weak pace. Georgia and
Tennessee will struggle t o match last year's good
growth.
Continuing gains in population, employment,
and i n c o m e appear t o be the source of the
Southeast's economic strength. The regional rate
of growth in these areas exceeded the nation's
and stoked the demand for output in several of
the Southeast's economic sectors. Attracted by a
favorable climate, j o b opportunities, and amenities that contribute to the quality of life, people
continue to migrate to the region, settling primarily in eastern metropolitan areas. Since 1980
population increases have averaged nearly 2 percent per year for the region and exceeded 3 percent in Florida. This growth has not been uniform
throughout the Southeast, however. The western
states of the region showed a meager increase of
0.7 percent or less in 1986 because of out-migration and negligible growth in Louisiana's population.
Services and Trade Show Strength
Responding to the needs of an expanding population base, service industries, wholesale and
retail trade, residential construction, as well as
finance, insurance, and real estate showed the
most strength in 1986. Manufacturers of transporF E D E R A L RESERVE B A N K O F A T L A N T A 5
tation equipment, textiles, and f o o d also performed relatively well, meeting burgeoning demand for products from both the growing region
and the nation.
Weaknesses still exist, however. Sectors that
were ailing in 1985 made little improvement in
1986, and some deteriorated even further. Agriculture, mining, most nondurable goods manufacturing, and export trade showed continuing or
worsening strain. Nonresidential construction
and durable goods manufacturing slumped in
1986 after increasing in 1985. The decline in the
oil and gas industries struck a severe blow to the
region's manufacturing sector, which was already
hard-pressed by foreign c o m p e t i t i o n in both
domestic and export markets. Especially affected
were those firms producingdurable goods used in
the drilling industry. Unfortunately, the sideeffects from the troubled oil industry are likely t o
continue through 1987. A flattening of trends in
the oil-dependent sectors, rather than a continuation of the downward slide, is about the best that
can be hoped for.
In spite of these problems, overall job gains
should continue in the range of 3 t o 4 percent, as
they were in 1986. This was slightly higher than the
2 t o 3 percent growth for the nation (Chart 1).
The trade, service, government, and financial sectors, which account for over two-thirds of the
region's total employment, will provide the majority of the 500,000 new jobs expected for
1987.
Trade. Mirroring population trends in the Southeast, the trade sector continued to grow more
rapidly than in the nation and remained the
region's largest employer, with one-fourth of the
total jobs (Chart 2). Personal income expansion
slowed in 1986 as dividend and interest payments
fell off and manufacturing income edged up only
slightly; nonetheless, consumer spending showed
sufficient strength to keep trade moving, albeit at
a slower rate than in 1984 and 1985. Trade sector
employment rose more than 3 percent in 1986,
adding about 100,000 jobs, and should continue
that pace into 1987.
Services. Growth in the region's various service
industries, which account for one-fifth of total
employment, has surpassed even expansion in
Chart 1.
Total Employment, Southeast and
United States
180"
(Millions)
Chart 2.
Employment in the Southeast by Sector
(,4s a percent of nonfarm
employment, in thousands of workers)
(Millions)
Services
21%
United States
160"
Southeast
Trade
25%
140"
120100-
1972
1976
1980
1984
Source: C o m p u t e d b y Federal Reserve Bank of Atlanta from
monthly data released b y southeastern State Departments of E m p l o y m e n t Security and U.S. Bureau of Labor
Statistics (household survey).
the trade sector (Chart 3). In 1986 services employment posted a 4 percent increase and added
over 105,000 employees, compared with an increase of less than 3 percent for the nation as a
whole. This sector appears destined to do at least
as well in 1987. Spurred by increases in population and expansion of businesses, the region's
health, education, and legal services benefited
most from developments in the service sector.
Amusement and recreational enterprises have
prospered as more people explore ways to spend
their leisure time. Firms that maintain and repair
the exploding inventory of computers and related
equipment, now standard fixtures in most businesses, have also contributed to rapid gains in service employment. The lodging industry prospered from increased numbers of tourists and
conventions attracted to the Southeast, especially
during 1986, and prospects look good for these
areas in 1987.
Financial Services. Financial services, which
are closely related to the service sector, expanded
with similar verve in 1986. Business growth and
accompanying real estate development, along
with changes and extensions in the region's financial institutions, have stimulated employment in
the financial services sector markedly, adding
about 30,000 new jobs to total employment during 1986. Although it appeared to be slowing as
6
Source: C o m p u t e d b y Federal Reserve Bank of Atlanta f r o m data
released by southeastern State D e p a r t m e n t s of E m p l o y ment Security.
the year drew to a close, financial services employment is still likely to contribute a significant
number of new jobs in 1987.
Construction. In the past, expansion in services and trade has gone hand in hand w i t h
growth in construction. An increasing population
has typically stimulated demand for residential
housing as well as buildings for offices, stores,
warehouses, and new or enlarging businesses.
However, past overbuilding in the commercial
area and changes in depreciation allowances on
rental properties forced the region to adjust to
overcapacity in office buildings and multi-family
residential structures during 1986. Consequently,
construction began slowing during the first quarter and was faltering from its pace a year earlier as
1986 ended. Even though total construction
employment registered little or no increase for
the year as a whole, single-family residential building continued to be strong. The decline in mortgage interest rates during the year no d o u b t
contributed t o the brisk upturn in single-family
building permits, which rose by 8 percent in 1986
as contrasted with a decline of nearly 0.5 percent
in 1985. Multi-family permits, on the other hand,
declined between 1 and 2 percent from their
1985 level—a sharp drop from previous years.
Government. The government sector, the region's third largest employer with 18 percent of
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
Chart 3.
Services Employment in the Southeast
(Thousands)
Source: C o m p u t e d b y Federal Reserve Bank of Atlanta f r o m
m o n t h l y data released b y southeastern State Departments of E m p l o y m e n t Security, January 1 9 6 9 t o December 1986.
the total number of jobs, held up rather well in
1986 despite earlier forebodings of a decline due
to budget-cutting efforts. Even though employment gains slowed during the year, the government sector contributed nearly 45,000 additional
jobs t o the region's economy during 1986, and it
should continue t o provide support in 1987,
although increases are likely to weaken.
Manufacturing Remains Vulnerable
The Southeast's major vulnerability is the nondurable goods component of its manufacturing
sector. Loss of markets abroad for domestic products and continuing inroads of imports to domestic markets have reduced o u t p u t and cut
employment in these industries (Chart 4). Strengths
in other areas of manufacturing have helped
offset these weaknesses, however; since 1985
manufacturing has declined by less than 0.5 percent in the Southeast, as compared to 1 percent
nationwide. Most of the losses nationally were in
the durable goods industry.
Bright spots. Despite its overall lethargy, the
region's industrial complex shows promise in
several areas. Automobile manufacturing is one of
the bright spots. Producers of transportation
equipment such as tires, alternators, wiring harnesses, and other automobile components had a
Chart 4.
Nondurables Employment
in the Southeast
Source: C o m p u t e d b y Federal Reserve Bank of Atlanta from
m o n t h l y data released b y southeastern State Departments of E m p l o y m e n t Security, January 1 9 6 9 to December 1986.
good year due t o the continuing briskness of
domestic auto sales. Airplane manufacturing has
also strengthened this sector, though a slowdown
in shipbuilding acted as a damper in the region.
Job growth was not quite as robust in 1986 as in
1985 and fell far below the exceptionally high rate
in 1984; nevertheless, the increase of 3.5 percent
runs ahead of employment figures in any other
area of manufacturing and exceeds national j o b
gains in the transportation equipment industry
as well.
Vigor in the Southeast's poultry and fish industries during 1986 also boosted total employment.
The sharpened appetite of national consumers
for these regional products has w i d e n e d the
market and opened opportunities for extending
production and processing. Job increases in food
manufacturing have approached the 1.5 percent
rate of 1985, and prospects for 1987 may be even
brighter if possibilities for increased food exports
materialize as domestic prices drop t o match
prices abroad.
Paper and lumber products, keyed t o the region's substantial forest products industry, remain
areas of growth in manufacturing despite competition from abroad. Paper production climbed
from 1985's plateau but has yet to regain 1984's
pace. Ongoing expansion in the domestic economy and some cessation in paper imports from
7
FEDERAL RESERVE B A N K O F A T L A N T A
abroad have helped to bolster regional output
and employment. Further gains should be evident in 1987 as the dollar's decline begins t o
increase the U.S. share of the paper industry in
export markets. Anticipation of a healthy national
economy should spur domestic consumption of
paper as well.
The lumber industry has done well to hold its
own during the past year, when imports from
Canada virtually flooded the U.S. market. Despite vitality in single-family home construction, a
particularly intensive user of lumber, the region's
lumber industries garnered only a small share of
the increase in lumber demand. Lumber manufacturing employment rose by only 1 percent during the past year, about the same rate as in 1985.
More rapid growth is not likely unless Canadian
lumber products become more expensive relative t o domestic lumber, or imports are restricted
by some other means. (A Canadian export levy of
15 percent will be assessed in 1987.) The continuing demand anticipated for single-family homes
should keep lumber use high in 1987.
Source: C o m p u t e d b y Federal Reserve B a n k of Atlanta f r o m
m o n t h l y data released b y southeastern State Departm e n t s of E m p l o y m e n t Security, J a n u a r y 1 9 6 9 t o December 1986.
Serious weaknesses. Even though strength in
some areas has helped to prop manufacturing in
the Southeast, weaknesses have dominated the
sector as a whole. Total employment for 1986 fell
by around 10,000 workers from 1985's level.
Machinery manufacturing suffered the greatest
j o b losses. The tailspin of the petroleum industry,
and the attendant sharp reduction in demand for
machinery and equipment used in oil and gas
well drilling, contributed significantly to the drop
in machinery manufacturing in 1986. The need for
farm machinery remained weak as well because
of economic pressures on farmers in the region.
Lastyearthe machinery sector lost around 6,000
workers, nearly 2 percent, following on the heels
of a relatively slow 1985. Prospects are not favorable for much recovery in machinery demand for
the year ahead.
to the falling dollar was not much in evidence as
the year d r e w t o a close, largely because the dollar
did not drop significantly in relation t o the currencies of key Asian competitors other than Japan.
Import prices did not rise sufficiently t o generate a
turnaround in domestic apparel employment;
however, modernization now makes it possible
t o increase output with fewer employees, and
industry reports indicate that some expansion of
production has indeed occurred. Nevertheless,
imports still dominated a large segment of the
apparel market at the close of 1986. If the competitive position of domestic manufacturers
improves as expected in 1987, apparel employment should at least level out and could even
begin regaining some of its losses.
Employment losses in primary and fabricated
metals industries can be traced in part t o languor
in machinery manufacturing. As demand for machinery and equipment waned, metals manufacturing industries also slowed. In addition, competition from international markets in the aluminum industry has left domestic aluminum manufacturers hard-pressed, resulting in the closure of
a number of plants in the Southeast.
Apparel. The apparel industry continues t o
slide, despite a sharp drop in 1985 (Chart 5). Although the rate of decline was somewhat slower
during 1986, the recovery anticipated in response
Chemicals. Chemical production has been
perhaps the bleakest area of manufacturing in the
Southeast. In 1986, chemicals employment continued t o crumble, a pattern almost uninterrupted
since e m p l o y m e n t reached its peak in 1979
(Chart 6). In 1986 it slid by over 4 percent, more
than double the drop in 1985, falling a total of 20
percent since 1979. Although the downward
trend flattened during the latter portion of the
year (in contrast t o an upturn nationally) and
could indicate the beginningof improvement,the
industry is a long way from recovery in the Southeast. Domestic production has suffered market
8
Chart 5.
Apparel Employment in the Southeast
(Thousands)
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
Chart 6.
Chemicals Employment in the Southeast
(Thousands)
Source: C o m p u t e d b y Federal Reserve Bank of Atlanta f r o m
m o n t h l y data released b y southeastern State Departm e n t s of E m p l o y m e n t Security, January 1 9 6 9 to Dec e m b e r 1986.
losses due to noncompetitive pricing; and, to
make matters worse, a significant share of the
domestic market has shriveled due to hardship in
the agricultural community. Financially burdened
farmers have cut back on expenditures for fertilizers, insecticides, and herbicides in an effort t o
economize on production costs. Man-made fiber
manufacturers have also reduced use of chemical
raw materials as their former shares of domestic
textile markets dwindle. Even with the dollar's
decline, there was no evidence of substantial
recovery in the Southeast's chemical manufacturing at the end of 1986.
Primary Sector
Agriculture. The agricultural sector in the
Southeast, as already indicated, has been faltering
since prices for agricultural c o m m o d i t i e s began
t o break under the weight of oversupplies and reduced markets in 1981. In 1986 this dilemma was
compounded in the Southeast by severe drought
that reduced production by one-third or more in
some locations. In Georgia, where the drought
was the most intense, average yields of the soybean crop were cut by nearly 40 percent. Forages
for grazing livestock were all but eradicated by the
dry, hot weather, and large portions of cattle herds
had t o be marketed for lack of feed. Although
rains returned in August and September, the
damage to most crops was irreversible, and farmers faced the dual problem of low market prices
and low production. These difficulties have further eroded the financial condition of farmers,
leaving increasing numbers of them with insufficient funds to make principal and interest payments on outstanding loans. Still dwindling land
values have left some lenders seriously exposed
because collateral values are no longer sufficient
to secure loans outstanding to farmers. Lenders in
the Farm Credit System and the Farmers Home
Administration, especially, face heavy loan losses.
The incidence of bankruptcies and foreclosures is
likely to rise further in the aftermath of this unfortunate year for crop production.
On the brighter side, those farmers with little or
no debt—about 45 percent— will be particularly
helped by agricultural programs to provide supplemental income. The decline in corn prices
sharply reduced feed costs to livestock and poultry producers, creating opportunities for profitable livestock feeding. Prices of feeder livestock
increased in response to the prospects for profits,
and incomes of southeastern herdsmen rose for
the first time in several years. Thus, the livestockproducing sector can look forward to a significantly betteryear in 1987. Although crop surpluses are
likely to hold down market prices and incomes for
some time, large subsidy payments provided by
commodity programs will make the crop income
picture better than it would have been otherwise.
Oil. Debility in the oil sector pervaded the
e c o n o m y of the region's western area during
1986. The plunge in petroleum prices associated
with the worldwide glut in energy supplies has
had a major impact on energy-producing industries throughout the Southeast. Coal, natural gas,
and oil production have dropped sharply, and
employment in the mining sector has plummeted. Louisiana's economy has born most of the
brunt of this breakdown. Not only have oil field
workers been put out of work, but most other sectors of the state's economy have been pulled
down by the virtual collapse of the oil sector.
Sharp contraction in overall business activity and
the shrinkage in the state government's budget
necessitated by revenue reductions have caused
an economic squeeze that weighs down statistics
for the entire region. Financial institutions that
loaned heavily either to the oil industry or to other businesses affected by problems in the petroleum sector face severe difficulties. W h i l e
9
FEDERAL RESERVE B A N K OF A T L A N T A
prices of crude oil seem to have stabilized during
the second half of 1986, recovery of the oil industry's previous prosperity does not appear in the
cards, either in 1987 or in the foreseeable future.
Ongoing erosion of the export market share for
the region's agriculture and manufacturing industries has continued to slow trade flowing through
the region's shipping and port facilities. Cargo
volume moving along the extensive waterways of
the region, for example, has been far below earlier
expectations and signs of improvement are scarce.
The decline of the dollar and measures to subsidize agricultural trade should begin to improve
export trade flows in 1987 as domestic products
attain a more competitive status in international
markets.
Improvement Likely to Continue
Overall, the economy of the southeastern region should continue t o outdistance that of the
nation in 1987. The continuing influx of population and corresponding gains in employment and
personal income largely account for more rapid
growth in the Southeast. Single-family residential
construction should lead in the expected increases, while commercial construction is expected t o remain lackluster until overcapacity has
been absorbed. Manufacturing activities could
expand to supply a larger share of domestic as
10
well as foreign markets, although, because of
technical efficiencies achieved during recent adjustments (in the apparel industry, for example),
employment probably will not rise in proportion
to manufacturing output. Nevertheless, workers
should continue to find jobs in the burgeoning
service and trade areas so that the region's total
employment may maintain its rate of increase at 3
percent or more, a m o u n t i n g t o a b o u t half a
million new employees in 1987.
The agricultural and energy-producing sectors
will be lingering areas of weakness not only during
1987 but for many years t o come. Heavy indebtedness incurred during periods of prosperity will
continue to go unserviced, resulting in additional
bankruptcies and foreclosures among borrowers
and loan losses for lenders. The financial institutions involved heavily in agricultural and energy
loans will experience additional hard adjustments
in the months and years ahead. For the preponderance of lenders across the region, however,
encouragingeconomic prospects indicate opportunities for sound growth and improving prosperity. Overall, the Southeast seems likely t o
retain and perhaps enhance its appeal for new
residents and businesses from elsewhere in the
nation and abroad through 1987 and beyond.
— Gene D.
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C
Sullivan
REVIEW
National Outlook
Our o u t l o o k for the U.S. e c o n o m y in 1987 is
significantly different from last year's, despite the
fact that the projection for growth in the gross
national product (CNP) is essentially the same.
This forecast of 2-1 / 2 to 3 percent growth in G NP,
adjusted for prices, includes substantial changes
in the composition of output. In 1987 domestic
consumption will contribute less to the expansion of overall spending in the United States on
balance, without weakening dangerously, while
demand for U.S.-produced goods by foreign consumers will emerge as a source of strength. Advances in these t w o leading sectors will more than
offset the slump affecting business investment in
structures and the flat profile anticipated for federal government spending, yielding moderate but
sustained real growth for 1987.
Given these modest prospects for expansion,
substantial additional progress in reducing the
rate of unemployment is not expected; 1987 is
likely to end with the civilian unemployment rate
only slightly below its current level. However, barring additional tightness in the labor market and
assuming that inflationary expectations continue
winding down, price pressures should also be
quite moderate. Inflation, whether measured by
consumer prices or the GNP deflator, should remain moderate in 1987. The extraordinary price
performance of 1986 will probably not repeat
itself though, since no additional declines in oil
prices are anticipated and import prices are likely
to be higher as a result of the dollar's depreciation. Nevertheless, the underlying current of inflation should not show any alarming resurgence
before the year's end. Specifically, the GNP deflator will probably increase 3.5 percent over the
four quarters of 1987, as compared t o a surprisingly low 2.2 percent during the same period
of 1986.
A Look at the Sectors
Consumer Spending. Household spending
(personal c o n s u m p t i o n expenditure) accounts
for nearly two-thirds of total spending in the
economy. Because of its weight, even minor
variations in the level and composition of consumer spending are extraordinarily important t o
the aggregate outlook.
In 1986, when the dollar level of indebtedness
and the debt-to-income ratio had each reached
unprecedented levels, it was c o m m o n t o describe the consumer as "debt-constrained." Economists generally supposed that at some point the
burden of servicing the debt w o u l d begin to
inhibit additional spending. However, other measures of the household debt burden, such as debtto-asset levels and payment schedules, while rising,
showed a less onerous obligation. Lower interest
rates and lengthening maturities worked to keep
monthly payments manageable. In fact, consumers continued spending and borrowing freely
during 1986. Still, the assumption that increasing
debt burdens will lead to a deceleration of spending is a reasonable one, and it is likely that debt
levels will work to moderate consumer spending
in 1987. The most important fundamentals of
household spending—wage and salary growth,
asset value growth, and consumer c o n f i d e n c e will also decline slightly in 1987. This slowdown
should not be overemphasized, however: the fundamentals remain solid, and although household
spending growth may be lowerthan in 1986, it will
still lend strength to the economy.
Services will lead consumer spending, while
demand for durable goods, especially autos, may
fall below last year's level. Acceleration in purchases of durables and autos late in 1986 suggests
less buying may be planned for 1987; but this
slackening will probably have only a small impact
on total household spending, and its effects
should diminish after the first quarter.
Investment. Business fixed investment dropped
off considerably in 1986 from its earlier pace, and
continued weakness is expected in 1987. Several
factors that determine investment in plant and
equipment will not support additional spending
in 1987. Investment in structures will be held
down by fairly low and steady capacity utilization
of plants, overbuilding in the office and retail
space markets, continued difficulty and uncertainty in the energy sector, and certainly, the new
tax laws, which treat such investments less favorably. The multiple negative factors influencing
investment in structures make it easy t o forecast
marked contraction in this component. Investment in equipment is harder to predict. Though
underutilization of plant implies some general
11
F E D E R A L RESERVE B A N K O F A T L A N T A
slack in equipment use, continuing automation
and the decline in the value of the dollar bode
well for e q u i p m e n t demand. Expenditures for
investment in e q u i p m e n t will show moderate
growth, with demand gaining strength toward the
year's end.
Inventory levels are typically lower during
periods of low inflation than in times of high inflation or expected inflation. The continuation of
only moderate inflation and tight inventory control measures put in place during the last recession should keep inventory levels down and fluctuations mild, thus making inventory spending a
relatively neutral factor in the 1987 outlook.
Housing. Overbuilding and removal of tax
incentives have already had an adverse impact on
spending for multi-family housing. Since overbuilt
markets are a problem in many areas, changes in
the tax law will only exacerbate adjustments previously underway. The new tax treatment raises
the break-even occupancy rate by lengthening
the depreciation period for apartment and condominium units and restricting the usefulness of
real estate partnerships.
The picture for single-family housing is much
brighter, although still moderate. Building activity
in this segment reached record-setting levels in
early 1986 and subsided over the rest of the year.
Construction should continue in 1987 at about
the same speed as in late 1986. This slower pace,
near 1.2 million units annually, is consistent with
low mortgage rates working in a market with little
remaining pent-up demand. While single-family
housing activity for 1987 will fall below annual
averages in 1986, no additional weakening over
the year is expected.
Government Expenditures. I n late 1985 and
early 1986, government securities markets and
interest rate forecasts responded t o congressional
moves t o reduce federal government budget
deficits through the Gramm-Rudman-Hollings
Act. GNP forecasts also took into consideration
government commitment to reduced debt, predicting lower real GNP growth on the basis that
one source of aggregate demand, government
spending, had been withdrawn w i t h o u t being
completely offset by additions from other sectors.
For good or for ill, the dramatic and rapid deficit
reduction envisioned last year will not take place.
(The 1986 deficit of $220.7 billion was a record.)
Neitherare continued record deficits expected in
the future, however. The profile for the federal
deficit in 1987 and beyond is for a steady, gradual
12
Chart 7.
Value of U.S. Dollar
Measured by Two Currency Indices
( 1 9 8 0 = 100)
Source: C o m p u t e d f r o m data released b y the Federal Reserve
B o a r d of G o v e r n o r s a n d the Federal Reserve Bank of
Atlanta.
decline. Such a pattern requires true fiscal restraint, but not in the stringent proportions of the
Gramm-Rudman-Hollings plan. Although the
downsized forecast for the federal government
budget suggests no additional programs will be
created, the reduction can still a c c o m m o d a t e
funding of current services. This means less stimulus from government expenditure than in the
early 1980s; hereafter, government's contribution
to aggregate demand will be neutral for the outlook. 1
Net Exports. The most important economic
development in the United States during 1986
was the slowdown at year's end in the deterioration of the nation's net export position. Actual
improvement is expected in 1987. The impact of
the dollar's depreciation, which began in early
1985, was first felt in late 1986; but most of the
adjustment has not yet materialized (Chart 7).
The dollar's drop of nearly 35 percent since February 1985 will make goods produced in the
United States relatively less expensive than foreign wares in both domestic and foreign markets,
thus stimulating U.S. exports and moderating
import demand (Chart 8).2 This improvement in
the trade picture has already begun to appear, but
how much of the turnaround will be accomplished in 1987 remains to be seen. The average
monthly change is likely to be small, and a number of factors argue against a rapid reversal. First,
the dollar has not declined equally against the
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
Chart 9.
Spot Oil Prices
(Average of daily highs and lows,
Brent, U.K.)
Chart 8.
Import Prices
All Goods, Excluding
Fuel and Related Products
All Goods
12-j
9-
10.2
(Qui)
y
63-1
-3-
y
—
\
\ v
/
/
\
-6-
-9.8
(QUI)
-9-12-I
1
83
1
84
1
85
86
87
Source: Department of Labor, Bureau of Labor Statistics, International Division.
currencies of all U.S. trading partners. Importantly,
the dollar has retained its strength or actually
appreciated against the currencies of some of our
major trading partners, such as Canada and the
newly industrializing nations of the Pacific rim
region. Secondly, currency movements are not
the sole determinant of changes in trade patterns.
Income growth within nations that import U.S.
goods also affects trade. Western Europe currently lags behind the United States in e c o n o m i c
expansion. Latin American nations remain burdened with financing external debt, and these
countries also limit imports by various means.
Finally, the petroleum-based economies of OPEC
are in recession. Thus, the prospects are not good
for a resurgence in demand for U.S. goods led by
foreign income gains. Consequently, a narrowlybased dollar depreciation must produce a large
adjustment. Still, this change is in the works, and
its growing impact should be evident throughout
1987 and beyond.
Inflation and Unemployment
Real CNP growth of 2-1/2 to 3 percent, other
things remaining equal, is not likely t o lead t o
either a substantial increase in underlying inflationary pressures or a marked reduction in the
unemployment rate. However, in 1987 a major
shift will occur in the factors that contribute t o
3 2 1 $ per barrel
J\
3028' y ^ x
y ^
\
L
2624l
2220"
\
1816
1
I A
14 1
12'
r \ [
10
V
Q
Ö
i
85
86
(1/2)
18.10
iJ
i
i
87
Source: Piatt's Oilgram News, McGraw-Hill, weekly data.
price changes. Last year's extraordinary reductions in energy prices, especially in the price of
petroleum products, led to very low measured
inflation without materially changing fundamental price trends beneath the surface (Chart 9).
Although the benefits of low oil prices will continue, no further declines below the 1986 average
are expected for 1987. This year, then, actual
measured inflation will more fully reflect latent
price pressures. Moreover, dollar depreciation
will lend some additional inflationary momentum
by raising the cost of imports and loosening the
constraints on prices of domestically produced
goods that compete with foreign products. Taken
together, however, these t w o factors will not lead
to increases in the GNP deflator above 3 to 3-1/2
percent (as a year-over-year average), because
other sources of inflation, especially wage and
salary demands, will be quite subdued.
Job growth in 1987 may equal its rate in 1986
w i t h o u t having much impact on the civilian
unemployment rate. As in recent years, the rate of
labor force expansion may prevent healthy employment growth from being reflected in the jobless rate. The o u t l o o k for overall real growth
suggests only minor additional declines in the
level of unemployment unless the rate of increase
in the labor force decelerates substantially.
The foregoing outlook is just as positive, albeit
more cautious, than last year's. Although the
forecast remains centered on a reasonable growth
13
FEDERAL RESERVE B A N K O F A T L A N T A
rate, the downside alternative is more worrisome
than before. Still, the long-awaited bottoming-out
of the trade accounts seems to be taking place,
and its slowly spreading effects are beginning t o
appear in the production and employment data.
The critical question is whether or not future
improvements in the foreign trade position will be
adequate t o compensate for the deceleration
anticipated in aggregate domestic demand. The
indicators considered here suggest that the an-
' S e e T h o m a s J. C u n n i n g h a m a n d R o s e m a r y C u n n i n g h a m , " P r o j e c t i n g
swer is "yes." However, the challenges confronting an economy adjusting to major changes in
both the composition of domestic activity and
the external environment are great. This outlook
does not discount these adjustments but concludes that the economy is capable of adapting
while still maintaining acceptable forward momentum.
— Mary S.
2
Rosenbaum
An alternative t r a d e - w e i g h t i n g of the dollar indicates a 2 2 percent de-
Federal Deficits a n d the I m p a c t of the G r a m m - R u d m a n - H o l l i n g s B u d g e t
preciation over the s a m e period. See Jeffrey A. R o s e n s w e i g , "A New
Cuts," Federal Reserve Bank of Atlanta, Economic
Dollar Index: C a p t u r i n g a M o r e Global Perspective," Federal Reserve
1986), pp. 19-24.
14
Review, vol. 7 1 (May
Bank of Atlanta Economic
Review, vol. 71 (June/July 1986), pp. 12-23.
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
Florida Stays
Out Front
David Avery and B. Frank King
A steady stream of tourists and new
idents should keep Florida's economy
ling along, but its lead over the nation's
of growth may
narrow.
resrolrate
Florida's economy continued its better-thannational growth into 1986, though it lost some
ground as the pace of the national e c o n o m y
slackened. Migration into the state made for
healthy population expansion, and a sharp rise in
tourism boosted Florida's increasingly important
trade and service sectors, providing a firm base for
overall advance. Statewide, however, overbuilding put a damper on construction activity, and
foreign c o m p e t i t i o n limited manufacturing
growth.
In 1987 many of the same forces will beatwork.
Continuing health in the national economy should
The authors are, respectively, an economic analyst in the
regional section and associate director of the Research Department
Table 1.
Patterns of Nonfarm Employment in Florida
(Thousands of employees)
1976
Total Nonagricultural
Mining
Construction
Trade
Services
Transportation and
Public Utilities
Financial, Insurance,
and Real Estate
Government
Share
1986
Share
Absolute
Change
Percent
Change
2,812
10
167
743
606
100
0
6
26
22
4,668
10
342
1,280
1,203
100
0
7
27
26
1,856
0
175
537
597
66
0
105
72
99
182
6
246
5
64
35
192
552
7
20
337
720
7
15
145
168
76
30
362
28
16
26
63
33
49
29
17
31
24
13
1
1
1
2
1
2
1
1
1
1
529
28
25
37
127
61
49
32
15
62
24
11
1
1
1
167
0
9
11
64
28
0
3
-2
31
0
46
0
56
42
102
85
0
10
-12
100
0
Manufacturing
Lumber
Stone, Clay, and Glass
Fabricated Metal
Machinery
Transportation Equipment
Food
Apparel
Paper
Printing and Publishing
Chemicals
Source: Florida D e p a r t m e n t of Labor a n d E m p l o y m e n t Security, Bureau of Labor M a r k e t Information, Florida
1986 data.
assure sustained migration t o Florida, adding t o
the p o p u l a t i o n and augmenting d e m a n d for
goods and services. Tourism is likely to be stepped
up even more by the weakening of the dollar on
foreign exchange markets and expansions of
some of the state's recreational attractions.
Delayed reaction to the dollar's decline should
also bring employment gains in some manufacturing industries. The outlook is somewhat dimmed,
though, by several adverse conditions: construction may well slump throughout 1987, defense
contracts are likely t o continue tailing off, and
foreign competition may still limit recoveries for
both old-line and new Florida manufacturers.
Florida's Changing Economy
Florida's record of economically outperforming
the nation over the past several years is the result
16
1
1
1
1
1
Employment
Trends,
November
of the state's unusual economic structure, dominated by trade, service, and construction, as well
as continuing diversification of its manufacturing
sector. Employment patterns reveal much about
the changing Florida economy (Table 1). Total
nonagricultural employment increased by over60
percent in the state from 1976 t o 1986, but growth
from industry t o industry was quite diverse.
Perhaps the most dramatic change from 1976 to
1986 was recorded in the flourishing industries
typically called "other services." Other services
producers include, for example, engineers, consultants, private schools, hospitals, building
cleaners, laundries, and a variety of providers
whose products are not tangible. Hotels and
motels, automotive and other repair, amusement and recreation, health care, legal counseling, architectural and surveying firms, accounting,
and social work are also part of the miscellaneous
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
Chart 1.
Distribution of Nonfarm Employment, November 1986
(Florida versus United States)
United States
Florida
Trade
27.4%
Services
25.
Services
23.1%
Trade
23.9%
Other 1 %
Other 0.2%
Construction 5.1%
Nondurables 4.4%
Government
Transportation 5.3%
Government
15.4%
Durables
Finance 7%
7.2%
Construction
7.3%
16
Transportation 5.3%
-4%
Durables
11.1%
Nondurables
7.8%
Finance
6.3%
Source- C o m p u t e d b y Federal Reserve B a n k of Atlanta from data released b y the U.S. Department of Labor, Bureau of Labor Statistics, in conjunction with the Florida Department of L a b o r and Security, B u r e a u of Labor Market Information, BLS 790 Monthly
Hours, and Earnings
for
Report on
Employment,
Florida.
services. The number of employees added t o
these service firms in Florida between 1976 and
1986 registered as absolute change greater than
total 1986 manufacturing e m p l o y m e n t in the
state. Jobs in other services do not all fit the lowpay stereotype sometimes associated with service employment. Highly paid service professionals such as lawyers, doctors, and engineers
boost the annual wages for seivice workers.
Trade employment accounts for a somewhat
larger proportion of the workforce in Florida than
nationwide (Chart 1). Although the state's trade
sector distributes goods primarily to Florida residents, activity generated outside the state explains the higher concentration of trade jobs in
Florida. Tourism adds t o the state's trade employment, as does foreign commerce through several
seaports and air terminals. A relatively small
amount of wholesale and retail distribution t o
neighboring states also boosts trade. The growth
rate in trade employment has generally reflected
the rate of Florida's e m p l o y m e n t expansion
overall, rising much more slowly than in other
services.
The remaining components of Florida's service sector are measured separately and account
for about 26 percent of total state employment.
Forthe most part, j o b increases in these industries,
as in trade, have mirrored or lagged behind the
state's economy rather than moved ahead of it.
Transportation, communications, public utilities,
and government jobs have grown at about half
the state's overall rate. Financial institutions, on
the other hand, have added jobs at a somewhat
faster pace than nonagricultural employment as a
whole. As an aggregate, service producers of one
sort or another employ more than 81 percent of
Florida's nonfarm workers; this is a significantly
greater proportion than the 75 percent share of
the labor force for the same industries nationwide.
A good deal of Florida's economic robustness
can be traced to migrating retirees, w h o play an
important part in the prominence of services,
trade, and construction in the state's employment
base. The flow of these new residents has the
same effect as an industry that produces mainly
for out-of-state markets, namely transferring income and demand from outside of the state. The
influx stimulates employment, particularly in the
services, trade, and construction industries which
meet that demand.
The U. S. Census Bureau estimates that 1.4
million people migrated to Florida between 1980
and 1985, constituting 80 percent of the net
migration to the Southeast during that period.
