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FEDERAL RESERVE BANK OF ATLANTA JANUARY–APRIL 2014

EconSouth

The Economic Plight of

Millennials

How We Pay: Results from the Federal
Reserve’s Latest Payments Study
Changing Channels: The Evolving Face
of Media in the Southeast

EconSouth

inside

FEDERAL RESERVE BANK OF ATLANTA JANUARY–APRIL 2014

DEPARTMENTS
1

On Point

Fed @ Issue

Grassroots

Q&A

REIN

Closing Numbers

Staff

Lynne Anservitz
Editorial Director

The Economic Plight of Millennials
The millennial generation is entering the
labor force with one trait in common: they
watched as the Great Recession dramatically reshaped the landscape of employment,
housing, and their overall expectations. How
profoundly will the economic downturn and
its associated effects mark this generation?

Tom Heintjes
Managing Editor

Nancy Condon
Jeanne Zimmermann
Associate Editors
Stephen Kay
Contributing Editor
Charles Davidson
Staff Writers

How We Pay: Results from the Federal
Reserve’s Latest Payments Study

Changing Channels: The Evolving Face
of Media in the Southeast

Galina Alexeenko
Troy Balthrop
Mark Carter
Michael Chriszt
Ed English
Nicholas Parker
Shalini Patel
Contributing Writers
Peter Hamilton
Odie Swanegan
Designers

Editorial Committee
Robin Ratliff
AVP and Public information Officer
Michael Chriszt
VP and Public Affairs Officer

Changes in technology have affected not only
how people live and work, but also how
individuals and businesses pay for goods and
services. The Federal Reserve’s most recent
triennial study of the payments system
highlights a number of shifts in this
dynamic arena.

New digital devices and enhanced technology
have given consumers a feast of content to
consume. Although consumers are the clear
winners in this new media landscape, regional
players in the communications field are
scrambling to remain in the game.
EDITOR’S NOTE: This issue
of EconSouth contains quick
response, or QR, codes. Using an
SAMPLE
iPhone, Android phone, or other
device and a downloaded reader
application, you can scan the QR
codes embedded throughout the issue. The codes will take
you to locations on the Atlanta Fed’s website that will provide
enhanced information on the subject at hand.

on point
Free subscriptions and additional copies are
available upon request to
Public Affairs Department
Federal Reserve Bank of Atlanta
1000 Peachtree Street, N.E.
Atlanta, Georgia 30309-4470
or by calling 404/498-8020
EconSouth is also available on the Atlanta Fed’s
website at frbatlanta.org.
Change-of-address notices, along with a current
mailing label, should be sent to the Public Affairs
Department.
The views expressed in EconSouth are not necessarily those of the Federal Reserve Bank of Atlanta
or the Federal Reserve System.
Reprinting or abstracting material is permitted
provided that EconSouth is credited and a copy of
the publication containing the reprinted material
is sent to the Public Affairs Department.
ISSN 0899-6571
Editor’s note: Throughout this issue, Southeast
refers to the six states that, in whole or in part,
make up the Sixth Federal Reserve District:
Alabama, Florida, Georgia, Louisiana, Mississippi,
and Tennessee.
Photos pp. 4–5, 11 courtesy of the Atlanta Braves;
map on p. 11 courtesy of Wikimedia Commons;
back cover photos by Flip Chalfant (top) and
courtesy of the San Francisco Fed (right).

The Might (and Plight) of the Millennials
Like generations before them, the demographic cohort known as the millennials
—those born roughly between 1980 and
1995—have shaped a number of social
and cultural aspects, including fashion,
technology, and politics. One area where
they’re facing challenges in leaving their
mark, however, is the economy. Unemployment among younger people is persistently
high, as are the school loans many of them
have accumulated. Atlanta Fed economic
analyst Mark Carter—himself a millennial
—looked at this group’s economic challenges, which are daunting in the short
term but not without glimmers of better
times ahead.
“Having kept a close eye on labor
markets over the last few years, I was not
so surprised to learn details about what the
labor market looks like for millennials, but
I was surprised to see that more of them
are financing their education using credit,
with each student assuming, on average,
more debt than those in the past,” he said.
“Despite the millennial generation’s being
the best-educated generation in U.S. history, data show that those holding more
student loan debt are less likely to hold
mortgage and auto loans.”
Checking in on payments
Just as changing economics and evolving
technologies have shaped the millennials, they’ve also brought changes to how
we pay for goods and services. Managing
editor Tom Heintjes used the release of the
Federal Reserve’s fourth triennial payments study as an opportunity to look at
the changing composition of the payments
system, noting the impact of digitization on
payments.
“A pack of checks lasts me a lot longer
than it used to, and the Fed’s payments
study makes it obvious that many people
are writing fewer and fewer checks than
in years past,” Heintjes said. “Although
electronic payment methods are grow-

ing rapidly—and it will be fascinating to
watch their trajectories in future payments
studies—I suspect that the paper check
will continue to occupy a somewhat significant role in payments as data breaches
associated with newer payment methods
grab occasional headlines.”
The (changing) media is the message
If you’re holding this printed magazine in
your hands, odds are that you’re not of the
generation who grew up with the Internet.
In his story, staff writer Ed English—a
former full-time journalist—explores the
changing patterns of media consumption
and determines the winners, the losers,
and those whose outcomes are not yet
clear. In any event, though, he notes that
the fragmenting media landscape could
come at a worrisome cost.
“While I am a big fan of the technological advances that have enhanced my enjoyment of entertainment media, I see two
trends related to journalistic media that
cause me concern,” English said. “Network
and cable television news have trended
toward panel discussion shows and away
from reports in the field. On a local level,
newspapers have trended toward smaller
staffs and smaller papers. While I understand the economics behind both trends, I
fear the effect of shrinking the amount of
boots-on-the-ground reporters in the field.”
A discussion of changing media consumption patterns provides me with a natural segue to announce that 2014 will see
three issues of EconSouth, not four. Our
next issue will be out in August, and we’ll
end the year with our customary outlook
issue. We value your interest in EconSouth
and are developing plans to allow the
publication to continue our commitment to
explore the regional and national economy
in innovative and engaging ways. z
Lynne Anservitz
Editorial Director

frbatlanta.org 1

Fed @ Issue

A Changing Southern
Exposure

MIKE CHRISZT is vice president
in the Atlanta Fed’s public affairs
department.

came to the Federal Reserve Bank
of Atlanta in 1989. During the past
25 years, I’ve witnessed quite a few
changes in the regional economy. Then,
as now, a deep understanding of the
economy in the Atlanta Fed’s district was
important to the formulation of monetary
policy.
Developing economic intelligence
about the region accelerated with the
inception of the Atlanta Fed’s Regional
Economic Information Network (REIN)
in 2008. Through REIN, we reach out
to hundreds of contacts who are drawn
from large and small businesses from all
sectors of the Southeast economy. We
also reach out to representatives of the
community. This broad range of contacts
provides a representative picture of economic conditions across the region.
Changing times, lessons learned
Back in the early 1980s, the Southeast’s
rapid growth was a key feature of the
U.S. economic picture and one that many
people wanted to understand better. Over
the past three decades, rapid development was spurred on by in-migration to
the region, especially to Florida and parts
of Georgia and Tennessee.
Whereas the region seemed recessionproof during several downturns, we’ve
been especially hard hit recently and
have recovered more slowly than other
regions. In-migration slowed with the
financial crisis, the Great Recession, and
the slow recovery that followed. As a
result, the need for new houses, hospitals, shopping malls, and schools also
slowed. With the overbuilding that had
occurred in construction and the rise in

2 EconSouth January–April 2014

foreclosures, the construction and related
building materials industries declined.
The Southeast’s progress out of
recession has been hindered by several
intertwined forces: tepid employment
growth, general economic uncertainty
that restrained consumer and business
spending, challenging banking condi-

While we may not have
regained all the jobs
lost during the recession,
progress is evident.
tions, and still-weak housing markets in
the region’s largest states and metropolitan areas.
Stability gradually returns
As 2014 progresses, it’s clear the Southeast economy is improving. While we may
not have regained all the jobs lost during
the recession, progress is evident. For
example, employment in the service sector has surpassed its prerecession level.
Construction employment still lags, and it
is unrealistic to imagine we will—or even
should—see the high levels of construction jobs experienced during the housing
boom.
Manufacturing employment is
making steady gains, but here, too, the
region’s employment level is lower than
it was in 2007. Although employment in
manufacturing is on the rise, structural
changes in this sector make it unlikely
that we’ll see a boom in factory-related
job growth. The low costs that had been
the Southeast’s comparative advantage

relative to other sections of the country
earlier in the 20th century began to face

Although we currently
face an economic
challenge that may be
among the greatest in
our recent history, the
resilience of the region
has been a constant.
competition in the century’s latter years
from even lower-cost foreign producers.

Technology has also had a significant impact as capital continues to
replace labor. Output levels are rising
thanks to productivity gains. New auto
plants have arrived in the region, and the
boom in energy production throughout
the country has benefited the existing
energy-related manufacturing base here,
especially in Louisiana.
From the vantage point of two-anda-half decades at the Atlanta Fed, I’ve
seen many such changes to the southeastern economy. Further, I’m confident that
many others are on the horizon and will
play an important role in the continual
transformation that has made the South-

What are the risks in
retail payment systems?

east such a dynamic region. Although
we currently face an economic challenge
that may be among the greatest in our
recent history, the resilience of the region
has been a constant. And though I’m
not a native Southerner, I’ve lived here
long enough to know that this resilience
will serve the region well in tomorrow’s
economy. z

The Atlanta Fed’s Retail Payments Risk Forum (RPRF)
identifies, detects, and encourages mitigation of risk in
existing and emerging retail payments to contribute to
the stability, efficiency, and availability of retail payments
systems. RPRF does this all by:
• Researching retail payments products and systems;
• Collaborating with industry participants, regulators, law
enforcement, the legal community, and others in the
Federal Reserve System; and
• Convening payments providers and parties integral to
establishing new products, laws and regulations, policies,
and standards that affect and shape retail payments.

and Rails,

which investigates the latest trends in payments risks.
In addition, learn more about our events and other
publications by visiting frbatlanta.org/rprf/

frbatlanta.org 3

grassroots

Cobb County, Georgia

Cobb County’s
Sunbelt Success
Story Confronts
the Future

t doesn’t look like much now, just
60 acres of Georgia pines and vines.
But what is coming to this patch of
brambles could ignite the Cobb County
economy like no single project has since
a warplane factory opened during World
War II.
At least that’s the hope of county
leaders and economic developers. The
site, near the intersection of interstates
285 and 75, is where the Atlanta Braves
major league baseball team will construct a $672 million stadium that’s
scheduled to open in 2017. Alongside the
ballpark, the Braves plan a mixed-use
development to draw residents, shoppers,
diners, and office workers year-round.
Excitement is high. Cobb County
Commission Chair Tim Lee and other
officials predict the county’s $300 million
investment will pay off handsomely.
“It will be a catalyst to completely
transform an area that’s already the economic hub of Cobb County,” said Brooks
Mathis, senior vice president of economic
development at the Cobb Chamber of
Commerce.
Not everyone is convinced. Taxpayer
groups have protested the county’s financial commitment to the project. Media
reports say the public tab will amount
to more than $500 million over three
decades of paying off interest on bonds
and other expenses.
The ballpark complex “is going to
change things, certainly, in that part of
Cobb County,” said Don Sabbarese, an