Thanks t o this influx the state's population grew
three times as fast as the nation's in the early
17
FEDERAL RESERVE B A N K O F A T L A N T A
Table 2.
Florida's Population Growth by Metropolitan Area
(Thousands)
Percent
1980
Naples
Ft. Pierce
Ocala
Ft. Myers
Melbourne—Titusville—Palm Bay
Ft. Walton Beach
West Palm Beach—Boca Raton—Delray
Orlando
Panama City
Daytona Beach
Sarasota
Bradenton
Tampa—St. Petersburg—Clearwater
Gainesville
Lakeland—Winter Haven
Jacksonville
Pensacola
Tallahassee
Ft. Lauderdale—Hollywood—Pompano E
Miami—Hialeah
1985
86.0
151.2
122.5
205.3
273.0
109.9
576.8
700.1
97.7
258.8
202.3
148.5
1,613.6
171.4
321.7
722.3
289.8
190.3
1,018.3
1,625.7
116.7
199.2
160.0
267.5
343.9
138.1
723.0
872.2
121.1
309.9
239.7
171.9
1,865.0
197.2
369.4
825.1
330.5
214.5
1,130.3
1,762.4
Change
35.7
31.7
30.6
30.3
26.0
25.7
25.3
24.6
24.0
19.7
18.5
15.8
15.6
15.1
14.8
14.2
14.0
12.7
11.0
8.4
Source: University of Florida, College of B u s i n e s s Administration, B u r e a u of E c o n o m i c and B u s i n e s s Research, " T h e Florida O u t l o o k , " third quarter data.
1980s; newcomers to the state explained almost
90 percent of this rapid increase.
Rates of migration t o Florida depend on economic conditions in the nation as well as the state.
Past experience indicates that during periods of
high interest rates or recession, migration to Florida slows. W h e n the national housing market is
weak, potential migrants, particularly retirees, are
likely to have more difficulty sellingtheir homes in
other parts of the country. Florida's ability to produce jobs may also influence migration.
In recent years the state's population surge has
spread both geographically and across age categories. Six smaller metropolitan areas in Florida
(Naples, Fort Pierce, Ocala, Fort Myers, Melbourne-Titusville-Palm Bay, and Fort Walton
Beach), are among the ten fastest growing in the
country (Table 2). Each posted an average growth
rate above 25 percent for the 1980-1985 period.
The age mix of residents has become more
diverse in recent years, too. Retirees have been
joined by large numbers of working-age people,
w h o have filled the jobs created by the state's
burgeoning economy. In fact, the share of working-age individuals has risen relative to those aged
65 and over. Since 1980 the percent increase in
the number of residents between 25 and 44 years
of age has been greater than in any other age category.
Tourism also heightens the importance of the
service, trade, and construction sectors. About 10
percent of Florida's payroll workers provide food,
lodging, and recreation for travelers, a larger share
than employed in either financial services or construction. Though most travelers to Florida come
from the United States, a significant number of
foreigners also visit the state. Indeed, Florida attracts more foreign visitors than any other state.
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
18
Tourists stimulate business activity at general
merchandise stores, restaurants, lodging facilities,
car rental agencies, airlines, and the state's myriad
recreational attractions. Out-of-state visitors also
pump up the public sector by contributing sales
tax revenue. Like most manufacturing, but unlike
most services, tourism is exported to consumers
w h o live outside the state and thus creates additional tax revenues that enable state and local
governments to provide Floridians a level of service higher than they could otherwise enjoy
without paying appreciably higher taxes. Florida's
reliance on exporting tourism also links its economy closely to national and international developments.
Florida's harbors and its proximity t o Latin
America and the Caribbean fuel the demand for
yet another kind of seivice, in this instance related to transportation. Florida ports now handle
about $21 billion in international shipments, representing approximately 5 percent of the value of
the nation's merchandise trade. The Miami Customs District and that city's international airport
are t w o of the busiest commercial and transportation facilities in the nation. In terms of the dollar
value of trade, Miami's diversified seaport and airport activity accounts for more than half of the
state's total shipments. Tampa and Jacksonville
are the state's other major ports. Port activity, like
manufacturing, depends heavily on circumstances outside of the state. Exchange rates and the
e c o n o m i c conditions of international trading
partners play a crucial role in the performance of
this part of the economy.
Advances in manufacturing employment have
trailed behind those in services, trade, and construction over the past decade. Florida manufacturing has responded by diversifying. Although
manufacturing employment as a portion of the
state's total employment fell nearly 2 percentage
points from 1976 to 1986, it would have dropped
even more without some 100,000 new jobs in machinery and transportation equipment manufacturing. Each of these industries produces significant amounts of technologically advanced
military orspace equipment. "Machinery" includes
sophisticated electrical and electronic equipment, and "transportation equipment" includes
space vehicles and their components. Firms supplying high technology products have been responsible for a substantial part of the recent climb
in Florida's manufacturing employment.
Large defense contractors generate a considerable portion of the state's technologically oriented
production. At present, Florida ranks fifth among
all states as a recipient of defense expenditures.
These disbursements are largely for military payrolls and retirement pay, but the civilian payroll of
the Department of Defense and defense contract
spending are also significant.
Florida's employment gains in electronics and
communications equipment manufacturing have
paralleled the rapid upsurge of defense expenditures for these products. The Orlando area,
which is a center for missile systems and defense
electronics, and the West Palm Beach area, where
aircraft engines and components are produced,
account for nearly one-half of defense contracts
in the state (see map). The dollar value of Department of Defense prime contract awards in the
state rose by 23 percent from 1984 to 1985 compared to a 15 percent increase for the nation.
However, a damper on federal defense budget
expansion in 1986 and planned reductions in
1987 foreshadow a decline in contract awards
over the next several years. Florida's economy
seems unlikely to escape the adverse impacts of a
defense spending slowdown.
Basic industries such as chemicals, paper, and
lumber, once vital to the state's small manufacturing sector, have reported flat or falling employment and a dwindling employment share, while
machinery and transportation equipment manufacturing have grown. The paper industry has lost
jobs since 1976, and j o b growth has been flat for
the lumber industry despite robust construction
growth.
Agriculture is an important exporting sector in
Florida, earning gross returns of over $4 billion a
year. The citrus industry alone employs about
45,000 workers and produces a crop worth more
than $1 billion, while food processors employ
another 49,000 workers. Freezes in recent years
and the threat of the citrus canker disease have
hurt orange and grapefruit growers, and groves
are shifting to the southern, less frost-prone, part
of the state. Despite shrinking citrus acreage and
increasing import competition, however, the total
value of Florida's citrus crop has risen over the last
few years.
Other Florida farm products have not done so
well. Vegetable prices have been held down by
the rising tide of imports from Mexico and by
freezing weather. Cattle prices have also fallen as
demand for beef sagged. While sugar cane growers
generally remain prosperous, their well-being depends heavily on government assistance through
import quotas and price supports.
19
F E D E R A L RESERVE B A N K O F A T L A N T A
Department of Defense Contract Awards and Personnel
Prime Defense Contracts Awarded by County (1985)
I
j Under $50 Million
$ 5 0 Million t 0 $ 5 0 0
H
|
Million
\ Over $500 Million
Personnel by Location
0
100 -1,000
•
1,001 -10,000
yi
10,001 - 20,000
Source: D e p a r t m e n t of D e f e n s e , D i r e c t o r a t e for I n f o r m a t i o n , O p e r a t i o n s a n d
Awards by Region and State Fiscal Year 1985 a n d Department of Defense Personnel
Year
•
by State Fiscal
Q
«U
1985.
Thus the structure of Florida's economy, which
is both highly dependent on seivices and trade
and especially sensitive t o national and international e c o n o m i c conditions, is quite open.
Developments outside the Florida e c o n o m y
influence migration rates, tourism, and demand
for many of the state's manufactured goods. Exchange rates and the conditions of foreign economies play an important role in port activity,
affect tourism, and determine to some extent the
need for manufactured goods and services. This
structure has generally stood the Florida economy
in good stead, providing j o b and income gains at
rates well above the nation's for the last eight
years and a jobless rate consistently lower than
that of the United States since 1982 (Chart 2).
The Economy in 1986
Even though long-range projections typically
foresee strong expansion for the state, Florida's
economic performance decelerated along with
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
20
Chart 2.
Unemployment Rates
(Seasonally adjusted)
Florida
Table 3.
Changes in Florida's
Nonfarm Employment by Industry
(Percent, year-over-year)
United States
November
1984-1985
November
1985-191
Nonmanufacturing
Mining
Construction
Trade
Services
Finance, Insurance,
and Real Estate
Transportation and
Public Utilities
Government
4.5
0.0
2.4
4.5
6.7
3.9
-4.0
1.6
5.0
4.5
5.9
3.8
0.8
3.0
0.5
3.5
Manufacturing
Durables
Machinery
Transportation
Equipment
Lumber and Wood
Fabricated Metals
Stone, Clay, and
Glass
Nondurables
Printing and
Publishing
Food
Apparel
Chemicals
Paper
1.6
2.0
0.8
2.2
3.8
3.0
5.6
1.0
0.0
6.5
3.7
1.4
0.0
1.0
1.6
-0.5
5.4
0.0
0.0
-3.7
0.0
5.1
-0.6
-3.0
-7.7
-0.3
Industry
Source: U.S. D e p a r t m e n t of Labor, B u r e a u of Labor Statistics,
Current Population Survey.
the nation's in 1986. Both newly important sectors and old standbys were troubled. Growth in
nonfarm employment dropped from 5.2 percent
in the first eleven months of 1985 to 3.4 percent in
the same period of 1986, as compared to national
figures of 3.5 percent in 1985 and 2.7 percent in
1986. The state's unemployment rate stayed well
below the national average. As e m p l o y m e n t
growth in the state slackened, personal income
gains also slowed from the 7.9 percent gain in
1985. Florida's income growth rate nevertheless
ran ahead of that of the nation and the rest of
the Southeast.
Personal income gains in Florida generally followed the employment developments in various
sectors of the economy. Income earned in other
services and in finance, insurance, and real estate
took the lead, with advances well above the state
average, while income earned in retail trade kept
pace with the state's average. Weak components
included manufacturing, transportation, communication, and public utilities as well as wholesale
trade. Mining income fell dramatically from levels
a year earlier as dropping oil prices and subdued
demand for phosphate eroded earnings. Earnings
from mining reached nearly $1.1 billion in its peak
year, 1984, but slid to an annual rate of $620
million in the first half of 1986.
Source: C o m p u t e d b y Federal Reserve B a n k of Atlanta from data
released b y the Florida Department of L a b o r a n d Emp l o y m e n t Security, B u r e a u of Labor Market Information,
in cooperation with the U.S. D e p a r t m e n t of Labor, B u reau of Labor Statistics, BLS 790, Monthly Report on
Employment,
Hours, and
Earnings.
Florida's t w o most important individual sources
of income—transfer payments and government
payrolls—accounted for nearly three-tenths of
the state's total income in early 1986. This proportion far exceeds the income share attributable to
any other income source. Income from both
sources grew at a rate somewhat above the state
average during the first half of 1986.
Services. N o n m a n u f a c t u r i n g e m p l o y m e n t
growth mirrored both the strength of Florida's
economy in relation to the nation's and its decline
from 1985 rates (Table 3). Except for government
21
FEDERAL RESERVE B A N K O F A T L A N T A
and trade, which showed employment increases,
most service industries added jobs at about the
same rate as in 1985 or more slowly. Still, the
majority of seivice industries fared better than
manufacturers. Hotels and other lodging places,
Chart 3.
Value of Florida's International Trade
(12-month moving totals1)
Exports
health care facilities, business services, and recreational attractions registered strong year-overyear employment gains. Both state and local
government employment also increased in the
the first eleven months of 1986. Job growth in
finance, insurance, and real estate slowed from its
rapid 1985 pace but still maintained momentum.
Fueling the nonmanufacturing sector, migration maintained its high rate through 1986. Labor
force expansion which continued at almost twice
the nation's pace confirms this. At least one respected forecast (Hank Fishkind and Pam Schenker, A/f. G. Lewis Econometric Forecast, 3rd quarter
1986) stated that net migration into the state
for the year would be the highest ever. This projected growth is consistent with National Planning
Association estimates that Florida's population
will increase from 11.2 million in 1985 to 16.9
million in the year 2000.
Florida tourism, which also boosted the setvice
sector, was off to a good start in 1986, but growth
in the number of visitors slowed as summer approached. Airtravel to the state jumped sharply in
the first quarter. The uptrend tapered during the
latter part of the year, even though a rising penchant for air rather than auto travel to Florida persisted. Discount airfares and package tours to
competing vacation spots in the Caribbean may
have also played a role in the slowdown.
In contrast to airtravel, auto travel, as measured
by welcome center registrations, decreased from
1985. After rapid growth from January to March,
the next four months were all down compared to
a year ago. This pattern continues a trend which
began in 1984 toward increasing air travel and
declining or moderatingauto travel, a reflection of
the impact of discounted airfares on transportation patterns.
Deregulation has lowered airfares for heavily
traveled routes, thus encouraging more travelers
to fly rather than drive. The change has not been
entirely favorable for Florida. Discounted fares to
such popular destinations as California along with
new entries on popular routes have, in some
instances, dropped the cost of travel to more distant locations below the cost of travel to Florida.
Imports
51980
1982
1984
1986
' D a t a for the C u s t o m s District Ports of Miami a n d Tampa.
Source: C o m p u t e d b y Federal Reserve B a n k of Atlanta from data
released in U.S. D e p a r t m e n t of C o m m e r c e , Highlights
U.S. Export
of
Trade, various issues.
The dollar's decline has not only stimulated
domestic travel by Americans but also encouraged foreigners to travel in the United States.
More Latin Americans, particularly Brazilians, traveled to southern Florida.
,
Boosted by in-migration and tourism, Florida s
retail sales through the first half of 1986 continued
to surpass the nation's, expanding at an accelerating pace while national growth was falling off.
Led by strong car sales, retail purchases were up 9
percent in Florida during the first six months of
1986 compared with the same period the previous year. Auto companies' generous financing
deals gave car sales a good boost through September, but retail increases in Florida were still
down sharply from increases in the mid-teens
registered in 1984.
Both the Miami and Tampa Customs Districts
have recovered some lost ground following a
period of severely depressed export activity that
began in 1981 and ended in late 1983, but most of
the export rebound was achieved in 1984. Export
shipments continue to be very sluggish in the
Tampa District. Imports, on the other hand, have
been rising dramatically at most Florida ports
throughout the current national economicexpansion. These divergingtrends have turned Florida's
overall foreign trade position from that of a net
exporter of goods to a net importer (Chart 3).
NOVEMBER/DECEMBER 1986, E C O N O M I C REVIEW
22
Total tonnage shipped through the port of
Miami was up 3.1 percent during the fiscal year
ending in September 1986. The Miami Customs
District's export dollar volume in September 1986
was 12 percent higher than in the same month a
yearearlier, primarily due to a pickup in shipments
t o Latin American markets. Although Miami's
exports to Latin America have been increasing
lately, they are still one-fifth below peak levels
recorded in 1980.
Trade through the Tampa Customs District is
much less diversified than in Miami. Tampa's
dependence on just a few products often dramatically influences the port's trade performance.
The ports of Tampaand Jacksonville, forexample,
recently recorded dynamic import growth, primarily due t o influxes of petroleum and petrochemical products in Tampa and automobiles
in Jacksonville. On the other hand, soft world
markets for phosphate rock and allied products
have hurt Tampa's export trade.
In contrast t o other Florida ports, Jacksonville's
trade activity has been vigorous. The Port of Jacksonville continues to rank among the nation's top
centers for automobile imports. In response t o
the strong demand for imported autos in the
United States, the port handled 460,700 vehicle
units in fiscal year 1985, a j u m p of 11 percent from
imports one year earlier. Through August of 1986
Jacksonville auto imports were almost 20 percent
above the comparable period in 1985.
Government expansion also added t o state
employment rolls. State and local governments
took on 23,400 workers from November 1985 to
N o v e m b e r 1986 for an increase of 4 percent,
while the federal government increased by 2.2
percent. Florida ended fiscal 1986 w i t h a $60
million state budget surplus. Revenues were up
by 12.3 percent over 1985, and expenditures rose
by 9.7 percent. The state is moderately expanding
its sales tax base base in 1987 by cancelling all
sales tax exemptions for services, effective July
1987. The National Governors' Association expects this change to raise about $1 billion during
1987. The Gramm-Rudman-Hollings budget balancing plan has made it more difficult to predict
receipts from federal programs. Because of uncertainty about federal aid, several fiscally strong
states, including Florida, are finding alternative
ways to budget for these receipts. Florida has
appropriated $30 million from its working capital
fund fortransferto the general fund should offsets
to significant federal funds reductions be needed.
Manufacturing. Rates of employment growth
in manufacturing were up from 1985. Still, manufacturing jobs increased at only about half the
pace of nonmanufacturing gains. Production in
some parts of the machinery industry slowed.
Heavy construction, agricultural, and nuclear
equipment producers faced unchanged domestic demand. Electrical and electronic machinery
production moved ahead in 1986 as companies
with defense contracts and ties to the aircraft industry prospered. Their healthy advance was partially obstructed by a slump in semi-conductor
sales. The Challenger accident made matters
worse for both electronic and transportation
equipment makers. In its wake, contractors laid
off about 2,000 workers. Strong aircraft and boat
demand bolstered transportation equipment production and employment, though.
Lumber and w o o d manufacturing rallied somewhat in 1986 from its sluggish performance in
1985, but j o b gains are still far from the doubledigit levels of 1984 and 1983. Despite substantial
new construction in the Sunshine State and surrounding states, the lumber industry experienced
weak prices and mounting inventories. Large
amounts of Canadian lumber were reportedly
sold in the Florida market.
Import competition had an adverse impact on
nondurable manufacturing industries. Food processing registered marginal employment losses.
Chemical industry employment slid d o w n sharply from levels a year ago as agricultural chemicals
faced both feeble demand and foreign competition. Job levels in apparel and paper industries
shrank.
Construction. Between 1982 and 1984, construction in Florida raced ahead of overall economic growth as the state bounced back from the
effects of a national recession. Construction
slowed some in 1985, but the state began 1986
with overbuilding in almost all categories of construction and in nearly all geographic areas. Total
building permits were down 11 percent for the
first half of 1986 and continued to tumble during
the rest of the year. Construction e m p l o y m e n t
increases were meager. A surfeit of multi-family
residential and commercial building exists nationally, but vacancy rates are even higher in
Florida. More than three years' supply of office
space is reported in Tampa and Miami at present
rates of new occupancy. Like the state's other
real estate markets, Florida's retail space is also
overly abundant.
23
F E D E R A L RESERVE B A N K O F A T L A N T A
Single-family residential permit growth in Florida dropped to a low 0.8 percent rate during 1986,
compared t o a 15 percent rate nationally. Although Florida's employment and personal income gains have also declined since 1984, these
rates are still substantially above national rates. In
light of Florida's continuing population boom,
low single-family permit increases suggest excessive housing inventories rather than weakening demand. After strong strides in 1983 and 1984,
multi-family building permits fell by 3.2 percent in
1985 and by about twice that in 1986.
Following a national trend, office construction
also slumped. During 1986, permit values dropped
12 percent from their 1985 levels. Vacancy rates in
all major Florida office markets (Fort Lauderdale,
Orlando, Tampa, and Miami) exceeded the national rates.
Industrial construction fell more dramatically
than any other building activity in Florida. High
rates of unused capacity and dropping growth
rates in manufacturing employment and personal
income have all contributed to the curtailment of
industrial construction activity. Industrial vacancy
rates in M i a m i were nearly twice the national
rate.
Agriculture. Like construction, Florida's agriculture, buffeted by bad weather in recent years,
lost ground. There was some good news for farming in 1986, but not enough. Total farm income
appears t o be heading for its second straight
d o w n t u r n , even though the citrus season saw
continued recovery in orange groves from past
freeze damage. Total orange production rose 19
percent from the 1984-1985 season, while the
less damaged grapefruit industry increased production 7 percent; nevertheless, falling orange
prices resulted in returns $200 million less than in
the 1984-85 season. Drought and acreage reductions have also cut soybean and peanut revenues
in the northern part of the state. Livestock revenue was virtually unchanged through the first half
of the year.
Largely as a result of the problems in citrus and
row crop production, farmland values have fallen
about 10 percent since 1984. Consequently,
farmers have seen the paper value of land drop by
about $2 billion. Substantial nonfarm demand for
land suggests that favorable prices are nevertheless being paid for land destined to be used as
subdivisions or for some other nonagricultural
purpose.
The Outlook for 1987
Overall, Florida's economy next year should
continue to develop at a respectable pace, but its
lead over the U.S. economy may narrow. Most of
the strengths and weaknesses of 1986 are likely t o
persist. O n the positive side, a moderately healthy
national and international economy, the residual
effects of past dollar declines, relatively stable
energy and credit costs, recovering agriculture,
and resumption of serious work on the space
shuttle should inject some vigor into the state's
economy. The impact of these circumstances will
be most evident in seivice and trade income and
employment but should also extend to agriculture, construction, and some manufacturing industries. Continuing foreign c o m p e t i t i o n for
Florida lumber, paper, chemicals, and electronic
products, along with a defense spending slowdown and past overbuilding, will offset some of
this strength, however.
Population and Tourism. Migration into the
state will probably continue t o fuel the rise in service and trade employment in 1987. The continuing stimulus from national developments—the
weaker dollar, low oil prices, and falling interest
rates—may well set the stage for migration that
approaches the high numbers of 1985 and 1986.
The moderate U.S. economic growth expected in
1987 should step up incomes nationally, thus
prompting travel to the state and stimulating consumer spending.
Advances in tourism in 1987 promise to approach 1986's pace. Rising incomes, stable employment, and central Florida promotions should
bring more travelers t o the state. The state's
appeal t o tourists will probably be enhanced by
new local attractions, such as a $300 million
movie studio and entertainment complex being
built by the Disney Corporation outside of Orlando. A fifteenth anniversary celebration for Walt
Disney W o r l d begun in October 1986 should
increase the number of visitors t o the state. A
similar event at California's Disneyland boosted
attendance there by 19 percent.
The economic stabilization efforts of Brazil and
Argentina have produced rising tourist and business travel from these countries after a hiatus from
NOVEMBER/DECEMBER 1986, E C O N O M I C
24
REVIEW
1982 to 1985, but recent economic troubles in
those t w o countries threaten this trend. Any
adverse impact will be felt mainly in Miami, which
is again starting to grow as the business and banking centerfor U.S.-South American trade. A steady
dollar exchange rate indicates that Canada will
not make a strong contribution to Florida's tourist
growth in 1987, but travel from Germany and the
United Kingdom is likely to increase.
Construction. Despite in-migration and a significant dip in mortgage rates through much of
1986, the outlook for overall residential construction is not good. Single-family home sales will
probably be strong, but many of those sales will
merely reduce currently high inventories. Little if
any growth is expected. Florida's multi-family
construction is likely to drop again in 1987. The
new tax reform act will have a negative impact on
investment in multi-family housing. High apartment vacancy rates in many Florida cities will also
discourage construction. Nor is the Florida condiminium market likely t o recover from its malaise. The majority of the thousands of vacant
units, especially in the Miami area, will probably
remain on the market unless the dollar's depreciation or rapid recovery from debt problems strongly stimulates Latin American demand. Neither of
these developments is expected to bring sufficient recovery in 1987, though. Tax reform and
limited prospects for price appreciation are putting a damper on local buying and investing as
well, so that it may take several more years t o
absorb available condominium markets.
High office vacancy rates in all major markets
will carry over into 1987 and depress office construction. Although strong gains in service, financial, insurance, and real estate employment indicate lively demand for office space, 1987 will
probably be the year in which developers wait to
see vacant space absorbed before beginning new
ventures. The tax reform act will reinforce developers' hesitancy because it removes many of the
tax advantages for office construction.
Expansion in store construction has slipped t o
match slowed retail sales growth since 1983 and
will probably continue t o slide in 1987. No retail
sales surge is expected in 1987, and some overbuilding plagues the retail space market also.
Shrinking growth in manufacturing employment,
manufacturing personal income, and retail construction have all contributed to the curtailment
of industrial construction. These factors, along
with Miami's high industrial vacancy rate (twice
the nation's), point to a slowdown in industrial
construction that will make this sector Florida's
most vulnerable construction category in 1987
and possibly beyond.
Manufacturing. Manufacturers, especially those
in high-technology industries, face uncertain prospects in the near term. Cuts in defense spending
are likely to slow growth in this important Florida
industry during 1987. The Department of Defense
estimates that direct defense purchases in the
state will rise by 1.9 percent from 1986 to 1987,
about the same as for the nation. From 1985 t o
1986, defense purchases in Florida outpaced
those of the nation by a considerable margin.
Employment in high-technology industries will
benefit from the revival of the space shuttle program, which is scheduled to begin full-fledged
rehiring in April. Current National Aeronautics and
Space Administration plans call for the first launch
in early 1988.
Some renewed demand for the products of
Florida's manufacturers seems probable as the
domestic economy expands moderately and
the dollar's decline continues to affect the U. S.
trade balance. These developments will stimulate
most of the state's manufacturers, though some
will feel the stimulus more than others. Electronics
competition may ease some, but not enough to
overcome crimps in defense spending and stagnant demand. A holding pattern in electrical
equipment manufacturing employment is about
the best that can be expected.
Some basic industries may be helped by the
weaker dollar and slowing of the nation's agricultural slide. As a consequence of the weak
Canadian dollar, Canadian w o o d and paper exports have remained highly competitive. At year's
end the Canadian government agreed t o impose
a 15 percent export levy on Canadian lumber
shipments to the United States. This should make
Florida lumber more competitive; however, the
United States also made changes in treatment of
capital gains for tax purposes which tend t o
reduce profits from timbering. Although the combined effects of the duty and tax changes are difficult to project, marked recovery in the lumber
industry is not likely.
Excess supplies and low prices in the agriculture
sector nationally are diminishing the demand for
25
F E D E R A L RESERVE B A N K O F A T L A N T A
fertilizer so that Florida's phosphate industry is
currently operating at about 80 percent of capacity. In 1987 domestic demand should stabilize
as acreage reductions slow, but foreign demand
may decline further. Because the phosphate industry has been in a lengthy period of adjustment,
supply capabilities should be increasingly in balance with demand, but any growth in the industry
is unlikely.
Farming. Prospects for the state's agriculture in
1987 are somewhat improved over recent years.
The citrus industry continues to recover from past
freeze damage, but canker remains a threat. The
crop for 1986-87 is expected to be the largest in
three years. Sugar cane growers still have a farm
program which will assist them in earning acceptable returns. Even though vegetable growers face
accelerating imports from Mexico and the Caribbean, their outlook is mostly optimistic, since
domestic demand for vegetables is rising and pro-
26
duction costs are declining. Vegetable prices have
not suffered the sharp price declines experienced
by other crops.
Conclusion
In the year ahead, Florida's employment and
income should continue to rise at a rate somewhat above the nation's. The pace of growth will
be influenced strongly by the way the U.S. economy and economies abroad reactto past declines
in the dollar. The speed at which the state can
absorb its excess inventory of buildings is another
important factor that will bear on Florida's economic prognosis. Unless migration and tourist
flows slow substantially, however, the Sunshine
State's economic outlook for 1987 will remain
fairly bright.
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C
REVIEW
Georgia Takes
Problems in Stride
Joel Parker and Jody Lipford
A rebound
in manufacturing
will help
Georgia's economy grow faster than the
nation's again in 1987, despite
construction slowdowns and an ailing farm sector.
Georgia's economy grew faster than the nation's
in 1986,in spite of a lagging manufacturing sector,
farm woes, and slackening construction activity.
The state's economic expansion will probably
continue exceeding that of the United States and
most of the Southeast in 1987, but the pace will
again slow and growth will become more uneven
than in the recent past. No striking departures from
the pattern of 1986 trends are predicted for
1987.
Economists expected advances to taper last
yearfrom the brisk rate in 1985, and the numberof
new jobs created dropped dramatically from
117,000 in 1985 t o an estimated 79,000 in 1986.
The balance of strengths and weaknesses in the
state provided some surprises, nonetheless.
Employment in wholesale and retail trade showed
the most gains. The cheaper dollar, however,
did not deliver the benefits anticipated by Georgia's large manufacturing sector, which barely
edged ahead. The service sector, usually a boon
The authors are, respectively, an economist and former intern
in the regional section of the Atlanta Fed's Research Department
F E D E R A L RESERVE B A N K O F A T L A N T A 27
Table 1.
Percent of Employment Growth
(1985 to 1986)
United States
Georgia
Atlanta
Georgia
excluding
Atlanta
-10.6
3.9
14.3
2.0
Construction
6.7
7.9
12.9
2.8
Manufacturing
-0.1
0.3
0.9
.0
Durables
-1.1
0.5
2.0
-0.7
1.3
0.2
-0.2
0.3
Transportation and Public Utilities
1.1
1.5
2.1
0.5
Trade
3.0
4.1
4.3
3.9
2.8
2.4
3.4
0.4
3.1
4.8
4.7
5.0
5.8
4.4
4.1
5.0
2.8
Employment Categories
Mining
Nondurables
Wholesale
Retail
Finance, Insurance, and Real Estate
Sen/ices
4.7
3.8
4.5
Government
1.7
1.3
2.6
0.4
2.1
Federal
n/a
2.7
3.5
State
n/a
-0.1
0.9
-0.6
n/a
1.4
2.7
0.4
2.5
2.8
3.9
1.8
Local
TOTAL NONFARM EMPLOYMENT
' L a b o r Statistic S y s t e m and the U.S. Department of Labor, B u r e a u of Labor Statistics, BLS
Hours, and
790 Monthly
Report
on
Employment,
Earnings.
to the state's economic health, hesitated a bit as a
result of problems in agriculture and construction.
Government employment also expanded, but
more slowly than in 1985. Commercial construction lost ground as predicted, but single-family
residential building exceeded the expectations of
most analysts (Table 1).
Manufacturing, the b a c k b o n e of Georgia's
economy outside Atlanta, faces the prospect of a
ragged mixture of advances and declines among
its component industries and can count on only
slightly faster overall growth than last year. Commercial construction will slow further. Nevertheless, the combined influences of trade, services,
government, single-family h o m e building, and
Atlanta's moderating e c o n o m i c vigor should
bolster areas of weakness and push the state
ahead. The rapidly growing Atlanta economy has
28
typically been strong enough t o draw the rest of
the state, but its decelerating pace may not be
enough t o fully compensate for weaknesses in
other parts of Georgia in 1987. The solid performance of some of Georgia's smaller cities in 1986
gives hope that they will reinforce Atlanta's positive influence on other areas of the state. Augusta,
Columbus, Macon, and Savannah recorded moderate employment expansion in 1986. Although
j o b growth in Augusta failed to match unusually
high gains recorded in 1985, employment rates in
the latterthree cities improved from 1985. Advances outside Atlanta, however, still d e p e n d on
manufacturing and farm-related businesses. Unless one or both of these sectors turns around,
Georgia may find it more difficult t o maintain its
economic lead over the nation in the coming
year.
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
Table 2.
Distribution of Nonfarm Employment in Georgia
(1986)
Georgia
Employment Categories
Mining
Number of
Employees
(thousands)
Percent
Distribution
Atlanta
Number of
Employees
(thousands)
Percent
Distribution
Georgia
Excluding Atlanta
Number of
Employees
(thousands)
Percent
Distribution
0.52
8.3
0.31
1.4
0.11
6.9
Construction
157.2
5.96
82.9
6.27
74.3
5.64
Manufacturing
556.1
21.07
184.7
13.98
371.4
28.19
Durables
218.7
8.29
97.3
7.36
121.4
9.21
Nondurables
337.4
12.78
87.4
6.61
250.0
18.97
Transportation & Public Utilities
164.9
6.25
106.8
8.08
58.1
4.41
Trade
674.5
25.56
379.9
28.75
294.6
22.36
Wholesale
202.7
7.68
136.0
10.29
66.7
5.06
Retail
471.8
17.88
243.9
18.46
227.9
17.30
Finance, Insurance, & Real Estate
143.1
5.42
93.0
7.04
50.1
3.80
Services
480.9
18.22
291.0
22.02
189.9
14.41
Government
453.1
17.17
181.6
13.74
271.5
20.61
96.6
3.66
39.6
3.00
4.33
State
104.3
3.95
35.6
2.69
57.0
68.7
Local
252.2
9.56
106.3
8.05
145.9
11.07
2,638.7
100.00
1,321.3
100.00
1,317.4
100.00
Federal
TOTAL NONFARM EMPLOYMENT
5.21
Source: C o m p u t e d b y Federal Reserve B a n k of Atlanta from January t h r o u g h N o v e m b e r 1 9 8 6 data released b y the Georgia Department of Labor,
L a b o r Statistic S y s t e m and t h e U.S. Department of Labor, Bureau of L a b o r Statistics, BLS 790 Monthly Report on
Employment,
Hours, and
Earnings.
A Concise Guide to the
Georgia Economy
Wholesale and retail trade play a greater role in
Georgia's economy than they do in the nation's.
About 25 percent of the state's jobs in 1986, as
compared t o 23.5 percent in the United States,
came from businesses in those sectors (Table 2).
Trade accounts for 15 percent of Georgia's personal income (Table 3). More than half the state's
trade workers live in the 18-county metropolitan
Atlanta area, which serves as a regional distribution center for the state and the Southeast and
maintains a high concentration (67 percent) of
Georgia's wholesale e m p l o y m e n t . Atlanta's role
in distribution makes the entire state responsive
to economic conditions elsewhere in the Southeast.
While trade is the largest employer in Atlanta
and in the state as a whole, manufacturing occupies the lead position in the rest of Georgia and
FEDERAL RESERVE B A N K O F A T L A N T A
is likely to be the swing factor in Georgia's economy during 1987. In 1986 manufacturing produced 15 percent of Georgia's total personal
income and employed about 21 percent of the
state's nonfarm workers. Textile and apparel firms
account for 12 percent of the state's manufacturing jobs and hold a strategic position in the
Georgia economy outside Atlanta, where 28 percent of all nonfarm jobs depend on manufacturing. Textiles claim a share of e m p l o y m e n t in
Georgia five times that of the nation, and apparel
employment is nearly twice its proportion nationally. In Atlanta, where only 14 percent of the jobs
are in manufacturing, producers of automobiles
and aircraft form the single most important manufacturing group.
The wide range of activities included in " o t h e r
services" constitute the third largest component
of Georgia's economy and supplied 18 percent of
its jobs in 1986. Services account for 22 percent of
Atlanta's employment, just slightly less than in the
29
Chart 1.
Employment Distribution in
Miscellaneous Services
(Georgia versus United States, 1982)
Table 3.
Sources of Personal Income in Georgia
(Second quarter 1986, seasonally
adjusted annual rate)
Total
($ million)
Percent
of Total
572
0.7
4,295
15.0
Durables
5,805
7.0
Nondurables
6,699
8.0
5,663
6.8
Georgia
3 United States
5.2
12,504
30 -| Percent
Mining
Construction
Manufacturing
Transportation, Communication
and Public Utilities
12,271
14.7
Retail Trade
6,424
5,847
7.0
2015-
10-
7.7
Wholesale Trade
25"
Trade
Finance, Insurance,
and Real Estate
4,131
5.0
Services
11,505
10,581
12.7
713
0.9
Dividends, Interest, and Rent
10,658
12.8
Transfer Payments
10,418
12.5
83,311
100.0
0
Farming
Source: U.S. Department of C o m m e r c e , Bureau of E c o n o m i c
F
< iì- Co -i* i- C
¡
3
/
i* / Ì / /
^ & $
g
^
13.8
Government
5 -
Q
^
/
/
/
J?
d?
t4w
^ <
?
<? /
o°
^
/
V
Source: C o m p u t e d b y Federal Reserve B a n k of Atlanta from data
released in U.S. D e p a r t m e n t of C o m m e r c e , Bureau of
the C e n s u s , 1982 Census of Service Industries,
Geographic Area Studies, Georgia, N o v e m b e r 1984.
Analysis.
United States as a whole. Outside Atlanta, however, as is the case in trade, services provided only
14 percent of all nonfarm jobs, lagging behind
manufacturing and government. This group of
businesses appears t o exert a stabilizing influence
on employment. Major segments of the service
category, such as automotive and other repair as
well as medical and legal services, provide relatively steady work and depend more on populat i o n growth and demographic factors than on
business cycles (Chart 1). Atlanta, with its large
share of service jobs, has benefited most from that
stability in the past. However, as the city increases
its share of more cyclically sensitive service providers such as advertising firms, architects, engineers, consultants, and convention and tourist
30
businesses, it becomes more vulnerable to national and international events such as business
cycles and changes in the dollar's value.
Government has been one of the most stable
elements of Georgia's e c o n o m y , t h o u g h its
employment share has declined in recent years.
By 1986, it had slipped behind services t o fourth
place in share of total nonfarm employment but
still almost matched services in percent of the
state's personal income.
Although trade, manufacturing, services, and
government together account for over 80 percent
of Georgia's nonfarm workers, the remaining industries often exert an important influence on the
state's economy. Two of the smaller employment
categories that remain relatively stable are the
transportation, communication, and public utilities industries as well as finance, insurance, and
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
real estate. Though employment gains in transportation have slowed and communications
employment has been cut back as an efficiency
measure in response to increased competition,
this area has nevertheless remained steady. Employment in finance has enjoyed more rapid but
similarly stable growth.
Construction and agriculture are strongly cyclical. Though these t w o sectors employ a relatively
small proportion of the state's labor force, their
influence is magnified bytheirstrongresponsesto
changes in factors affecting them. Construction
typically responds sharply to statewide changes in
income and t o over- or undersupply of buildings.
Agriculture, which exerts a significant influence on
the economy of rural Georgia, likewise reacts t o
external influences such as weather, the dollar's
value, and the level of farm output in other areas
of the world.
Over the past several years, trade, transportation, and the services orientation of Atlanta's
economy have combined to fuel a growth rate in
Georgia faster than the nation's. Because of this
economic strength, Georgia yearly attracts and
employs large numbers of new residents, w h o in
turn contribute t o the state's prosperity by adding
to income and increasing demand. Slowing economic growth has tapered the inflow somewhat,
but it remains substantial. Georgia's e c o n o m y
created enough new jobs in 1985 and 1986 t o
employ newcomers to the work force from outside and inside the state as well as to help reintegrate some of the state's unemployed. Georgia's unemployment rate has declined from 6.5 t o
6.0 percent over the last two years.
and precipitate a moderate shift toward consumption of domestically produced goods as well
as strengthen exports.
Manufacturing. Because the outlook for wholesale and retail trade, services, and government is
relatively stable, manufacturing will exert a powerful influence on any changes in overall economic
performance. Georgia's manufacturing, in turn,
responds to external forces, since most of the
state's manufactured goods are consumed elsewhere. A turnaround in the nation's foreign trade
deficit would benefit many Georgia manufacturing firms; still, they could well respond sluggishly,
because most measures of the dollar's value
abroad reflect only moderate exchange rate
movements against some important foreign competitors. Thus, this large segment of the state's
manufacturing sector may see slight improvement at best.
Despite the fact that manufacturing jobs in
Georgia expanded faster than in the nation, they
have grown more slowly than total nonfarm
employment in the state for a number of years.
The former strength of the dollar on foreign
exchange markets contributed to manufacturing's
torpor and especially hurt Georgia's important
textile, apparel, and automobile producers. The
dollar's decline since early 1985 has not thus far
provoked a response in import prices sufficient t o
shift consumer purchases dramatically toward
domestic goods o r t o stimulate exports. Exporters
to the United States have apparently cut their profit margins to maintain competitive prices, and the
dollar's value has not dropped against the currencies of some Asian nations competing vigorously
for textile and apparel market share. Although in
the rest of the nation lumber and w o o d products
and chemicals showed signs of improved foreign
demand, these industries have not yet picked up
in Georgia.
Even though the margin between Georgia's
growth rate and that of the nation has been
diminishing yearly, the state will probably continue expanding at a pace slightly faster than the
nation's in 1987. Weaknesses in manufacturing
and construction seem likely t o worsen, but
momentum or even acceleration in other segments of the state economy should ensure progress.
This forecast for Georgia depends on the assumption that the real gross national product will
grow between 2.5 and 3.0 percent in 1987. It also
assumes a weaker dollar vis-a-vis other major
currencies will raise the price of imported goods
The number of jobs in nondurables and durables industries grew at markedly different rates in
1986. Nondurable industries, including textiles,
apparel and paper, account for 61 percent of the
state's manufacturing jobs. With the exception of
printing and publishing, they are registering poor
gains. Recent influxes of textile and apparel
imports as well as implementation of labor-saving
technology limited expansion of employment in
these industries to a lethargic 0.2 percent over the
1985-86 period.
In contrast, most segments of the durable goods
industries performed relatively well; employment
in this category jumped 19 percent over the last 3
Georgia's Recent Progress
and the 1987 Outlook
F E D E R A L RESERVE B A N K O F A T L A N T A
31
years, propelled by a major defense contract with
an Atlanta aircraft manufacturer and expansion
and modernization of automobile assembly plants.
The state's transportation equipment industry,
which employs almost 2 percent of Georgia's
work force, boasted 42 percent j o b growth from
1983 to 1986. Employment in the state's stone,
clay, and glass firms also advanced during this
period in response to brisk demand from the then
vibrant construction industry.
Growth in manufacturing varied throughout the
rest of Georgia, showing some signs of new
activity. Columbus, for example, will soon be
home t o the headquarters of an automobile battery factory that will create new jobs. A new paper
plant in Effingham County, near Savannah, will
employ approximately 1,000 workers when construction is completed. Augusta, the state's most
rapidly growing city outside Atlanta, continues t o
enjoy strong employment gains from new industries and expansion of existing ones. The Macon
area is developing a base of defense industries.
However, in areas of Georgia with high concentrations of textile and apparel firms, the long-run
o u t l o o k is lukewarm at best, and more plant
closings are likely.
The impact of the dollar's decline on the competitive position of Georgia manufacturers in
worldwide markets is a critical factor in the fate of
this sector. The stimulative effects of the falling
dollar were not fully realized in 1986; if they
materialize in 1987, Georgia's manufacturing sector will be a primary beneficiary. Some economists believe prices for imports will rise as foreign
producers become increasingly unable t o absorb
losses of market share by cutting profits. Third
quarter 1986 data on import prices reveal significant increases for autos, equipment, and softwood
lumber. Imported textile prices have risen moderately, but prices for the apparel c o m p o n e n t
have held steady. These price movements should
favor Georgia's lumber and machinery production as well as textiles. The outlook for the state's
apparel firms remains unimproved, though. Georgia's manufacturing will remain particularly susceptible to competition with textile and apparel
exporters like Korea and Taiwan. Because the shift
in the dollar's value has barely affected exchange
rates with these nations, manufacturing in Georgia
may not gain as much from the dollar's decline as
it does in the United States as a whole.
Even though imported car prices rose, the high
volume of sales generated by financing incentives
in 1986 will probably prevent a surge of sales in
1987. Inventory clearance made room for 1987
models on dealers' lots, but brisk sales in 1986
absorbed some 1987 demand. Georgia's automobile manufacturing employment should be
stable in 1987 unless excessive inventories become a problem. Then, employment in late 1987
and 1988 could decline.
Finally, Georgia's textile industry is heavily concentrated in carpet production, and much of the
textile rebound in 1986 was due t o strong housing
sales and office construction, which prompted
the demand for carpet. While single-family construction should c o n t i n u e stimulating carpet
demand, barring a rise in mortgage rates, the curtailment of multi-family construction and most
types of commercial building will weaken the carpet segments of the textile industry in the coming
year. Combined, these effects will still bolster
manufacturing employment in Georgia, but the
support will be modest.
Construction. An expected decline in the construction industry will be the second most important factor in Georgia's 1987 economic outlook.
Construction in the state faced slower expansion
in 1986, but its rate of e m p l o y m e n t gain was
higher than most other industries. Single-family
residential building, propelled by falling interest
rates, starred in this show, taking off at a pace
exceeding that of 1984 and 1985 (Table 4). The
average effective rate on 30-year fixed rate mortgages in Atlanta dipped below 10 percent in 1986,
the lowest level since 1974. Vigorous population
and e m p l o y m e n t gains, b o t h exceeding the
national averages, further stimulated demand for
housing. Of the state's six largest metropolitan
areas, only Savannah failed to show a strong increase in residential building during 1986.
Georgia's store and industrial construction
showed surprising tenacity and strength as well.
The retail building pace accelerated throughout
1986, while industrial construction gains slowed
but maintained a healthy level. New store construction was motivated partly by the need t o
serve the state's expanding residential neighborhoods and partly by speculation. Though current
demand may be insufficient t o support many
recently constructed malls and shopping centers,
retailers are reserving space on the basis of anticipated demand. Additional store space stimulated building of more warehouse and distribution facilities. This flurry of construction has
resulted in a superabundance of both retail and
industrial facilities, especially in Atlanta.
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C
32
REVIEW
Table 4.
Construction Permits
(Annual percentage growth of
dollar value)
United
States
Georgia
39.66
14.08
12.16
-5.90
59.58
23.75
12.94
6.02
Single-family Residential:1
1983
65.79
1984
3.55
1985
3.32
1986
14.06
57.86
4.90
6.91
14.08
Multifamily Residential:1
56.21
1983
8.62
1984
1.80
1985
-13.14
1986
96.32
5.01
3.89
-10.12
TOTAL:
1983
1984
1985
1986
Offices:
1983
1984
1985
1986
3.43
17.96
16.94
-18.32
97.51
25.43
-2.37
-38.39
1983
1984
1985
1986
33.78
36.35
17.63
7.78
88.99
1983
1984
1985
1986
8.65
58.56
-0.89
0.75
12.23
15.69
67.22
11.39
Stores:
88.81
8.61
60.89
Industrial
' A n n u a l percent g r o w t h of units.
Source: C o m p u t e d b y Federal Reserve Bank of Atlanta f r o m data
in U.S. D e p a r t m e n t of C o m m e r c e , B u r e a u of the C e n s u s ,
Housing
Units Authorized
by Building
Permits
and
Public Contracts (C-40). 1 9 8 6 figures represent a c o m parison b e t w e e n d a t a from J a n u a r y to N o v e m b e r 1 9 8 6
a n d January t o N o v e m b e r 1985.
Not surprisingly, office and apartment construction declined from 1985 levels; for offices,
1986 was the second consecutive year of decline.
Both office and apartment markets in the state,
and particularly in Atlanta, had developed excess
capacity that forced down effective lease rates
and, thus, profitability. This factor alone w o u l d
have eventually triggered construction slowdowns; however, imminent tax reform sealed the
issue and precipitated office and apartment
development decreases in Georgia as well as the
nation. Buildings that could scrape along financially with 70 percent occupancy will need higher
levels underthe new tax law. As a result, construction activity tumbled.
Construction-related employment and personal income in Georgia during the coming year
are expected t o be below their 1986 levels.
Single-family residential activity, though difficult
to anticipate for 1987, will probably finish the year
below its 1986 level. This prognosis is based on
the fact that population and total employment
growth, t w o key factors in housing demand, are
expected to increase more slowly in 1987 than
1986. Atlanta may nevertheless show some single-family housing growth because it generates
more jobs than the rest of the state and attracts a
disproportionately large share of new Georgia
residents.
Multi-family residential and office construction
in Georgia will decline again during 1987. For the
most part, lenders will be hesitant to fund new
development. During 1987, and perhaps 1988,
these two real estate categories will be absorbing
current excess space. Vacancy rates, especially in
Atlanta where much of the activity has been in the
past, are so high that little new activity is likely.
Trade. Trade, services, and government should
anchor Georgia's economic prosperity in 1987.
Each segment will probably advance more slowly
than in 1986, though. Trade sector j o b growth in
Georgia slackened from a strong 7 percent average annual rate between 1983 and the end of
1985 t o a little over 4 percent during 1986. This
rapid deceleration may have been partially in response t o Atlanta's tapering general merchandise
sales growth, which dipped from 7.6 percent in
1985 to 6.2 percent in 1986. The drop in sales
growth suggests that the rapid 7 percent yearly
trade employment advances would have been
unsustainable overthe longhaul, since the pool of
personnel would then have grown faster than the
demand for their services.
33
FEDERAL RESERVE B A N K O F A T L A N T A
Trade activity and e m p l o y m e n t will m o v e
ahead in 1987 but less vigorously than in 1986.
The overall economic expansion expected forthe
state should pull trade activity along with it. The
state's vibrant single-family housing market has
been an important source of trade growth in past
years because recent home buyers, allowing for
some lag time, tend to make major purchases of
appliances and home furnishings as well as secure
the services of lawyers, real estate agents, inspectors, landscapers, and decorators. Despite the
marginal decline in demand expected for singlefamily units, there is still room for a relatively brisk
level of sales in 1987. The improvement anticipated in the state's manufacturing sector could
also generate income growth and fuel retail and
wholesale sales and employment growth. Lower
income tax rates will give consumers more disposable income to spend as well.
On the negative side, lack of vigorous growth in
the regional e c o n o m y will slow e m p l o y m e n t
gains in the state's wholesale trade. Tax reform
legislation, because it eliminates the deductibility
of interest on revolving credit and charge card
accounts used t o finance an important segment
of retail sales, could'also constrain spending.
However, gains in population and income should
balance these hindrances to reinforce trade sector growth.
Services. Almost as surprising as the manufacturing sector's weak response to the falling dollar
was slower growth in Georgia's usually stalwart
service industries. Services employment expanded at an average annual rate of over 6 percent from
1983 through 1985, but the pace tapered to 4 percent from 1985 through 1986. The nation experienced a similar but smaller slowdown.
The damper on Georgia's services growth can
be traced t o the state's 1986 drought, continuing
agricultural recession, and the beginning of a
decline in commercial construction, all of which
cut into demand for business services. Business
services such as advertising, credit reporting,
employment agencies, and data processing firms
constitute the state's single largest service component, accounting for 28 percent of all service
employment. Much-needed rain and the resulting resurgence of Georgia's farm industry in the fall
of 1986 boosted services demand by the agricultural sector, but the market for business services among real estate and construction firms
slowed throughout the year. The state economy's
less vigorous rate of advance in 1986 also acted as
a general drag on services. Though the lodging
34
and amusements components of the service
industries performed well, riding the crest of a
strong wave of tourism, this strength was not sufficient to overcome weakness among business
services.
Setbacks in the service sector were more severe
in Georgia than the United States as a w h o l e
because the precipitating industries, farming and
construction, constitute larger parts of the state's
economy than the nation's. Georgia's farm sector
accounts for about 4 percent of total state employment, compared to roughly 3 percent for the
nation, and construction's share of 1986 employment in Georgia is 22 percent above the national norm.
The t e m p o of services expansion during 1987 is
not likely regain its previous pace. Weaknesses in
the state's construction and agriculture industries
are not expected t o improve much in 1987; indeed, they may worsen. The vigor anticipated in
lodgingand amusements will not be enough t o lift
services expansion in 1987 above its level in
1986.
Tourism. Georgia tourism reinforces demand
for services as well as goods sold by the state's
retailers and wholesalers. Tourism enjoyed an
excellent year in 1986, thanks to a variety of
economic developments. The home mortgage
refinancing surge of 1985 and 1986 may have
created discretionary funds, often channeled
toward vacations and other non-essentials. Some
contend that the 1986 stock market surge caused
a "wealth effect," which loosened consumers'
purse strings by giving them a cushion of appreciating equities. A national inflation rate of less
than 2 percent in 1986 combined with moderate
personal income growth also enabled households to budget more for travel. In addition, the
dollar's decline relative to many other currencies
and the threat of terrorism against Americans
abroad made international travel more expensive
and risky.
Tourists are expected t o spend even more in
the state in 1987 after a good year in 1986. The
dollar's fall will probably c o n t i n u e t o inhibit
foreign travel. Moderate gasoline prices and effective advertising at the state level have boosted
prospects for car travel in the State of Adventure,
and concern about violence to Americans traveling in Europe may divert many vacation dollars to
domestic travel.
Government. In contrast t o trade and services,
government has captured a declining proportion
of Georgia's jobs and income. Over the period
NOVEMBER/DECEMBER 1986, E C O N O M I C
REVIEW
from 1983 to 1986, government employment in
the state grew 1.3 percent annually, compared to
a 5 percent increase for total nonagricultural employment. Total personal income gains likewise
outstripped growth in personal income from government sources by more than four percentage
points over the same period.
To finance its expenditures, Georgia relies on
sales tax receipts for almost 50 percent of its total
tax revenues; individual income taxes account for
38 percent; and corporate income taxes supply
another 9 percent. Compared with state governments across the nation, Georgia's reliance on
individual and corporate income taxes is relatively
high; its dependence on sales tax revenues is
comparable to that of other states. Unadjusted for
income differentials, Georgia ranks 37th (one
being the highest) in per capita taxes.
Though Georgia has not changed its tax rates in
recent years, its tax revenues have grown rapidly
in response to strong population and per capita
personal income gains. The state's faster-thannational population growth alone would increase
personal income and tax revenues; however, the
substantial rise in revenues is largely the result of
marked advances in per capita personal income.
Both have led t o hefty increases in sales and
individual income tax receipts.
Georgia revenue collections will be tempered
in the future by slowing income growth and possible reductions in federal revenue sharing. As
Georgia's per capita income growth regresses
towards the national average, tax collections may
slow as well. The availability of federal funds is
also in question as congressional concern about
reining in federal deficits casts a shadow over
federal transfers t o all levels of government.
Georgia's 1987 budget assumes the same federal
fundingas in 1986, which meansthat state general
revenues could be reduced if federal revenue
sharing cutbacks are implemented.
Transportation, Communication, and Public
Utilities. Paralleling the deceleration of government jobs, the state's transportation, communication, and public utilities industries fell from a 4
percent annual average rate of employment increase between from 1983 and the end of 1985 t o
just short of 2 percent from 1985 to 1986. This
sluggishness, largely attributable to slower expansion by long distance telephone carriers and electric utilities, has also resulted in a falling share of
Georgia employment for transportation, communication, and public utilities. The weak growth
experienced in 1986 is expected t o continue in
F E D E R A L RESERVE B A N K O F A T L A N T A
1987. No developments appear on the horizon t o
accelerate growth in this usually sedate group of
industries. Still, these industries are t o o small a
part of the state's e c o n o m y t o hamper overall
state growth significantly.
Finance, Insurance, and Real Estate. Finance,
insurance, and real estate industries are another
relatively small group of employers in the state,
which have nonetheless added jobs at a fast, consistent pace.
Employment growth in this industry group shows
no signs of peaking yet, though the national
growth rate exceeded the state's early in 1986 for
the first time in several years. The outlook for this
component of Georgia's economy is for continuing, though slowing, growth during the coming
year.
Finance, insurance, and real estate jobs in
Atlanta constitute a higher percentage of the
area's employment than in the nation as a whole,
indicating some saturation may be taking place.
Atlanta's employment growth in these industries
stood at 4 percent compared to national figures
of almost 6 percent over the same period in 1986,
suggesting that opportunities for expansion in
Georgia's financial segment may be better outside the capital city.
Agriculture. Georgia agriculture continues t o
endure hard times. Personal income from farming
p l u m m e t e d a dramatic 40 percent in 1985 t o
reach afive-year low of $2.7 billion. Totals for 1986
will probably show further losses. Unprofitably
low yields and government acreage reduction
programs have slashed the number of acres planted by 33 percent since 1981, when 6 million acres
were in production. Over the past 3 years, an
estimated 6,000 Georgia farms have either ceased
operation or been absorbed into other farms. The
financial distress of Georgia's farm sector has had
an adverse impact on the entire state economy,
especially in rural counties.
A combination of factors has led to the difficulties facing Georgia's agricultural sector. Low
prices as a result of excess world supplies have
been at the root of Georgia farmers' misfortune.
The price of soybeans, for example, has dropped
nearly 30 percent over the past two years. Lower
crop and livestock revenues reduced farm cash
receipts by 14 percent during 1985. The summer
of 1986 brought still another disastrous drought,
the worst in recent years, prompting cattle herd
sell-offs that depressed beef prices. Compared
with 1985, estimated yields per acre for peanuts,
cotton, and corn were down substantially. High
35
production in other areas of the nation ruled out
an increase in crop prices and further hurt farm
revenues. Although government aid has mitigated
the effects of the drought, weather-related losses
by the state's farmers are still estimated at $339
million.
Barring another drought, Georgia farmers can
look for improvement in 1987. Current liquidations are painful, but they will reduce the supply
of agricultural commodities and consequently
improve prices. A strong government program
during 1987 will also help boost farm incomes.
Prospects for farm exports are more promising
because the falling dollar and lower support
prices should begin stimulating demand for U.S.
agricultural commodities.
Conclusion
Georgia's economic performance was mixed in
1986. Typically strong sectors such as retail trade,
single-family residential construction, and financial services advanced markedly. Last year's employment growth in each of these industry groups
exceeded the average rate for the three previous
years. Stung by setbacks in commercial construction and agriculture, services employment, which
36
has been among the state's fastest growing industry groups, slipped well below its usual pace in
1986. Strong performances among transportation
equipment firms helped Georgia manufacturing
escape the decline suffered by that sector nationally, but expansion was weak by any other
standard. D e m a n d for domestically produced
goods accelerated less vigorously than expected
in response to the rising costs of imports. Overall,
the state's growth was moderately above the
nation's.
Georgia's economy will probably advance in
1987 but less briskly than in 1986. Slowing commercial construction, waning automobile demand, and the continuing strength of the U.S.
dollar against some Asian currencies will hold the
economy back. Atlanta's strong service base and
its expanding role as a financial center should
anchor growth there, and a moderate turnaround
in manufacturing will spur some progress in the
state's smaller towns. Perhaps just as important,
the state's image as a land of opportunity will continue t o draw newcomers, spark employment,
and contribute t o the income gains that fuel the
state's economy. If Georgia can avoid further farm
distress and escape federal revenue sharing cuts,
the state's economy should sustain some lead on
national growth.
NOVEMBER/DECEMBER 1986, E C O N O M I C REVIEW
Tennessee:
Challenges Ahead
Jon Moen
Slower
growth
in household
nationwide
spells only modest
for this heavy
producer
of
goods.
spending
expansion
consumer
Prospects for Tennessee in 1987 are mixed and
d e p e n d largely on national and international
developments. The state's economy is similar t o
the nation's and should respond to the same forces
that help or hinder U.S. economic growth during
the year ahead. Decelerating consumer demand
anticipated in 1987 may cut into expansion of the
state's important manufacturing sector, which
produces mainly consumer goods rather than
business or industrial e q u i p m e n t . Although a
turnaround in the trade balance could offset this
effect as more consumer needs are met through
The author is an economist in the regional section
Atlanta Fed's Research
Department
F E D E R A L RESERVE B A N K O F A T L A N T A 37
of the
domestic production, the modest advance expected in the national economy portends moderate growth at best for Tennessee.
In 1986 Tennessee's personal income expanded slightly faster than the nation's. Most of the 6
percent average increase for the first three quarters in I986 came from a dramatic surge in construction earnings that helped balance the state's
lagging manufacturing sector. Employment gains
in Tennessee of roughly 4 percent between 1985
and 1986 were better than the nation's and those
of all other southeastern states. Although the
figures may be somewhat misleading since they
include part-time workers and those taking second jobs, they still indicate good growth. M o s t
of the increase t o o k place in the nonmanufacturing sector.
Trends in 1987 will mirror developments in
1986. Despite the fact that strong consumer
spending mitigated losses caused by foreign imports, income gains in manufacturing advanced at
a rate far below the average increase in earnings
for the state. Manufacturing, which accounts for
20.5 percent of the state's income, will probably
continue to flag in 1987. Tourism, a bright spot in
1986, should provide even more strength in the
year ahead. The new tax bill and overbuilding will
cause commercial and multi-family construction to continue sliding, but single-family residential construction should maintain some of its 1986
momentum. Moderate strength in housing activity nationally may help the state by stimulating
its lumber and furniture industries. Transfer payments and government employment, the second
largest source of income in Tennessee, did not
strengthen the e c o n o m y in 1986 and are not
expected to contribute much in 1987; nor will
employment in finance, insurance, and real estate
increase substantially in 1987.
Agriculture showed no significant improvement in 1987, but neither did farmers in Tennessee
experience the same financial distress that afflicted those elsewhere in the country. Some indications suggest that 1987 will be the bottom of
the trough for farming in Tennessee as well as in
the nation as a whole.
All in all, the outlook for 1987 is remarkably like
last year's, though it lacks some of the optimism of
the 1986 forecast. The new tax bill, uncertainty
about the strength of consumer buying, and an
unpredictable export market have all introduced
caution about the state's performance vis-a-vis
the nation's in 1987.
38
The Shift Away From Industry
Although the manufacturing sector's share of
total employment has been falling for the last
twenty years in Tennessee, as in the United States
generally, industry still looms larger in this state's
economy than in the nation's. As a result, Tennessee has not participated as extensively as
some other southeastern states in the national
expansion of the past few years. National trends
characterized by a weak domestic manufacturing
sector, a growing service sector, and higher defense spending have not helped states that depend heavily on nondefense industry. Instead,
U.S. economic developments have favored states
like Florida and Georgia where services and production of electronics and transportation equipment for military use play an important role.
In 1985, Tennessee's per capita earnings were
just 81.1 percent of the nation's, up only slightly
from 80.3 percent in 1982. Tennessee's lead over
the nation's rate of income growth, then, is only
slowly closing a considerable gap. However, over
the last five years the state's income trends have
stabilized and begun to follow national patterns
of growth and decline—a relatively recent development related to the shift away from manufacturing. Before 1982, Tennessee's consumer-oriented manufacturing industries made the state's
economy especially sensitive to fluctuations in
the national economy, so that nationwide declines resulted in even sharper drops for Tennessee. After the 1981 -82 recession the pressure
of import competition and labor-saving modernization, especially in chemical and textile firms,
caused industrial j o b growth t o slow significantly.
Even so, these adverse effects were partly offset
during the current expansion by strong gains in
aggregate consumption that have not been characteristic of other upswings in the national economy. Over the long run, the waning importance
of manufacturing should serve t o steady the
state's historically more volatile reactions to the
national business cycle.
Despite the fact that service and trade jobs have
more than compensated for reductions in Tennessee's industrial e m p l o y m e n t , the state will
increasingly face the problem of structural (and
hence hard-to-remedy) unemployment created
by j o b losses in the manufacturing sector. Even if
demand for manufactured goods becomes stronger, automation makes it unlikely that employment in Tennessee's industries will rise in proportion to output.
NOVEMBER/DECEMBER 1986, E C O N O M I C
REVIEW
26-i
2422-1
Chart 2.
Distribution of Manufacturing
Employment in Tennessee
1 qJPercent of total manufacturing jobs,
1986 average1)
Chart 1.
Distribution of Nonfarm
Employment in Tennessee
(Percent of total nonfarm jobs,
1986 average^)
1412-
\ Manufacturing
20-
18161412-4
ioBe'11
10-1
4-
4-
D
2-
2J
0
r ' r
è
£
J
*
£
/
^
.fi
£
»
¿s
O -s-
/
'I
s'
Ö'
/
fi
C
CL
fi
#
& -V
/cf1
/5
¿"
' J a n u a r y t h r o u g h November
'January through November
Source: Tennessee D e p a r t m e n t of L a b o r Security,
Labor Market Report, various issues.
^
V
Tennessee
Manufacturing
The share of manufacturing e m p l o y m e n t in
Tennessee is larger than in the rest of the United
States, 25 versus 20 percent (Chart 1). The largest
employer in the nonagricultural sector, manufacturing provides jobs for 486,000 persons out of a
total of 1.92 million. Several key factors influence the level of manufacturing employment in
Tennessee, and their particular combination suggests only weak expansion in 1987 or possibly a
continued decline. Unlike other states in the
Southeast, Tennessee's manufacturing industry is
geared more towards consumer goods such as
appliances, automobiles, and apparel rather than
heavy equipment (Chart 2). Consumer spending
is likely to grow more slowly in 1987 than in 1986,
when increased discretionary income following
the oil price cuts led to a strong surge in buying.
Although the decline in the value of the dollar will
mitigate overseas competition for several of Tennessee's industries, others will not benefit unless
the dollar depreciates more dramatically against
the currencies of all ourtrading partners—particularly Korea, Singapore, and Hong Kong. Producers
Source: Tennessee Department of Labor Security,
Labor Market Report, various issues.
Tennessee
in these countries have made substantial inroads
into U.S. markets in recent years, and many
foreign products compete with nondurable goods
like apparel and textiles produced in Tennessee.
In industries such as textiles that anticipate stronger demand, manufacturers have invested heavily
in labor-saving equipment; therefore, any expansion in output will be accompanied by less j o b
growth than in the past. Prospects for the textile
industry are a little better than for apparel, and
business showed signs of improving last year as
the fall in the dollar's value provided some relief
from competing exports. Even though the number of jobs in textiles has been dropping steadily
for nearly 20 years, it increased slightly in the third
quarter of 1986 and could stabilize or rise slightly
more in 1987. Employment in the apparel industry, which has also been contracting over the long
term, did not experience a turnaround in 1986,
and none is expected this year.
Little job growth is likely in the chemical industry, which has also seen steadily declining employment over the past 20 years, largely due to
intensive modernization and labor-saving efforts.
The decline in the dollar's value may help t o
39
FEDERAL RESERVE B A N K O F A T L A N T A
stabilize this industry because stronger demand
from textile producers and higher prices for foreign chemicals will tend to lessen competitive
pressures. At the same time, inventories of bulk
chemicals remain high worldwide, suggestingthat
increasing demand may not stimulate substantial
new production.
One bright spot in Tennessee's nondurable sector was the resumption of employment growth in
printing and publishing, an industry that has
expanded in recent years. Its output has been
mainly in the form of book publishing, with an
emphasis on religious publications. Music publication is also important, especially in Nashville.
The number of school textbooks printed is expected t o grow rapidly in 1987 as elementary school
enrollments rise nationwide.
Food processing is another industry which has
enjoyed employment growth in the last three
years. This may be due to heighteningdemand for
more prepared and time-saving foods and t o
generally lower food prices. Good growth should
continue in 1987.
The outlook for durable manufacturing is uncertain for 1987. Should the fairly strong housing
expenditures characteristic of 1986 continue,
Tennessee's lumber and furniture manufacturers
will probably keep on seeing moderately strong
demand. Employment in this area expanded 2.4
percent in the first nine months of 1986, following
three consecutive years of increase. The lumber
industry in Tennessee, which specializes in hardwoods, has been less affected than softwood producers elsewhere in the Southeast by import
competition with Canada. Hardwoods like oak
are used mostly in furniture, cabinetry, flooring,
and other specialty products, while softwoods are
used more heavily as structural components in
construction and for paper. Not only does a
strong housing industry bolster demand for cabinetry and other hardwood products, but it also
leads eventually t o furniture buying; so, this
industry should perform well in 1987. Tennessee's
home appliance manufacturers should also benefit from continuing momentum in single-family
housing construction in the state and the nation
as a whole.
Transportation e q u i p m e n t is another major
durable goods industry that has shown relatively
good growth over the past 20 years. Expansion in
this area was quite strong in 1986 thanks t o auto
plant extensions, and the rate of growth in Tennessee's output of cars and trucks probably sur40
passed that of other states. It is unlikely, however,
that auto demand will be as vigorous in 1987.
Consumer auto purchases were raised to an unsustainable level in the third quarter of 1986. This
surge of sales was due largely to special financing
packages offered t o move inventories that had
built up earlier in the year when production outstripped purchases. Car buying was also boosted
by the change in the deductibility of sales taxes
under the new federal income tax law. Some
businesses as well as individual consumers shifted
purchases from 1987 to 1986 to take advantage of
the deduction before it is phased out. As a consequence, 1987 could bring only flat t o modest
advances in Tennessee's auto industry.
The uncertainty surrounding auto demand may
have figured in General Motors' decision, announced in 1985, t o cut back its investment in the
new Saturn plant at Spring Hill. Saturn was conceived as a low-cost car t o compete in a product
area that has eluded American manufacturers.
Increasing competition from new producers in
Korea and Yugoslavia, however, has further clouded the future of demand for American-made small
cars. The plant is now expected to add 3,000 jobs
when it is completed late in the decade rather
than the 6,000 originally anticipated. A smaller
plant will probably limit expansion in related
manufacturing, and General Motors plans to buy
some components for the Saturn car overseas as
well, instead of producing them domestically as
originally planned. General Motors claims, nevertheless, that this cutback is not permanent but
rather reflects a lengthening of the development
and introduction phase of production.