4 EconSouth January–April 2014

economist at Kennesaw State University
in Cobb. Eighty-one games a year, which
will likely draw a combined 2.5 million to
3 million fans, and a major real estate project will undoubtedly generate economic
benefits such as hotel stays, sales taxes,
and restaurant meals, Sabbarese said.
On the other hand, there will be
costs in addition to those already known,
including higher public safety, utility,
and transportation costs. Whether the
benefits ultimately exceed the costs, Sabbarese added, “is very hard to predict.”
Another chapter for a quintessential
Sunbelt suburb
One thing is certain. No matter how it
turns out, the Braves’ move 12 miles up
I-75 will be the latest chapter in Cobb
County’s evolution as a countywide version of the quintessential boomtown of
the Sunbelt South. Today, according to
2013 U.S. census data, Cobb has 707,000
residents and more than 300,000 jobs,
making it a bigger employment center
than any Georgia metropolitan area
besides Atlanta.
Immediately north-northwest
of Fulton County, home of the city of
Atlanta, Cobb has gained 100,000 people
since 2000 and more than a quarter
million since 1990, data from the U.S.
Census Bureau show. Cobb County has
on average added the population of the
city of Charleston, South Carolina, every
10 years since 1970. By 1990, a majority
of Cobb Countians were born outside
Georgia, according to Thomas A. Scott, a
historian at Kennesaw State University.
Cobb County—and metro Atlanta gener-

Big changes are on the horizon for Cobb County, which will become home to the Atlanta
Braves’ new stadium starting in 2017.

Cobb County, Georgia

Population
Marietta population
Total housing units
Median household income
Median home value

688,078
56,579
286,490
$65,180
$203,000

Source: U.S. Census Bureau, 2010 Census

Cobb
County
ally—grew thanks to the ingredients
that built the Sunbelt South: defense
spending, the interstate highway system,
aggressive industrial development efforts, low business and living costs, and a
pleasant climate year round.
Of course, without Atlanta, Cobb
County as we know it wouldn’t exist, a
fact that remains as true now as ever,
said Tad Leithead, chairman of the
Cumberland Community Improvement
District (CID), a self-taxing group of commercial property owners located where
the Braves plan to move. In fact, some
of the demographic and economic forces
that long propelled suburbs like Cobb
have dissipated. Consequently, those
places may need to rethink their development if they are to continue to grow,
according to some observers.
Suburban shopping and office
complexes exist because of easy automobile access. In its first 15 years—1988
to 2003— the Cumberland CID focused
on making its pocket of Cobb County
ever more car-friendly, helping to build
roads, access ramps, and parking decks,
Leithead pointed out. For the CID, Cobb,
and metro Atlanta more broadly, cardriven growth succeeded in many ways.
The 5.5-square-mile Cumberland CID
today encompasses some 50,000 jobs—
including the headquarters of the Home
Depot Inc., WellStar Health Services, and
Genuine Parts (NAPA)—and the majority of Cobb’s management and executive
positions, according to the CID. Through
the 1980s up until the housing bust
and recession, Cobb and metro Atlanta
consistently ranked among the nation’s

leaders in employment and population
growth.
“We grew, but we grew badly; we
sprawled,” said Leithead, who also is former chairman of a regional planning body,
the Atlanta Regional Commission (ARC).
“But it worked for 50 years. A lot of people
made a lot of money. People did well. But
the distances got too great, traffic got too
bad. It’s like a rubber band that’s stretched
out: it either has to snap back or break.”
That rubber band of Atlanta congestion has eased back lately. Metro area traffic is no longer among the top-five worst in
the country, according to the Texas A&M
University Traffic Institute, but mainly because of the recession’s impact on volume.
And the area’s congestion remains the
nation’s seventh worst, according to the
institute’s most recent ranking.
It is not just traffic that has Cobb at a
crossroads. Demographics do not play to
the county’s traditional strengths: good
schools and safe, affordable housing for
families. For one, there are fewer families
these days. Between 1970 and 2012, the
portion of U.S. households that were
married couples with children under 18
plummeted from 40 percent to 20 percent,
according to the U.S. Census Bureau.
(See the related story on page 6.) Meanwhile, in the wake of the Great Reces-

sion, younger adults have shown considerably less interest than older Americans
in owning houses and cars and taking
on the associated debt, according to
research including a 2013 study by economist Richard Fry of the Pew Research
Center. Finally, numerous studies have
shown that younger adults prefer urban
living. In fact, in recent years, that trend
has propelled many cities like Atlanta to
grow faster than their surrounding suburbs for the first time in many decades,
according to the Census Bureau.
“We definitely face that,” said Mathis
of the county’s chamber of commerce
said of the demographic currents. Mathis
points to himself: he is 31 and lives in
Atlanta’s thriving urban district of Midtown, not in Cobb County.
On the bright side for Cobb, developers in the county are moving to create
more urban-type walkable developments, particularly in the Cumberland
area that is only about 10 miles from
Atlanta. The Cumberland CID is situated
near hiking trails in the Chattahoochee
River National Recreation Area, and
the CID has launched several projects
aimed at making the area more conducive to walking.
“We’re lucky in that we’re not trying
to create this environment so far outside
the city,” said Mathis.
He has a point. Residential development has radiated so far outside Atlanta
that Cobb, especially the closer-in parts
of the county like the Cumberland district,
are almost considered intown markets,
Continued on page 11

frbatlanta.org 5

THE ECONOMIC PLIGHT OF

MILLENNIALS

6 EconSouth January–April 2014

A demographic cohort is never monolithic, but the group that recently entered
the labor force had one trait in common: they watched as the Great Recession
dramatically reshaped the landscape of employment, housing, and, in general,
their expectations. How profoundly will the economic downturn and its associated
effects mark this generation?
What shapes a generation? Differences among age groups can
be the result of life cycle events (people behave the way they do
because of where they are in life), period effects (such as wars,
economic downturns, and medical or scientific breakthroughs),
or cohort effects (effects from events or trends that occur to
a generation during their young adult years but whose effects
reverberate for years). These are the factors the Pew Research
Center uses to explain differences among age groups.
Largely as a result of the Great Recession, the millennial
generation—which demographers generally define to include
those born after 1980—is marked by each of Pew’s generationshaping characteristics. Besides sending shockwaves through

the U.S. economy, the Great Recession has reshaped many millennials’ plans and opportunities.
Big decisions deferred
On top of the economic hardships facing the millennials, they
show signs of veering from established patterns (see the sidebar
on page 8). Whereas the last few preceding generations moved
more quickly toward getting married or buying a house, millennials as a group are taking their time on those fronts (for many,
out of necessity). In 2012, 36 percent of the nation’s young adults
ages 18 to 31 were living in their parents’ home, the largest share
in four decades, according to 2013 data from Pew. The same

frbatlanta.org 7

Millennials’ Preferences and
Their Effects

s one might expect, millennials exert significant economic sway. The preferences of this
cohort have changed along with the changing economic realities. To quote the Atlantic magazine, “Since World War II, new cars and suburban
houses have powered the economy and propelled
economic recoveries. Millennials may have lost
interest in both.”
Perhaps this loss of interest, though, can be
attributed to the tendency of consumers to make
increasingly rational decisions in times of elevated
economic hardship or uncertainty. The Atlantic
article goes on to say that the typical new car
costs about $30,000 and sits in a garage or parking lot 23 hours a day. The increased prevalence
of Zipcar and similar car-sharing services shows
that young consumers are adopting thrifty habits,
especially when it’s convenient to do so.
Taking note of this trend in car-sharing, Ford
Motors has made a notable effort to provide fleet
vehicles for Zipcar. The automaker’s rationale is
that millennials might have no interest in purchasing a car now, but if they do later, they’ll be
familiar with the brand, increasing the likelihood
that today’s Zipcar customer will be tomorrow’s
Ford owner.
In separate reporting on millennials, the
Atlantic praises millennials for their increased
appetites for “smaller houses built in dense,
mixed-use neighborhoods,” which creates a larger
economic multiplier effect while also creating
other efficiencies, such as—theoretically, at
least—increased funding for school districts.
According to the article, “Economists have found
that more than half of the variation in output per
worker across the U.S. states can be explained by
density.” z

8 EconSouth January–April 2014

year, just 25 percent of millennials were married, down from 30 percent of the same age group that were married in 2007. Statistics like
these bring the Great Recession’s effects on the millennial generation
into sharp focus.
Indeed, the bleak employment situation millennials encountered
upon entering the labor force likely hindered household formation
rates: they weren’t able to rent apartments or furnish and equip their
own households in general. Though labor markets today continue
their slow rebound from their recession-era lows, the U.S. Bureau of
Labor Statistics (BLS) says youth unemployment rates (ages 16–24)
remained around 15.5 percent in 2013 and began 2014 at 14.2 percent,
roughly twice the rate of overall unemployment. In fact, excluding
those under the age of 25, the overall U.S. unemployment rate was
only 5.4 percent in January 2014, according to the BLS.
Another statistic from Pew illustrates millennials’ straits: in
2012, 63 percent of people ages 18–31 had jobs, down from 70 percent
of their same-aged counterparts who had jobs in 2007. Unemployed
millennials are much more likely than their employed cohorts to live
with their parents.
More skills, more problems?
Even beyond the harsh labor market conditions into which millennials graduated, other distinctive factors have intensified frustrations for this demographic. Millennials view higher education as
crucial to enhancing their skills and thus their career prospects, and
data strongly support their view: a new Pew survey shows that, on
virtually every measure of economic well-being and career attainment (including personal earnings, job satisfaction, and the share
employed full-time), young college graduates are outperforming their
peers with less education.
However, these skills come with skyrocketing costs even as students under 30 years old are increasingly taking on loans to finance
their education. A New York Fed report shows total student loan debt
for those under 30 grew from $144 billion in the first quarter of 2005
to more than $322 billion in the fourth quarter of 2012. During the
same period, the number of people under 30 who borrowed to pay for
their education increased from 10.8 million to 15 million.
Overall increased enrollment levels explain, in part at least, the
larger number of people borrowing to finance higher education, but
student borrowers have taken out much higher amounts: from 2005
to 2012, the average per capita amount of education-related debt that
Americans under 30 took on went from about $13,000 to $21,000, according to New York Fed data.
In fact, even as every other kind of debt generally decreased
throughout the Great Recession, student loan debt was a clear outlier. The total amount of student debt for all age groups went from
just shy of $300 million in 2004 to just over $1 trillion by the end of
2012, according to New York Fed data. At no time during that period
did student loan balances decrease.
Generally, the Great Recession forced Americans to target and
prioritize debts. Credit cards, for instance, received borrowers’ pri-