Fortunately, Tennessee's manufacturing output
is only lightly concentrated in the production of
heavy business and investment equipment, as
the removal of the investment tax credit and the
lengthening of depreciation schedules starting in
1987 will keep demand for capital equipment
modest. Even though the new tax law should
encourage investment in computers nationally,
this positive stimulus will not affect Tennessee's
electronics industry, which produces mainly electrical machinery and electrical components of
transportation equipment. Exports of U.S. capital
equipment should show some improvement in
1987, but whether or not such an upswing w o u l d
substantially help Tennessee manufacturing remains to be seen.
Declining e m p l o y m e n t in manufacturing resulted in disparities among j o b growth rates across
NOVEMBER/DECEMBER 1986, E C O N O M I C
REVIEW
Table 1.
Nonfarm Employment in Tennessee's Major Cities
(Thousands)
Percent Change
1985
Monthly Average 1
1986
November
Monthly Average 1
1985-1986
November
Monthly Average 1
November
-0.9
Chattanooga
175
182
179
181
2.3
Knoxville
230
231
232
235
0.8
1.7
Memphis
384
389
387
394
0.8
1 -3
Nashville
Tennessee
426
435
431
441
1.3
1.4
1,858
1,902
1,930
1,980
3.9
4.1
"January t h r o u g h November.
S o u r c e : Tennessee D e p a r t m e n t of E m p l o y m e n t Security, Tennessee
Labor
the state (Table 1). Employment expanded most
in the Tri-Cities area in eastern Tennessee. Knoxville and Chattanooga, also in eastern Tennessee,
had the slowest advances in employment. Farther
west, j o b growth in Nashville proceeded rapidly,
while in Clarksville it was much slower. Several circumstances account forthe slackness in Knoxville
and Chattanooga. Manufacturing jobs in these
cities have been dwindling, and trade and service
sector employment was barely strong enough to
keep overall employment growing (Table 2). Cutbacks at the Tennessee Valley Authority (TVA) and
Oak Ridge facilities also limited j o b growth in
these t w o cities.
All in all, 1987 is not likely t o bringany reversal of
the long-term decline in manufacturing's importance as a source of employment in Tennessee. A
slowdown in consumer durable purchases and
flat demand from business investment will probably work against whatever improvement results
from better foreign trade. Income originating in
this sector should be somewhat higher due to
reasonably good productivity growth, but not
strong enough t o push beyond the reduced pace
in 1986.
Service and Trade Sectors
Broadening of the service sector in Tennessee
more than offset shrinkage in manufacturing. Service employment rose from 359,000 in 1985 t o
389,000 in 1986 (Table 3). Growth in wholesale
and retail trade was another source of j o b gains:
Market Report, various issues.
employment rose from 438,000 in 1985 to 466,000
in 1986. The trade and service sectors are a more
stable source of new jobs and tend to vary less
over business cycles than does manufacturing.
The trade sector is slightly larger as a source of
income in Tennessee than in the United States as
a whole, due in part t o the state's central location
and its position on the interstate highway and
national rail systems, which make it a natural distribution center. Tourism and population increases in the state's metropolitan areas have also
fed the growth of services and retail trade in Tennessee. While the state's overall population rose
slowly compared with that of the nation or the
Southeast between 1980 and 1985, some of Tennessee's metropolitan areas experienced significant expansion during this period. The average
annual population gain for Tennessee over the
past six years was 0.8 percent, the same as for Mississippi; however, the Nashville metropolitan
statistical area grew at a markedly faster average
annual rate of about 1.4 percent. Knoxville also
expanded more rapidly than the state. The new
residents came from shifts of population within
the state between rural and urban areas and from
an in-migration of Northerners. (Flows between
Tennessee and other southeastern states resulted
in population losses for Tennessee.) Between July
1985 and july 1986, population increased 0.8 percent, suggesting that the growth trends of the past
five years are continuing. The density of Tennessee's population, which, at 116 persons per
square mile, is greater than the U.S. average or
than that of any other southeastern state except
41
FEDERAL RESERVE B A N K O F A T L A N T A
Table 2.
Distribution of E m p l o y m e n t b y City a n d Percent C h a n g e 1 9 8 5 to 1 9 8 6
Chattanooga
Thousands
1986
Knoxville
Percent
Change
Thousands
1986
Memphis
Percent
Change
Thousands
1986
Nashville
Percent
Change
Thousands
1986
Percent
Change
-0.3
43.5
-0.6
47.9
-3.6
50.9
-2.5
90.2
Durable
16.9
-4.3
27.8
-3.9
21.9
-3.5
51.9
1.3
Nondurable
26.5
2.0
20.0
-3.3
28.9
-1.8
38.3
-2.2
136.2
3.4
184.4
2.1
336.5
1.4
341.0
Mining
1.0
-6.6
1.5
-19.4
0.1
10.0
0.7
1.6
4.7
Construction
7.0
9.9
11.5
7.8
17.8
2.6
27.4
9.6
8.0
-1.5
8.7
0.0
33.4
3.2
20.1
-8.9
55.2
-0.5
106.3
-0.8
104.4
1.4
Manufacturing
Nonmanufacturing
Transportation and
Public Utilities
38.9
-1.9
Wholesale
10.1
0.8
13.1
-1.7
34.6
-1.1
27.6
3.2
Retail
28.7
-2.8
42.1
-0.1
71.6
-0.6
76.7
0.8
2.4
Trade
Finance, Insurance
and Real Estate
Services
11.2
6.8
8.3
-6.4
23.3
4.5
29.8
40.1
11.7
50.3
3.7
87.8
0.5
95.1
1.2
3.7
63.6
2.8
Total
0.8
431.2
1.2
30.0
-0.7
48.8
4.9
179.6
Government
67.9
2.4
232.2
0.8
387.4
' J a n u a r y t h r o u g h November.
Source: Tennessee D e p a r t m e n t of Labor Security, Tennessee Labor Market Report, various issues, a n d U.S. Department of Labor, U.S. Bureau of
L a b o r Statistics, News, various issues.
Table 3.
C h a n g e s in E m p l o y m e n t
(Tennessee versus the United States)
Tennessee
1985 Average
Employment
(Thousands)
Total Nonfarm Employment
Manufacturing
Nonmanufacturing
Mining
Construction
Trade
Services
Transportation and Public Utilities
Finance, Insurance, and Real Estate
Government
1,860.9
489.4
1,371.2
8.1
82.1
437.7
359.3
91.1
89.3
304.3
United States
1986 v. 19851
1985 v. 1984
1986 v. 19851
Percent Change Percent Change Percent Change
3.9
-0.7
5.6
-9.5
4.3
7.0
8.4
0.9
0.9
3.9
2.9
-2.1
4.8
-6.3
0.6
8.4
5.3
3.3
4.3
1.3
2.7
-0.8
3.5
-14.5
6.6
2.9
5.1
0.6
6.0
2.2
'First eleven m o n t h s of e a c h year.
Source- C o m p u t e d b y Federal Reserve B a n k of Atlanta from data released by the Tennessee Department of E m p l o y m e n t Security,
Labor Market Report, various issues, and U.S. Department of Labor, Bureau of L a b o r Statistics, News, various issues.
42
Tennessee
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
Table 4.
Construction in Tennessee
(Percent change, 1985 to 1986')
Value of Nonresidential
Construction
Single-Family Permits
Knoxville
Percent
Change
1985
1986
Percent
Change
1986
10
1,605
1,213
-24
85.3
133.4
56
1,770
1
1,512
605
-60
129.3
156.4
21
3,783
1,819
-52
263.6
288.6
1986
1,425
1,571
1,761
Percent
Change
($ millions)
1985
1985
Chattanooga
Multi-Family Permits
Memphis
5,383
6,218
16
Nashville
5,225
7,569
21,685
45
8,465
6,293
-26
553.5
473.7
9
-14
25
19,193
12,883
-33
1,289.7
1,334.2
3
Tennessee
17,314
' J a n u a r y t h r o u g h November.
Source- C o m p u t e d b y Federal Reserve B a n k of Atlanta f r o m d a t a in U.S. Department of C o m m e r c e , Bureau of the Census, Housing
Authorized
by Building Permits and Public Contracts (C-40) and F. W. D o d g e , Dodge Construction
Potentials.
Florida, also creates a good environment for retail
trade and services industries.
With slight exceptions, retail trade and seivices
showed modest to sizable gains for both employment and income in 1986. In the first eight months
of 1986 the value of retail sales rose by 10.3 percent over the same period in 1985, and department store sales were up 11.2 percent over 1985.
These increases were among the highest in the
nation. For 1987 moderate growth in the trade
sector seems most likely, in keeping w i t h the
slowdown in consumption expected for Tennessee and the United States as a whole as consumers become wary of incurring more debt.
Jobs in finance, insurance, and real estate
edged ahead by about 1.0 percent in 1986, down
sharply from the 4.0 percent gain a year ago;
employment in transportation, communication,
and public utilities advanced slowly as well. These
industries are not expected t o add workers any
more quickly in 1987. The impact of the new
interstate banking laws is just beginning to be felt
in Tennessee with the takeover of Third National
Corporation in Nashville by SunTrust Bank of
Atlanta, but how the legislation will affect employment in the banking industry is still unclear.
Although the real estate industry will feel the
slowdown in certain types of residential and commercial construction, continued strong demand
for single-family dwellings should help maintain
earlier j o b gains.
Units
Construction
The pattern of new construction in Tennessee is
mixed across the state and from city t o city (Table
4). Statewide, single-family building permits rose
27 percent in 1986 over 1985, while the number
of permits for multi-family buildings—condominiums and apartments—fell sharply. The value
of nonresidential construction was also d o w n
slightly. This pattern, similar to Georgia's, is expected t o continue in light of an overbuilt office
market and changes in tax laws that make commercial real estate investment less attractive.
The larger cities in Tennessee show disparate
construction trends: single- and multi-family permits registered less change between 1985 and
1986 in Chattanooga than in other cities. Permits
issued in both categories declined in Knoxville,
with the number of multi-family permits falling
more than for the state as a whole. Nashville and
Memphis reflected statewide trends, showing a
large increase in the number of single-family permits. In all cases, the prospectforan upturn in Tennessee's multi-family construction is not good—a
prediction that applies to the rest of the Southeast
and the nation as well.
Travel and Tourism
Travel to Tennessee increased dramatically last
year. State and national parks enjoyed a 9 percent
43
FEDERAL RESERVE B A N K O F A T L A N T A
gain in visitors during 1986, and registrations at
state visitor centers j u m p e d 21 percent for the
period from January t o October compared to the
same period in 1985. August registrations were up
a full 95 percent over those in August 1985; this
unusual increase was probably the result of special advertising for " H o m e c o m i n g 1986." The
state promotional budget in 1986 was the third
largest in the United States, surpassed only by
lllinoisand Michigan, and will probably be maintained in 1987.
Homecoming 1986 was the largest statewide
celebration and promotional project in Tennessee's history, involving 39 communities around
the state. Each community researched its history,
planned for its future, selected a Homecoming
project, and staged a community celebration at
some point in 1986. Memphis's advertising campaign was particularly successful in attracting
visitors.
Air travel increased in 1986, especially in
Nashville. Airplane passenger arrivals between
January and September 1986 were up 44 percent
statewide, 24 percent in Memphis, and 42 percent in Nashville. Nashville's importance as an air
transportation center has grown as a result of its
selection by American Airlines as a regional hub.
Airfare competition, discounting, and promotional packages have also increased air travel to Nashville. American Airlines activity there recently met
with protest concerning runway expansion and
overflight noise in surrounding residential areas.
American responded by threatening t o revoke
Nashville's designation as a hub; if the company
follows through, a substantial number of anticipated jobs in the area would not be created, hindering Nashville's potential as a major southeastern transportation link.
The outlook for the tourism industry in Tennessee is as promising for 1987 as for 1986. M o d est but stable GNP growth, combined with the
lagged effects of the state's promotional efforts
in 1986, should make 1987 another good year for
travel. Slowly rising gasoline prices probably will
not deter tourists bound for the state by car. New
facilities and hotel renovations scheduled for
completion by the end of 1986 t o take advantage
of accelerated depreciation rules should further
boost travel by lowering room rates. Declining
occupancy rates suggest that hotels in some cities
like Chattanooga and Memphis are overbuilt relative t o recent growth in demand.
44
Farming and Mining
On the whole, the outlook for agriculture in
Tennessee is more optimistic than for the rest of
the Southeast because Tennessee's agricultural
sector is more diversified than that of most other
states in the region. Financial distress is less problematic for Tennessee's farmers, but even so the
numberoffarmshasshrunkfrom98,000to96,000
(about 2 percent) since 1985. Although the value
of farmland increased slightly in 1986, it is still well
below its peak of 1981.
Last summer's drought in the southeastern
United States resulted in lower levels of crop output and reduced yields per acre. At the same time,
crop prices are down about 14 percent from the
same time last year. Total production of grains like
corn soybeans and sorghum is expected to drop
by at least 20 percent in Tennessee compared t o
8 percent nationwide. O n the other hand, livestock prices are up 15 percent. The drought's
effect on feed supplies caused milk and egg prod u c t i o n t o fall off slightly from last year, and
tobacco and cotton will probably register prices
and output for 1986 lower than in 1985. In 1987,
livestock income could rise, but crop income will
be down.
The state's major mining activity—coal—is
located in the eastern half Tennessee. Employment in coal mining fell 9 percent from its 1985
average, continuing a trend begun in 1984. Demand from the TVA has helped t o keep coal
employment in Tennessee from falling even faster.
Low water levels caused by the drought have cut
into the TVA's hydroelectric generating capacity
so that through much of 1986 hydroelectric generation was about half of the normal level. The
shortfall was replaced largely by more expensive
coal-fired generation. Thus, additional demand
brought about increased employment in the second half of 1986.
Aluminum production continues contractingas
producers of raw al u m i n u m shift t o countries
where electricity is cheap and bauxite is readily
available; Brazil, for example, has benefited from
this relocation. Fabrication of aluminum products
in Tennessee should not, however, be affected by
the shift.
Government
The outlook for government and related employment is not particularly optimistic. First, the
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C
REVIEW
TVA and Oak Ridge Laboratories do not provide
as many jobs as they did in the past. Second, in
comparison to Florida and Georgia, Tennessee
has fewer industries based on defense—one area
where federal expenditures are likely to continue
despite cutbacks in 1987. State and local government employment grew faster between 1985 and
1986 than between 1984 and 1985, thus reversing
the trend toward declining government employment earlier in the decade. Much of the loss in
employment, then, was at the federal level, and
next year w o n ' t show much improvement. Despite last year's advance, state government employment is expected to grow only modestly in
1987.
Tennessee relies on sales taxes for a large
portion—about 76 percent—of its state and local
revenue and draws the rest from specific commodity taxes, licenses, and fees. The state constitution forbids the imposition of an income tax.
Because sales taxes will no longer be deductible
from federal income taxes in 1987, people may
have shifted expenditures on expensive items t o
the end of 1986, and this could create a one-time
windfall in sales tax receipts. Some states have
tied their personal income taxes to federal taxes in
a way that will generate additional state revenue
under the new tax bill. Unfortunately, because
Tennessee has no personal income tax, it will not
benefit from this change. Falling federal appropriations and cutbacks in revenue sharing will also
limit growth in state programs. While federal contributions to the state's general fund are expected
t o increase by about 6 percent, contributions to
transportation and highway projects will probably
fall by 15 percent. Federal funds for other capital
projects are likely to be cut by almost 50 percent;
however, the amounts involved are small compared t o other federal transfers. Spending on
highways and other transportation projects will
nevertheless be expanded in Tennessee if the
state goes ahead with plans t o issue a substantial
volume of bonds that w o u l d increase the Department of Transportation's budget by almost 40
percent.
Tennessee relies on federal transfers for about
31 percent of its general revenue. Although several other states receive a large share of their
general revenue from the federal government,
they, unlike Tennessee, maintain a variety of
methods for collecting revenue. Tennessee's dependence on sales taxes and license fees may
make the state more susceptible t o cutbacks in
federal funding o w i n g t o its inability t o raise
revenue by other means. A large increase in sales
tax rates could be politically more difficult t o
enact than modest increases spread across several different taxes. Debt financing of the sort proposed to fund Tennessee highways may become
more widespread in this traditionally fiscally conservative area of the United States.
The Problem of Structural
Unemployment
Tennessee's similarity to the United States suggests that it, too, is vulnerable to the problems of
economic transition and the shift in industrial
structure now affecting the U.S. economy as a
whole. Increasing structural unemployment may
become a new concern for state policymakers in
1987 and beyond. Structural unemployment is
caused by the loss of jobs in industries that are
either in long-run decline or in the process of
modernizing or automating production. The
chances that workers laid off from these industries
will return to their old jobs are slim, and their skills
are not in demand by other industries. The jobs
that are available for such workers would probably pay substantially less than previous jobs, and
many of the unemployed are unwilling t o accept
such work. The decline of the U.S. steel industry
provides a textbook example.
Structural unemployment differs from short-run
joblessness caused by business cycles. Cyclically
unemployed individuals are more likely to move
where their skills are still in demand orto wait until
they are recalled from layoff. Alternatives for the
structurally unemployed are less clear-cut in the
sense that migration or perhaps a little patience
will not help solve their problem. There's no place
t o move that will offer better opportunities in the
same line of work. Younger workers may be able
t o acquire new skills by returning to school, but
older workers could have difficulty finding new
jobs even if they are retrained.
Decline in employment in chemicals, durables
manufacturing, and apparel may present Tennessee's government with the new problem of
how to deal with this increasing structural unemployment, an issue that northern industrial states
have been facing since the late 60s. The combination of cutbacks in federal transfers and atax structure heavily weighted towards sales taxes and
licenses could make it more difficult than expected to finance state programs t o aid or relocate
45
F E D E R A L RESERVE B A N K O F A T L A N T A
these unemployed individuals. While Tennessee
has been successful in attracting new manufacturing, the long-run feasibility of such a policy for
dealing with structural unemployment is not clear.
N e w industry may benefit overall e c o n o m i c
development, but unless the structurally unemployed happen to fit the new industry's labor
requirements, selectively attracting new industry
will be a cumbersome solution at best. This is not
t o say that structural unemployment is a massive
problem hovering on the horizon; rather, it is a
new problem that the state will have t o cope with
continually as its economy becomes more and
more like that of the United States. In the past, displaced agricultural workers moved to cities or
areas where factory labor was in demand; the
alternatives for unemployed factory workers are
not yet obvious.
Summary and Outlook
In the year ahead, Tennessee's economy should
expand modestly, but its growth is contingent on
several factors. First, consumer demand for durables as well as non-durables needs to remain
strong; as noted earlier, Tennessee's manufacturing sector is geared towards producing consumer
goods. If consumer confidence falters, perhaps in
response to increasing levels of consumer debt,
continuing growth in Tennessee would be doubt-
46
ful. Second, manufacturing will have to hold its
own. Recent improvement in the international
balance of payments will not necessarily help
Tennessee's manufacturing sector. Most of the
shift in exchange rates has been with countries
like Japan and West Germany. Because trade with
these countries includes industrial and investment goods as well as electronic and other types
of consumer goods not produced in Tennessee,
Tennessee manufacturers may not see much
upswing in their exports. The exchange rates for
countries like Taiwan and Korea, which compete
with Tennessee's textile and apparel industries,
have not yet fallen much; unless they do, decreased competition from imports will not be a
significant source of growth for Tennessee's
manufacturing sector in 1987.
Continuing strong construction of single-family
homes will support manufacture of furniture and
appliances. The current farm crisis did not affect
Tennessee as severely as other states in the South
and Midwest, and so further farming growth is
expected.
Because no one sector of Tennesse's economy
is expected to be a substantial drag on its overall
performance in 1987, national and international
developments will be the factors that influence
the course of expansion. Most forecasts for the
United States in 1987 predict moderate growth at
rates similarto those of 1986; the same will be true
of Tennessee.
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C
REVIEW
Louisiana: The Worst
May Be Over
William J. Kahley
and Gustavo A. Uceda
The good news for Louisiana
is that less
bad news lies ahead—as
long as oil prices
stay fairly
stable.
Louisiana's economic outlook remains subdued
compared with prospects for the United States as
a whole, but a continuation of last year's dramatic
skid is unlikely in 1987. Over the last five years,
deterioration of Louisiana's economically crucial
energy sector has caused an almost continuous
widening of the gap between the state's jobless
level and that of the United States as a whole,
The authors are, respectively, an economist and a research
assistant in the regional section of the Atlanta Fed's Research
Department.
47
culminating in unemployment rates d o u b l e the
nation's. In 1987, however, world energy prices
are expected to be more stable than in previous
years of this decade, and this stability will help t o
halt the local economy's slide into recession.
Nevertheless, chronic fiscal problems have necessitated state and local government spending
cuts and tax increases that dim the prospect for
overall e m p l o y m e n t growth; and, if oil prices
should fall, the state's e c o n o m y surely w o u l d
ratchet downward again.
Lack of diversification links the entire Louisiana
economy t o the fortunes of the oil and gas extraction and petrochemical industries, and the impact
of the drop in oil prices has affected different sectors of the economy at different times. The state's
industrial strengths and weaknesses are also shifting within the broad, energy-sector-determined
movement of the general state economy in response t o market changes in the national economy. In 1987 overall employment as well as the
number of jobs is likely to remain flat in primary or
raw materials-producing industries such as agriculture, forestry, fishing, mining, and oil and gas
extraction. M o d e s t e m p l o y m e n t growth is in
store for Louisiana's secondary sector, which
includes manufacturing industries and construction. Manufacturing j o b gains should offset moderate employment losses that are likely in the
service industries, the tertiary sector. On balance,
then, the odds are better than fifty-fifty that Louisiana's economy has reached its trough, though it
is likely t o linger there for the next year or more.
This outlook is an improvement over prospects
in 1986 when virtually all segments of the state
economy sank during the first half of the year in
response to the precipitous two-thirds decline in
oil prices. Fortunately, e m p l o y m e n t began t o
show signs of stabilizing during the second half of
the year when the price of oil rebounded and held
at about $15 per barrel.
Whether or not the downward spiral in the
price of oil, and consequently in the state economy, had finally run its course continued to be a
critical uncertainty for Louisiana as 1986 ended.
National growth anticipated in the range of 2.5 to
3 percent in 1987, though it bodes moderately
well for the employment outlook in most states,
will not be sufficient t o fuel overall advances in
Louisiana. Local industries producing for national
markets nevertheless will benefit.
The price of oil would have to rise t o at least $18
per barrel and be expected t o stay there for some
time in order for the Pelican State economy to
48
expand more than marginally in 1987. As long as
oil holds at $15 or $16 per barrel, oil and gas drillingactivity is unlikely t o rise much above the nadir
reached in the first half of 1986.
A m o n g industries comprising the secondary
sector of Louisiana's economy, construction will
undoubtedly languish in 1987 if the primary sector stalls as anticipated. Some bright spots exist for
Louisiana's battered manufacturing sector in 1987,
however. Most of the gains will go to producers of
nondurable goods such as f o o d and kindred
products, chemicals, paper, and petroleum refining. These industries have experienced an improved competitive position internationally due
t o the falling dollar, lower input costs, or increased
productivity. Employment in durable goods manufacturing, much of which is linked closely t o the
energy sector, is not likely to rise much next year
but should at least stabilize after recent sharp
declines. A few durable industries unrelated t o
energy, such as lumber and w o o d products, may
see j o b gains in 1987.
Employment in the service sector—including
wholesale and retail trade; finance, insurance, and
real estate; health, education, business, and government—is probably going to slip more in 1987,
exacerbating the unexpectedly sharp declines
that occurred in 1986. The service sector has
generally been the last major portion of Louisiana's economy to experience the fiercely negative impact of the oil price bust, which has moved
through the economy with a ripple effect: the
outer, service sector is still disturbed even after
the epicenter of the energy sector has calmed. If
the slide in this sector during 1987 can be held t o
one-tenth or one-fifth its loss of nearly 50,000
employees during 1986, the overall nonagricultural employment base forthe state should
remain about where it was in the second half of
1986. If the drop is much more than that, then the
expected manufacturing employment gain will
not be enough t o keep overall employment from
falling in 1987 for the fifth time in the past six
years.
Tourism and port activity, two important sources
of demand for the goods and services produced
by Louisiana industries, will probably add the
most strength to the state's economy in 1987
because they are driven primarily by sources outside the state where the e c o n o m i c climate is
stronger. In contrast, demand from the government sector will be slow because of the fiscal difficulties of state and local governments. These
problems will be compounded by the limited
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C
REVIEW
increase in federal defense spending in the state
and cuts in federal government revenue sharing
and grants-in-aid. The downsizing of the state
economy, which has already reduced the demand for important consumer goods and business services produced and sold within the state,
will be hard to reverse.
All in all, then, when viewed either from the
perspective of final purchases or from the side of
industrial production, there is little promise that
the Pelican State's economy will climb very high in
1987.
Chart 1.
Unemployment Rate
(Seasonally adjusted)
Louisiana
United States
1986: Near Depression After Years of
Recession
Historically Louisiana's e c o n o m y has been
more vulnerable to international economic developments than most state economies, because
the state's economic base has been concentrated
in extracting and processing primary commodities. Large volumes of these goods and
materials have traditionally gone to foreign nations with fewer energy, food, and forestry resources than the United States. New Orleans'
status as a great port and international city is
attributable t o the flow of the Mississippi River,
which seives as a mighty integrating vehicle to the
global waterway transportation network.
In most years of this decade international trade
activity overall has eroded, seriously affecting
major Louisiana industrial producers that seive
world markets. Agricultural, energy, paper, and
chemical producers, among others, have suffered
from economic recession abroad, a strong dollar,
increased foreign competition, and technological
changes that have reduced employment. Deregulation of transportation and energy markets has
also shocked port and energy transmission activities, creating new competitive problems (as well
as new opportunities). Adjustingto these cyclical,
structural, and institutional changes has nonetheless been relatively easy for Louisiana compared
t o the pain of falling oil and gas prices in recent
years, which caused the e c o n o m y t o disintegrate.
Almost 90,000 jobs, or one out of twenty, came
off the payrolls of Louisiana employers in the year
ending in November 1986, while 2.3 million
workers were added t o payrolls nationally—an
increase of 2.5 percent. Louisiana's energy exploration collapsed and extraction employment
alone dropped by 22,300 in the same year-long
Source: U.S. Department of Labor and Lousiana Department of
L a b o r , s e a s o n a l l y a d j u s t e d b y the Federal R e s e r v e
Bank of Atlanta.
period—accounting for nearly half of the 47,000
jobs lost in mining during the entire past five years
of its decline. Other major losers were manufacturing (-7,000) and construction (-15,500), both
industries that supply and support exploration
activities; state and local government employment (-7,200); services (-6,700); and wholesale
and retail trade (-16,100). By late 1986, employment had been dropping in all but a few segments
(such as health and educational seiVices) forayear
or more.
The drilling shutdown prompted a leap in the
state's already high unemployment rate, from
11.3 percent in December 1985 to 13.9 percent
in November 1986. During the same period the
nation's unemployment rate held near 7 percent
(Chart 1 ). Another consequence of the shutdown
was that in 1986, for the first time in recent
memory, industrial employment fell across the
board in Louisiana. Nationally employment declined in mining and manufacturing but increased
throughout the service sector, in construction,
and in many individual manufacturing industries.
Louisiana's economic performance was so dismal
in 1986 that for months it claimed headlines as the
state afflicted with the highest unemployment
rate in the country. The unfavorable spread between Louisiana's unemployment rate and that of
49
FEDERAL RESERVE B A N K O F A T L A N T A
Chart 2.
Louisiana Oil Rig Activity and
Nonfarm Employment
(Indexed series, 1969 = 100)
Source: Louisiana D e p a r t m e n t of Labor, Louisiana Labor Market
Information,
and H u g h e s Tool C o m p a n y , Monthly
Rig
Count.
the nation has been climbing by one percentage
point per year since 1981.
sector and dwindling port activity, are also down
substantially.
The boom-and-bust pattern shown by Louisiana's recent industrial change is similar whether
measured by absolute or percentage changes in
industrial employment or income or by changing
industrial shares. Durable goods producers expanded employment by one-fifth in the 1976-81
period. Industries that are closely linked t o energy
exploration and production such as primary and
fabricated metals, electronic and non-electronic
machinery, and electrical and transportation
equipment fared best, while nondurable goods
producers expanded employment by only 5 percent. By contrast, in the most recent five-year
period employment dropped 34 percent for durable goods producers compared t o half that for
nondurable goods producers. Moreover, income
generated in the nondurables industries (such as
food, paper, printing, and publishing) has actually
grown over the past five years.
The changing employment pattern nationally
over the past ten years has been one of moderate oscillation compared t o Louisiana's volatile
performance. Both economies are marked by a
long-term shrinkage in manufacturing's employment share and a rise in service's share, but the
more subdued national pattern reflects a diversified economic structure as opposed to Louisiana's undiversified, energy-based economy.
1981-1986: Employment Change from
Peak to Trough
Louisiana's economy peaked in 1981 when the
price of a barrel of oil topped out at $35. Since
then a series of downturns in the price of oil and in
drilling activity have pulled the entire Louisiana
economy downward (Chart 2). Employment in
the state now is not much different from what it
might have been without the oil boom of the
1970s. In the first five years out of the last ten,
Louisiana payrolls grew by 24 percent compared
t o 13 percent for the nation; in the last five years,
jobs declined by 8 percent in Louisiana versus an
11 percent gain nationally. For the entire 19761986 period, e m p l o y m e n t rose only 13 percent
in Louisiana compared t o 26 percent nationally.
The magnitude of employment decline in Louisiana since 1981 is enormous (Table 1). Over
150,000 jobs have been lost in mining, construction, and manufacturing, most due to a slumping
energy sector. Transportation and wholesale trade
employment, crimped by the troubled energy
50
Local Labor M a r k e t Developments
The geographic pattern of employment change
in Louisiana appears to correspond roughly t o the
overall pattern of industrial weaknesses. The
unemployment rate tended to rise more for the
entire state than it did for metropolitan areas during 1986 (Table 2). ( U n e m p l o y m e n t rates are
generally lower for metropolitan areas of the state
than for nonmetropolitan areas.)
It is reasonable to suppose that these disparities indicate healthier, more diversified economies in service-based metro areas and shaky
economic structures in rural areas that are mired in
dependency on natural resources currently selling
at low prices. This explanation is in part sound
because relatively stable and fast-growing service
industries cluster in urban areas due to obvious
location advantages. The economies of metro
areas are, however, by no means uniformly healthy.
Alexandria and Baton Rouge are the only places
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
Table 1.
Louisiana Nonfarm Payroll Employment1
Percentage Share
Absolute Change (thousands)
1981
1986
Mining
4.7
6.3
3.8
1976-86 1976-81 1981-86
-5.0
41.8
-46.8
Construction
8.6
8.3
5.9
-25.1
21.9
-47.0
Percent Changes
1976-86 1976-81
66.7
-8.0
1981-86
-44.8
-21.8
19.0
-34.3
-25.2
-34.2
-16.7
14.9
6.7
8.2
13.6
6.6
6.9
11.1
4.8
6.3
-31.6
-17.4
-14.2
24.9
20.0
4.9
-56.5
-37.4
-19.1
-15.9
-19.4
-12.9
12.5
22.4
4.5
Transportation and
Pubic Utilities
7.9
8.2
6.7
-3.5
29.5
-33.0
-3.3
28.0
-24.5
Wholesale Trade
6.3
6.3
5.5
-0.7
20.3
-21.0
-0.8
24.3
-20.2
17.1
16.2
19.5
66.5
39.2
27.3
29.1
17.1
10.2
4.7
4.7
5.5
20.9
15.2
5.7
33.2
24.1
7.3
16.6
17.9
21.0
95.5
73.2
22.3
42.9
32.9
7.5
19.9
3.3
23.7
-8.4
Manufacturing
Durable
Nondurable
Retail Trade
Finance, Insurance,
and Real Estate
Services
Government
Total (Absolute)
19.4
18.8
21.2
(1,339.5) (1,657.0) (1,518.1)
61.6
51.5
10.1
23.8
(178.6)
(317.5)
(-138.9)
13.3
' D a t a for N o v e m b e r
Source: C o m p u t e d b y Federal Reserve Bank of Atlanta from data released b y the Louisiana Department of Labor, Louisiana
Labor Market
Informa
tion, various issues.
where e m p l o y m e n t and the labor force have
grown, and even their gains have been meager.
In New Orleans, where the jobless rate declined briefly despite a drop in employment, the
misleading statistical gain shown by the unemployment figures resulted because some laid-off
workers went to other states and other jobless
individuals left the workforce as they became discouraged and stopped looking for work. A shrinking labor force—composed of both those working and those looking for work—also helped the
Lake Charles unemployment rate hold its ground.
Shreveport, Houma-Thibodaux, and Lafayette
experienced extremely hard times as their labor
force and employment bases dropped and their
unemployment rates and number of unemployed rose. In Lafayette the unemployment rate
was 15.5 percent in November, more than six
percentage points higher than a year earlier.
A few salient facts provide stark evidence of the
poor conditions in smaller Louisiana labor market
areas. By late 1986, 22 out of the 45 nonmetro
parishes registered unemployment rates above
15 percent (compared to 12 areas in 1985); unemployment rates dropped below 1985 levels in
only five parishes, and their rates still ranged between 10 percent and 18 percent. Only t w o parishes had unemployment rates under 10 percent,
and only the Ruston area (Lincoln parish) registered an unemployment rate lower than the nation's.
Put together in a geographic composite, these
statistics reveal that the economy has gone from
bad t o worse for virtually all areas of the state. The
southern parishes once benefited dramatically
from energy sector activity. Now, rural parishes
there must depend more heavily on fishing activity or on cultivation of traditional crops such as
rice or sugar cane that are aided by government
programs. In the metro areas, some slight economic support comes from tourism or other services, or from nondurable manufacturing industries like chemicals. Northeast delta parishes
heavily reliant upon farming had another tough
51
FEDERAL RESERVE B A N K O F A T L A N T A
Table 2.
Labor Market Conditions, United States Versus Louisiana"
(Thousands)
Percent
Change
1985-1986
Area and Employment
November
1986
November
1985
United States
Civilian Labor Force
Employed
Unemployed
Rate (percent)
118,623
110,751
7,872
6.5
116,097
108,282
7,815
6.6
2.2
2.3
0.7
Louisiana
Civilian Labor Force
Employed
Unemployed
Rate (percent)
1,968.6
1,703.9
264.7
13.4
1,987.5
1,763.1
224.4
11.3
-1.0
Alexandria
Civilian Labor Force
Employed
Unemployed
Rate (percent)
59.6
53.1
6.5
10.9
58.6
53.0
5.6
9.6
Baton Rouge
Civilian Labor Force
Employed
Unemployed
Rate (percent)
260.4
232.5
27.9
10.7
259.9
232.8
27.1
10.4
Houma-Thibodaux
Civilian Labor Force
Employed
Unemployed
Rate (percent)
75.6
61.0
14.6
19.3
79.1
70.2
8.9
11.2
Lafayette
Civilian Labor Force
Employed
Unemployed
Rate (percent)
105.8
89.4
16.4
15.5
110.5
100.4
10.1
9.2
Lake Charles
Civilian Labor Force
Employed
Unemployed
Rate (percent)
72.1
61.5
10.6
14.7
74.0
63.9
10.1
13.7
Monroe
Civilian Labor Force
Employed
Unemployed
Rate (percent)
68.9
61.5
7.4
10.8
68.6
62.0
6.6
9.6
592.9
526.8
66.1
11.1
605.5
542.1
63.4
10.5
164.7
143.5
21.2
12.9
167.9
150.3
17.6
10.5
New Orleans
Civilian Labor Force
Employed
Unemployed
Rate (percent)
Shreveport
Civilian Labor Force
Employed
Unemployed
Rate (percent)
-3.4
18.0
1.7
0.2
16.1
0.2
-0.1
3.0
-4.4
-13.1
64.0
-4.3
-11.0
62.4
-2.6
-3.8
5.0
0.4
0.8
12.1
-2.1
-2.8
4.3
-1.9
-4.5
20.5
* D a t a not seasonally adjusted.
Source: U.S Department of Labor, Bureau of Labor Statistics, The Employment
Market Information,
D e c e m b e r 29, 1986.
Situation,
a n d Louisiana Department of Labor, Louisiana
Labor
52 N O V E M B E R / D E C E M B E R 1 9 8 6 , E C O N O M I C R E V I E W
Chart 3.
Personal Income Growth
(Annual percent change)
Source: C o m p u t e d b y Federal Reserve Bank of Atlanta f r o m data
in the U.S. D e p a r t m e n t of C o m m e r c e , Quarterly
Personal Income, various issues.
year as did agricultural communities across the
nation, and the situation for lumber production in
the north central and western areas deteriorated
as Canadian softwood heightened competition
for southern pine growers.
Population, Income, and Consumer
Spending
The loss of 139,000 payroll jobs in Louisiana
over the past five years, a decrease of 8.3 percent,
reflects the woeful condition of the local economy. It is little wonder that employment declines
of this degree have adversely affected consumer
spending, business investment, and state and
local government fiscal positions.
A smaller rate of increase in personal income
compared to that of the nation was the initial
indication that Louisiana's economy was misfiring
five years ago. Since mid-1982 Louisiana's personal income growth has been consistently below the nation's, and, over the most recent 12
months for w h i c h data are available, even its
nominal increase has been barely positive (Chart 3).
Taking into consideration the inflation rates of 2
percent or more during 1986, total real personal
income in the state has fallen significantly.
More unfortunate yet, real income per capita
may also be lower now because natural population increase (births minus deaths) has outpaced
the loss of population attributable to migration,
thus loweringthe amount of real income available
for each person. Even if per capita income has not
fallen as a consequence of population growth,
laid-off workers who previously received unemployment compensation have migrated from the
state. Although they were not earning paychecks
in Louisiana, these jobless workers did receive
unemployment compensation from a "kitty" provided by Louisiana employers, which was then
spent locally on food, housing, transportation,
and other goods and seivices. When they departed, these consumers took spending dollars with
them, leaving the shelves of Louisiana retailers
stocked with items that would now turn over at a
slower rate, further depressing retailers' cash flow
and incomes.
Calculating precisely the amount of out-migration from Louisiana is difficult. The most recent
estimates available (1985) suggest that net migration (the number entering minus the number
leaving Louisiana) was between -21,000 (based
on Internal Revenue Service income tax filing
data) and -27,000 (based on a U.S. Bureau of the
Census survey). Given the extent of the economic slump in the state, it would not be surprising if net migration from the state in 1986 ends up
being twice the figure for 1985, representing about
1 percent of the state's population. That amount
would be sufficient to offset natural population
increase.
The upshot of these population and income
movements for Louisiana retailers has been distressing. Total retail sales in Louisiana were off 1.3
percent in the first ten months of 1986 compared
t o figures a year earlier. Nondurable goods sales of
items such as food and clothing have been flat
while durable goods sales have slumped sharply.
New vehicle registrations were down 13 percent
from the January to October 1985 period. Car
sales were, however, stimulated at the end of the
model year by auto manufacturers' rebates and
cheap financing programs. Even so, sales were
lower than in September 1985.
Looking ahead, it is hard to imagine that sales
activity could be robust, even though retailers are
selling from a weakened sales base. Louisiana^
sales performance has been below the nation's
since 1982 and is likely to lag again in 1987 (Chart
4). Some retailers selling into selected markets,
such as the New Orleans tourist and conventioneer trade, will gain sales at a moderately
healthy pace, but the overall climate for retailers
is poor.
Basically, the consumer spending outlook is
gloomy. The degree of spending strength is determined largely by the number of buyers and the
53
FEDERAL RESERVE B A N K O F A T L A N T A
Chart 4.
Retail Trade
(Annual percent change)
United States
Louisiana
—
Source: U.S. Department ot C o m m e r c e , B u r e a u of the Census,
Monthly Retail Trade, various issues.
amount of money they have to spend. In Louisiana, employment and income growth are both
sputtering along, and too few industries in the
state's primary, secondary, or tertiary sectors will
be strong enough to serve as engines for growth
in 1987.
Primary Sector Activities
Oil and Gas. Louisiana's drilling rig count rose
to 487 in December 1981. Since that time the
number of working rigs d r o p p e d fitfully until
1986, when the count collapsed to between 105
and 110 around mid-year. Drilling has since rebounded somewhat from depths not reached in
decades, but increases in activity during the
second half of 1986 can by no means serve t o
stimulate the general oil patch economy. The
major benefit of renewed drilling will be to keep
employment from falling more severely than it
would otherwise.
The pace of drilling towards the year's end in
1986, as measured by the rig count, was only half
the level of the previous year. But even the level at
the year's end in 1985, around 250, was only
about half as much as the peak in 1981. Thus,
instead of recovering in 1986 from a rather lackluster performance in 1985, the Louisiana oil and gas
54
industry was virtually swamped in the worst
scenario imaginable. An early 1986 pricing and
production war caused the price of a barrel of oil
to drop by two-thirds to around $9 per barrel near
mid-year. OPEC countries subsequently regrouped,
at least for a time, enabling the price of "Louisiana
sweet" to rise to between $15 and $16 per barrel
in 1986, or to 60 percent of the price in 1985. This
price is too low to get the oil industry moving
again, but it is probably high enough to prevent
further decline.
The future behavior of crude oil prices depends
heavily on OPEC's ability t o collude effectively.
Current proposals call for allocating quotas that
would put oil prices in the range of $17 to $19 per
barrel. If the price of oil settles in the upper part of
that range in 1987, then this could be the year the
oil industry stabilizes and starts to recoverfrom its
highly depressed condition. Whether or not that
will happen is open to question, but 1987 is likely
to be a better year than 1986.
Agriculture. Agriculture is Louisiana's second
most important natural resource industry after
energy. The good news for 1986 was that the
severe drought which affected the Southeast
largely bypassed Louisiana. As a consequence,
yields for major crops equaled or exceeded those
of 1985.
The bad news is that farming is diminishing in
Louisiana as it is elsewhere in the country largely
due t o sluggish markets and yet another wave of
productivity-enhancing technological improvements in farming. Greater international competition continues t o erode the return on investment
in U.S. agriculture, and farmers have responded by
cuttingacreage or going out of business. Louisiana
farmers idled another half-million acres in 1986,
lowering crop acreage to a level nearly onequarter less than in the peak year of 1981, before
commodity prices began their five-year decline.
For farm suppliers, acreage reductions mean
less demand for fertilizer, pesticides, and other
farming materials as well as farm labor. Downsizing the agricultural sector also lowers farm land
values. The U.S. Department of Agriculture estimates that farm land asset values dropped 20 percent in 1986, costing the state's farmers $2.5
billion in losses.
There are some indications that land values and
the amount of planted acreage have reached a
plateau. Stabilization of agriculture probably will
not have much of a positive impact on the general
economy, however. Federal government farm
programs will help supplement farm income,
NOVEMBER/DECEMBER 1986, E C O N O M I C REVIEW
especially for sugar cane producers, and the outlook is improved for producers of soybeans and
cotton, t w o of the state's leading crops. Nevertheless, it will be some time, if ever, before agriculture
again becomes a source of state e c o n o m i c
strength.
Forestry and Fishing. Most of the demand for
products from Louisiana's forests originates from
three sources: southern pine is used in construction, primarily for framing residential buildings,
and hardwoods like oak are used by the oil industry for rig building and related activities or by furniture manufacturers. In 1986 demand for hardwoods from the oil industry was nil. On the other
hand, d e m a n d from furniture manufacturers
tended to be relatively strong. As a result of these
offsetting forces, prices showed little movement
but offered profits for some sellers; producers
w h o usually sell t o the oil industry were struggling,
while suppliers to furniture makers fared well.
During the first half of 1986 unfavorable weather kept southern pine production down while
housing-related demand for the w o o d remained
satisfactory. However, after mid-year the cumulative economic impacts of the depressed oil industry, continuing competition from Canadian producers, and a seasonal production increase led t o
a substantial fall in prices during the third quarter.
Prospects for 1987 remain mixed. If recovery in
the oil industry is limited, as expected, demand
for hardwoods from that source would increase
only slightly. The demand for hardwoods by furniture manufacturers is not likely t o increase much
either, because abatement of the nation's home
building boom is reducing the need for their product. Depression in the Louisiana and Texas housing industries, w h i c h are important buyers of
Louisiana lumber, will probably limit growth for
southern pine producers, too, although a new 15
percent Canadian tax on exports of softwood will
help boost demand in other U.S. housing markets.
Louisiana's shrimp industry, which accounts for
over half of Louisiana fishermen's revenues, fared
well in 1986 for the second year in a row. Not only
were costs substantially lower as a result of cheaper
fuel, but catches set a new record. During the first
nine months of the year nearly one-fifth more
shrimp were harvested than in the same recordbreaking period in 1985. Prices also tended to be
relatively stable despite the supply increase.
Because so much of the nation's shrimp is imported at high transportation cost, local produc-
tion enjoys a strong natural comparative advantage.
The outlook for forestry and fishing in 1987
depends on the same factors that will affect
agriculture: commodity price, amount of production, and fuel costs. As in agriculture, weather
plays a large role in determining production and
cannot be forecast with great accuracy; other factors determining profits are positive but not
strongly so.
Secondary Sector Activities
Construction and manufacturing activities have
lost more jobs over the past five years (47,000 and
57,000, respectively) than mining has, although
their percentage declines have not been quite as
large. Weakness in the secondary sector is linked
largely to the failing energy sector, but until recently other international economic crosscurrents
such as the strong dollar and the slow pace of
w o r l d e c o n o m i c growth have been w o r k i n g
against the secondary sector as well. These forces
are now turning in favor of manufacturing and
offer hope for expansion of important Louisiana
industries duringthe year ahead. Because it is produced and consumed locally, construction unfortunately will not benefit from improved conditions for U.S. suppliers to world markets.
Construction. Construction accounts for a
larger share of employment in Louisiana employment than it does in the nation (6 percent versus
5.1 percent), even though construction has fallen
for the last three years in the state while booming
nationwide. In 1981, when Louisiana construction was prospering along with the rest of the state
economy, its employment share was 8.3 percent
compared t o 4.9 percent for the nation. In 1987,
construction's
share of
Louisiana's
nonagricultural payrolls could drop yet again for the
fourth consecutive year, but the odds are better
that its share will be roughly the same as in
1986.
The new U.S. tax law will sap certain construction markets, such as office, industrial, and multifamily housing structures,that are already in cyclical decline. Construction in Louisiana must
cope not only with less generous subsidies and
tax shelter provisions but also with above-average
office building vacancy rates and the out-migration of people and businesses. The above-average vacancy rates signal a glut of buildings that
must be occupied, and out-migration makes
55
F E D E R A L RESERVE B A N K O F A T L A N T A
office, industrial, and residential space harder t o
absorb.
Though evidence is not conclusive, some information supports the view that Louisiana's building may have reached the b o t t o m of its precipitous drop. Permit and construction contract
data show that the pace of construction is at its
slowest in fifteen years; construction employment is also no higher now than it was back in
1973 before the energy-prompted construction
boom. In addition, residential construction, at
least, has rebounded in the areas hardest hit by
the energy slump. Houma and Lake Charles both
show higher residential contract values (as reported
by F. W. Dodge) through November 1986 than
through the same period in 1985.
Although construction's downslide may be
ending or due to end soon, it is hard to imagine
much rebound, if any, in 1987. Important segments of the energy exploration, drilling, and production processes that directly or indirectly influence construction are not likely to strengthen
significantly in the year ahead. The standstill in the
energy sector directly limits construction of pipelines and industrial and commercial buildings
used by related suppliers of goods, materials, and
services. Indirectly, construction is further hindered by the absence of a positive spillover from
the energy sector to the general economy. Moreover, tax reform has stripped away many of the
advantages for building, and less infrastructure is
needed in Louisiana's downsized economy.
These factors suggest that, while construction
may stabilize in 1987, this sector will not have the
power to pull the state's economy forward.
Manufacturing. The 57,000 jobs lost in Louisiana's manufacturing industries over the past
five years accounted for 7 percent of the shrinkage in manufacturing e m p l o y m e n t nationally
over that period. Many of these j o b losses, like
those in construction, were due to weakness in
the energy sector. Some jobs were also shed as
manufacturers lost share in foreign and domestic
markets t o rivals from other countries. In the
important chemical and allied products industries, forexample, world market share declined for
several reasons—a strengthening dollar, recession, and slow growth of markets, and increased
production from new competitors. Other jobs
were lost as producers adopted new labor-saving
technologies and processes.
As chemical producers lost sales, say, to German manufacturers because of exchange rate
changes or t o Saudi Arabian producers w h o were
56
opening up new plants, Louisiana producers responded by shutting down less efficient and more
labor-intensive plants along the Mississippi River
between Baton Rouge and New Orleans as well as
in the Lake Charles area. Demand for agricultural
chemicals also slackened as a result of the debtservicing problems and economic recessions in
South America and in developing nations elsewhere. Similar problems hampered Louisiana
manufacturers of f o o d and kindred products,
lumber and w o o d products, paper, petroleum,
primary metals, and other goods for sale in export
or domestic markets.
Two-thirds of the drop in manufacturing employment since 1981 came in the durable goods
industries. By contrast, durable goods jobs increased sharply in the five years before 1981 and
reached about the same number as the 114,000
workers in nondurable goods industries. Fortunately, the drop in jobs in both types of manufacturing appears to be nearing an end, and the
outlook for several nondurable goods industries
actually is fairly bright. September marked the first
month in 1986 that employment increased for
durable and nondurable goods producers. Even
so, on a year-over-year basis, e m p l o y m e n t in
major manufacturing sectors remained below
levels a year earlier, and only a few specific industries gained workers during 1986 (Table 3).
Looking ahead t o 1987, industries that produce
f o o d , paper, chemicals, petroleum, and other
nondurable goods (chiefly leather, rubber, and
textile products) should finally begin t o benefit
from the decline in the foreign exchange value of
the dollar. Some durable goods industries, such as
lumber, metals, machinery, and electronic equipment, will also benefit, though lingering malaise
in the energy sector probably will limit e m p l o y ment gains in these industries t o very modest
increases.
Louisiana's Service Sector
The service sector in Louisiana is large and
diverse, accounting for four out of five jobs among
the 1.5 million workers on all payrolls in the state.
Nationally, three out of four workers, or 75 million, are employed in service sector jobs. These
service jobs run the gamut from government
positions t o work in all the various establishments that provide consumer goods or personal
services. They also include all of the jobs in finance, transportation, and public utility industries
NOVEMBER/DECEMBER 1986, E C O N O M I C REVIEW
Table 3.
Manufacturing Wage and Salary Employment in Louisiana
(Thousands)
November
1986
Manufacturing
Durable Goods
Lumber and Wood
Furniture and Fixtures
Stone, Clay, and Glass
Primary Metals
Fabricated Metals
Machinery, except Electrical
Electrical and Electronic Equipment
Transportation Equipment
Other Durable Goods
Nondurable Goods
Food
Apparel
Paper
Printing and Publishing
Chemicals
Petroleum and Coal
Other Nondurable Goods
Source: Louisiana D e p a r t m e n t of Labor, Louisiana
Labor Market
174.7
76.9
12.9
0.6
6.7
3.4
13.4
9.6
7.8
19.9
2.6
97.8
23.5
9.1
11.3
10.3
27.6
12.2
3.8
167.7
72.1
13.0
0.5
6.3
3.0
11.9
8.1
7.2
19.8
2.3
95.6
23.4
8.4
11.3
10.2
25.9
12.0
4.4
Information,
that accommodate businesses and consumers, as
well as legal, health, education, accounting, and
other professional services.
Louisiana's concentration of seivice employment, which is higher than the nation's, is due in
part to the dominance of the state's energy sector
and in parttothe prominence of NewOrleans as a
port and tourist center. The predicament facing
Louisiana's service sectorand the well-beingof its
workers may be summed up simply: the health of
this crucial sector depends on the vitality of the
energy sector and on international economic
conditions affecting port trade. With most of its
eggs in t o o few baskets, Louisiana's service industry, like its nonservice employment, depends on a
narrow range of economic activities. Because
neither its manufacturing nor its service sectors
are diversified, Louisiana experiences volatile
booms and busts associated with raw material or
commodity price cycles. By contrast, Florida and
November
1985
Absolute
Change
1985-1986
-7.0
-4.8
0.1
-0.1
-0.4
-0.4
-1.5
-1.5
-0.6
-0.1
-0.3
-2.2
-0.1
-0.7
0.0
-0.1
-1.7
-0.2
-0.6
December 29,1986.
Georgia supply more varied manufactured goods
and services to buyers from other states or nations
and thus experience faster and less volatile
growth.
Aside from wholesale and retail establishments, the largest service industries in Louisiana
are related to port or tourism activities, finance,
insurance, and real estate activities, or government. Port and tourism services are driven largely
by demands from outside the local economy,
while government and financial services meet
mostly demands for local services. Because of the
sources of demand, prospects in 1987 for tourism
and port activities are understandably brighter
than prospects for government and finance, insurance, and real estate activities.
Tourism. Tourism is a significant industry in
Louisiana, third after oil and agriculture. In
1986,tourism indicators, such as visitor center and
park registrations, hotel occupancy, and airline
57
FEDERAL RESERVE B A N K O F A T L A N T A
travel increased compared to 1985 levels. Depressed travel within the oil patch states (from
Texas to Louisiana, for example) due t o layoffs
and reduced local spending limited overall tourism increases in Louisiana, despite healthy vacation travel gains from other states.
Long a mainstay of New Orleans' economy and
second only to port activity in jobs generated,
tourism is now targeted to provide even stronger
support. As a legacy of the ill-fated Louisiana
World's Fair, New Orleans now has an expanded
convention infrastructure with more hotel rooms,
convention space, and retail establishments. A
new convention center, site of the state pavilion
forthe fair, reportedly is booked at half its capacity
into the next century. Proposals have been made
t o add a riverfront aquarium, a theme park and
science center, casino gambling in the French
Quarter, and to double current convention center
facilities to encourage more tourism and generate
more jobs. Tourism can probably become a more
important source of growth, creating new jobs
and businesses that will, in turn, spawn others.
Traveler surveys consistently show that New
Orleans remains a favorite spot for visitors, and
proposals have been "made to develop the tourist
potential of outlying, "Cajun Country" areas.
The 1987 outlook for tourism in New Orleans
and the state is mostly positive. An increase in
activity will depend in part on recovery of employment in Texas, the number one supplier of
visitors to the state. (California, New York, and
Florida are the three states next in importance.)
One negative factor is that state government's
money crunch has forced a reduction in the tourism budget and closing of some highway rest
stops and state attractions. However, Louisiana
has also instituted new advertising campaigns that
may be effective in attracting visitors, especially in
light of the fact that domestic travel will be less
costly in 1987 than vacations abroad and does not
present the same potential dangers. Finally, business, government, and convention travel should
strengthen in response to the pricing promotions
that accompanied tourism ad campaigns. New
Orleans operators, in particular, are pricing their
many new hotel rooms aggressively. As a result,
overall occupancy is likely to rise somewhat in
1987.
Port Activity. The New Orleans Customs District was the nation's largest in terms of cargo
volume at the beginning of the 1980s. It has been
rebounding for t w o years now following sharp
declines in activity during the recession years
58
Chart 5.
New Orleans Customs
District Shipments
(Annual percent change)
Source: U.S. D e p a r t m e n t of C o m m e r c e , Highlights
Export and Import Trade, various issues.
of
U.S.
earlier this decade (Chart 5). Even so, sluggish
export growth for agricultural and energy commodities, along with still-shrinking manufactured
exports, continues to cause port-related employment to drop. The drop in the dollar's exchange
value against other currencies will help boost
export shipment levels in 1987, but increasing
competition from other U.S. ports will hold down
both shipments and employment gains.
The recent trade performance figures for the
Pott of New Orleans, the state's largest port by far,
are revealing. Over the past five years, the port's
total tonnage has fluctuated sharply between 15
and 19 million tons and the cargo mix has changed
dramatically. The volume of export shipments has
dropped by 2.1 million tons to 11 million, while
import volume has increased from 4.3 million
tons to 5.9 million. The loss of bulk shipments of
grain and other commodities has not been a
major setback for the state's economy though.
Much of the flow of commodities represents production from outside the state, and the movement of these goods down the Mississippi River
generates relatively few jobs in transportation
and port-related service industries.
A modest decline in general cargo shipments
and relatively slow growth of container shipments
have hurt the Port of New Orleans. Manufactured
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
goods that comprise general cargo shipments
usually boost port revenues because of their
relatively high value compared to bulk commodities. General cargo and container shipments
also create more employment. Since 1980, about
9,000 of the 22,000 water transportation jobs in
New Orleans have been lost as a result of reduced
trade activity and lost oil industry servicing jobs.
In search of an economic cure, the Port of New
Orleans has developed a $38 million strategic
plan to revitalize port facilities and improve the
basic economic character and value of the port.
The plan calls for management and marketing
changes that will help the port compete more
effectively and generate an improved product
mix which emphasizes general cargo shipments.
The decision by the U.S. government to pay for
much of the cost of deepening the Mississippi
River channel to 55 feet from Baton Rouge to the
Gulf will also certainly improve long-run prospects for trade activity in Louisiana.
In 1987 trade shipments with Latin America,
Asia, and Europe should continue to improve and
perhaps accelerate. The falling dollar and faster
economic growth should boost commodity trade,
as will elements of a new U.S. farm program that
uses subsidies t o encourage exports. However,
increased exports of agricultural commodities,
energy products, and derivatives such as chemicals will not create many port jobs.
Finance. Troubled economic times frequently
result in acceleration of industry adjustments that
would have to be made over the long haul in any
event. Often this process of adjustment brings
new opportunities that enable an industry t o
bounce back stronger than ever. Just as Port
Authority and state officials hope that their strategic planning will revitalize port prospects, bankers hope that changes in the state banking law will
revitalize the troubled financial industry in Louisiana. Lenders, under stress because many of
their energy, agricultural, and real estate borrowers are illiquid and threatened by insolvency,
may get much-needed flexibility from new laws
that make mergers across parish and state lines
possible.
Louisiana's finance, insurance, and real estate
employment grew at a faster pace than the nation's in the 1970-83 period. O v e r t h e past three
years, however, employment growth in this sector
has been accelerating nationally but decelerating
in Louisiana. Indeed, in several months this year
employment in finance, insurance, and real estate
dropped in Louisiana compared t o last year's
levels.
Thus far, financial industry troubles in Louisiana have been manageable, and the state legislature has passed an interstate banking bill that
will allow banks from fourteen southern states to
acquire or merge with Louisiana banks. This legislation, like the 1984 law enabling bank holding
companies to cross parish boundaries t o merge
and seek deposits from around the state, gives
banks more options to diversify both assets and
liabilities on their balance sheets.
Debt servicing problems of borrowers from
banks and thrift institutions have contributed to
bank failures and shrinking net worth of financial
institutions around the state. Eight bank failures
were recorded by the year's end in 1986 compared to only one in the 1983-1985 period, and
regulatory net worth at Louisiana's thrifts has been
declining for three years. Banks, because they
concentrate on commercial loans, are faced with
problem loans in all types of businesses, but
agricultural, energy, and commercial real estate
loans head the queue. Savings and loan associations' problems stem chiefly from residential
lending or commercial lending secured by real
estate. Many of these loans have turned sour in
the state's shrinking economy.
Lenders will continue to be burdened with the
need to restructure problem loans in 1987. Some
of the weaker financial institutions in the state are
likely to be acquired by more financially secure
ones in Louisiana or other states as loan burdens
become overwhelming. For the short run this will
mean stagnating employment in the industry
while consolidations occur. However, the opening up of banking markets on a statewide and
regional basis improves the prospect that the
necessary partnerships and workout agreements
will be made in a timely and efficient manner.
Government. The poor fiscal condition of Louisiana's state and local governments is a topic that
has received widespread attention from national
and local news media. The growing danger exists
that local government's fiscal feebleness in New
Orleans, Baton Rouge, Shreveport, and other
metro areas, as well as in the entire state government, will cause employment in the state t o drop
substantially more. The situation is compounded
by limited increases in federal defense spending
in Louisiana and curtailment of federal government revenue sharing and grants-in-aid. Additional cuts in government spending and employment, combined with tax hikes, threaten t o
59
F E D E R A L RESERVE B A N K O F A T L A N T A
drag the e c o n o m y d o w n into a vicious circle,
exacerbating the state's economic recession.
On numerous occasions over the past five years
state and local government budgets have had t o
be revised downward in response to new and
lower estimates for revenues that resulted from a
narrowingtax base and falling energy prices. Since
1981, the severance tax on oil and gas has fallen
from one-third of total state revenues to about 11
percent in the current fiscal year projection. Even
at the year's end in 1986, the state government
was grappling with the effects of a budget that had
been knocked out of kilter by even lower revenues than anticipated just a few months before.
Anticipated severance tax receipts on oil were
calculated at the beginning of the current fiscal
year (FY1987 that began July 1) on the assumption
that the price of Louisiana oil would be $15.50. By
September, a p r o j e c t e d $255 m i l l i o n deficit
prompted Governor Edwards to slash most state
agency spending by 10 percent (5 percent for
education). The budget cuts, which were expected to cause the layoff of more than 2,000 state
workers, still left the state w i t h a $30 million
general fund deficit. To'make matters worse, new
deficit figures produced by the Legislative Fiscal
Office in December put the shortfall much higher;
in response, a special session of the legislature
was called to consider where further savings could
be made in the budget. Shifting some tax revenues from planned construction t o use in covering operating expenses was one solution along
with still more sharp spending cuts. A statewide
lottery proposed as a way of raising as much as
$150 million per year was not adopted.
The huge deficit projected by the fiscal office
resulted only in part from overestimating the
average oil price forthe fiscal year. Louisiana loses
up t o $50 million in annual revenue for every $1
drop in the price, and by the end of October
Louisiana oil was sellingfora little over $14 a barrel
before climbing to $16 near the year's end. The
gap in the forecast price of oil, then, does not
60
account for the major portion of the higher deficit
projection. Instead, the deficit is largely due t o the
negative "multiplier" impact on the entire state
economy that results from a debilitated energy
sector. The ailing energy industry causes the state
economy as a whole to shrink, lowering corporate and individual income tax receipts along
with sales tax collections.
Besides these state government fiscal difficulties, local governments have also been forced
to curtail locally funded services. Cutbacks have
been mandated across the state by cities and
municipalities. The most highly publicized measures have been undertaken in New Orleans.
There, virtually all city services closed on Fridays
for the last quarter of 1986, and the city's 5,600
workers earned 20 percent less salary for the short
w o r k week. This latest action f o l l o w e d earlier
layoffs of more than 1,400 city employees to help
combat a $30 million deficit at the beginning of
1986.
In light of the severe fiscal problems in the state
and local government sector, overall government
employment is bound to weigh down ratherthan
stimulate Louisiana's economy in 1987. Worse
yet, there is the possibility that government fiscal
problems will destabilize the economy further.
Uncertainty concerning this possibility coupled
with uncertainty overthe future price of a barrel of
oil give ample cause for worry about Louisiana's
employment prospects in 1987.
Conclusion
If the national and international economies
grow at 1986 rates and if the price of oil stabilizes,
then Louisiana's economy has a good chance t o
begin a slow recovery from recession by the
second half of the year. Another drop in the price
of oil, however, or a slowdown in the United
States or abroad, would probably mean further
employment declines in a state economy already
threatened by a deteriorating government sector.
NOVEMBER/DECEMBER 1986, E C O N O M I C
REVIEW
Alabama: A Stronger
Year Ahead?
Gene D. Sullivan
The improvement
expected
in the U.S.
trade
balance
should
give
Alabama's
manufacturing
sector a lift, fueling
faster
growth for
1987.
Alabama's prospects for a stronger economy in
1987 hinge on the performance of its manufacturing sector. If the dollar's decline on foreign exchange markets raises import prices and slows the
influx of foreign goods, then manufacturing is
likely to improve. Growth in manufacturing employment would increase personal income, which
would in turn stimulate trade, services, and housing industries in the state. Advances in these
important areas would push the 1987 economy
beyond its pace last year toward the more rapid
growth rate that marked the 1983-84 period. Signs
of improvement at the end of 1986 support this
The author is the Research Officer in charge of the regional section of the Atlanta Fed's Research Department.
F E D E R A L RESERVE B A N K O F A T L A N T A 61
forecast of a stronger year ahead for Alabama's
economy.
Despite malaise in manufacturing during the
past year, Alabama's economy in 1986 was a bit
stronger than in 1985. Total employment, including self-employed as well as those on the payrolls
of business establishments, rose at an annual rate
of more than 3.4 percent, ahead of the 3.2 percent
increase in 1985. A b o u t 55,000 more peopled
found jobs last year as opposed to 50,000 new
employees in 1985.
Nevertheless, an influx of migrants from troubled "oil patch" areas caused the labor force t o
rise even more rapidly than employment; in 1986
it recorded its highest annual increase since the
late 1970s. The 76,000 additional people looking
for jobs drove the state's u n e m p l o y m e n t rate
back up t o the double-digit range by mid-year so
that the rate in 1986 was well above the average
level for 1985. On the positive side, the arrival of
new people helped wholesale and retail trade
employment during 1986 and promises t o stimulate demand for housing and consumer goods
during 1987 if the economy grows as expected
and provides new jobs. The recent increase in the
work force contrasts sharply with trends between
1980 and 1985, when Alabama's work force expanded at an annual rate of less than 1.5 percent,
far below the average performance for the region.
Despite new residents in the state and rising
total employment, personal income growth in
Alabama during 1986 did not keep pace with
1985. Slack gains in 1986 are attributable largely to
t w o factors: lapses in dividends and interest (reflecting the drop in interest rates on savings
instruments) and government's slowing rate of
wage and salary increases, which largely offset the
rise in employment. The pickup in total employment projected for 1987, particularly in manufacturing, should raise personal income from its
sluggish 1986 performance, but the increase is
unlikely to match 1984's nominal rate of 8.8
percent.
Diversification of Alabama's economy in recent
years has helped buffer the impact of downturns
in the goods-producing sectors. Although manufacturing is the state's largest single economic sector, with one-fourth of total employment, the
sector comprising trade, government, and other
services accounts for another 60 percent of total
employment. Along with manufacturing these
industries constitute about 85 percent of Alabama's total economic activity (Chart 1). Finance,
62
Chart 1.
Distribution of
Nonfarm Employment in Alabama
(Percent of total nonfarm jobs,
1985 annual average)
Other Services
17.0%
Source: C o m p u t e d b y Federal Reserve B a n k of Atlanta from data
released in the U.S. Department of Labor, Bureau of
L a b o r Statistics, BLS 790 Monthly Report on Employment, Hours, and
Earnings.
insurance, real estate, construction, and other
activities such as mining and agriculture provide a
relatively minor share of the state's jobs.
Manufacturing
A closer look at manufacturing reveals diversity
(Chart 2). The apparel industry stands out, providing about 15 percent of manufacturing employment—jobs for about 53,000 workers in 1985. It
has also been Alabama's most troubled producer
during the difficult period of rising import competition since j o b levels reached their peak in
1984. Inroads from abroad have especially threatened manufacturing of men's and boys' suits and
coats, the state's largest apparel category. Apparel
employment in 1986 averaged about 5,000 workers below 1984's peak level, with most of the drop
occurring after mid-1985. Following a severe dip
in March 1986, the number of workers edged
upward and held through the fall months of
1986.
As imports become more costly, Alabama's
manufacturers are likely to expand their market
share and could add to employment growth during 1987. Falling corporate tax rates are also
expected to help labor-intensive producers in the
year ahead. These improvements should bolster
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
Chart 2.
Alabama's Leading
Manufacturing Industries
(Percent of total manufacturing jobs,
1985 annual average)
Machinery 1 1 . 8 %
Apparel 14.9%
Textiles 1 0 . 1 %
Other 1 0 . 4 %
Stone, Clay,
& Glass 2 . 5 %
Food 8.1
Printing 3 . 4 %
Chemicals 3.4%
Lumber & W o o d 8.1%
Paper 6 . 2 %
Transportation 7 . 6 %
Fabricated Metals 6 . 4 %
Primary Metals 7.3%
Source: C o m p u t e d b y Federal Reserve B a n k of Atlanta from data
released in the U.S. Department of Labor, B u r e a u of
L a b o r Statistics, BLS 790 Monthly Report on Employment, Hours, and
Earnings.
manufacturing's largest industry and thus contribute strength to the industrial sector as a whole,
especially t o the dominant nondurable goods
production component, which was hardest hit by
import competition. These industries, including
paper and chemicals, accounted for over 1,500 of
the nearly 2,500 jobs lost in manufacturing during 1986.