Table 1
Household-Formation Shortfall by Age Group, 2011
Age group

Number of households
formed (in millions)

Shortfall (in millions)

18–24

6.0

1.0

25–34

19.6

0.9

35–44

21.3

0.1

45–54

24.5

—

55–64

21.8

0.2

65 and over

25.4

0.5

118.6

2.6

Total

Note: Household formations among the cohort age 45–54 rose by 100,000 in 2011.
Source: U.S. Census Bureau, Current Population Survey; Atlanta Fed economist Tim Dunne’s calculations

mary debt-reduction efforts. U.S. credit card debt peaked around
the end of 2008 at about $900 million. By the end of 2012, that
balance was comfortably under the $700 million mark, Fed data
show. Auto loan debt also decreased by about $100 million during the recession. In that same period, students took on about
$150 million more in student loan debt, New York Fed data show.
That New York Fed study shows that the share of 25-yearolds who carry student debt went from 27 percent in 2004 to 43
percent in 2012. Though not in itself necessarily a problem—and
in fact could be viewed as young people taking advantage of
relatively low-interest financing of a skill-enhancing education—much more troubling is the share of young adults with
delinquent balances on their student loan accounts. Of students
under 30 who borrowed money to pay for higher education, the
share of those accounts that have been delinquent for 90 or more
days has doubled from 8 percent in 2004 to 16 percent in 2012.
New York Fed data also revealed that hardly anyone ages 25 to
30 who holds a delinquent student loan balance also originates a
home loan, one of a number of drags on millennials’ particularly
low household formation rate.
However, there’s a silver lining to the rapidly increasing
debt that millennials take on to fund their education. In general, young people with at least a bachelor’s degree say that the
money was well spent. According to the Pew survey, 72 percent
of those ages 25 to 32 with at least a bachelor’s degree say that

they have already paid off their college loans. Of the two-thirds
of college-educated millennials who borrowed money to pay for
their schooling, about 90 percent say their degrees have been
worth it—or they expect them to be.
Indeed, because of the rising income disparity between
the college-educated and those without degrees, the only thing
more expensive than a college education could be not getting
one. The Pew Research survey points out a growing and stark
difference in wages between college-educated young adults
and those without a degree (see the sidebar, “The Case of the
Stagnating Wage”). In 2012 dollars, the Pew survey shows
millennials with at least a bachelor’s degree earn a median
income of $45,500 annually, about $17,000 more per year than
the median $28,000 income the study associates with those
having only a high school degree. In an age when overall median annual earnings have remained relatively flat, millennials
have remained mindful that this earnings premium is strongly
associated with education.
Millennials and household formation
According to Atlanta Fed economist Timothy Dunne, the rate
at which all Americans formed households fell sharply during
the Great Recession, as one might expect, given the nature of
the downturn. In 2012, Dunne wrote an article for the Cleveland
Fed titled “Household Formation and the Great Recession.” In it,
Dunne showed that the greatest shortfall in household formation
during that period occurred with young adults.
Dunne’s research, which used Current Population Survey
(CPS) data from the U.S. Census Bureau, showed that the total
shortfall (relative to historically typical levels) in the number of
household formations from 2007 to 2011 was roughly 2.6 million.

frbatlanta.org 9

Table 2
Headship Rates for Adults 18 Years and Older
All age groups

Adults ages 18 to 34

2007

52.0

37.9

2008

51.9

37.4

2009

51.6

36.9

2010

51.2

35.9

2011

51.3

35.8

Note: Data shown are percentages. “Headship” refers to heading a household.
Source: Census Bureau, Current Population Survey; Atlanta Fed economist Tim Dunne’s calculations

The Case of the Stagnating Wage

illennials make up the best-educated
generation in U.S. history, with a little
more than a third of those ages 25–32
holding at least a bachelor’s degree. By comparison, in 1965, 13 percent of the same age
group held degrees. A Pew Research survey on
young adults, education, and earnings says that
as the share of college graduates has grown,
their degrees have also become more valuable:
between 1965 and last year, the median annual
earnings of college graduates ages 25–32 grew
from $38,833 to $45,500 in 2012 dollars, a nearly
$7,000 increase.
The combination of more millennials earning degrees and the premium for those degrees
increasing might therefore lead you to conclude
that they earn considerably more than previous
generations of young adults, but overall they
don’t. The overall median annual earnings of
today’s millennials ($35,000) aren’t too different from the earnings at comparable ages of
the baby boomers ($34,883) or the generational
cohort after them, often referred to as Generation X ($32,173). z

The largest age group contributing to that shortfall, representing about
1 million fewer household formations than demographers would expect
to see, was the 18- to 24-year-old cohort. The second-largest age group
contributing to the household-formation shortfall was the 25- to 34-yearold group, which had about 900,000 fewer formations during the Great
Recession (see table 1 on page 9). For those two age groups combined, the
homeownership rate peaked in 2004 at about 44 percent and plunged to
about 37 percent by the end of 2011.
Dunne offers another way to think about the shortfall in household
formation: looking at something economists call the “headship rate,”
which is the probability that a person is the head of a household (see
table 2). Of all age groups combined, the headship rate fell from 52
percent in 2007 to 51.3 percent in 2011, a decline of about 0.7 percentage
point. For those adults aged 18 to 34, however, the headship rate declined from 37.9 percent to 35.8 percent during the same period, a decline
roughly three times the size of the aggregate headship rate. In this period,
younger adults faced reduced access to mortgage credit, a weaker overall
economy, and increased uncertainty about the housing market.
Finding the silver linings
Although some dark clouds hang over the heads of the millennials, those
clouds do reveal some silver linings. The millennials have helped inflate the
student debt balloon, but in the process they’ve become the best-educated
cohort in U.S. history. And although median annual wages have largely
stagnated, the benefits of a college education are apparent when comparing
college-educated millennials with those not possessing a degree.
And when the Atlanta Fed’s Dunne looks at young adults’ depressed
household-formation rates, he believes a strengthening economy will
cause millennials to pick up the pace. “Improvements in labor markets
should lead to increases in headship rates and an increase in household
formation,” he said, “and this linkage should hold true for millennials
as well.” z
This article was written by Mark Carter, a senior research analyst—and, it
should be noted, a millennial—in the Atlanta Fed’s research department.

10 EconSouth January–April 2014

The home of the Braves: Cobb County’s plans for the Atlanta Braves ballpark (shown above in
blue) involve a mix (shown above in red) of retailing, restaurants, hotels, and parking.

Continued from page 5

said Domonic Purviance, a housing market analyst at the Atlanta Fed.
No longer just a bedroom community
Cobb has matured in many ways. For
example, the county has a net inflow of
commuters every day, according to the
ARC, meaning that more people drive
in for work than drive out. Like many
suburban counties, Cobb also has grown
more diverse ethnically and economically. It is still affluent, to be sure, with
a poverty rate of 12 percent compared to
17 percent for all of Georgia, and median
household income of $65,000, 31 percent
higher than the state level, according to
Census data. But the number of older
and less well-off residents has increased
sharply, which will place demands on
county services that were not a concern
for many years.
Cobb also took a hit from the recession. Employment fell by 13 percent,
according to the U.S. Bureau of Labor
Statistics, about twice the rate of job
losses nationally. No class-A office building (top-tier buildings that command
the highest rents) has been built in Cobb
since 2000.

Cobb’s economy still sound
For all its challenges, Cobb County is
hardly in dire straits. The county employment base is anchored by several large
corporate headquarters. A Lockheed
Martin Aeronautics Company plant,
which opened during World War II as the
Bell Bomber factory, employs nowhere
near the 32,000 it had at its peak decades
ago. But it remains an economic mainstay
with 6,300 people on the payroll. Cobb’s
housing market has improved after the
stinging recession. And all told, nonfarm
employment as of mid-2013 had climbed
back to within 2 percent of its prerecession peak, according to the most recent
data from the BLS.
Cobb’s debt rating on general obligation bonds remains among the top 1
percent of counties nationwide, according to the county’s website. Fitch Ratings
recently cited a “stable economy” and
sound public management in explaining its rating. The county’s population
is highly educated: 44 percent of county
residents over 25 have at least a bachelor’s
degree, compared to just under 30 percent
of Americans and Georgians. Culturally,
Cobb boasts a highly regarded perform-

ing arts center that is home to the Atlanta
Opera and Atlanta Ballet. Now the Braves
are heading up the interstate.
Cobb County probably won’t again
grow as spectacularly as it did in the
1980s and ’90s. That’s all but inevitable,
Sabbarese said. The county faces challenges similar to those faced by most
suburbs and by the Atlanta area at large.
But Cobb will confront those challenges
armed with considerable economic
strengths. z
This article was written by Charles Davidson,
a staff writer for EconSouth.

frbatlanta.org 11

Question & Answer

“The Modest Economic Recovery
Has Played an Important Part in
Slowing Household Formation”
An Interview with Tim Dunne of the Atlanta Fed

he economic struggle of the millennial generation (those born since
1980) has been widely discussed
in the media, and its behavior is also of
great interest to economists. Tim Dunne,
an economist in the research department
at the Atlanta Fed who specializes in
applied industrial economics and labor
economics, has written extensively on
household formation in the United States.
Dunne recently spoke with EconSouth to
discuss this demographic cohort.

TIM DUNNE
Title:

Research economist and policy adviser

Organization: Atlanta Fed
Website:

frbatlanta.org/research/economists/
timothy_dunne.cfm

Other:

Before he joined the Atlanta Fed in
2013, Dunne was a vice president
at the Cleveland Fed, where he led
the research department’s Regional
Issues Group. Prior to joining the
Federal Reserve, he was director of
research in the office of the chief
economist at the U.S. Census Bureau.
Dunne earned his bachelor of arts
in economics and history from the
College of William and Mary and his
doctorate in economics from Pennsylvania State University. His major
fields of study are applied industrial
economics and labor economics.

12 EconSouth January–April 2014

EconSouth: What kind of rebound in
household formation has there been
over the last several years?
Tim Dunne: Unfortunately, the data that
are typically used to measure household
formation are presenting mixed signals at
the moment. Not to be too wonkish here,
but the U.S. Census Bureau has several
different survey instruments that it uses
to estimate the number of households in
the United States. The more recent data
from the housing and vacancy survey
have shown only muted gains, whereas
data from the annual supplement of
the Census Bureau’s Current Population Survey [CPS] indicate a substantial
rise. The observed difference in magnitudes—1.3 million versus 2.5 million from
2011 to 2013—is certainly large enough to
influence one’s assessment of the overall
strength of household formation over the
period in question.

That caveat in order, I’ll focus
here on the data from the CPS’s annual supplement. The recent data have
been pretty solid. Household formation
over the last two years has averaged
about 1.25 million, close to the numbers
seen prior to the Great Recession. The
headship rate—the percent of the adult
population identifying themselves as

The proportion of young adults
living with their parents is
almost as high as it was at the
end of the recession.
the head of a household—has risen but
remains below prerecession levels. The
headship rate fell relatively sharply over
the Great Recession, accounting for the
bulk of the decline in household formation rates. This decline was especially
sharp for younger adults, those ages
18 to 34.
ES: Have millennials participated in the
recovery in household formation?
Dunne: It’s a mixed picture. There has
been some rise in headship rates for
individuals 18 to 34 years old, but the
headship rate for this age group remains
well below the rate seen prior to the
Great Recession. We know that much

of the falloff in household formation
was the result of a decline in headship
rates for the young adult cohort, many
of whom ended up living with their
parents. Greg Kaplan at the University of
Pennsylvania recently published a paper
showing that the option to move back in
with parents serves as insurance against
labor market risks. Indeed, that is still
true in the most recent data, as well. The
proportion of young adults living with
their parents is almost as high as it was
at the end of the recession.
It is clear that the modest economic
recovery has played an important part
in slowing household formation. Andrew
Paciorek of the Federal Reserve Board
has a very nice research paper on the
cyclical nature of household formation
that highlights the strong links between

labor markets and household formation. Paciorek uses a relatively simple
econometric model of the headship rate
and then projects it forward using the
Congressional Budget Office’s forecast of
the unemployment rate through the end
of the decade. The key point of the paper
is that improvements in labor markets
should lead to increases in headship rates
and an increase in household formation—and this linkage should hold true
for millennials as well.
However, as Paciorek says in his paper, “although data through 2012 suggest
that new housing starts and permits have
begun to recover, they remain far below
their long-run trends.”

states over the course of the recession
and recovery?
Dunne: Admittedly, the statistics generated using the CPS data at a regional
level are noisy, but the cyclical patterns
in headship rates that we see at the
national level are present in the Southeast. Headship rates fell sharply during
the recession but have made a partial
recovery since 2010, supporting a rise in
household-formation rates. In short, the
region’s recovery in household formation
is following the broad contours of the
national recovery. z
This interview was conducted by Mark
Carter, a senior economic analyst in the
Atlanta Fed’s research department.

ES: How have headship and household
formation rates evolved in southeastern

Can economic growth
benefit all communities?
We think so.

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the conference explores ways to ensure that economic growth can
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For more information and to register,
visit www.philadelphiafed.org/ROC2014
frbatlanta.org 13

REIN

Regional Economic Information Network

Regional Update: 2014 Seeing Modest Growth, So Far

Energy, hospitality among growth sectors
According to energy contacts, strong production and higher
pipeline capacity continued to bolster activity in the Gulf of
Mexico. The unusual winter weather also benefited the sector by
increasing the use of utilities such as natural gas.
The Southeast purchasing managers index (PMI), a gauge
of regional manufacturing activity, expanded slightly in January.
After contracting in December, the index increased 2.2 points
in January, to 50.6. A reading above 50 represents an expansion
in the regional manufacturing sector, and a reading below 50
indicates a contraction. Early reports from contacts indicated
that the weather forced some plants to shut down, but the loss in
output was temporary and will be made up in the short run. (See
the Business Inflation Expectations survey update on page 18.)
Hospitality contacts said that some areas affected by
the weather lost revenue as a result of closures of attractions
and restaurants. However, most hotels were not as adversely
affected. In fact, some saw an increase from businesses that
encouraged their essential staff to stay in hotels close to their
workplace.
On another positive note, the U.S. dollar’s favorable
exchange rate is contributing to an increase in the number of
international visitors to the states.
Residential real estate continues to improve for most of
the region. According to the Atlanta Fed’s February 2014 business contact poll, the majority of builders and brokers said
sales were up slightly to significantly compared with a year
ago, and home inventory levels had fallen or were unchanged
from year-earlier levels. Home prices also continued their
ongoing recovery.
Employment holds firm
For the most part, hiring didn’t have a notable uptick during
the early months of 2014. Businesses continued to experience
difficulties filling certain positions with people who had the
needed skills and experience, and employers tended toward using overtime and automation before they considered hiring. The
modest level of hiring that did occur appeared to be focused on
filling revenue-generating positions and mostly in sectors such
as construction (see chart 1).
However, to get a better sense of what the hiring intentions
were for this year, the Atlanta Fed conducted a survey in early
January. Of the 554 survey responses received, 46 percent said
they intend to increase employment over the next 12 months and

14 EconSouth January–April 2014

Chart 1

Employment Momentum by Sector
ChartSoutheastern
1
Southeastern Employment Momentum by Sector
Improving
Three-month average percent change, annualized

Overall, business contacts reported that economic conditions
continued to improve modestly across the Southeast for the
early part of 2014. Sectors driving the mild improvement include
energy, manufacturing, hospitality, and real estate.

Expanding

12
Construction

Transportation and public utilities
Leisure and hospitality
Manufacturing

8
6
Finance, insurance,
and real estate
Other services
–2

Retail

4
2

Professional and business services

–1
Government

Contracting

1
–2

2
3
Education and health care

Information

Slipping

–4

Year-over-year percent change
Note: Data are through December 2013, monthly, and seasonally adjusted.
Source: U.S. Bureau of Labor Statistics, Atlanta Fed calculations
Note: Data are through December 2013, monthly, and seasonally adjusted.
Source: U.S. Bureau of Labor Statistics, Atlanta Fed calculations

Chart 2

Chart 2 Employment Plans: An Historical Perspective
Employment Plans: An Historical Perspective
Increase

Unchanged

Decrease

Jan. 2014

46.4%

44.0%

9.6%

Jan. 2013

45.8%

41.6%

12.5%

Jan. 2012

45.6%

44.2%

10.2%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Note: Respondents were asked the question “Do you expect your firm to increase employment, leave employment unchanged,
or decrease employment over the next 12 months?” Samples sizes are 421 respondents (January 2012), 670 (January 2013),
and 554 (January 2014).
Source: Atlanta
business contact
poll the question "Do you expect your firm to increase employment, leave employment unchanged,
Note:Fed
Respondents
were asked
or decrease employment over the next twelve months? Samples sizes are 421 respondents (January 2012), 670 (January 2013),
and 554 (January 2014).
Source: Atlanta Fed business contact survey

44 percent intend to keep employment levels unchanged (see
chart 2). Although these results may be seen as generally positive, it’s advisable to view them with caution because the previous two years of conducting the same survey showed similar
signals, and job growth in the Southeast nevertheless remained
slow in both years.
The Atlanta Fed’s survey singled out the 46 percent of firms
that indicated they planned to increase employment, asking contacts to select the most important factors driving their decision

the same factor:
keeping operating
costs low. Other
frequently selected
reasons were
uncertainties related to health care
costs, regulations,
government policies,
and expectations for low
sales growth.
Recent data support Atlanta Fed findings of slow but
steady gains in regional payroll employment. The latest
available data from the U.S. Bureau of Labor Statistics
show that district payrolls rose a relatively modest
18,000 in December. The unemployment rate for the district fell 0.3 percentage point in December, to 6.7 percent,
mirroring the national trend.

Chart 3 Chart 3
Factors behind Employers' Plans to Hire
Factors behind
Employers’ Plans to Hire
Jan. 2014

Jan. 2013

Jan. 2012

Expected growth
of sales is high
Need skills not possessed
by current staff
Current staff are overworked
Firm's financial position
has improved
Decreased economic or
financial uncertainty
Other factors
Reduced employment too
much during the recession
Labor costs have fallen
0

Percent

Note: Respondents were asked the question “What are the most important factors behind your plans to increase employment?”
Only respondents who plan to increase employment were asked to respond to this question. Participants ranked the three
factors in order from 1 (most important) to 3 (third most important).
Note:
Respondents
were
Source: Atlanta Fed
business
contact
pollasked the question "What are the most important factors behind your plans to increase employment?"
Only respondents who plan to increase employment were asked to respond to this question. Participants ranked the three
factors in order from 1 (most important) to 3 (third most important).
Source: Atlanta Fed business contact poll

Chart 4
Factors behind Employers’ Plans to Restrain Hiring

Jan. 2014

Jan. 2013

Jan. 2012

Want to keep operating costs low
Expected growth of sales is low
Uncertainty about other regulations
or government policies
Cannot find workers
with required skills
Uncertainty about the
cost of health insurance
No sources of restraint
Labor costs are high
Other factors
Firm's financial position
has deteriorated
Current staff are underutilized/
working reduced hours
0

Percent

Note: Respondents were asked the question “What are the three most important factors , if any, restraining your hiring plans?”
Participants ranked the three factors in order from 1 (most important) to 3 (third most important).
Source: Atlanta Fed business contact poll

(see chart 3). A majority cited high expectations for sales growth as
the most important reason. The second most often cited reason was the
firm’s need for skills not possessed by existing staff. The third reason
was that the firm’s current staff were overworked. However, another
frequently cited issue was improvement in the firm’s financial position.
Conversely, the survey asked all participants to rank (in the same
manner as the previous question) the three most important factors
restraining hiring activity (see chart 4). Interestingly, in all three
categories (first, second, and third most important), a majority selected

Prices remain largely stable
Similar to 2013, we continued to hear reports of modest
and relatively stable input cost pressures. Contacts in
the construction industry were a notable exception: the
industry has faced significant increases in costs of some
materials and labor as this sector’s activity improved. In
general, our contacts continued to report having little to
no pricing power.
The Atlanta Fed’s February business inflation
expectations (BIE) survey indicated costs were up 1.8
percent from a year ago (see chart 5 on page 16).
Wage pressures remain largely subdued, with the
exception of the energy and construction sectors and a
few hard-to-fill jobs.
Region’s outlook appears to be on the upswing
Looking forward, almost all of the Atlanta Fed’s 44 directors believe that sales growth in their businesses will
either be sustained at current levels or will accelerate
over the next three to six months—a notable improvement from what they expected in October 2013 (see chart
6 on page 16).
The outlook among regional manufacturers and
retailers (including those in the hospitality sector) is also
especially optimistic going into the new year. According
to the Southeast PMI, manufacturers’ optimism rose in
January to the highest level since January of last year.
The majority of surveyed managers reported expectations of higher production over the next three to six
months. Recent inclement weather conditions aside,

frbatlanta.org 15

REIN

Regional Economic Information Network

5
Chart 5Chart
Current Unit Costs
Current Unit Costs

7
Chart 7 Chart
Year-Ahead Unit Cost Expectations
Year-Ahead Unit Cost Expectations

Percent

0
Oct.
2011

Jan.
2012

April
2012

July
2012

Oct.
2012

Jan.
2013

April
2013

July
2013

Oct.
2013

Oct.
2011

Jan.
2014

Note: Data compare unit costs to the same time the prior year and are through February 2014.
Source: Atlanta
ChartFed’s
6 Business Inflation Expectations (BIE) survey

Firms'
Outlook for Growth for the Next Three to Six Months
Note: Data compare unit costs to the same time the prior year and are through February 2014.