Paper manufacturing fell sharply from 1985 to
1986. Initially troubled by weak demand, paper
producers then suffered from labor strikes that
idled 2,000 workers at important mills during July
and August, and production slid even further.
Demand for paper in 1987 should be buoyed
by health in the U.S. economy and a weaker dollar
abroad, which could stimulate some recovery in
international markets for U.S. paper products. If
Alabama manufacturers can avoid further labor
disputes and plant shutdowns, paper employment should at least regain its 1985 level if not
resume the annual growth trend of 1.5 t o 2 percent that characterized the industry from 1981
through 1985. Over the long run, paper manufacturing is likely to continue t o be one of Alabama's
growth industries because of the state's advantages in timber production.
Conditions are not as favorable in the chemical
industry. Fortunately, chemical workers constitute only about 3 percent of Alabama's total
manufacturing employment. Though employment seemed to have steadied in 1984-85 following several years of precipitous decline, it fell still
further during 1986. Despite recent indications
that a turnaround is beginning elsewhere in the
Southeast, Alabama's employment in chemicals
production averaged nearly 3 percent or 300
employees below its level in 1985. Prospects for
better export markets in 1987 should at least
stabilize jobs in chemicals production, thus easing one of the drags on nondurables employment
during 1986.
Weaknesses in nondurable manufacturing would
have been more marked without a relatively good
performance in textiles and food manufacturing.
The textile industry, which added 1,000 jobs over
1985's level, was especially positive: weaving,
knitting, yarn, and thread mills registered the most
notable gains. Employment in textiles advanced
steadily throughout 1986 and should continue t o
rise during 1987. Strong demand for carpet has
prompted expansion of production facilities in
Phenix City. The market for textile products used
in automobiles, residential buildings, and furnishings is likely to remain strong if the nation's
economy maintains its pace as anticipated in
1987. The elimination of the investment tax
credit, though, may hamper further expansions in
the capital-intensive textile manufacturing area.
Although food manufacturing grew less rapidly
in 1986 than in 1985, it still added over 800 jobs to
1985's record high employment. The prominence
of the broiler chicken industry in Alabama along
with increasing demand for poultry has been a
major force in bringing 3,000 new workers to food
manufacturing since 1982. The rising popularity of
chicken and fish (another locally produced product) and growing numbers of residents in the
region ensure that 1987 will be a good year for
food manufacturing.
The durable goods-producing industries, which
account for a little less than half of the state's
manufacturing work force, were stronger than
nondurables industries in 1986, though durables
industries, too, lost ground. Employment turned
down after mid-year, resulting in a drop of around
1 000 workers from 1985. Even so, some particular
industries did well and partially offset other less
vigorous industries.
Machinery manufacturing, with approximately
43,000 employees, is the state's largest durables
industry. In 1986 it did little more than maintain
the levels reached after the brisk growth of 1983
and 1984.The industry has done well, though, t o
63
FEDERAL RESERVE B A N K O F A T L A N T A
avoid losses like those suffered in Mississippi and
Louisiana. As in those states, demand for machinery in Alabama, stemming from oil and gas
well drilling in the southwest region of the state,
has dropped. Problems with the space program
have crimped machinery manufacturing employment in the Huntsville area as well. However,
Huntsville will gain about 3,500 new jobs as a
result of a new electronics manufacturing plant
and a large compact disk manufacturing plant
planned for that area. Stabilization in the petroleum industry in 1986 and the return of normal
activity in the space program should bring renewed strength to machinery manufacturing in
1987.
Transportation equipment was one of the most
robust areas in manufacturing during most of
1986. Alabama's extensive tire manufacturing industry and various auto parts plants enjoyed a
continuing increase in business due to brisk demand for automobiles in the first half of 1986. As
auto buying slumped during the fourth quarter of
1986, the market for auto parts and accessories
slowed and employment dropped in the state's
manufacturing plants. Even so, defense spending
for ship and boat building on the Gulf Coast gave
transportation manufacturing an additional boost.
Employment gains for the industry in 1986 averaged well above 3 percent, or 1,000 jobs, making
it a bright spot in Alabama's employment picture.
Auto demand seems likely to slow a bit from its
pace in 1986, especially since the special low-rate
financing packages offered duringthe second half
of 1986 may have pulled some 1987 demand forward into 1986. This means that employment in
the transportation equipment industry will at best
remain near the high level posted in 1986. However, if prices of imported cars escalate sharply in
1987 in response to the decline of the dollar
against other currencies, especially the yen, more
American-made cars might be sold, with the result
that domestic manufacturing would expand to
supply a larger share of the market. Whether or
not the prices of imported cars rise sharply probably depends in large part on additional depreciat i o n of the dollar against foreign currencies.
Through 1986 Japanese auto manufacturers tempered price increases in U.S. markets by shrinking
their substantial profit margins, but presumably
they now have less leeway to adjust profits if the
dollar should drop further against the yen.
An increase in domestic manufacturers' share
of the U.S. auto market and leveling out in the
64
Chart 3.
Alabama's Primary Metals Employment
(Thousands)
Source: Alabama D e p a r t m e n t of Industrial Relations, Alabama
Labor
Market News, various issues, in c o n j u n c t i o n with the U.S.
D e p a r t m e n t of Labor, Bureau of Labor Statistics.
energy industry could help Alabama's metals
manufacturing industries recover somewhat from
their languor in 1986. Combined j o b losses in
primary and fabricated metals manufacturing
affected over 2,000 workers. Hardships were
especially severe in the steel and a l u m i n u m
industries. The slump in the petroleum industry
curtailed demand not only for machinery but for
pipe used in oil and gas well drilling. While drilling
activity could improve slightly in 1987 with stabilizingoil prices, demand for steel products is not
likely to recover much. Chart 3 shows that employment in Alabama's primary metals industries
has been cut in half since 1970.
A number of Alabama's aluminum plants closed
during 1986 due to dwindling demand for metals
and c o m p e t i t i o n from foreign manufacturers.
These plant closures do not bode well for recovery of the domestic aluminum manufacturing
industry in the near future. W h e n and if expansion
resumes, it will probably be at technologically
improved plants with reduced labor requirements
so that even rising output would not increase
employment much.
The swelling tide of imports in 1986 brought
bad news for another of Alabama's durable goods
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
industries, lumber and w o o d products. Even
though vigorous housing construction stimulated
demand for lumber, an increasing share of the
market was taken by Canadian producers. Despite the fact that the dollar depreciated against
most foreign currencies last year, it rose slightly
against the Canadian dollar. Hence, Canadian
lumber prices dropped relative to U.S. prices, and
the volume of lumber imports j u m p e d sharply.
Thus, even the brisk market for lumber did not
stop employment in Alabama's lumber and w o o d
industries from dipping slightly in 1985 and dropping faster in 1986. Employment measured about
500 jobs below 1985's level but appeared to
steady duringthe second half of 1986. If Canadian
lumber imports are controlled as expected during
1987, and if single-family residential construction
remains robust, lumber producers may enjoy
some improvement in the comingyear. This component of Alabama's manufacturing sector would
then add its momentum t o several other industries which together could return manufacturing
employment to an upward path in 1987. Expansion in manufacturing would probably spill over
into nonmanufacturing sectors as well.
Chart 4.
Alabama's Trade Employment
(Thousands)
Source: Alabama Department of Industrial Relations, Alabama
Labor
Market News, various issues, in c o n j u n c t i o n with the U.S.
Department of Labor, Bureau of Labor Statistics.
Trade
Trade, the state's largest nonmanufacturing industry, w i t h 310,000 employees, is likely t o
benefit most directly from the rising income
that would accompany an upturn in manufacturing. Combined w i t h the population increase in
1986, improvement in manufacturing could easily
push 1987 trade employment beyond the 3 percent increase posted the previous year. Although
advances slipped in 1986, reflecting a slowdown
in personal income growth, trade employment
rallied after the first quarter t o add around 10,000
jobs to Alabama's total employment during the
year (Chart 4). The number could easily approach
13,000 or more in 1987 to accommodate the
state's growing population.
Department stores in Birmingham and Mobile
performed remarkably well in 1986. Sales in both
metro areas climbed over 12 percent from 1985,
far exceeding their rate of growth in the nation.
Statewide consumer activity, as reflected in sales
tax collections, was disappointing, however.
Alabama's sales tax revenues duringthe fiscal year
ending in June 1986 rose only 1.2 percent over
levels a year earlier. This disparity indicates that
rural and less dense urban areas with undiversified
manufacturing industries have been growing slowly.
FEDERAL RESERVE B A N K O F A T L A N T A
Alabama's sluggish overall consumer spending
activity in 1986 did, however, come in the wake of
healthy growth in 1985, when the state collected
14.4 percent more revenue than in 1984. Most
retailers indicate optimism about the sales outlook for 1987.
Unfortunately, the state's export trade sector
does not share the optimistic outlook projected
for domestic trade. Were it not for the relatively
small size of the state's export segment, prospects
for Alabama's total economy would be considerably worse. Alabama's overall international
trade has weakened steadily over the last two
years. Dollar exports performed poorly in 198586, and imports shrank from their peak in 1984.
The decline of the dollar with respect to major
currencies since early 1985 has not thus far improved the flow of goods. Export activity was flat
in 1985-86 as world demand for Alabama's coal
and soybeans continued to flag in response to
increasing competition from suppliers abroad.
The McDuffie Coal terminal, which was designed
to handle about 25 million tons annually for
export, is currently operating at less than 50 percent of its capacity. By 1986 Alabama's total
exports had d r o p p e d almost 60 percent from
65
their high point in 1980. The value of imports handled by the Mobile Customs District in 1986 also
tumbled from levels a year earlier, but the drop
was a direct result of lower import prices for oil.
The world trade outlook in 1987 offers only slim
hopes for positive developments in the Port of
Mobile. Depreciation of the dollar is not likely t o
produce a quick turnaround in the demand for
Mobile's major export commodities. Nor does
the modest growth projected for major industrial
countries bode well for U.S. manufacturing and
agricultural exports handled at the port.
Chart 5.
Alabama's Services Employment
(Thousands)
Government
Expanding e m p l o y m e n t and rising income
should also increase revenues for state and local
governments, enabling some growth in government services. Government employment rose by
about 4,000 workers in 1986, nearly its best increase since 1980. After that time the state plunged
into the recession of 1981 -82 and revenue reductions forced the first year-over-year declines in
government employment in more than t w o decades. Recovery has been difficult: in 1986 average
employment of 301,000 workers finally moved
the number of government jobs above the 1980
level. Advances in computerization, which make
office workers more productive, should keep
government employmentfrom climbingto match
the economy's expansion. However, as living
standards improve, demand for the quantity and
quality of government services increases; and an
economic upturn in 1987 should at least maintain
employment advances made during 1986 in the
government sector.
Other Services
Services, which were a major source of new
e m p l o y m e n t in 1984 and 1985 and averaged an
increase near 5 percent in both years, faltered in
1986, reflecting the effects of the slowdown in
income expansion (Chart 5). Alabama's third
largest nonmanufacturing group, services employed about 247,000 workers and provided
about 6,000 new jobs in 1986 as compared with
12,000 in 1985. Employment gains stagnated
duringthe summer months of 1986 but recovered
toward the year's end, offering more evidence
that Alabama's economic vigor may be returningas
1987 begins.
66
Source: Alabama Department of Industrial Relations, Alabama
Labor
Market News, various issues, in c o n j u n c t i o n w i t h the U.S.
D e p a r t m e n t of Labor, B u r e a u of Labor Statistics.
Alabama's lodging and restaurant industries
were a particular source of strength during the
past year. Tourist activity and conventions drew
visitors to the state, though certainly not in the
same numbers as in neighboring Florida. Nevertheless, tourism had a good year in 1986. Airtravel
was up slightly from already high levels in 1985,
but the increase masked variation from month to
month and from city to city. Birmingham retained
its position as Alabama's busiest airport, while
M o b i l e had fewer passengers in 1986 than in
1985.
The number of visitors registering at the state's
welcome centers indicates that auto travel rose in
1986, aided by the sharp drop in gasoline prices.
Many of the state's attractions recorded marked
growth in visitor attendance between januaryand
March of 1986, and the space shuttle accident
apparently drew a wave of visits to the Alabama
Space and Rocket Center in Huntsville.
The outlook for Alabama's tourism industry is
brighterfor 1987. Business, government, and convention travel to Birmingham, Huntsville, and
Montgomery should continue t o boost the demand for lodgings in those local markets and help
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
Chart 6.
Alabama's Construction Employment
industries added about 3,600 jobs last year, easily
surpassing the 3,000 figure of 1985.
All segments of the finance, insurance, and real
estate industries are prospering, w i t h real estate
leadingthe way. The drop in mortgage rates acted
as a catalyst for rapid expansion in activity all
across the state. The finance industry has also
experienced a burst of vitality as institutions prepare for the state's interstate banking law to take
effect July 1,1987. After that date acquisitions by
out-of-state institutions may slow employment
gains in Alabama's banks. However, some of the
anticipated slowdown may be offset by continued diversification of nonbanks into activities
formerly the exclusive domain of commercial
banks. On the whole, finance, insurance, and real
estate are expected to maintain healthy growth
through 1987 and should again add over 3,000
new jobs.
Construction
Source: Alabama Department of Industrial Relations, Alabama Labor
Market News, various issues, in c o n j u n c t i o n with the U.S.
D e p a r t m e n t of Labor, Bureau of Labor Statistics.
absorb the new rooms that are being added. Projections estimate that tourism should be up 4 to 6
percent for Alabama in 1987 compared with 7 to
10 percent for the region as a whole.
Growth in manufacturing, trade, and government employment w o u l d also move the service
sector forward at a faster clip. The service sector
has traditionally been less volatile than other
areas of the economy; while it is slowerto drop off
during recessions, it is also slower to recover.
Thus, although improvement should begin in
1987 if past patterns hold, return to the advances
of 1984 and 1985 may not occur until 1988 or
later. Even so, 1987 is likely to bring 7,000 to 8,000
new service jobs to the state.
Finance, Insurance, and Real Estate
The finance, insurance, and real estate component of the economy—related to services though
considerably smaller—normally reacts more t o
downturns in the business cycle than do service
industries. However, in 1986 it posted gains of 5.4
percent. This increase was the highest on record,
even more rapid than in 1984 and 1985. These
Construction was Alabama's strongest industry
from 1983 to 1985, but in 1986 it skidded sharply
from an employment growth rate near 10 percent
in 1985 to a paltry 1.8 percent (Chart 6). After the
first quarter of 1986, advances essentially halted
as both residential and nonresidential construction slid below levels a year earlier. The largest
downturn was registered by nonbuilding construction, but nonresidential structures such as
office buildings and warehouses were also faltering dramatically toward year's end. At the same
time, permits for residential building were moving
up briskly with multi-family building permits leading the way. The spurt in multi-family activity was
apparently related to builders' efforts to get projects underway before tax reform legislation discontinued breaks for this kind of construction.
The new legislation also put caps on the volume
of tax exempt revenue bonds used liberally in the
past to finance apartment construction.
Single-family building is responding well t o the
recent influx of population. Furthermore, comparatively low mortgage interest rates make home
ownership more attractive than it has been since
1978. Multi-family activity is expected to drop
sharply afterthe first of the year, but vigor in singlefamily buildingshould hold construction employment near its 1986 level. Increases in total construction employment are not likely until the
overabundance of commercial structures is absorbed and demand picks up again. If the overall
economy improves in 1987, the space should be
67
FEDERAL RESERVE B A N K O F A T L A N T A
used more quickly, possibly bringing new life to
construction as early as 1988.
Transportation and Natural Resources
Industries such as agriculture, transportation,
coal mining, and gas and oil unfortunately can
boast neither progress in 1986 nor much promise
of recovery in the foreseeable future. Following a
feeble performance in 1985, transportation lost
nearly 2 percent (1,200) of its workers in 1986.
Reductions in production and dropping shipments of natural products such as coal, timber,
farm commodities, and oil and gas are largely responsible for dwindling employment in transportation. Some recovery anticipated in export
markets for agricultural products, timber, and
paper products should bring slight improvement
in shipping activities during 1987. The number of
transportation workers could hold at 72,000 t o
73,000 workers, echoing figures for the past two
years.
The agricultural sector, w i t h around 50,000
workers, continues to languish due to excess supply, weak demand, and intensifying financial pressures. The field crop portion of Alabama's farm
sectorfaced especially difficulttimes as the state's
farmers endured still another severe drought in
1986. Yields of leading crops fell substantially
below normal levels. In addition, crop plantings
were reduced by 17 percent in 1986, when much
marginal acreage was idled. Since its peak in 1981,
crop land has been cut by 45 percent—a sizable
1.5 million acres.
Total farm cash receipts in Alabama shrank by 9
percent in 1985. Although crop revenue continued to slide in 1986, livestock revenue improved thanks t o higher prices for most products.
Livestock earnings helped hold total farm cash
receipts close t o their level in 1985.
A sign of continuing hardship in Alabama's farm
sector in 1986, another 2,000 farms ceased operation or were merged into existing farms. Farm
asset values dropped $472 million, due primarily
to the diminishing value of farmland. Since their
highpoint in 1981, Alabama farmland values have
plummeted approximately $1.5 billion, and modest declines are likely to continue in 1987 as crop
farming remains unprofitable on most of the
state's low-yielding, high-cost acreage.
The importance of Alabama's crops continues
t o wane compared with livestock and poultry as
more producers discover that crop farming in
Alabama is not competitive with that of other
68
states or regions given current yields, costs, and
product prices. For livestock producers, however,
1987 may be another prosperous year thanks t o
low feed costs and increasing prices for meat
(especially poultry) in response to brisk consumer
demand. Overall, contraction of the farm sector is
likely to proceed but at a slower rate than during
the past t w o or three years.
The economic situation for Alabama's substantial coal mining industry also grew more dismal in
1986, and prospects for improvement remain
remote. The coal industry is concentrated in a
twelve-county area in the north central part of the
state. In 1985 production was almost equally
divided between underground and surface mines.
At the end of 1985, 20 underground and 136 surface mines were in operation. During 1986 a number of mines closed temporarily and at least t w o
large underground mines were permanently shut
d o w n because of shrinking demand and poor
returns. As a result, coal production in 1986 declined. Most of the 20 to 25 percent of the state's
coal that is exported is the metallurgical variety
used for steel production, largely in Japanese
mills. If Japan's auto production gears down as a
result of a loss in share of the U.S. market, Alabama's coal exports are likely to shrink as well,
spelling still further contractions for the state's
mining activities.
The slump in coal demand is related to the continued energy glut, which, as noted elsewhere,
has cut back oil and gas production and explorat i o n in the southwestern portion of the state.
Stabilization, as opposed to the collapses of 1986,
is about the best that 1987 can offer. The most the
energy industry can contribute t o the state's
economic growth is probably an end to the drag
produced by its steep slide in 1986. Stability in the
energy industry will nevertheless allow the state's
economy t o make a better showing in 1987.
Conclusion
The pickup anticipated in manufacturing, trade,
services, and single-family housing—the bulwarks
of Alabama's economy—should boost economic
activity in 1987 beyond its performance in 1986
toward the more rapid rate of growth that characterized the 1983-84 period. Recent signs of improvement, such as rising export volume and
slight employment upturns in the apparel, chemical, and paper manufacturing industries, bolster
confidence that 1987 will, in fact, be a stronger
year for Alabama's economy.
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
Mississippi in 1987
Mixed Prospects
W. Gene Wilson and Gene D. Sullivan
Slight improvement
may be in store
for
Mississippi,
though rural areas will
continue to lag due to farm and energy
weaknesses
while cities move ahead on the
strength
of services and
trade.
The passing year embroidered Mississippi's economic tapestry with good news and bad. Despite
substantial worsening of the unemployment rate,
the state's economy showed modest expansion
in 1986. Sectors such as services added thousands
of jobs; industries like machinery, on the other
hand, suffered j o b losses (Table 1). Personal income gained less than in 1985, but consumer
spending was robust.
Prospects for 1987 are also checkered by a mixture of negative and positive factors. Moderately
higher energy prices, if maintained, may revive the
moribund oil and natural gas industries. Major
The authors are, respectively, a senior economic analyst and
the Research Officer in the regional section of the Atlanta Fed's
Research
Department.
"I
gki.
Snjpf
FEDERAL RESERVE B A N K O F A T L A N T A
.ist..
69
Table 1.
Job Gains or Losses in Mississippi
From 1985 to 1986*
Gains
or Losses
Manufacturing
1,000
Durables
-600
Machinery
-1,580
Primary Metals
-260
Transportation
Equipment
1,200
Other
Nondurables
40
1,600
Food
850
Apparel
300
Paper
-20
Textiles
210
Other
260
Construction
-640
Trade
5,850
Services
5,200
Government
980
* 1 9 8 6 data estimated.
Source: Estimated by Federal Reserve Bank of Atlanta from data
released in the U.S. Department of Labor, Bureau of
Labor Statistics, BLS 790 Monthly Report on Employment, Hours, and
Earnings.
improvement will not occur, however, until prices
move to much higher levels.
Lower interest rates and higher personal income apparently stimulated greater consumer
spending in 1986 and will probably continue
making a positive impact in 1987. Incentives by
automobile companies spurred car sales in 1986
but may have cut into business for 1987.
Changes in federal tax regulations are likely t o
lead to reductions in commercial and multi-family
construction. Considerable interest rate declines
in 1986 helped only to level residential construction from its downward slide, and there seems little reason to expect more housingactivity in 1987.
A fall-off in construction will also hurt the lumber
70
industry, which is especially important in some of
the state's rural counties.
Much of the state's economic activity appears
to be developing a dual nature. In rural areas,
where primary industries and manufacturing
dominate the entire economy, conditions will
remain weak. In urban areas where services, government, and trade are important, the economy
should at least remain stable and will probably
show moderate growth in 1987. Overall, the
state's economy will repeat a familiar pattern in
1987; it will be 1986 all over again but with a
slightly different mixture of strong and weak
industries, though Mississippi may see moderate
improvement in 1987.
Labor
Mississippi's economic health depends heavily
on a few individual industries within the state, but
it is also affected by other factors. The size of the
labor force, for example, determines the supply
of available workers. An imbalance between labor
force growth and j o b creation will either raise
unemployment rates or constrain economic expansion, depending on the type of imbalance.
During 1986 the Magnolia State's labor supply
increased between 2 and 3 percent, more slowly
than in 1985 but otherwise at the highest rate
since 1980 (Chart 1). Growth in the labor force
outpaced the economy's creation of jobs by
almost t w o to one.
Swelled with the return of unemployed oil
workers from Louisiana and Texas, Mississippi's
expanding pool of workers led to a rise in the
unemployment rate. Although labor force growth
slowed dramatically during the third quarter, the
u n e m p l o y m e n t rate c l i m b e d even faster than
before as total employment dropped from its
peak in the first half of the year. Seasonally adjusted rates in the double digits represented the
highest level of unemployment since 1983. Despite the increase in unemployed Mississippians,
the average number employed during 1986 rose
about 10,000 from 1985.
Income and Spending
Demand for the products of Mississippi's factories and fields depends not only on the number
of people working but also on the amount they
earn. Manufacturing payrolls registered about 3
percent higher than in 1985, and average weekly
earnings climbed about 2 percent. Reflecting
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
Chart 1.
A Comparison of Labor Force and
Employment Growth Rates in Mississippi
(1971-1986)
Employment
Labor Force
the first half of 1985. General department store
sales activity, on the other hand, has been weak,
perhaps reflecting slack home sales and growing
consumer caution about the use of debt.
Consumer spending in 1987 will probably improve but is not expected to be robust. Car sales
in the coming year may suffer from the manufacturers' incentives that drew so many customers
late in 1986. Although retailers in the state are
guardedly optimistic about increases in their sales
next year, they also fear some loss of consumer
confidence as people become more concerned
about the liberal use of credit and the state's
economic prospects. Loss of confidence typically
exerts a negative influence on retailers' sales and,
consequently, on profits.
Primary Industries
Source: C o m p u t e d b y Federal Reserve B a n k of Atlanta from data
released in U.S. Department of Labor, Bureau of Labor
Statistics, Employment
and Earnings, various issues.
these and other gains, total personal income in
the Magnolia State rose approximately 6 percent
in 1986, a rate of growth higher than in 1985.
Over half of the state's income comes from just
three sectors—manufacturing, transfer payments,
and government—with shares of 19, 18, and 14
percent, respectively. Manufacturing and government have helped raise the state's average income in recent years. Whereas manufacturing
continued t o play a positive, albeit weaker, role in
1986, the public sector faced a stringent state
budget hampered by lower revenues. Moreover,
the possibility that less federal money will flow to
the state because of deficit reduction measures
suggests a more limited role for government in
1987.
In conjunction with Mississippi's income growth,
consumer spending enjoyed a healthy increase.
Total sales tax collections for the fiscal year ending
in June 1986 were up 6 percent from a year earlier,
when state sales revenues were catapulted by
unusually strongconsumerspending. (The 19 percent upswing in collections in 1985 marked the
best year for state retailers in some time.) The car
sales recovery, attributable to pent-up demand
after several years of slow sales and manufacturers' incentives, provided a major boost to total
retail sales. New car and truck registrations for the
first half of theyearwere 3.8 percent higherthan in
FEDERAL RESERVE B A N K O F A T L A N T A
The economy in a particular geographic area
usually develops in roughly three stages, each
dominated by primary, secondary, or tertiary
industries. In the first stage of development most
economic activities involve such industries as
agriculture, mining, forestry, or fishing. In the case
of Mississippi, agriculture held sway over the
state's economy until well into the twentieth century. As recently as 1950, over 40 percent of the
work force was employed in agriculture.
Primary industries have continued to be, if not
the economic backbone of the state, a decidedly
important segment of it. In 1960, over one-fifth of
the work force in 53 of Mississippi's 82 counties
were e m p l o y e d in agriculture; in six of these
counties over half of the total labor force farmed.
In 12 of the same counties over one-fifth of the
workers were employed in either mining or forest
products. Today 9 percent of Mississippi's employees still work in primary industries compared
t o 5 percent nationwide. These industries remain
especially crucial in rural counties.
Agriculture. The agricultural sector contributes
more than $2 billion annually to the state's economy, which has a gross output of roughly $26
billion. Farming generates even more indirectly. A
small number of commodities produce most of
the state's farm income. Cotton and soybeans,
the t w o leading crops statewide, are responsible
for about half the farm cash receipts. Cotton has
receded from its historical prominence, while
soybeans have come forward t o constitute a
major source of farm revenue. The cattle and
broiler industries account for another 30 percent
of agricultural cash receipts.
71
Table 2.
Population Changes in Mississippi
(1984 compared with 1970)
1970
1984
Difference
Percent
Change
49,500
37,100
11,800
42,000
40,200
14,500
8,800
15,700
19,300
45,414
37,087
9,377
42,219
35,737
13,940
8,060
11,604
16,338
-4,086
-13
-2,423
219
-4,463
-560
-740
-4,096
-2,962
-8
0
-21
1
-11
-4
-8
-26
-15
88,600
135,300
215,100
44,900
36,000
123,556
168,742
259,400
78,061
57,278
34,956
33,442
44,300
33,561
21,278
39
25
21
75
59
2,217,000
2,597,952
380,952
17
Agricultural Counties
Bolivar
Sunflower
Tunica
Leflore
Coahoma
Humphreys
Sharkey
Quitman
Tallahatchie
Urban Counties
Jackson
Harrison
Hinds
Rankin
De Soto
State Total
Source: U.S. D e p a r t m e n t of C o m m e r c e , B u r e a u of the Census, Current Population Reports, Local Population Estimates, Series P-26.
Mississippi's farm sector remains in a generally
weak condition: financial distress appears widespread, crop prices are sagging, and profits remain
elusive. The number of liquidated farms has been
high in recent years, and the trend toward consolidation is continuing. In fact, from 1984 to mid1986, more farms—4,000 in all—ceased operation in Mississippi than in any other southeastern
state. Those farmers still in business face substantial declines in wealth. The value of farmland has
plummeted almost 30 percent since its peak in
1981, eroding nearly $4 billion in farm asset
value.
In Mississippi, as in the nation, 1987 may be the
year that agriculture begins the long road t o recovery. Because land prices are approaching parity with the land's income-earning capacity, asset
values are unlikely to fall much lower and could
even rise slightly. Farm debts outstanding should
72
continue shrinkingand so cause farmers' equity to
rise. Government commodity payments provided an important supplement to farm income in
1986 and will again in 1987. However, net farm
income is expected to remain low, and profits will
accrue only t o the most efficient, well-managed
farms.
Agriculture's short-run impact on income growth
in the state, especially in rural counties, is accompanied by a more long-term, structural effect. The
economic organization of Mississippi today is the
logical descendant of the state's agrarian past.
Strong reliance on primary industries, in contrast
t o economic diversification in the nation and
elsewhere in the Southeast, has laid the groundwork for much of Mississippi's present economic
environment. As agriculture became increasingly
capital-intensive, farm labor became overly abundant. Poor returns to farming, low farm wages, and
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
better j o b opportunities elsewhere led to dramatic population shifts.
Many people in rural, agricultural counties
moved either out of the state or to the few urban
areas such as Jackson, where more favorable
economic opportunities exist. Counties in the
Mississippi Delta typically have lost between 5
and 20 percent of their population since 1970.
Urban areas, on the other hand, generally have
gained from 20 to 75 percent in the same period
(Table 2). Migration from rural to urban areas is
likely to continue, although at a slower pace. Consequently, the state's economic growth must supply enough jobs not only for new entrants to the
labor force but also for people leaving agriculture
or other declining primary industries.
Wood. Forestry contributes about $500 million
each year to the Magnolia State's economy, primarily from the sale of lumber. The lumber industry suffered from decreasing demand in 1986 as
construction weakened and lumber imports remained competitive. Employment in the lumber
and w o o d industry averaged approximately 2 percent below its 1985 level. This decline makes
1986 the first year employment fell in the industry
since 1982. Although 3,000 jobs were added between 1983 and 1986, labor-saving technological
advances will reduce prospects for further j o b
growth.
Employment in lumber and w o o d industries
may slacken in 1987 if demand weakens further.
Nonresidential and multi-family residential construction is expected to have a poor year that will
result in less need for lumberand o t h e r w o o d products. Single-family residential construction will
also be slower, thus decelerating demand for lumber and furniture. Mississippi's thriving furniture
industry, located largely in the northeastern part
of the state, will be affected by sluggish furniture
sales. An export tax on Canadian lumber may help
to offset the impact of diminished construction
temporarily by increasing the market share of
domestic lumber. Also, lumber exports began rising in 1986 and could play a positive role in
1987.
Energy. Because the average cost of producing
oil in Mississippi is $15 per barrel, the state's small
oil industry was devastated by the dramatic plunge
in petroleum prices. The major impact has been
on state tax revenues, one-fifth of which come
from severance taxes on oil and gas. In 1986
severance taxes plunged along with the price of
oil. The state taxes crude oil and natural gas at 6
percent of its value, and the drop in the price of
F E D E R A L RESERVE B A N K O F A T L A N T A
oil, rather than reduced production, was primarily
responsible for the state's losses. Oil production
showed only a slight downward trend in 1986,
because small, unprofitable wells were capped.
Exploration declined as the number of drilling rigs
operating in the state fell by nearly half from the
third quarter in 1985 t o the third quarter in
1986.
The price of natural gas declined approximately
30 percent from its level in 1985 because domestic supplies exceeded demand. Since 1981, sales
have dropped 15 percent as a result of increased
competition from other energy sources. In 1986
production fell almost 10 percent due to well
closures, but prices remained low. By the end of
1987 supply and demand may once more be in
balance, resulting in a moderate price increase. In
the meantime, the industry should not lose any
ground and may find itself reviving somewhat.
Secondary Industries
As economies develop, primary industries concerned with extracting resources from the environment give way in relative importance t o
secondary industries that process products of
primary industries into marketable goods. Manufacturing and construction are t w o leading
examples. The importance of manufacturing is
proportionately greater for Mississippi than for
either the nation or the Southeast. Unfortunately,
secondary industries are not the same source of
strength they would have been, say, two decades ago.
Manufacturing. Employment in manufacturing
peaked in 1978 in Mississippi, and, although it has
recovered markedly from the 1982 recession
trough, it has not thus far regained its earlier level
in the current expansion (Chart 2). Large quantities of imports into the United States due to
increased competition from foreign producers
and the impact of an expensive dollar on foreign
exchange markets proved detrimental t o the
state's manufacturers in recent years. Nevertheless, almost 30,000 jobs were restored after the
recession of 1981-82. In 1986 manufacturing
employment experienced only slight growth and
so remained close to 1985 levels.
Most j o b losses in the manufacturing sector
during 1986 were among workers producing durable goods, that is, goods which can be used longer
than three years. This was a change from 1985
when durable goods production boasted the
73
Chart 2.
Mississippi Manufacturing Employment
(1969-1986)
250-
240
Thousands
A
/ym
J
230-
J
220-
210-
200-
190-
J
f
j
n
r
J
1T
J
180-
1972
1976
1980
1984
Source: U.S. Department of Labor, Bureau of Labor Statistics,
BLS 790 Monthly Report on Employment,
Hours, and
Earnings.
majority of new jobs in manufacturing. Since durable goods account for 14 percent of the state's
employment, conditions in these industries have
a noticeable effect.
Job gains of roughly 6 percent in transportation
e q u i p m e n t industries in 1986 offset losses in
machinery and primary metals, so employment in
the durable goods sector overall remained stable.
Other durables industries experienced only slight
gains or stayed essentially the same.
Employment in the somewhat less important
nondurable goods sector showed modest growth,
rising about 1 percent. Specific industries, for the
most part, followed suit. Apparel, textile, and
f o o d e m p l o y m e n t , which make up over t w o thirds of nondurable goods employment, rose
about 1, 4, and 3 percent, respectively. Paper
employment also improved a little.