Jan. 2013
July 2013

June 2013
Dec. 2013
Jan. 2014

April 2013
Oct. 2013

March 2013
Sept. 2013
59

45
40

59
56

55
50

50
44
39

Percent

29
19

5 5
0 0

1 3

Lower

Same

Feb.
2012

June
2012

Oct.
2012

Feb.
2013

June
2013

Oct.
2013

Feb.
2014

Note: Survey respondents supplied their cost expectations for the next 12 months. Data are through February 2014.
Source: Atlanta Fed Business Inflation Expectations (BIE) survey
Note: Survey respondents supplied their cost expectations for the next 12 months. Data are through February 2014.
Source: Atlanta Fed Business Inflation Expectations (BIE) survey

Chart 6Source: Atlanta Fed's Business Inflation Expectations (BIE) survey
Firms’ Outlook for Growth for the Next Three to Six Months

retailers also have a generally positive outlook for this year.
Hoteliers expect slight growth in occupancy rates for the first
quarter of 2014 compared with the same period last year, and
they expect room rate and revenues per available room to grow
more robustly.
BIE survey results show that prices should pick up slightly,
to 2 percent over the next 12 months (see chart 7). Inflation
expectations have changed little during the past six months.
Overall, the growing sense of optimism among the Atlanta Fed’s regional contacts supports what President Dennis
Lockhart said in a speech at the start of the year: “Compared
to previous Januaries, we are entering this year on a more solid
economic footing,” and the economy “seems poised to transition
to better conditions” in 2014. z

Higher

Note: Respondents were asked the question “What is your outlook for the rate of growth in your business over the next three to six
months compared to current rates?” Percentages may not add to 100 due to rounding.
Source: Atlanta Fed directors poll
Note: Respondents were asked the question "What is your outlook for the rate of growth in your business over the next 3 to 6 months
compared to current rates?" Percentages may not add to 100 due to rounding.
Source: Atlanta Fed directors poll

On the Ground: An Interview with the Atlanta Fed’s Regional Executives
What are business contacts telling you
about their outlook for 2014?
Tom Cunningham, regional executive at
the Atlanta Fed: I keep hearing anecdotes
from a variety of sources about pretty
decent economic growth, but this rather
positive news is usually accompanied by

16 EconSouth January–April 2014

some expression of skepticism or caution.
“Things are looking pretty good for us
right now but…” is how the conversations
typically start. The in-migration of jobs
and people to Georgia is clearly picking
up, and existing firms are noticing the
increasing economic activity. Yet there
is still a reluctance to break ground on

major capital projects when investment in
existing facilities is sufficient to meet the
marginal increase in demand.
I get a strong sense that there is a
large pent-up demand for major capital
expenditures, particularly in areas where
there has been a material change in
economic conditions—say, firms concen-

trated in natural gas–related endeavors—
but a real reluctance to be the first firm to
make the major investment move. Big
projects are inherently scary to start,
even if you know the end result of the
project is necessarily where the industry is heading.
A big problem is that we’ve been
here before, at the beginning of the last
few years, and there have been notable
midyear swoons. Nonetheless, 2013
ended up with a pretty decent rate of
economic growth despite some sputtering
in the summer, and there seems to be an
increasing willingness to take the plunge
for strategic advantage. Some reports of a
resurgence of demand for manufacturing
space are quite encouraging, and there is
a growing sense that this time around, the
acceleration has some traction.
Lesley McClure, regional executive
at the Birmingham Branch of the
Atlanta Fed: My contacts in Alabama
have surprisingly consistent expectations
for 2014. What’s interesting is that their
expectations seem to differ a fair amount
from the expectations of other parts of
the Atlanta Fed’s district. The business
leaders in Alabama tell me they expect
continued growth in 2014, but the level of
growth will be modest. Several expressed
surprise regarding the improvement in
national gross domestic product in the
fourth quarter of 2013—from where they
stood, they didn’t see anything approaching that level of growth.
Often, contacts will elaborate that
the growth they expect will be a result
of actions they’ve taken to improve their
businesses—entry into new markets or
products, as an example—and they don’t
think there will be much of an impact
as a result of a strengthening economy.
Many remain concerned about the lack
of significant job growth and worry that
without meaningful improvement in jobs,
the consumers they serve won’t be able to
increase their consumption. The positive elements for Alabama continue to be
manufacturing and a gradually improving
housing market.

Chris Oakley, regional executive at the
Jacksonville Branch: Central and North
Florida business contacts are reasonably
optimistic about activity in 2014. Notably,
many believe that headwinds have abated
and opportunities appear to be increasing. There tends to be a willingness to
take on more risk than we have heard in
quite some time, though this feedback is
more frequently heard from our larger
contacts.
Residential real estate markets in
this territory continue to improve, with
some areas experiencing low inventory
levels not seen since before the recession.
Relatedly, lenders report increases in
purchase mortgages, but these increases
are not enough to offset the declines they
are seeing in home refinancing. Automobile loans have been a source of increased
activity for most lenders.
Tourism remains strong, and expectations for continued strong visitor
counts are up. While most retail contacts
reported solid holiday sales, a good deal
of caution remains.
Consumers are very cost-conscious,
and a new era of price transparency
appears to be contributing to a ceiling
on increases. Perhaps a stagnant employment market is contributing to this
feeling. Most employers are not indicating
significant job growth, although those
individuals with special skills such as engineering and accounting are in demand
in most markets. In a nutshell, continued
slow improvement seems to describe
most perceptions.
Karen Gilmore, regional executive at the
Miami Branch: The South Florida business community is generally optimistic as
we settle into 2014. One of my colleagues
and I recently participated in the annual
economic summit hosted by the Greater
Miami Chamber of Commerce, which was
widely attended by business leaders in
South Florida, to discuss the business environment. Our takeaway from the summit and from one-on-one discussions is
that the business community is optimistic
about the general business environment

and about the prospects for their individual
businesses for 2014.
The most significant issue being
expressed by many business leaders in
South Florida is the difficulty in hiring
skilled trade workers and professionallevel employees. The mix of available
workers in the market and the jobs available are not in sync.
Contacts in the community banking
area are reporting increased loan activity
and a marked reduction in problem loan
issues, so they are generally optimistic
about business opportunities going forward. Most community bankers balance
their positive outlook with concern about
new regulatory requirements under the
Dodd-Frank Act. They overwhelmingly
express the concern that compliance
requirements will weigh negatively on
community banks and affect their business models.
Lee Jones, regional executive at the
Nashville Branch: My business contacts
in middle and east Tennessee are generally optimistic about their companies’
prospects. Last year was a good year
for most contacts, and the fact that the
economy continued to grow even in the
face of fiscal and other uncertainties has
boosted business confidence and the outlook for 2014. To many, the recovery now
seems more sustainable and more certain.
Middle Tennessee has done particularly well in the past few years. The
Nashville metro area’s economy has been
growing rapidly, to a large degree because
of the significant presence of the auto industry as well as the vibrant tourism and
health care sectors. Economic expansion
has generated strong job growth in the
area, which in turn has supported a robust recovery in the local housing market.
Perhaps not surprisingly, many of the
manufacturers and construction-related
companies I’ve recently talked to across
the state are especially upbeat about
2014. Retailers are also expecting a good
year. They are hopeful that jobs growth
Continued on page 19

frbatlanta.org 17

REIN

Regional Economic Information Network

Chart 3
Sales Levels and Margins

Business Inflation Expectations Survey

Chart 3
Sales Levels and Margins
–10

Percent

Year-ahead inflation expectations increased somewhat to 2.0
percent in August, before declining to 1.9 percent in September.
Expectations remained at this level through January 2014 (see
chart 1). Long-term inflation expectations (per year, over the next
five to 10 years) increased slightly in January to 3.0 percent but have
since declined, fluctuating in the range of 2.7 percent to 2.8 percent
over the last several months (see chart 2). Firms’ sales levels and
profit margins were virtually unchanged over the last two quarters
of 2013 (see chart 3), and year-over-year unit costs remained stable
in the range of 1.6 percent to 1.8 percent (see chart 4).
From the June to September readings, the difference between
firms’ current unit sales levels and what they consider normal sales
levels (the “sales gap”) increased for businesses of all sizes, with
small firms (fewer than 100 employees) reporting the largest sales
gap (down 7.4 percent). In December, sales gaps of small and large
firms (500 or more employees) continued to grow (down 8.6 percent
and 3.8 percent, respectively), while midsize firms (from 100 to 499
employees) noted a significant narrowing of their sales gap (from
6.6 percent down to 2.2 percent down; see chart 5). z

Sales levels

–20

Margins

–30

July 2013

Aug. 2013

Nov. 2013

Dec. 2013

Chart 4Chart 4
Year-Over-Year Unit Costs
Year-Over-Year Unit Costs

Uncertainty

Percent

Year-over-year unit costs
Uncertainty (variance)

1
July 2013

Percent

Oct. 2013

Note: A reading in the diffusion index greater than zero indicates better-than-normal activity.
Source: Atlanta Fed Business Inflation Expectations (BIE) survey
Note: A reading in the diffusion index greater than zero indicates better-than-normal activity.
Source: Atlanta Fed Business Inflation Expectations (BIE) survey

Chart Chart
1 1
Year-Ahead Inflation Expectations and Uncertainty
Year-Ahead Inflation Expectations and Uncertainty

Sep. 2013

Aug. 2013

Sep. 2013

Oct. 2013

Nov. 2013

Dec. 2013

Source: Atlanta Fed Business Inflation Expectations (BIE) Survey
Source: Atlanta Fed Business Inflation Expectations (BIE) survey

Year-ahead inflation expectations

1
July 2013

Aug. 2013

Sep. 2013

Oct. 2013

Nov. 2013

Dec. 2013

Source: Atlanta Fed Business Inflation Expectations (BIE) survey

Chart 5
Firms’Chart
Unit5Unit
Sales
Firms'
SalesLevels
Levels
Small firms (1-99 employees)
Midsize firms (100-499 employees)
Large firms (500 or more employees)
All firms

Source: Atlanta Fed Business Inflation Expectations (BIE) survey

Chart 2Chart 2
Long-Term Inflation Expectations and Uncertainty
Long-Term Inflation Expectations and Uncertainty

–1.5

–2

Percent

Long-term inflation expectations

–2.2

–2.5

–4

–3.8

–4.3

Percent

–4.8
–5.6

–6

–6.6

Uncertainty (variance)
–8

–7.3

–7.4
–8.6

1
April 2012

July 2012

Oct. 2012

Jan. 2013

April 2013

Source: Atlanta Fed Business Inflation Expectations (BIE) Survey
Source: Atlanta Fed Business Inflation Expectations (BIE) survey

18 EconSouth January–April 2014

July 2013

Oct. 2013

Jan. 2014

June 2013

Sep. 2013

Note: Respondents described their unit sales levels at that time versus normal unit sales levels.
Source: Atlanta Fed Business Inflation Expectations survey
Note: Respondents described their unit sales levels at that time versus normal unit sales levels.
Source: Atlanta Fed Business Inflation Expectations survey

Dec. 2013

Data Corner: A Look at Regional Manufacturing
Southeast Purchasing Managers Index

Manufacturing growth in the Southeast was moderate but
steady in 2013. The average overall purchasing managers index
(PMI) reading for the year was 52.0 points, down slightly from
2012’s average of 53.9 points. The PMI survey indicated expansion in 10 of 12 months during 2013, and January’s reading of 50.6
suggests that the steady pace of growth will continue into the first
quarter of 2014 (see the chart).
The Atlanta Fed uses the Southeast PMI, produced by the
Econometric Center at Kennesaw State University, to track regional
manufacturing activity. A reading on the index above 50 represents
an expansion in the manufacturing sector, and a reading below 50
indicates a contraction. The survey provides an analysis of manufacturing conditions for the region in Alabama, Georgia, Florida,
Louisiana, Mississippi, and Tennessee. Representatives from various manufacturing companies are surveyed regarding trends and
activities in new orders, production, employment, supplier delivery
time, and finished goods.
In 2013, the national PMI—produced by the Institute of Supply
Management (ISM)—was a bit stronger than the Southeast PMI.
(The Southeast PMI is not a subset of the national ISM index.) The
national ISM index averaged 53.9 points in 2013, but it lost some
momentum from December 2013 to January 2014, when it dropped
5.2 percentage points month over month. Many analysts attributed
the decline to unseasonably severe winter weather rather than to a
significant slowdown in manufacturing activity.
An encouraging sign in recent Southeast PMI surveys occurred when purchasing managers were asked about their produc-

Southeast Purchasing Managers Index
70

50.6

20
Jan.
2007

July Jan.
2007 2008

July Jan.
2008 2009

July Jan.
2009 2010

July
Jan.
2010 2011

July Jan.
2011 2012

July Jan.
2012 2013

July Jan.
2013 2014

Note: A reading above 50 indicates an expansion in the region’s manufacturing sector. A reading below 50 indicates a
contraction. Data are through January 2014.
Source: Kennesaw
Stateabove
University
Econometric
Center in the region's manufacturing sector. A reading below 50 indicates a
Note: A reading
50 indicates
an expansion
contraction. Data are through January 2014.
Source: Kennesaw State University Econometric Center

tion expectations over the next three to six months. Although this
question is not a component of the overall PMI, it does provide a
glimpse into the industry concerning activity levels in the months
ahead. Optimism among purchasing managers had been on the rise
in late 2013. When asked in December for their production expectations for the next three to six months, 53 percent expected higher
production. In January, the optimism trend increased again, with 62
percent expecting higher production going forward. z

Continued from page 17

and rising home values and wealth will
encourage consumers to boost spending.
Still, despite the notable improvement in outlook, many companies remain
fairly risk-averse, especially when it
comes to hiring and investing. Businesses,
for example, are choosing to modernize
and expand efficiency at existing facilities
such as plants and malls versus building
new ones.
Overall, although business optimism
has clearly risen, not many of my contacts
believe that growth is poised for a takeoff
in 2014. As one of my branch directors
noted in our January meeting, most of his
business contacts had a good 2013, and
they expect to have a good or slightly better 2014.

Adrienne Slack, regional executive at
the New Orleans Branch: Our regional
contacts are optimistic about consistent
and steady growth expectations in the
near and medium term, which is an improvement over late last year. All contacts
anticipate 2014 growth to be as strong as
or stronger than 2013, with some industries such as energy and petrochemical
construction continuing to see robust
demand increases.
Outside of energy, contacts across
the Gulf Coast are experiencing an
increase in tourism-related business
including hotel occupancy, casino traffic, and retail. Further, contacts in our
Alabama and Florida beach communities
are reporting strong residential and some

commercial real estate activity, including sales of existing properties and new
construction.
Additionally, many businesses are
investing capital in projects. Office and
hotel construction projects that were on
the white board through the financial
downturn are now coming to fruition. As
evidence of the construction confidence
upswing, we noted a change in investment
strategy by construction contractors. As
medium- to longer-term projects become
confirmed, construction companies are
reporting a shift to purchasing rather
than leasing industrial construction
equipment. z

frbatlanta.org 19

HOW
WE
PAY
RESULTS FROM THE FEDERAL
RESERVE’S LATEST PAYMENTS STUDY

20 EconSouth January–April 2014

Changes in technology have affected not only how people live and work,
but also how individuals and businesses pay for goods and services. The
Federal Reserve’s most recent triennial study of the payments system
highlights a number of shifts in this dynamic arena.

Many factors influence trends in noncash payments, including
technological and financial innovations, changes in consumer
and business financial behavior, the business cycle, regulatory
developments, and population growth. The Federal Reserve’s
previous payments studies—the first was conducted in 2000—
revealed a number of notable trends, such as the rise in the use
of debit and prepaid cards and the decline in the use of checks.
The Fed recently completed its fifth triennial payments study,
which showed continued changes in how businesses and consumers make payments (see chart 1 on page 22).
Taking a snapshot from three angles
The Federal Reserve Payments Study consisted of three research efforts designed to capture the current volume and composition of noncash payments in the United States:
• The Depository and Financial Institutions Payments
Survey collected the number and value of noncash payments, cash withdrawals, and deposits that posted to
customer accounts, and unauthorized transactions (most
likely related to third-party fraud) that took place during
March 2013. A total of 1,182 depository institutions provided
data for the survey.
• The Networks, Processors, and Issuers Payments
Surveys estimated the number and value of electronic

payments in the United States for 2012. As of December
2013, a total of 196 organizations provided data, including 92 of the largest payment organizations that process
automated clearinghouse (ACH), credit card, debit card,
and prepaid card transactions. (Automated clearinghouse
refers to a network for financial transactions that is used
for a wide range of payments, including direct deposits
of payments such as Social Security and direct debits of
recurring payments.)
• The Check Sample Survey estimated the distribution of
checks by counterparty and purpose for 2012. The study’s
data were based on a random sample of checks collected
by 11 of the largest U.S. banks.
Cards hold a strengthening hand in payments
The study found that cards significantly increased their share of
total noncash payments, from 43 percent in 2003 to 67 percent
in 2012. The use of ACH grew more modestly, increasing from a
share of 11 percent in 2003 to 18 percent in 2012. Checks represented nearly half (46 percent) of all noncash payments in 2003,
but only 15 percent in 2012 (see chart 2 on page 22).
The payments study broke down card payments into two
broad categories: general-purpose and private-label cards. Credit
card payments (including both general purpose and private

frbatlanta.org 21

Chart 1

Distribution
Chart
1 of Noncash Payments in 2012
Distribution of Noncash Payments in 2012

Chart 2
2
TrendsChart
in Noncash
Number
and
Type of Transaction
Trends
in NoncashPayments
Payments by by
Number
and Type
of Transaction
50

18% ACH

38% Debit card

Debit card
40

7% Prepaid card

Checks (paid)
Billions of transactions

15% Checks (paid)

Credit card

ACH
10

21% Credit card

Share of payments

Prepaid card

0
2003

Source: 2013 Federal Reserve payments study

2006

2009

2012

Source: 2013 Federal Reserve payments study

3% Credit card
2% Debit card

0% Prepaid card

Source: 2013 Federal Reserve payments study

61% ACH

33% Checks (paid)

Value of payments
Source: 2013 Federal Reserve payments study

label)—which declined slightly from 2006 to 2009—returned
to growth from 2009 to 2012. The number of credit card
transactions grew at an annual rate of 7.6 percent, rising from 21
billion in 2009 to 26.2 billion in 2012.
The number of debit card payments exceeded the number
of credit card payments
for the first time around
ECONSOUTH NOW PODCAST 2004. By 2012, the number
of debit card payments had
Geoffrey Gerdes, senior economist
reached 47 billion—much
at the Board of Governors of
higher than the 26.2 billion
the Federal Reserve, discusses
credit card payments in the
the Fed’s payments study. On
same year.
frbatlanta.org, select “Podcast.”
Although prepaid cards
are a type of debit card,
they also represent a dis-

22 EconSouth January–April 2014

tinct category of noncash payments that the payments study
considered separately. Compared with credit, debit, ACH, and
check, prepaid card payments (including both general purpose and private label) increased at the fastest rate from 2009
to 2012 (15.8 percent annually), reaching a total of 9.2 billion
transactions in 2012. The number of prepaid card payments
increased 3.3 billion from 2009 to 2012, a higher growth rate
than previous studies reported.
In 2012, card and ACH payments made up 85 percent of
all noncash payments by number and 67 percent of total value,
with check payments making up the remainder. The number of
general-purpose credit card transactions rose at an annual rate
of 6.8 percent per year from 2009 to 2012, compared with 1 percent annually from 2006 to 2009. The value of these payments
went up 9.3 percent per year from 2009 to 2012. By number,
business general-purpose credit card payments grew from 2.3
billion in 2009 to 3.4 billion in 2012, an increase of more than
one billion payments.
By number, general-purpose debit card payments grew by
about 9.4 billion, or 7.7 percent per year, from 2009 to 2012—the
largest total growth by number among all types of payment. The
estimated number of PIN debit card transactions accounted
for 36 percent of all general-purpose debit card transactions,
similar to estimates in previous studies. The number of business
general-purpose debit card transactions grew more quickly than
consumer transactions from 2009 to 2012 (8.6 percent compared
with 7.7 percent per year, respectively).
ACH expands its footprint
The number of ACH transactions grew at an annual rate of 5.1
percent from 2009 to 2012 (slower than the long-term growth of

Number and Growth of Noncash Payments
Compound annual growth rate
2003

2006

2009

2012

2003–12

2009–12

Total (billions)