In summary, j o b growth in manufacturing industries has been generally stable. The nondurable goods sector added about 1,600 jobs, a
welcome turnaround from 1985. Employment in
the durable goods sector declined from 1985,
although some industries gained while others
lost.
74
What are the developing trends for manufacturing in 1987? The dollar's realignment suggests
some improvement. Since the value of the dollar
relative t o various foreign currencies has fallen,
more dollars are needed to buy foreign products.
As foreign-made products become more expensive, further improvement is likely for producers
of nondurable goods. Employment in durable
goods production is likely to improve in some
industries but may weaken again in others. Prospects for primary metals and machinery production remain uncertain, but makers of transportation equipment probably will experience losses.
Ingalls Shipbuilding, which alone employs roughly
1 percent of the durables work force, w o n additional ship contracts in 1986, but the impact of
these gains will not be felt until at least 1988. In
the interim, employment at Ingalls may decline as
existing projects conclude before new ships are
started.
Mississippi's automotive parts industry also
may face harder times. Should 1987 prove a poor
year for auto sales, some workers w h o turn out
parts and accessories for autos could lose their
jobs. There are approximately 60 auto parts factories in the state. Whether or not auto dealers
face a bad year depends on the effects of substantial incentive-induced sales in 1986, new tax regulations, higher import prices, and the state of the
economy. Consideringthe overall impact of these
factors, the negative potential seems to outweigh
the positive.
Construction. Workers in construction account
for about 5 percent of nonfarm employment.
Over the last two decades their numbers have
fluctuated between 30,000 and 45,000. A rise of
approximately 9 percent in construction employment in 1986 from the seasonal low early in the
year represented an improvement, but average
e m p l o y m e n t remained 2 percent b e l o w last
year's level.
Total residential construction stabilized in 1986
after enduring a very weak year in 1985. Although
construction picked up, it remained almost 30
percent less (as measured by residential units)
than in 1984. After declining throughout 1985,
multi-family building permits showed a surprising
2 percent gain in 1986. Single-family building permits, in contrast, remained relatively weak (Chart
3). Residential construction is not likely t o change
much in 1987. Since mortgage rates fell markedly
in 1986, much of the demand for single-family
homes may have been satisfied. A stable or
declining mortgage rate is unlikely to elicit much
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
Chart 3.
Multi-Family and Single-Family
Building Permits in Mississippi
(Units, 12-month rate)
Multi-Family ——
Single-Family
Source: U.S. Department of C o m m e r c e , Bureau of the Census,
Housing
Units Authorized
by Building
Permits
and
Public Contracts
(C-40).
further demand for housing in 1987. Multi-family
construction should also fall off as tax changes
reduce investment.
Much of the activity in the construction industry during 1986 occurred in nonresidential building. After some weakness in 1985, nonresidential
construction resumed the expansion it had begun
in 1983. In 1986 this construction ran 10 percent
above the previous year as measured in square
footage. Continuation of this trend through 1987
appears doubtful because changes in tax laws will
reduce investors' incentives to engage in commercial construction, prompting a downturn.
Tertiary Industries
Tertiary industries, the next stage of development in the e c o n o m i c pattern, have been a
powerhouse for Mississippi's economic growth in
recent years. Here, not only services, trade, finance, insurance, and real estate, but also the
public sector is placed under the framework of
the tertiary sector; government, though not a
private industry, is a purveyor of services. Thus
defined, the tertiary sector accounts for roughly
60 percent of nonfarm employment in Mississippi. Employment in this sector has increased
substantially in the nation, the region, and the
state, and the trend indicates that future employFEDERAL RESERVE B A N K O F A T L A N T A
ment gains will be largely within the tertiary group.
For Mississippi's economy, however, this sector
plays a less central role than it does in the Southeast or the nation.
Services. Service industries, which include
business services, lodging, health care, recreation,
and similar nontangible transactions, are becoming an increasingly important source of jobs and
income for Mississippi's economy. As in the nation andtheSoutheast,Mississippi'semployment
growth can be traced to services, which account
for 15 percent of the nonfarm jobs and 10 percent
of the personal income generated in the state.
During 1986, over 5,000 people entered service
jobs, pushing the employment average almost 4
percent above its level in 1985.
Major job growth occurred in health and business services, both in absolute numbers and percentages. The outlook for 1987 remains positive,
although employment gains will not keep pace
w i t h the high rates recorded during the past
three years.
While tourism is a small segment of Mississippi's economy, it does generate approximately $1
billion of the state's gross product. Roughly onethird of the total is generated in the counties along
the Gulf Coast. Registrations at visitor centers and
national parks during 1986 indicate improved
tourism statewide, but tourist activity on the Gulf
Coast nevertheless declined from 1985's levels.
While the number of visitors was up, dollar-based
measures such as hotel sales tax receipts were
either flat or down slightly. The depressed Louisiana economy and greater competition from
Alabama and Florida help explain the drop in
tourist trade along the coast. Air traffic showed a
mixed picture, varyingfrom city to city, but was up
slightly statewide.
Tourism in 1987 will probably fare no worse
than in 1986. Higher gasoline prices than 1986's
average appear likely, but the modest increase
should have little effect on travel by car. The Gulf
Coast area will face the same competition and difficulties as in 1986, but some improvement in the
oil and natural gas industries may prompt visitors
frrom Louisiana to return to this traditional vacation spot.
Trade. Trade employment, which includes all
workers in wholesale and retail businesses and
accounts for over 20 percent of the nonfarm work
force, maintained its strong growth in 1986. Since
the recession trough approximately 22,000 people have been added t o the payrolls of wholesale
and retail trade firms, almost 6,000 of these in
75
Chart 4.
Mississippi Trade Employment
(Thousands)
Source: U.S. Department of Labor, B u r e a u of Labor Statistics,
BLS 790 Monthly Report on Employment,
Hours, and
Earnings.
1986 (Chart 4). The rise in trade jobs slowed,
though, during the latter half of the year. In 1987
trade will probably grow as consumer spending
continues rising, but at a slower pace than in 1986.
Much of the improvement can be expected in
urban areas.
Finance, Insurance, and Real Estate. Employment in Mississippi's financial, insurance, and real
estate industries has risen more than 3 percent per
year since 1984. In 1986, personal income growth
in this sector outstripped total increases for all
industries by a ratio of nearly two-to-one. This
trend indicates that the financial sector, though a
small component of total employment and personal income, is increasing in importance in the
Magnolia State and may be even stronger in
1987.
Major changes which should have a positive
impact on the economy are pending for the state's
financial services industries. In 1986, the Mississippi state legislature passed a two-phase interstate banking law. The first phase, effective July
1, 1988, will permit acquisitions and mergers
among banks in Mississippi and those in Alabama,
Arkansas, Louisiana, and Tennessee. The second
phase, effective July 1,1990, will allow banks from
most southern states t o enter Mississippi's borders. Both phases require reciprocity by affected
states. These developments, plus the new ability
76
of in-state banks t o make acquisitions and merge
beyond 100-mile limits, will undoubtedly change
the face of Mississippi banking over the next few
years. These regulatory changes should facilitate a
more efficient flow of capital within the state and
make a greater variety of services available t o
the public.
Mississippi's thrifts are strongly outperforming
their national counterparts. Growth rates of net
worth have exceeded national rates since 1984,
and 1986 was especially prosperous forthe state's
thrift industry.
Government. The government sector, which
claims roughly 180,000 employees or 22 percent
of all nonfarm employment, accounts for 18 percent of the state's personal income. Given the
significant role of government in the economy,
adverse conditions in that sector have a clear
impact on the state. Unfortunately 1986 was a difficult year for state and local governments.
Fromthebeginningofthe1986fiscal yearinjuly
1985, revenue consistently ran below the estimated levels that formed the basis of the state
budget. By November 1985, budget adjustments
and cutbacks totaling $70 million became necessary understate law. Despite continued shortfalls
in tax revenue, especially in oil and gas severance
taxes, the state managed to end fiscal year 1986
with no further budget cuts and even began the
new fiscal year almost $11 million ahead. Although
revenue in the last quarter of fiscal year 1986 fell
under projections, tax collections since the start
of the 1987 fiscal year have exceeded earlier
estimates. While oil and gas severance taxes remained dismally low in the third quarter, sales
taxes displayed considerable strength and corporate taxes were above projection. Because oil
prices moved higher, there is reason to believe
that severance taxes will improve at least modestly in the last quarter of 1986 and in 1987. Sales tax
growth may not continue as strongly as in the
beginning of the fiscal year due t o a slower rise in
consumer spending. Revenue estimates for fiscal
year 1987 were reportedly quite conservative;
therefore, unless some major event results in a
serious revenue shortfall, the state budget should
not run into difficulty.
The severe budget cutbacks in fiscal year 1986
limited j o b opportunities in government and led
t o j o b losses for some employees. A five-month
hiring freeze, along with layoffs and early retirements, reduced the number of employees workingforthe state by about 1,400, or 6 percent. Since
the start of the new fiscal year, however, roughly
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
Outlook Summary for Mississippi's Major Industries
Sector or
Industry
Percent of
Employment
Percent of
Personal Income
Government
22
14
Job losses in local government. Some recovery in state
government.
Services
15
10
Moderately strong.
5
3
20
10
Modest growth.
18
18
Manufacturing
Slight improvement in nondurable industries. Stable in durable industries.
Primary Industries
Agriculture weak but improving. Loss of jobs in lumber. A
few jobs gained in oil and natural gas.
Construction
Trade
300 employees have been rehired as funds allowed some vacancies to be filled.
In 1987 state government will not be a source of
strength in the economy. While a limited number
of jobs may be filled duringthe year, total employment in this sector will remain below the peak of
1986. N o r w i l l employment in local governments
fare any better, since layoffs and reduced budgets
seem to be in store as a result of the potential loss
of revenue sharing from the federal government.
Summary
An overview of the Mississippi economy suggests that 1987 will see modest improvement
over 1986, though the year may begin with high
unemployment and modest consumer spending.
As 1986 neared its end, unemployment remained
pervasive throughout the state. Duringthird quarter, 21 counties experienced at least one month
with over 15 percent unemployment. Most of
those counties were in the southern half of the
state, reflecting the distress in the oil and natural
gas industries and perhaps the spillover effects
from Louisiana's ailing economy.
F E D E R A L RESERVE B A N K O F A T L A N T A
Outlook
Weaker in 1987. Job losses
likely.
In 1987, slight j o b growth in trade, government,
manufacturing, and primary industries seems
likely. Trade should benefit from additional consumer spending, and the state government will
probably fill some of the positions left empty in
1986. Nondurable goods manufacturing may recover partially from the inroads of foreign competitors and the durable goods sector should
remain stable. Primary industries are also expected to begin a period of recovery in 1987. Unemployment will decline as displaced oil workers
either return to their jobs, find different employment, or move to other areas. Services should
continue to add jobs but probably at a slower rate
because the rapid j o b growth of recent years
appears unsustainable. Partially offsettingsome of
these gains will be the job losses expected in construction as a result of over-building and tax
regulation changes.
In summary, labor force expansion will probably be slower than in 1986 while job creation
may improve slightly, giving the e c o n o m y a
chance to match labor and j o b growth. Consequently, unemployment is expected t o fall in
1987. Consumer spending may rise as the year
progresses, providing fuel for the state's economy.
77
Index for 1986
AGRICULTURE
Marketing American
Agriculture:
Problems and
Opportunities
Donald W . Sands, January, p.20
Outlook for the Farmer
Robert P. Forrestal, June/July, p.5
BANK SURVEILLANCE
Nonbank Activities and Risk
Larry D. Wall, October, p.19
EMPLOYMENT
Two Measures of
Employment:
What Can They Tell Us?
David Avery, August/September, p.32
What's Behind Patterns of
State Job Growth?
William J. Kahley, May, p.4
FEDERAL D E F I C I T
The Long-Run Outcome of a
Permanent
Deficit
Thomas J. Cunningham, May, p.25
Projecting Federal Deficits and The
Impact of the
Cramm-Rudman-Hollings
Budget Cuts
Thomas J. Cunningham and
Rosemary Thomas Cunningham,
May, p.19
FINANCIAL INSTITUTIONS
Changing Thrifts: What Makes
Them Choose Commercial
Lending?
Robert E. Coudreau and
Harold D. Ford, June/July, p.24
The Foreign Bank Presence
in the Southeast
Brooks Mclntyre, January, p.36
Nonbank Activities and Risk
Larry D. Wall, October, p.19
Profits in '85: Large Banks Cain
While Others Continue to Lag
Larry D. Wall, August/September, p.18
INTERNATIONAL E C O N O M I C S
The Changing Pattern of U.S. Trade:
1975-1985
Jeffrey Rosensweig, Cretchen Lium, and
Kelly Welch, October, p.36
Competing Takes Hard Work
William Brock, January, p.6
Corporate Export Policies Provide the
Competitive
Edge
Sidney Topol, January, p.24
Developing Foreign Markets for
Southeastern Services
Edward S. Reed, January, p.28
The Dollar and Prices:
An Empirical Analysis
Joseph A. W h i t t , Jr., Paul D. Koch, and
Jeffrey A. Rosensweig, October, p.4
Florida's International Visitors: Profiling a
Warm Welcome
Barry E. Pitegoff, January, p.30
The Foreign Bank Presence
in the Southeast
Brooks Mclntyre, January, p.36
Foreign Direct
Investment
in the Southeast:
An Historical
Perspective
A New Dollar Index: Capturing a More
Global Perspective
Jeffrey A. Rosensweig, June/July, p.12
The Southeast: A Magnet for Foreign
Real Estate Investment
Alexius C. Conroy, January, p.40
The Southeast's Textile/Apparel
Trade
and the Import Threat
James C. Leonard, III, January, p.16
Strategies to Capture
International
Banking Business
Alexander M c W . Wolfe, Jr.
January, p.33
What are the Trends for Foreign Direct
Investments in the Southeast?
Cedric L. Suzman, January, p.42
Why Cultivate International
Markets
and Investments?
Andrew Young, January, p.11
INTERNATIONAL FINANCE
A New Dollar Index: Capturing a More
Global Perspective
Jeffrey A. Rosensweig, June/July, p.12
The Dollar and Prices:
An Empirical Analysis
Joseph A. W h i t t , Jr., Paul Koch, and
Jeffrey A. Rosensweig
October, p.4
MONETARY POLICY
The Monetary and Fiscal Policy Mix
James Tobin, August/September, p.4
Mira Wilkins, January, p.48
Marketing American
Agriculture:
Problems and
Opportunities
Donald W . Sands, January, p.20
78
NOVEMBER/DECEMBER 1986, E C O N O M I C
REVIEW
NONBANK BANKS
REAL ESTATE
Nonbank Activities and Risks
Larry D. Wall, October, p.19
The Southeast: A Magnet for Foreign
Real Estate Investment
Alexius C. Conroy, January, p.40
PAYMENTS SYSTEM
The ACH: An Elusive Dream
Pamela S. Frisbee, March, p.4
ACH Return Items
Gerald L. Keenan, March, p.19
Corporate Trade Payments: Hard Lessons
in Product Design
Bernell K. Stone, April, p.9
Desiderata for a Viable ACH
Bernell K. Stone, March, p.34
Dr. Frankenstein and the ACH
Bruce J. Summers, April, p.4
Electronic Payment Basics
Bernell K. Stone, March, p.9
Electronic Payments at the Crossroads
Bernell K. Stone, March, p.20
Managerial
Leadership:
A Key to Electronic Payment Success
George C. White, April, p.22
Scenarios for the Future of the ACH
Bernell K. Stone and George C. White,
April, p.29
F E D E R A L RESERVE B A N K O F A T L A N T A
REGIONAL E C O N O M I C S
Alabama:
A Stronger Year Ahead?
Gene D. Sullivan
November/December, p.61
Alabama: Prospects are Encouraging
Charlie Carter and Gene D. Sullivan
February, p.62
Economic
Overview
Gene D. Sullivan and
Mary S. Rosenbaum
November/December, p.4
Florida: A Good Year,
But Not An Easy One
B. Frank King and David Avery
February, p.13
Florida: Stays Out Front
David Avery and B. Frank King
November/December, p.15
Georgia: The Pace Slows,
But Growth
Continues
Joel Parker and M e h m e t llgaz
February, p.25
Georgia: Takes Problems in Stride
Joel Parker and Jody Lipford
November/December, p.27
Louisiana: The Worst May Be Over
William J. Kahley and
Gustavo A. Uceda
November/December, p.47
Louisiana: The Worst May Not Be Over
William J. Kahley and
Gustavo A. Uceda
February, p.50
Mississippi in 7 987: Mixed Prospects
W . Gene Wilson and Gene D. Sullivan
November/December, p.69
Mississippi: Outlook's a Bit Brighter
W . Gene Wilson and Gene D. Sullivan
February, p.71
Overview—The Southeast: A Look at the
Year Ahead
William J. Kahley and
Mary S. Rosenbaum
February, p.4
Tennessee: A Better Year Ahead
Bobbie McCrackin and Betty Bradfield
February, p.37
Tennessee: Challenges Ahead
Jon Moen, November/December, p.37
What's Behind Patterns of
State Job Growth?
William J. Kahley, May, p.4
TEXTILE INDUSTRY
The Southeast's Textile/Apparel
Trade
and the Import Threat
James C. Leonard, III, January, p.16
—Compiled
by George Briggs
79
S&Ls Total
NOW
Savings
Time
C r e d i t Union Deposits
Share Drafts
Time
32,073
166,105
498,307
59,774
8,274
50,843
702,321
31,071
165,279
503,249
59,159
7,936
50,388
622,291
25,014
144,048
451,825
42,632
6,109
35,395
+12
+28
+15
+10
+40
+35
+44
Commercial Bank Deposits
Demand
NOW
Savings
Time
.94,179
40,910
19,279
55,833
82,621
191,884
39,445
18,569
54,894
83,226
176,404
38,495
14,824
48,390
79,040
+10
+ 6
+30
+15
+ 5
S&Ls Total Deposits
NOW
Savings
Time
C r e d i t Union Deposits
Share D r a f t s
Time
91,030
5,141
20,762
64,570
6,638
788
5,604
90,960
4,941
20,732
64,748
6,581
739
5,564
N.A.
N.A.
N.A.
N.A.
4,839
534
4,022
+37
+48
+39
Commercial Bank Deposits
Demand
NOW
Savings
Time
19,511
4,177
1,919
4,258
9,600
19,407
4,119
1,856
4,239
9,693
17..121
3.
,898
,386
,627
3.
8 .,687
+14
+ 7
+38
+17
+11
S&Ls Total Deposits
NOW
Savings
Time
C r e d i t Union Deposits
Share Drafts
Time
6,040
329
1,169
4,570
890
149
730
6,068
326
1,174
4,602
883
144
725
N.A.
N.A.
N.A.
N.A.
748
123
619
+19
+21
+18
73,881
15,702
8,464
25,672
25,904
72,777
14,823
8,088
25,231
26,264
65,481
14,285
6,434
22,405
24,185
+13
+10
+32
+15
+ 7
& L s Total
NOW
Savings
Time
C r e d i t Union Deposits
Share Drafts
Time
58,137
3,230
14,050
40,308
3,479
392
2,790
58,454
3,113
14,139
40,665
3,443
370
2,772
N.A.
N.A.
N.A.
N.A.
2,502
266
1,984
+39
+47
+41
Commercial Bank Deposits
Demand
NOW
Savings
Time
31.
,133
8.
,510
2.
,785
9.
,000
12,
,263
30,679
8,213
2,694
8,917
12,248
2 7 .,739
7.
,849
,966
7.
,603
,596
11,
+12
+ 8
+42
+18
+ 6
S&Ls Total Deposits
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Time
1.
,639
5.
,200
,254
1,
138
1,,145
7 ,515
735
7,,521
700
,646
,242
5,
,240
120
,136
N.A.
N.A.
N.A.
N.A.
835
69
749
+50
+100
+53
Commercial
Demand
NOW
Savings
Time
28,485
5,182
2,022
7,973
13,744
28,380
5,094
1,984
7,844
13,899
27,802
5,357
1,752
6,915
14,235
+ 2
- 3
+15
+15
- 3
S&Ls Total Deposits
NOW
Savings
Time
C r e d i t Union Deposits
Share D r a f t s
Time
.0,552
393
2,290
7,880
10,099
363
2,158
7,597
N.A.
N.A.
N.A.
N.A.
*
*
*
*
*
*
*
*
*
>&Ls Total
NOW
Savings
Time
C r e d i t Union Deposits
Share D r a f t s
Time
2,199
113
310
1,688
2,227
110
310
1,697
N.A.
N.A.
N.A.
N.A.
*
*
*
*
•
*
*
*
S&Ls Total Deposits
NOW
Savings
Time
C r e d i t Union Deposits
Share Drafts
Time
6,587
341
1,304
4,924
1,015
109
939
6,591
329
1,305
4,945
1,015
105
931
N.A.
N.A.
N.A.
N.A.
754
76
670
13,540
2,347
1,239
3,027
7,215
Commercial Bank Deposits
Demand
NOW
Savings
Time
27,629
4,992
2,850
5,903
13,895
13,503
2,336
1,224
2,963
7,247
27,138
4,860
2,723
5,700
13,875
1.
1,
13,003
2,517
1,010
2,643
7,117
25,258
4,589
2,276
5,197
13,220
+ 4
- 7
+23
+15
+ 1
+ 9
+ 9
+25
+14
+ 5
1,
1,
1,
*
+35
+43
+40
Notes:
All deposit data are extracted from the Federal Reserve R e p o r t of Transaction A c c o u n t s , other Deposits and Vault Cash (FR2900)
the average of the week ending the 1st M o n d a y of the m o n t h . T h i s d a t a , reported by institutions with over $26.8 m i l l i o n
t
in deposits and $2.6 m i l l i o n of reserve requirements as of J u n e 1 9 8 6 , represents 95% of deposits in the six state area. T h e annual r a t e of
change is based on m o s t r e c e n t data over c o m p a r a b l e year ago d a t a . The major differences between this report and the "call report"
u e f n J Z h ; J c e „ I 6 a « f o o f 1 ! n t e r b a ' * d e p o s i t s , and the treatment of f l o a t . T h e data generated from the R e p o r t of Transaction A c c o u n t s
is for banks over $26.8 mi lion in deposits as of June 1 9 8 6 . T h e total deposit data generated from the R e p o r t of Transaction A c c o u n t s
eliminates interbank deposits b y reporting the net of deposits "due to" and "due from" other depository i n s t i t u t i o n s T h e R e p o r t o f
Transaction Accounts subtracts cash in process of collection from demand d e p o s i t s , w h i l e the call report does n o t . The Southeast data
represent the total of the six s t a t e s . Subcategories were chosen on a s e l e c t i v e basis and do not add to total
* = fewer than four institutions r e p o r t i n g .
N . A . = Not A v a i l a b l e .
80
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
EMPLOYMENT
NOV
1986
C i v i l i a n Labor Force - t h o u s .
Total Employed - t h o u s .
Total Unemployed - t h o u s .
Unemployment R a t e - % SA
M f g . A v g . Wkly. Hours
Mfg. Avg. Wkly. Earn. - $
Civilian Labor Force - t h o u s .
Total Employed - t h o u s .
Total Unemployed - t h o u s .
Unemployment R a t e - % SA
M f g . A v g . W k l y . Hours
Mfg. Avg. Wkly. Earn. - $
C i v i l i a n Labor Force - t h o u s .
Total Employed - t h o u s .
Total Unemployed - t h o u s .
OCT
1986
NOV
1985
ANN.
%
CHG
118,623
110,751
7,872
118,699
110,857
7,842
116,097
108,282
7,815
+ 2
+ 2
+ 1
7.0
7.0
7.0
41.1
402
40.8
397
40.9
394
+ 0
+ 2
157787
14,834
1,253
16,111
14,871
1,240
1 5 ™ 68
14,436
1,124
+ 3
+11
8.1
7.9
7.5
41.3
352
41.3
348
41.5
352
- 0
0
1,901
1,715
185
1,910
1,729
182
U666
147
+ 5
+ 3
+26
U n e m p l o y m e n t Rate - % SA
10.9
9.8
8.5
M f g . A v g . Wkly. Hours
Mfg. A v g . Wkly. Earn. - $
41.1
359
41.4
358
41.3
355
- 0
+ 1
5,394
5,375
319
5,667
5,336
331
5,354
5,059
295
+ 1
+ 6
+ 8
FLORIDA
Civilian Labor Force - t h o u s .
Total Employed - t h o u s .
Total Unemployed - t h o u s .
U n e m p l o y m e n t Rate - % SA
M f g . A v g . W k l y . Hours
Mfg. Avg. Wkly. Earn. - $
Civilian Labor Force - t h o u s .
Total Employed - t h o u s .
Total Unemployed - t h o u s .
5.6
5.4
5.4
41.4
334
40.6
327
42.3
337
- 2
- 1
3,027
2,856
171
3,040
2,868
172
2,900
2,721
179
+ 4
+ 5
- 4
5.9
6.0
6.4
41.1
344
40.9
341
41.2
338
- 0
+ 2
1,969
1,703
265
1,987
1,728
259
1,987
1,763
224
- 1
- 3
+18
Unemployment R a t e - % SA
13.9
13.7
11.8
M f g . A v g . Wkly. Hours
Mfg. Avg. Wkly. Earn. - $
42.4
445
42.0
439
42.5
442
- 0
+ 1
1,162
1,029
133
1,172
1.042
130
1,127
1,111
107
+ i
12.3
12.2
9.9
40.4
302
40.8
299
- 2
+ 1
2,335
2,168
167
2,286
2,115
171
+
+ •¿
+ b
Unemployment R a t e - % SA
M f g . A v g . W k l y . Hours
Mfg. Avg. Wkly. Earn. - $
Civilian Labor Force - t h o u s .
Total Employed - t h o u s .
Total Unemployed - t h o u s .
Civilian Labor Force - t h o u s .
Total Employed - t h o u s .
Total Unemployed - t h o u s .
U n e m p l o y m e n t R a t e - % SA
M f g . A v g . Wkly. Hours
Mfg. Avg. Wkly. Earn. - $
Civilian Labor Force - t h o u s .
Total Employed - t h o u s .
Total Unemployed - t h o u s .
Unemployment R a t e - % SA
M f g . A v g . Wkly. Hours
Mfg. Avg. Wkly. Earn. - $
NOTES:
2,335
2,155
179
8.1
8.0
41.8
327
41.2
344
/
+24
7.9
42.3
321
-
+ 1
- b
OCT
1986
NOV
1985
IBT587
NOV
1986
ANN.
%
CHG
Manufacturing
Construction
Trade
Government
Services
F i n . , I n s . & Real E s t .
Trans., Com. & Pub. Util.
19 i 220
5,158
24,293
17,187
23,481
6,421
5,371
19 Ì 247
5,267
24,081
17,030
23,481
6,393
5,367
99,428
19,313
4,909
23,645
16,894
22,406
6,054
5,296
+
+
+
+
+
+
+
2
0
5
3
2
5
6
1
Manufacturing
Construction
Trade
Government
Services
F i n . , I n s . & Real E s t .
Trans., Com. & Pub. Util.
13,172
2,316
797
3,344
2,319
2,809
765
719
13 114
2*318
801
3,307
2,313
2,791
762
720
12,918
2,320
795
3,222
2,287
2,692
743
729
+
+
+
+
+
+
-
2
0
0
4
1
4
3
1
Nonfarm Employment - t h o u s .
Manufacturing
Construction
Trade
Government
Services
F i n . , I n s . & Real E s t .
Trans., Com. & Pub. Util.
1,451
352
74
322
302
249
70
71
1,451
355
73
319
301
249
70
72
1,441
356
74
308
305
244
66
72
+ i
- 1
0
+ 5
- 1
+ 2
+ 6
- 1
Nonfarm Employment - t h o u s .
Manufacturing
Construction
Trade
Government
Services
F i n . , I n s . & Real E s t .
Trans., Com. & Pub. Util.
4,667
528
342
1,280
720
1,203
337
246
4,618
526
341
1,258
716
1,187
335
244
4,499
520
339
1,214
694
1,153
324
245
+
+
+
+
+
+
+
+
4
2
1
5
4
4
4
0
Nonfarm Employment - t h o u s .
Manufacturing
Construction
Trade
Government
Services
F i n . , I n s . & Real E s t .
Trans., Com. & Pub. Util.
2,696
557
166
700
457
496
146
166
2,689
558
166
693
455
496
147
167
2,616
560
153
666
453
472
140
164
+
+
+
+
+
+
+
3
1
8
5
1
5
4
1
Nonfarm Employment - t h o u s .
Manufacturing
Construction
Trade
Government
Services
F i n . , I n s . & Real E s t .
Trans., Com. & Pub. Util.
1,518
168
90
378
321
318
84
102
1,519
168
92
377
321
317
84
103
1,606
175
105
394
329
322
86
115
- 5
- 4
-14
- 4
- 4
- 1
- 2
-11
Nonfarm Employment - t h o u s .
Manufacturing
Construction
Trade
Government
Services
F i n . , I n s . & Real E s t .
Trans., Com. & Pub. Util.
860
221
36
187
194
137
37
41
860
222
37
185
194
137
37
41
854
223
38
182
194
133
36
40
+ 1
- 1
- b
+ i
0
+ 3
+ 3
+ 3
Nonfarm Employment - t h o u s .
Manufacturing
Construction
Trade
Government
Services
F i n . , I n s . & Real E s t .
Trans., Com. & Pub. Util.
1,980
489
90
477
326
406
91
93
1,976
489
91
475
325
405
91
94
1,902
486
85
456
312
369
90
92
+ 4
+ 1
+ 6
+ 5
+ 4
+10
+ 1
+ 1
All labor force data are from Bureau of Labor Statistics reports supplied by state a g e n c i e s .
O n l y the unemployment rate d a t a are seasonally a d j u s t e d .
T h e Southeast data represent the total of the six s t a t e s .
F E D E R A L RESERVE B A N K O F A T L A N T A
81
LATEST
CURR.
DATA PERIOD
Personal Income
($ bil. - SAAR)
Taxable Sales - $ bil.
Plane Pass. A r r . (thous.)
Petroleum Prod, (thous.)
Consumer Price Index
1967=100
Kilowatt Hours - m i l s .
Personal Income
($ b i l . - SAAR)
Taxable Sales - $ bil.
Plane P a s s . A r r . ( t h o u s /
Petroleum Prod, (thous.)
Consumer Price Index
1967=100
Kilowatt Hours - m i l s .
Personal Income
($ b i l . - SAAR)
Taxable Sales - S bil.
Plane P a s s . A r r . (thous.)
Petroleum P r o d , (thous.)
Consumer Price Index
1967=100
Kilowatt Hours - m i l s .
Personal Income
($ bil. - SAAR)
Taxable Sales - $ bil.
Plane Pass. A r r . (thous.)
Petroleum Prod, (thous.)
Consumer Price Index
1977=100
MIAMI
Kilowatt Hours - m i l s .
Personal Income
(S b i l . - SAAR)
Taxable Sales - $ bil.
Plane P a s s . A r r . (thous.)
Petroleum Prod, (thous.)
Consumer Price Index
1967=100
ATLANTA
Kilowatt Hours - m i l s .
Personal Income
($ bil. - SAAR)
Taxable Sales - $ bil.
Plane Pass. A r r . ( t h o u s /
Petroleum P r o d , (thous.)
Consumer Price Index
1967=100
Kilowatt Hours - m i l s .
Q3
3,479.6
N.A.
N.A.
8,636.6
3,319.9
N.A.
N.A.
8,900.7
+ 5
NOV
3,497.1
N.A.
N.A.
8,458.6
NOV
SEP
330.8
203.1
330.5
216.8
326.6
179.1
+ 1
+13
422.5
N.A.
4,833.6
1,467.0
399.7
N.A.
4,369.4
1,525.0
+ 7
NOV
NOV
427.0
N.A.
5,184.5
1,452.0
SEP
N.A.
36.3
N.A.
37.8
N.A.
28.5
NOV
NOV
45.0
N.A.
130.8
56.0
44.8
N.A.
145.0
58.0
43.0
N.A.
123.0
58.0
+ 6
- 3
SEP
N.A.
4.8
N.A.
5.1
N.A.
3.8
+26
167.4
165.3
157.5
+ 6
2,523.8
26.0
NOV
175.8
11.5
2,359.9
29.0
SEP
174.3
11.3
2,117.9
36.0
NOV
173.9
9.0
+19
-28
80.2
N.A.
1,645.1
N.A.
AUG
338.9
6.3
75.6
N.A.
1,631.4
N.A.
OCT
330.0
4.5
+ 8
SEP
81.4
N.A.
1,901.1
N.A.
OCT
339.9
5.8
NOV
NOV
50.5
N.A.
302.7
1,291.0
50.5
N.A.
324.9
1,300.0
50.7
N.A.
292.8
1,347.0
+ 3
- 4
SEP
N.A.
5.8
N.A.
5.9
N.A.
4.4
+32
NOV
NOV
25.1
N.A.
38.0
79.0
25.2
N.A.
41.2
80.0
23.6
N.A.
32.6
84.0
+16
- 6
SEP
N.A.
2.6
N.A.
2.7
N.A.
1.9
+37
57.6
N.A.
288.1
N.A.
56.5
N.A.
317.5
N.A.
53.6
N.A.
171.6
N.A.
N.A.
5.8
N.A.
6.5
N.A.
4.9
Q3
Q3
Q3
NOV
NOV
SEP
Q3
NOV
- 5
+19
- 5
+27
+ 5
+1
+28
+17
+ 1
+29
- 0
Agriculture
Prices Rec'd by Farmers
Index (1977=100)
121
Broiler Placements (thous.
86,527
Calf Prices ($ per cwt.)
63.2
Broiler Prices ($ per lb.)
30.6
Soybean Prices ($ per bu.)
4.66
Broiler Feed Cost ($ per ton) (Q4)177
(Q4)177
124
80,700
62.2
34.9
4.64
(Q3)190
128
82,706
58.8
30.0
5.00
(Q4)181
5
+ 5
+ 7
+ 2
7
- 2
111
35,870
58.6
29.8
4.80
179
117
33,120
57.3
34.0
4.83
184
113
34,378
54.8
28.0
5.01
182
2
+ 4
+ 7
+ 6
4
- 2
Agriculture
Farm Cash Receipts - $ m i l .
Dates: SEPT., S E P T .
1,345
Broiler Placements (thous.)