81.4

95.2

108.1

122.8

4.7%

4.4%

General-purpose card

30.8

44.3

58.4

73.8

10.2%

8.1%

Credit card

15.2

19.0

19.5

23.8

5.1%

6.8%

Debit card

15.6

25.0

37.5

47.0

13.0%

7.7%

Prepaid card

0.0

0.3

1.3

3.1

—

33.5%

Private-label card

4.6

5.8

6.1

8.5

7.1%

11.6%

Credit card

3.8

2.7

1.5

2.4

–4.8%

17.1%

Prepaid card

0.8

3.0

4.6

6.1

24.9%

9.7%

ACH

8.8

14.6

19.1

22.1

10.9%

5.1%

37.3

30.5

24.5

18.3

–7.6%

–9.2%

Checks (paid)
Source: 2013 Federal Reserve payments study

10.9 percent per year from 2003 to 2012), resulting in 22.1 billion
payments in 2012 (see the table).
These estimates from the payments study reflect an ongoing deceleration in growth in the number of ACH payments but
mask some underlying trends. For example, the number of business payments to consumers and consumer online payments
using ACH increased much faster than the overall number of
ACH payments.
During most of the 2000s, conversion of checks to ACH
drove the growth in ACH payments. As check writing continued
to decline, the number of checks that could be converted declined as well, offsetting some of the gains associated with other
ACH activity. A substantial portion of checks were, like cards,
also being written at the point of sale. At the same time, however, checks were also being used for larger-value consumer bill
payment and payroll transactions as well as high-value businessto-business payments.
The check is down but not out
In 2003, Congress passed the Check Clearing for the 21st Century
Act (commonly called Check 21), which facilitated the development of widespread electronic check processing and clearing.
Check 21 has played a role in the rapid evolution of the U.S.
payments system. Over the past 10 years, paper check payments,

which before Check 21 typically required physical processing
and transporting, have been replaced by more efficient electronic
processes and alternative payment methods.
In 2000, checks dominated noncash payments options. By
2003, the decline of checks was apparent. By 2006, two-thirds of
all noncash payments were electronic. In 2009, checks fell to second place in terms of noncash payment value, behind electronic

Many factors influence trends in noncash
payments, including technological and
financial innovations, changes in consumer and business financial behavior,
the business cycle, regulatory developments, and population growth.
payments. An estimated 18.3 billion checks were paid in 2012,
with a value of $26 trillion (see chart 3 on page 24).
The number of checks paid from 2009 to 2012 declined
annually by 9.2 percent, while the value of checks paid declined
6.3 percent per year during the same period. As a result, the

frbatlanta.org 23

Chart 3
Chart 3
Noncash
Payment
by Payment
Type
Noncash
Payment Transactions
Transactions by Payment
Type
Prepaid card
Credit card

Checks (paid)
Debit card

ACH

Billions

120

Highlights from the 2013 Study
• Total number of noncash payments: 122.8 billion, up 4.4
percent from 2009 to 2012
• Total growth in the value of noncash payments: $72.2
trillion in 2009 to just under $79 trillion in 2012
• Total number of checks: 18.3 billion, fewer than half the
number a decade earlier (37.3 billion)
• Share of checks being deposited as images, with 17
percent being deposited as an image at the bank of first
deposit versus 13 percent in the 2010 payments study
• Credit card payments’ annual growth rate: 7.6 percent, a
payment type that registered a decline in the 2010 study
• Debit card payments growth: 7.7 percent

0
2003

2006

2009

2012

Note: All data are for 2012.
Source: 2013 Federal Reserve payments study

Source: 2013 Federal Reserve payments study
Source: 2013 Federal Reserve payments study

average value per check paid increased from $1,291 in 2009 to
$1,420 in 2012. Billers and merchants converted some consumer checks to ACH transactions, so the estimated number
of checks paid differed from the estimated number of checks
written. The share of checks written that were converted to
ACH increased from 12 percent by number in 2009 to 13 percent
in 2012. Further, the number of checks being deposited as images (including checks deposited by consumers using a mobile
device) shows a notable increase: 17 percent in 2012, up from 13
percent in 2009.
However, checks’ diminishing share of the payments pie
shouldn’t mask their significance in the payments system, as
they are declining from a dominant position. The value of checks

Checks’ diminishing share of the
payments pie shouldn’t mask their
significance in the payments system,
as they are declining from a dominant
position.
still represents one of the largest values in payment types, almost 44 percent. In a 2009 essay published by the Cleveland Fed
titled “The Check Is Dead! Long Live the Check! A Check 21 Update,” authors Paul W. Bauer and Geoffrey R. Gerdes anticipate
that the decline of checks will flatten out in the future. “Looking
ahead, while payment innovations will continue to whittle away
at check’s overall share in total payments, check volume will

24 EconSouth January–April 2014

likely stabilize, with billions of checks being written well into
the future,” they wrote.
Fostering future efficiencies
The goal of the payments study is to enhance understanding of
the complex and always-changing payments system throughout the financial services industry and with the public. Most
organizations base their infrastructure investments on trends
in the marketplace as well as what they are directly observing.
For those organizations, the Fed’s payments study provides
important information that can help guide future decisions
about investments in payments system hardware, software, and
personnel. Supplying information that helps improve this sort
of decision making furthers one of the Fed’s main policy goals:
fostering an effective, efficient payments system. z
This article was written by Tom Heintjes, managing editor of
EconSouth.

HOW MANY JOBS DOES IT
TAKE TO LOWER THE
UNEMPLOYMENT RATE?
You can find answers to this and many other questions
with resources from the Atlanta Fed’s Center for Human
Capital Studies. We offer several tools that will help you
better understand jobs, employment, and labor.
Jobs Calculator: An interactive tool that depicts changes in the unemployment rate.
How much does the labor force participation rate affect the unemployment rate?
Labor Market Spider Chart: A frequently updated tool showing 13 measures of labor
market activity. Visualize the status of the labor market and track its multiple
dimensions.
Human Capital Compendium: What is the Federal Reserve saying about
human capital and employment? This repository provides access
to research published on topics related to employment,
unemployment, and workforce development.

To access these tools and more,
visit frbatlanta.org/chcs/

frbatlanta.org 25

CHANGING CHANNELS:
THE EVOLVING FACE OF
MEDIA IN THE SOUTHEAST
26 EconSouth January–April 2014

New digital devices and enhanced technology have given consumers a
buffet of content to consume. Although consumers are the clear winners
in this new media landscape, regional players in the communications
field are scrambling to remain in the game.

There’s never been a time when consumers have had so many
choices for media content. And as the number of choices has
gone up, so have consumers’ appetites. Technology is at the core
of this increased gorging on information. Instead of waiting for
a once-a-day update from a newspaper or evening news broadcast, consumers can instantly access the latest Web reports from
journalists or bloggers around the world. Instead of making a trip
to the library to conduct research, students can instantly search
online volumes of data much larger than what their local library
once housed in print. Instead of making a trip to a video or music
store, consumers can make instant purchases and immediately
enjoy watching a movie or listening to a new music release.
But as consumers feast on all this content, the economic
repercussions are sometimes swift and surprising. Consider
Blockbuster, a national video chain that gobbled up regional
video and music retailers like Atlanta-based Turtle’s Records &
Tapes to build an empire that peaked in 2004 with 9,000 stores
and 60,000 employees. However, Blockbuster was slow to react
to competitors and the rise of videostreaming, and by 2010 it
filed for bankruptcy. Now all that remains in the United States
are 50 franchise-owned stores.
While consumers are the obvious winners in this new media
environment, its fluid landscape has resulted in tremendous
uncertainty for those whose livelihoods are linked to communication, from journalists to retailers to advertisers to educators
and students.
What’s catching consumers’ eyes and ears?
The average U.S. consumer spends 60 hours a week consuming
content across an array of devices, according to the U.S. Digital
Consumer Report published by Nielsen in February 2014. The
study also notes that Americans now own four digital devices
(such as smartphones and tablets) on average, and a majority of
U.S. households also own high-definition televisions.
Television feeds a good bit of that consumption. Nielsen’s
television ratings include four Southeast markets, and each

frbatlanta.org 27

shows the average consumer
spending nearly 20 percent of the
day watching programming (see
table 1).
Radio, which has maintained
a large audience, took a major revenue hit during the recent recession
and is still recovering. Overall U.S.
industry revenue for 2012 was $16.5
billion, which is only 90 percent of
what it was in 2008 ($18.3 billion),
according to figures from the Pew
Research Center. What is disappointing for the radio industry
is that 2012 should have shown a
spike for political advertising in a
presidential election year. However,
the $16.5 billion figure was only a
1.4 percent increase over 2011 ($16.2
billion).
Still, consumers are listening
to the radio more than two-and-ahalf hours daily, notes the Nielsen
State of the Media: Audio Today
2014 report. Overall, Nielsen
shows 242 million (92 percent)
of Americans 12 and older listening each week to at least one of
more than 16,000 radio stations
nationwide, featuring 50 different
formats. In the Southeast, recent
Nielsen numbers show a slightly
negative but reasonably steady
trend (see table 2).
The big change in radio is the
growth of the Sirius/XM satellite
subscriber base, which jumped 27
percent between 2009 (18.8 million)
and 2012 (23.9 million), according
to Nielsen.
Extra, extra, don’t read all
about it
The one piece of legacy media that
doesn’t seem to be keeping pace
as well as television and radio is,
of course, newspapers. Even with
Americans increasingly pulling
digital content, newspapers have
not fared well. With the exception
of Birmingham’s, online readership

28 EconSouth January–April 2014

Table 1

Daily Television Consumption in Four Southeast Markets
City

Live TV
hours/
minutes

DVR
hours/
minutes

Streaming
hours/
minutes

Total
hours/
minutes

Atlanta

4:39

0:38

0:06

5:23

Miami

3:59

0:24

0:04

4:27

Orlando

4:43

0:51

0:09

5:43

Tampa

5:02

0:34

0:07

5:41

Source: Nielsen U.S. Digital Consumer Report

Table 2

Urban Radio Markets in the Southeast
Percentage of estimated listeners age 12 and older
Market

Fall 2011

Fall 2012

Fall 2013

Atlanta

94.6

93.7

91.7

Jacksonville

90.3

92.3

91.8

Miami

94.3

94.5

92.8

Birmingham

93.1

92.3

92.7

New Orleans

93.9

93.1

91.9

Nashville

93.6

92.1

92.3

Source: Nielsen State of the Media: Audio Today 2014 report

Table 3

Decline of Southeastern Newspapers
Print Circulation
Change 2007–13

Online Viewership
Change 2007–13

Publication

Number

Percent

Number

Percent

Atlanta JournalConstitution

–576,956

–27.5%

–38,779

–3.6%

Birmingham
News

–51,756

–8.3%

186,364

93.7%

Florida
Times-Union
(Jacksonville)