12,542
Calf Prices ($ per cwt.)
58.5
Broiler Prices (t per lb.)
28.0
Soybean Prices ($ per bu.)
4.79
Broiler Feed Cost ($ per ton)
191
11,483
56.7
33.7
4.91
189
1,394
11,569
56.1
26.5
5.11
176
4
+ 8
+ 4
+ 6
6
+ 9
3,727
2,380
61.0
30.0
4.79
191
2,227
60.5
33.0
4.91
189
3,809
2,224
57.0
28.0
5.11
230
- 2
+ 7
+ 7
+ 7
- 6
-17
Agriculture
Farm Cash Receipts - $ m i l .
Dates: SEPT.,SEPT.
2,174
Broiler Placements (thous.)
14,230
Calf Prices ($ per cwt.)
53.5
Broiler Prices (<t per lb.)
29.5
Soybean Prices ($ per bu.)
4.71
Broiler Feed Cost ($ per ton)
191
13,072
53.9
33.0
4.75
189
2,340
13,866
51.3
28.0
5.10
182
7
+ 3
+ 4
+ 5
8
+ 5
698
N.A.
58.5
30.0
4.70
144
795
N.A.
56.0
31.0
4.70
230
-12
57.5
36.0
4.63
169
+ 4
- 3
0
-37
Agriculture
Farm Cash Receipts - $ m i l .
Dates: SEPT., S E P T .
Broiler Placements (thous.)
Calf Prices ($ per cwt.)
Broiler Prices (i per lb.)
Soybean Prices ($ per bu.)
Broiler Feed Cost ($ per ton)
966
6,718
62.0
33.2
4.88
144
6,337
58.8
36.4
4.95
169
1,136
6,7120
57.6
30.0
5.00
137
-15
- 0
+ 8
+11
- 2
+ 5
Agriculture
Farm Cash Receipts - $ m i l .
Dates: S E P T . , SEPT.
Broiler Placements (thous.)
Calf Prices ($ per cwt.)
Broiler Prices (t per lb.)
Soybean Prices ($ per bu.)
Broiler Feed Cost ($ per ton)
1,128
N.A.
56.8
30.0
4.88
181
55.7
32.0
4.89
205
1,238
N.A.
53.4
27.0
5.26
178
+ 6
+11
- 7
+ 2
Agriculture
Prices Rec'd by Farmers
Index (1977=100)
Broiler Placements (thous.)
Calf Prices ($ per cwt.)
Broiler Prices (t per lb.)
Soybean Prices ($ per bu.)
Broiler Feed Cost ($ per ton)
Agriculture
Farm Cash Receipts - $ m i l .
Dates: SEPT., SEPT.
Broiler Placements (thous.)
Calf Prices ($ per cwt.)
Broiler Prices (t per lb.)
Soybean Prices ($ per bu.)
Broiler Feed Cost ($ per ton)
Agriculture
Farm Cash Receipts - $ m i l .
Dates: SEPT., SEPT.
Broiler Placements (thous.)
Calf Prices ($ per cwt.)
Broiler Prices (t per lb.)
Soybean Prices ($ per bu.)
Broiler Feed Cost ($ per ton)
_
_
_
_
_
_
JPPT
Personal Income
($ b i l . - SAAR)
Taxable Sales - $ b i l .
Plane P a s s . A r r . (thous.)
Petroleum P r o d , (thous.)
Consumer Price Index
1967=100
Kilowatt Hours - m i l s .
'ersonal Income
($ b i l . - SAAR)
Taxable Sales - $ bil.
Plane P a s s . A r r . (thous.)
Petroleum Prod, (thous.)
Consumer Price Index
1967=100
Kilowatt Hours - m i l s .
Q3
Q3
NOV
SEP
+ 6
+ 7
+68
+18
- 9
NOTES:
Personal Income data supplied by U . S . Department of Commerce. Taxable Sales are reported as a 12-month cumulative total
Plane
Passenger Arrivals are collected from 26 airports. Petroleum Production data supplied by U . S . Bureau of Mines
Consumer Price^ ndex
supplied by Bureau of Labor Statistics. Agriculture data supplied by U . S . Department of Agriculture. Farm c l h Receijts dlta aJe r e p S e d
t e°tSt f o f \ e r s
R = revised!
'sta es V
82
T
- ' Wa v a l l a b i eT *
1
"
-
^
T h e
B
? U e r p,aCementS are an avera9e week1* rate"
™e sSastdatarepr
e
annual percent change calculation is based on most recent data over prior y e a r .
NOVEMBER/DECEMBER 1986, E C O N O M I C REVIEW
CONSTRUCTION
NOV
1986
OCT
1986
NOV
1985
ANN.
%
CHG.
wresidential Building Permits -- i Mil.
49,008
Total Nonresidential
8,591
Industrial Bldgs.
14,336
Offices
11,962
Stores
2,545
Hospitals
1,236
Schools
50,844
8,572
14,631
12,007
2,542
1,227
68.
,889
8.
,/91
,121
1/.
11.
,016
,189
2.
,14/
1.
-29
- 2
-16
+ 9
+16
+ 8
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ Mil.
SOUTHEAST
Nonresidential Building Permits - $ Mil.
Total Nonresidential
8,001
Industrial Bldgs.
1,091
Offices
1,958
Stores
2,304
Hospitals
422
Schools
160
8,215
1,095
2,014
2,327
394
158
11,427
1,200
2,565
2,276
416
158
-30
- 9
-24
+1
+ 1
+ 1
Value - S Mil.
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ Mil.
Nonresidential Building Permits - S M i l .
577
Total Nonresidential
76
Industrial Bldgs.
133
Offices
171
Stores
24
Hospitals
17
Schools
564
66
136
170
23
19
673
55
150
162
40
13
-14
+38
-11
+ 6
-40
+31
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ M i l .
NOV
1986
OCT
1986
NOV
1985
ANN.
%
CHG.
(12-month cumulative rate)
Nonresidential Building Permits
Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
3,922
422
963
1,118
241
45
4,065
425
1,005
1,154
224
43
5,896
554
1,177
1,1258
221
49
-33
-24
-18
-11
+ 9
- 8
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ Mil.
Nonresidential 8uilding
Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
.Mil.
1,752
341
389
493
37
38
1,788
341
393
483
32
41
1,955
311
485
308
33
21
-10
+ 10
-20
+ WJ
+12
+81
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ M i l .
Mil.
581
45
172
152
43
41
592
45
174
155
41
37
1331
49
412
255
46
56
-bb
- 8
-58
-40
SEjiMflMT Nonresidential Building Permits - 1 M i l .
257
Total Nonresidential
28
Industrial Bldgs.
62
Offices
83
Stores
22
Hospitals
8
Schools
253
26
65
81
16
7
295
22
53
60
15
8
-13
+27
+1/
+38
+4/
0
Residential Building Permits
Value - $ M i l .
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ M i l .
Nonresidential Building Permits Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
954
191
241
284
58
11
1,277
208
288
233
61
11
-29
-13
-1/
+22
-10
+y
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ M i l .
912
180
238
285
55
12
-
-11
/
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ M i l .
93,226
93,044
81,782
+14
1,056.0
684.0
1,055.6
695.5
944.2
760.3
+12
-10
142,243
143,897
150,670
- 6
15,875
15,933
14,562
+9
205.6
145.9
205.5
148.9
195.0
161.0
+5
- y
24,086
24,358
25,991
- 7
537
+24
y.8
7.8
+11
+ 3
668
io.y
8.0
668
io.y
8.4
1,245
1,232
1,210
+ 3
8,671
8,685
8,271
+ 5
105.9
91.3
105.1
93.4
103.3
97.3
+ 3
- 6
12,593
12,750
14,167
-11
3,771
3,794
3,104
+21
51.5
26.1
51.9
26.4
46.4
25.9
+11
+ 1
5,523
5,582
5,059
+ 9
587
609
779
-25
8.8
2.8
9.1
3.1
11.5
7.1
-23
-61
1,168
1,201
2,110
-45
356
365
333
+ 7
5.8
2.7
5.9
2.8
5.7
2.2
+ 2
+23
614
618
628
- 2
1,821
1,812
1,539
+18
22.7
15.0
22.6
14.8
18.2
20.8
+25
-28
2,943
2,976
2,816
+ 5
NOTESData supplied by the U . S . Bureau of the Census, Housing Units Authorized By Building Permits and Public Contracts C-40.
Nonresidential data exclude the cost of construction for publicly owned buildings. The Southeast data represent the total of the six
states.
FEDERAL RESERVE B A N K
OF ATLANTA
83
FINANCE
JAN.
1987
DEC.
1986
JAN.
1986
ANN.
%
CHG.
JAN.
1987
DEC.
1986
JAN.
1986
ANN.
%
CHG.
+11
+17
+35
+18
+ 0
S&Ls Total
D e p o s i t s 6 9 9 , 9 4 7
NOW
34,283
Savings
166,905
Time
496,671
Credit Union Deposits
61,038
Share Drafts
8,523
Savings & Time
51,623
698,806
32,076
166,112
498,286
59,777
8,257
50,844
616,032
25,125
141,261
448,749
43,493
6,262
36,155
+14
+36
+18
+11
+40
+36
+43
+28
+39
+28
î millions
minerei al B a n k
Demand
NOW
Savings
Time
Deposits
ÌtHHFHIBS^S/S
432,799
155,379
515,431
693,591
373,035
140,485
503,518
688,756
370,832
114,865
435,673
692,663
Commercial Bank Deposits
Demand
NOW
Savings
Time
203,528
46,398
21,796
57,817
83,868
194,219
40,910
19,279
55,826
82,659
182,336
41,121
15,516
50,831
80,154
+12
+13
+40
+14
+ 5
S & L s Total D e p o s i t s
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Savings & Time
90,141
5,361
20,739
63,552
6,790
819
5,690
90,671
5,141
20,762
64,570
6,638
788
5,604
N.A.
N.A.
N.A.
N.A.
5,317
591
4,442
C o m m e r c i a l tsank U e p o s i t s
Demand
NOW
Savings
Time
20,496
4,645
2,155
4,347
9,949
19,512
4,177
1,919
4,251
9,608
17,565
4,139
1,468
3,627
8,932
+17
+12
+47
+20
+11
S&Ls Total Deposits
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Savings & Time
6,077
355
1,160
4,597
896
154
739
6,040
329
1,169
4,570
890
149
730
4,605
227
842
3,539
800
131
652
Coït
79,068
18,017
9,749
27,009
27,102
73,882
15,702
8,464
25,672
25,904
67,396
15,291
6,677
22,797
24,784
+17
+18
+46
+18
+ 9
S&Ls Total Deposits
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Savings & Time
57,097
3,341
14,011
39,220
3,559
414
2,834
58,137
3,230
14,050
40,308
3,479
392
2,790
56,319
2,849
13,375
39,766
2,710
294
2,168
+ 1
+17
+ 5
- 1
+31
+41
+31
9,591
3,107
9,222
12,214
8,510
2,785
9,000
12,263
29,903
8,401
2,029
9,159
11,758
+ 8
+14
+53
+ 1
+ 4
S&Ls Total Deposits
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Savings & Time
1.,640
b .,203
1.
,303
139
1,,161
1.,639
5 ,,200
1,,254
138
1,,145
7 .,156
735
6,254
485
1,346
4,483
1,013
85
911
+21
+63
+22
+16
+29
+64
+27
5,785
2,325
8,114
13,497
5 ,,182
2 .,022
,9/3
1 3 .i /6b
5 ,,727
1 ,,940
/ . ,261
1 4 .,268
+ 2
+ 2
+20
+12
- b
S & L s Total D e p o s i t s
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Savings & Time
10,568
400
2,310
7,881
10,552
393
2,290
7,880
N.A.
N.A.
N.A.
N.A.
*
ìal B a n k
Demand
NOW
Savings
Time
Deposits
ial B a n k
Demand
NOW
Savings
Time
Deposits
Commercial Bank
Demand
NOW
Savings
Time
Deposits
Con
Bank
Deposits
Demand
NOW
Savings
Time
TENNE
C o m e r c i a l Bank
mH
Demand
NOW
Savings
Time
/.
2,656
1,357
3,060
7,190
Deposits
2 8 ,,665
5 .,/04
3 .,103
6 .,065
1 3 .,91b
2,347
1,239
3,02/
7,215
2/,647
4,992
2,8b0
b,903
13,904
2 ,,678
,058
2 .,650
7 .,157
1,
2 b .,b/2
4 .,885
2 .,344
b.
,337
1 3 ,,25b
- 1
+28
+15
+ 0
+12
+17
+3?
+14
+ b
S & L s Total D e p o s i t s
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Savings & Time
S & L s Total D e p o s i t s
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Savings & Time
,560
790
*
*
*
*
*
+56
+38
+30
+12
+18
+13
*
*
m
*
114
312
1,696
2,199
113
310
1,688
N.A.
N.A.
N.A.
N.A.
*
*
*
*
*
*
*
*
*
6,587
341
1,304
4,924
1,01b
109
939
b.
,596
239
1 .,02b
4 .,360
794
81
/II
6,624
361
1,306
4,955
1,032
112
956
+18
+51
+27
+14
+ 30
+38
+34
N o t e s : A l l d e p o s i t d a t a are e x t r a c t e d f r o m the F e d e r a l R e s e r v e R e p o r t o f T r a n s a c t i o n A c c o u n t s , o t h e r D e p o s i t s and V a u l t C a s h ( F R 2 9 0 0 ) ,
and are r e p o r t e d f o r the a v e r a g e of t h e w e e k e n d i n g t h e 1 s t M o n d a y of t h e m o n t h . T h i s d a t a , r e p o r t e d b y i n s t i t u t i o n s w i t h over $ 2 6 . 8 m i l l i o n
in d e p o s i t s and $ 2 . 6 m i l l i o n of r e s e r v e r e q u i r e m e n t s as o f J u n e 1 9 8 6 , r e p r e s e n t s 9 5 % o f d e p o s i t s in t h e s i x s t a t e a r e a . T h e annual r a t e of
c h a n g e is b a s e d o n m o s t r e c e n t d a t a o v e r c o m p a r a b l e y e a r ago d a t a . T h e m a j o r d i f f e r e n c e s b e t w e e n t h i s r e p o r t and t h e "call r e p o r t "
a r e s i z e , the t r e a t m e n t o f i n t e r b a n k d e p o s i t s , and t h e t r e a t m e n t o f f l o a t . T h e d a t a g e n e r a t e d f r o m the R e p o r t o f T r a n s a c t i o n A c c o u n t s
is for b a n k s o v e r $ 2 6 . 8 m i l l i o n in d e p o s i t s as of J u n e 1 9 8 6 . T h e total d e p o s i t d a t a g e n e r a t e d f r o m the R e p o r t o f T r a n s a c t i o n A c c o u n t s
e l i m i n a t e s i n t e r b a n k d e p o s i t s b y r e p o r t i n g t h e n e t o f d e p o s i t s " d u e to" and " d u e f r o m " o t h e r d e p o s i t o r y i n s t i t u t i o n s . T h e R e p o r t of
T r a n s a c t i o n A c c o u n t s s u b t r a c t s c a s h in p r o c e s s o f c o l l e c t i o n f r o m d e m a n d d e p o s i t s , w h i l e the call r e p o r t d o e s n o t . T h e S o u t h e a s t d a t a
r e p r e s e n t the total o f t h e six s t a t e s . S u b c a t e g o r i e s w e r e c h o s e n on a s e l e c t i v e b a s i s and d o n o t add t o t o t a l .
* = f e w e r than f o u r i n s t i t u t i o n s r e p o r t i n g .
84
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C
REVIEW
EMPLOYMENT
DEC
1986
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
M f g . A v g . W k l y . Hours
Mfg. Avg. Wkly. Earn. - $
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
M f g . A v g . W k l y . Hours
Mfg. Avg. Wkly. Earn. - $
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
M f g . A v g . W k l y . Hours
M f g . A v g . Wkly. E a r n . - $
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
NOV
1986
DEC
1985
118,049
110,588
7,461
118,623
110,751
7,872
115,780
108,063
7,717
ANN.
X
CHG.
+2
+2
-3
6.7
6.8.
6.9.
41.7
411
41
401
41.7
406
+0
+1
16,057
14,859
1,197
16,106
14,843
1,263
15,417
14,285
1,132
+4
+4
+6
7.6
8.1
7.5
41.8
365
41.3
356
42.3
362
-1
+1
1,887
1,707
180
1,905
1,718
187
1,798
1,648
149
+5
+4
+21
9.2
10.1
8.0
41.9
364
41.3
359
42
366
+0
-1
5,710
5,446
263
5,694
5,375
319
5,391
5,091
300
+6
+7
-12
Unemployment Rate - % SA
4.7
5.6
5.6
M f g . A v g . Wkly. Hours
Mfg. Avg. Wkly. Earn. - $
42.2
345
41.4
334
42.5
343
-1
+1
2,858
171
3,030
2,857
173
2,885
2,708
178
+5
+6
-4
5.9
5.9
6.4
41.6
357
41.2
340
42.1
344
-1
+4
1,958
1,690
268
1,975
1,706
269
1,963
1,740
223
+0
-3
+20
Civilian L a b o r F o r c e - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
M f g . A v g . W k l y . Hours
M f g . A v g . Wkly. E a r n . - $
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
14.3
14.1
12.0
M f g . A v g . Wkly. Hours
Mfg. Avg. Wkly. Earn. - $
42.8
452
42.3
443
42.7
448
+0
+1
1,153
1,018
135
1,164
1,030
134
1,111
1,007
105
+4
+1
+29
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
12.3
12.4
9.8
M f g . A v g . W k l y . Hours
Mfg. Avg. Wkly. Earn. - $
40.7
309
40.1
301
41.6
307
-2
+1
2,320
2,140
180
2,339
2,158
181
2,269
2,091
178
+2
+1
7.7
8.2
7.7
41.7
362
41.5
360
42.7
364
Civi lian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
M f g . A v g . W k l y . Hours
Mfg. Avg. Wkly. Earn. - $
-2
-1
ree
1986
NOV
1986
DEC
1985
Nonfarm Employment - thous.
Manufacturing
Construction
Trade
Government
Services
Fin., Ins. & Real. Est.
.
Trans. Com. & Pub. Util.
.
101,991
19,182
4,934
23,649
17,181
23,468
6,450
5,389
101,874
19,216
5,143
23,322
17,213
23,444
6,416
5,373
99,546
19,272
4,721
23,016
16,860
22,389
6,080
5,307
+2
+0
+5
+3
+2
+5
+6
+2
Nonfarm Employment - thous.
Manufacturing
Construction
Trade
Government
Services
F i n . , Ins. & Real. Est.
.
Trans. Com. & Pub. Util.
.
13,263
2,321
790
3,419
2,323
2,820
768
723
13,194
2,319
798
3,355
2,325
2,630
765
720
12,955
2,318
786
3,269
2,282
2,695
743
732
+2
+0
+1
+5
+2
+5
+3
-1
Nonfarm tmployment - thous.
Manufacturing
Construction
Trade
Government
Services
Fin., Ins. & Real. Est.
.
Trans. Com. & Pub. Util.
,
1,454
352
72
325
302
249
71
71
1,452
353
73
322
303
249
70
71
1,440
354
73
314
301
244
67
73
+1
-1
-2
+4
+0
+2
+5
-2
Nonfarm Employment - thous.
Manufacturing
Construction
Trade
Government
Services
F i n . , Ins. & Real. Est.
.
.
Trans. Com. & Pub. Util.
4,738
533
342
1,326
724
1,216
339
249
4,685
531
343
1,290
723
1,026
337
246
4,532
522
339
1,231
695
1,164
325
246
+Ò
+2
+1
+8
+4
+4
+4
+1
Nonfarm Émpioyment - thous.
Manufacturing
Construction
Trade
Government
Services
Fin., Ins. & Real. Est.
,
Trans. Com. & Pub. Util.
,
^2^708
558
164
712
456
497
146
167
2,696
558
166
699
457
496
146
166
2,626
559
153
679
453
469
140
165
+3
+0
+7
+5
+1
+6
+4
+1
Nonfarm Ì m p l o y m e n t ^ thous.
Manufacturing
Construction
Trade
Government
Services
.
F i n . , Ins. & Real, Est.
Trans. Com. & Pub, Util.
.
Ì75I2
166
87
380
321
315
84
103
1,518
168
90
378
321
317
84
103
1,600
174
100
397
328
321
86
115
-6
-5
-13
-4
-2
-2
-2
-10
Nonfarm Employment - thous.
Manufacturing
Construction
Trade
Government
Services
F i n . , Ins. & Real, E s t .
,
.
Trans. Com. & Pub, Util.
220
35
190
194
137
37
40
860
221
36
187
194
137
37
41
224
37
185
193
133
36
40
-2
-5
+3
+1
+3
+3
0
Nontarm tmployment Manufacturing
Construction
Trade
Government
Services
F i n . , Ins. & R e a l . Est.
Trans. Com. & Pub. Util.
491
90
487
326
407
91
93
489
90
479
327
406
91
94
485
83
464
313
365
89
94
+1
+8
+5
+4
+12
+2
-1
NOTES: All labor force data are from Bureau of Labor Statistics reports supplied by state agencies.
Only the unemployment rate data are seasonally adjusted.
The Southeast data represent the total of the six states.
FEDERAL RESERVE B A N K O F A T L A N T A
ANN.
X
CHG.
85
GENERAL
LATEST C U R R .
DATA PERIOD
O STATES
Personal Income
($ bil. - SAAR)
Taxable Sales - $ Oil.
Plane P a s s . A r r . (thous.;
Petroleum P r o d , (thous.)
Consumer Price Index
1967=100
Kilowatt Hours - m i l s .
ANN.
%
CHG.
PREV.
YEAR
AGO
3,479.6
N.A.
N.A.
8,334.9
3,319.9
N.A.
N.A.
9,081.0
+ 5
JAN
3,497.1
N.A.
N.A.
8,437.4
JAN
StP
333.1
203.1
331.1
216.8
328.4
179.1
+ 1
+13
JAN
427.0
N.A.
N.A.
1,422.0
422.5
N.A.
N.A.
1,438.0
399.7
N.A.
N.A.
1,535.0
SEP
N.A.
36.3
N.A.
37.8
N.A.
28.5
NOV
JAN
45.0
N.A.
130.8
54.0
44.8
N.A.
145.0
54.0
43.0
N.A.
123.0
62.0
SEP
N.A.
4.8
N.A.
5.1
N.A.
3.8
+26
167.4
165.3
157.5
+ 6
2,523.8
26.0
JAN
177.2
11.5
2,359.9
29.0
NOV
175.8
11.3
2,117.9
36.0
JAN
174.6
9.0
+19
-28
81.4
N.A.
1,901.1
N.A.
DEC
342.2
5.8
80.2
N.A.
1,645.1
N.A.
OCT
339.9
6.3
75.6
N.A.
1,631.4
N.A.
DEC
335.3
4.5
utc
JAN
50.5
N.A.
306.2
1,265.0
50.5
N.A.
302.7
1,280.0
50.7
N.A.
286.7
1,359.0
SEP
N.A.
5.8
N.A.
5.9
N.A.
4.4
DtC
JAN
25.1
N.A.
40.5
78.0
25.2
N.A.
38.0
79.0
23.6
N.A.
35.2
84.0
SEP
N.A.
2.6
N.A.
2.7
N.A.
1.9
57.6
N.A.
288.1
N.A.
56.5
N.A.
317.5
N.A.
53.6
N.A.
171.6
N.A.
N.A.
5.8
N.A.
6.5
N.A.
4.9
03
- 7
ANN.
JAN.
X
1986 CHG.
JAN.
1987
DEC.
1986
Agriculture
Prices Rec'd by Farmers
Index (1977=100)
119
Broiler Placements (thous.)
86,574
Calf Prices ($ per cwt.)
65.1
Broiler Prices ({ per lb.)
31.1
Soybean Prices ($ per bu.)
4.69
Broiler Feed Cost ($ per ton) (Ql)174
121
85,554
62.2
30.6
4.67
(Q4J177
124
81,167
58.9
30.5
5.12
(01)191
- 4
+ 7
+11
+ ?
- a
- 9
111
35,797
60.8
30.1
4.75
168
111
35,592
58.6
29.8
4.80
179
113
33,895
55.3
29.1
5.02
184
- 2
+ 6
+10
+ 3
- 5
- 9
Agriculture
Farm Cash Receipts - $ m i l .
Dates: N O V . , NOV.
1,818
Broiler Placements (thous.)
12,648
Calf Prices ($ per cwt.)
61.6
Broiler Prices (4 per lb.)
29.0
Soybean Prices ($ per bu.)
4.69
Broiler Feed Cost ($ per ton)
175
12,517
58.5
28.0
4.79
191
1,895
11,469
54.6
29.0
5.25
183
- 4
+10
+13
0
-11
- 4
4,225
2,289
63.0
29.0
4.69
175
2,353
61.0
30.0
4.79
191
4,551
2,195
57.5
29.0
5.25
235
- 7
+ 4
+10
0
-11
-26
Agriculture
Farm Cash Receipts - $ m i l .
Dates: NOV.,NOV.
2,849
Broiler Placements (thous.)
14,143
Calf Prices ($ per cwt.)
59.1
Broiler Prices (i per lb.)
29.5
Soybean Prices ($ per bu.)
4.82
Broiler Feed Cost ($ per ton)
175
14,044
53.5
29.5
4.71
191
3,087
13,697
51.3
28.5
5.16
181
- 8
+ 3
+15
+ 4
- 7
- 3
-12
58.5
30.0
4.70
144
1,246
N.A.
56.0
31.0
4.62
250
+ 7
+ 5
0
-41
EAST
personal income
($ bil. - SAAR)
Taxable Sales - $ bil.
Plane Pass. A r r . (thous.)
Petroleum Prod, (thous.)
Consumer Price Index
1967=100
Kilowatt Hours - m i l s .
Personal Income
($ bil. - SAAR)
Taxable Sales - $ bil.
Plane Pass. A r r . (thous.)
Petroleum P r o d , (thous.)
Consumer Price Index
1967=100
Kilowatt Hours - m i l s .
FLORIDA
Personal Income
($ bil. - SAAR)
Taxable Sales - $ bil.
Plane Pass. A r r . (thous.;
Petroleum P r o d , (thous.)
Consumer Price Index
1977=100
MIAMI
Kilowatt Hours - m i l s .
• i ÏA
Persoi
Personal Income
($ bil. - SAAR)
Taxable Sales - $ bil.
Plane Pass. A r r . (thous.)
Petroleum Prod, (thous.)
Consumer Price Index
1967=100
ATLANTA
Kilowatt Hours - m i l s .
ANA
Personal Income
($ bil. - SAAR)
Taxable Sales - $ bil.
Plane Pass. A r r . (thous.)
Petroleum Prod, (thous.)
Consumer Price Index
1967=100
Kilowatt Hours - m i l s .
MISSISSIPPI
Personal Income
($ b i l . - SAAR)
Taxable Sales - $ bil.
Plane P a s s . A r r . (thous.)
Petroleum P r o d , (thous.)
Consumer Price Index
1967=100
Kilowatt Hours - m i l s .
TENNESSEE
Personal Income
($ bil. - SAAR)
Taxable Sales - $ bil.
Plane P a s s . Arr. (thous.)
Petroleum Prod, (thous.)
Consumer Price Index
1967=100
Kilowatt Hours - m i l s .
Q3
Q3
Q3
NOV
NOV
SEP
Q3
NOV
SEP
Q3
03
03
NOV
SEP
Agriculture
Prices Rec'd by Farmers
Index (1977=100)
Broiler Placements (thous.)
Calf Prices ($ per cwt.)
Broiler Prices (ç per lb.)
Soybean Prices ($ per bu.)
Broiler Feed Cost (Î per ton)
+ 5
+ 6
-13
+ 1
+28
+ 8
+17
+ 2
+29
- 0
+ 7
- 7
+32
+ 6
+15
- 7
+37
+ 7
+68
+18
Agriculture
Farm Cash Receipts - $ m i l .
Dates: N O V . , NOV.
Broiler Placements (thous.)
Calf Prices ($ per cwt.)
Broiler Prices (i per lb.)
Soybean Prices ($ per bu.)
Broiler Feed Cost ($ per ton)
Agriculture
Farm Cash Receipts - $ m i l .
Dates: SEPT., SEPT.
1,093
Broiler Placements (thous.)
N.A.
Calf Prices ($ per cwt.)
60.0
Broiler Prices U per lb.)
32.5
Soybean Prices ($ per bu.)
4.62
Broiler Feed Cost ($ per ton)
147
Agriculture
Farm Cash Receipts - $ m i l .
Dates: SEPT., SEPT.
Broiler Placements (thous.)
Calf Prices ($ per cwt.)
Broiler Prices ($ per lb.)
Soybean Prices ($ per bu.)
Broiler Feed Cost ($ per ton)
1,540
6,717
61.2
32.5
4.81
147
6,678
62.0
33.2
4.88
144
1,803
6,533
56.5
30.5
5.24
159
-15
+ 3
+ 8
+ 7
- 8
- 8
Agriculture
Farm Cash Receipts - $ m i l .
Dates: SEPT., SEPT.
Broiler Placements (thous.)
Calf Prices ($ per cwt.)
Broiler Prices (i per lb.)
Soybean Prices ($ per bu.)
Broiler Feed Cost ($ per ton)
1,595
N.A.
59.8
31.0
4.84
187
56.8
30.0
4.88
181
1,767
N.A.
54.9
27.5
5.43
186
+ 9
+13
-11
+ 1
-10
NOTES:
Personal Income data supplied by U . S . Department of Commerce. Taxable Sales are reported as a 12-month cumulative total. Plane
Passenger Arrivals are collected from 26 airports. Petroleum Production data supplied by U . S . Bureau of Mines. Consumer Price Index data
supplied by Bureau of Labor Statistics. Agriculture data supplied by U . S . Department of Agriculture. Farm Cash Receipts data are reported
as cumulative for the calendar year through the month shown. Broiler placements are an average weekly rate. The Southeast data represent
the total of the six states. N . A . = not available. The annual percent change calculation is based on most recent data over prior year.
R = revised.
86
N O V E M B E R / D E C E M B E R 1986, E C O N O M I C REVIEW
CONSTRUCTION
ANN.
ANN.
DEC
1986
NOV
1986
DEC
1985
X
X
DEC
1986
CHG
NOV.
1986
DEC.
1985
94,694
93,226
83,107
+ 14
1,070.7
673.2
1,056.0
684.0
953.4
773.1
+12
-13
142,360
142,243
152,416
-7
15,696
15,875
14,903
+5
204.5
137.7
205.6
145.9
197.9
165.3
+3
-16
23,763
24,086
26,359
-10
677
668
552
+23
11.0
8.2
10.9
8.0
9.9
8.0
+11
+2
1,246
1,245
1,176
+6
8,528
8,671
8,477
+1
104.5
86.6
105.9
91.3
105.9
98.5
-1
-12
12,379
12,593
14,345
-14
3,783
3,771
3,188
+19
51.8
24.5
51.5
26.1
46.6
27.7
+11
-12
5,548
5,523
5,237
+6
565
587
785
-28
8.6
2.3
8.8
2.8
11.5
7.3
-25
1,077
1,168
2,108
-49
343
356
335
+2
5.7
2.3
5.8
2.7
5.7
2.5
+0
-8
590
614
640
-8
22.8
13.8
22.7
15.0
18.3
21.3
+25
-35
2,924
2,943
2,853
+2
CHG
12-month cumulative rate
ED STATES
49,008
8,591
14,336
11,962
2,545
1,236
69,309
8,722
17,319
11,224
2,134
1,133
-31
+2
-19
+6
+21
+7
Residential Building Permits
Value - $ M i l .
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ Mil.
- $ Mil.
7,895
1,127
1,983
2,328
473
160
8,001
1,091
1,958
2,304
422
160
11,457
1,192
2,639
2,280
344
157
-31
-5
-25
+2
+38
+2
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ M i l .
Nonresidential Building Permits - $ Mil.
569
Total Nonresidential
74
Industrial Bldgs.
133
Offices
173
Stores
24
Hospitals
18
Schools
577
76
133
171
24
17
624
55
150
160
13
14
-9
+34
-11
+8
+85
+2y
Residential Building Permits
Value - $ M i l .
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ Mil.
Nonresidential Building Permits - $ M i l .
3,850
Total Nonresidential
Industrial Bldgs.
425
Offices
988
1,114
Stores
Hospitals
288
Schools
43
3,922
422
963
1,118
241
45
5.
,868
53/
1 .,1/0
1 .,25b
189
50
-34
-21
-lb
-11
+52
-14
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multifamily units
Total Bu-iIding Permits
Value - $ M i l .
Nonresidential BuiIding
Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
1,764
354
418
510
37
40
1,752
341
389
493
37
38
2,049
316
545
318
25
20
-14
+12
-23
+60
+48
+1UU
Residential BuiIding
Value - $ M i l .
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ Mil.
Nonresidential Building Permits
Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
551
47
155
158
44
39
581
45
172
152
43
41
1,323
50
421
251
45
55
-58
-b
-63
-3/
-2
-29
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ M i l .
NÔnresîdêntH^undln^'ërK
Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
247
28
63
79
22
8
257
28
63
84
22
8
305
25
54
65
17
7
-19
+12
+1/
+22
+29
+14
TesiaennanunaTn^eniiTts
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ Mil.
Nonresidential Building
Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
914
200
225
294
58
12
912
180
238
286
55
12
1,287
209
299
231
55
11
-29
-4
-25
+2/
+5
+9
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ M i l .
Nonresidential BuiIding Permits - $ Mil.
Total Nonresidential
47,657
Industrial Bldgs.
8,879
Offices
14,079
Stores
11,889
Hospitals
2,574
Schools
1,212
NoiTesTdennanhmdin^>entnts
Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
NOTES: Data supplied by the U . S . Bureau of the Census, Housing Units Authorized by Building Permits and Public Contracts. C-40.
Nonresidential data excludes the cost of construction for publicly owned buildings.
The Southeast data represents the total of the six states.
DigitizedFEDERAL RESERVE B A N K O F
for FRASER
87
ATLANTA
Federal Reserve Bank of Atlanta
104 Marietta St, N.W.
Atlanta, Georgia 30303-2713
Bulk Rate
U.S. Postage
Address Correction R e q u e s t e d
Atlanta, Ga.
Permit 292
PAID
@FedFRASER