–152,630

–21.6%

18,287

7.2%

Miami Herald/
El Nuevo Herald

–446,919

–29.8%

108,433

28.1%

Tennessean
(Nashville)

–186,330

–20.5%

106,687

49.2%

Source: Association of Business Information and Media Companies

of metro newspapers has fallen short of offsetting the decreasing demand for
their print product, according to the Association of Business Information and
Media Companies (see table 3).
In reaction to falling readership, the Times-Picayune in New Orleans
and three metro newspapers owned by Advance Publishing in Alabama reduced their publishing schedule from daily to only three times a week.
As for the magazine industry, overall it held its own despite a continued
downturn by newsmagazines. According to the Alliance for Audited Media,
the total average circulation for the 386 U.S. consumer magazines reporting
comparable paid and verified circulation was down 1.7 percent, with paid subscriptions down 1.2 percent and single-copy sales off 11.1 percent. However,
Samir Husni, director of the Magazine Innovation Center at the University
of Mississippi, attributes the industry’s stability to the performance of niche
magazines.
The biggest change for the newsmagazine genre is the decline in sales of
single-issue copies.
While single-issue sales for the entire magazine industry fell by 8.2
percent in 2012, sales for newsmagazines declined almost twice that much (16
percent), with sales of Time magazine dropping 27 percent, according to the
Alliance of Audited Media.
No publication better reflects the hard times encountered by newsmagazines than Newsweek. After merging with the Daily Beast website in
2010, Newsweek ceased publishing a print issue for 14 months. Under new
owners (IBT Media), Newsweek returned to print in March. However, the
70,000 copies printed for the first issue are a far cry from two decades ago,
when Newsweek’s circulation peaked at 3.3 million.
What do these trends mean?
Advertisers are dogged in trying to maximize the exposure of their products
or services to consumers. Recent trends show television and the Internet
as the big winners. According to Nielsen’s most recent Global AdView Pulse
report, which covers the first three quarters of 2013, television has 57.6 percent of the media industry’s revenue while still showing growth of 4.2 percent
year over year. Meanwhile, digital advertising may have only 4.3 percent of the
industry’s total spending, but it easily has the highest growth rate at 26.6 percent
year over year (see chart 1 on page 30).
While newspapers still pull 18.9 percent of advertising dollars, their
performance (down 2 percent) in the first three quarters of 2013 continues a
long, steady decline. Data from Martin Langeveld at Nieman Journalism Lab
show newspapers attracted 37 percent of the nation’s advertising spending in 1949 and accounted for a larger share of ad revenue than television
until the early 1990s. A significant loss for newspapers was the migration of
classified ad revenue to services such as Monster.com, CareerBuilder.com,
Craigslist.org, and other online entities. And the magazine industry has seen
ad pages decline for six consecutive years, according to the Alliance for
Audited Media.

Millennials: Out with the Old,
in with the New (Media)

his issue of EconSouth examines
the economic challenges facing
millennials—those ages 18 to 31—
and explores changing media-consumption patterns among the general population. But how do millennials’ lifestyle
choices affect the way they consume
media?
It’s apparent that millennials—like
a vast percentage of the general population—are never without their cellphones,
which provide not only phone service but
Internet access, music, e-mail, and a host
of apps for everything from restaurant
choices to local retailer discounts.
A 2012 Pew Research study found
that millennials as an audience have far
less interest in traditional news than do
earlier generations. Whereas baby boomers spend 77 minutes a day watching,
reading, or otherwise consuming news,
the study notes, millennials spend only 46
minutes. And another Pew survey of more
than 1,000 technology stakeholders and
critics notes that by the year 2020, new
technologies will give media consumers—
especially tech-savvy ones such as millennials—the “ability to search effectively
for information online and to discern the
quality and veracity” of information they
find. z

What does this mean for the workforce?
One of the most visible shifts in the communications labor force has been at
newspapers, where the Pew Research Center noted that cutbacks in 2012 put the
industry down 30 percent since 2000 and below 40,000 full-time professionals for

frbatlanta.org 29

Chart 1
1
MediaChart
Industry
Revenue
Media Industry Revenue
4.3% Internet
0.3% Cinema

10% Magazines

18.9% Newspapers

3.5% Outdoor

57.6% Television

5.4% Radio

Media Growth Rate

Note: Data reflect the first three quarters of 2012.
Source: Nielsen Global AdView Pulse report

Note: Data reflect the first three quarters of 2012-13.
Source: Nielsen Global AdView Pulse report

Chart 2Chart 2
U.S. Communication/Media Jobs
U.S. Communication/Media
Jobs

2012
2003

3,000

2,000

1,000

Miscellaneous media

Photographers

Reporters/correspondents

Broadcast

Public relations

Writers/editors

Artists/designers

Advertising/marketing

Note: Data indicate thousands of jobs.
Sources: U.S. Bureau of Labor Statistics and author’s calculations
Source: U.S. Bureau of Labor Statistics and author’s calculations

the first time since 1978. Newspapers in the Southeast are consistent with national trends:
• Times-Picayune in New Orleans announced in
June 2012 that it would lay off 201 employees (32
percent of all staff) that September.
• Nashville’s Tennessean reduced its staff by 16 in
August 2013, leaving the publication with fewer
than 170 employees.

30 EconSouth January–April 2014

• Miami Herald/El Nuevo
Herald eliminated 13 jobs and
Media Revenue Growth Rate
decided not to fill 20 open
positions in October 2013. Four
Television
4.2%
years earlier, 24 positions were
Radio
−0.9%
eliminated.
Outdoor
5.0%
• Atlanta Journal-Constitution
Newspapers
−2.0%
cut its photography staff in
Magazines
−1.9%
half in October 2013, to five
Internet
26.6%
employees. Between 2006
Cinema
−5.9%
and 2009, the Atlanta paper
eliminated more than half of a
Note: Data reflect revenue in the first three quarters of
onetime 500-member staff.
2013 over the same period in 2012.
Source: Nielsen Global AdView Pulse report
• Florida Times-Union laid off
9.5 percent of its staff in 2011
after having terminated 6 percent of staff in 2010.
• Birmingham News/Press-Register (Mobile)/
Huntsville Times eliminated 400 positions in the
three newspapers in June 2012.
A major question is whether the losses of legacy media jobs
have been offset somewhat by jobs created by new media.
“I think the job picture is very muddy,” said Ann Hollifield,
head of the telecommunications department and the Thomas C.
Dowden Professor of Media Research at the University of Georgia. “It’s true that if you look at jobs in the legacy media, we have
seen a large decline in staffs of traditional news organizations.
At the same time, of course, we’ve seen an explosion of media
through other kinds of outlets, many of which have jobs attached
to those.
“We do know that one of the real problems that has occurred, particularly in news, is that a lot of the senior, highestpaid, most experienced people have been laid off in favor of
younger, cheaper labor. That’s a problem.”
According to figures from the U.S. Bureau of Labor Statistics, the number of workers nationwide who have jobs identified
with communication activity has actually increased slightly in
the last decade, from 5.3 million in 2003 to 5.5 million in 2012
(see chart 2).
Where are the job gains?
With job numbers sagging in legacy media, Hollifield points to
two sources of growth: social media jobs within traditional companies and media start-ups.
“From an economic perspective, social media is in large
part being driven by professional communicators who are working for companies that feed social media,” Hollifield said. “There
is a lot of chatter, but there is also an awful lot of structured
communication going on through social media that’s being driven by professionals. Companies aren’t just leaving social media
to take its own turn without their participation when it concerns

SMALL

their company or their brand. That’s a
whole new type of job that’s emerging in
media that didn’t use to exist.”
Start-ups like BuzzFeed and Business Insider are the other part of the job
creation equation.
“There are lots and lots of those
around, but let’s be realistic,” Hollifield
said, noting that a majority of start-ups
fail within five years. “There are lots of
media entrepreneurs and they are certainly producing jobs in the short term.
But how many of them continue in the
long term?

A major question is whether
the losses of legacy media jobs
have been offset somewhat by
jobs created by new media.
“As the dust settles from the wave of
start-ups, it will remove a certain amount
of competition from the marketplace.
What does that mean for traditional
media companies in terms of regaining
some of their economic strength and
being able to move forward in different
ways? I don’t think the industry will ever
be as we knew it. I don’t necessarily think
that’s a bad thing. But exactly where is
it going to wind up? I wouldn’t want to
be held to my prediction five years from
now,” said Hollifield.
Future communicators?
Even though the job market may be
uncertain and some schools, such as
Emory University and the University of
Colorado, are discontinuing journalism
programs, there does not yet seem to be a
shortage of new communicators wanting to enter the field. The recent hiring of
communications graduates is trending
slightly positively, according to the 2012
Annual Survey of Journalism and Mass
Communication Graduates produced by
the University of Georgia’s James M. Cox
Jr. Center for International Mass Com-

munication Training and Research. The
report, in its 27th year, surveyed communications graduates from 82 communications schools across the country. In 2012,
56 percent of communications school
graduates surveyed found full-time jobs
and another 17.9 percent landed part-time
work. This was the third straight year
of incremental improvement over a low
point in 2009, when only 46.2 percent
found full-time employment and another
20.8 percent got part-time work. Still, the
2012 figure is far below the numbers in
2000, when 71.1 percent found full-time
jobs while another 8.8 percent took parttime work.
Economic implications of new media
Regardless of their shape, the media play
an important role for “all other economic
processes,” Hollifield contends. She said,
“It is not a minor matter for our society
when you talk about the breakdown of
legacy media in terms of their ability not
only to hold government accountable and
keep government transparent, and therefore help reduce government corruption.
Studies show that the media are directly
related to the level of government corruption in countries around the world. And
that the level of government corruption is
directly related to the economic strength
and development potential of countries.
But on top of that, you also have the
simple fact that an enormous part of the
American media is actually businessto-business media, and they’re feeding
economic information to businesses that
use it to make business decisions. We
need a vibrant media.” z

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frbatlanta.org 31

WHERE DOES THE LABOR MARKET STAND?

WHAT’S HOLDING BACK JOB GROWTH?

HOW DO WE GET MORE JOBS?

WHERE ARE THE JOBS?
In the nearly five years since the recession ended, we have
recovered a lot of ground in the labor market. But we still are
far short of replacing the 8.7 million lost jobs.

Learn more in the Atlanta Fed’s 2013 Annual Report
www.frbatlanta.org/pubs/annualreport/13ar/.

Scan the QR
code for details

umbers

}

Number, in billions, of debit
card payments in the United
States in 2012

Source: 2013 Federal Reserve
payments study, as cited in
EconSouth’s article, “How We Pay”

45.5

Percentage of the population of
Sumter County, Florida, that was 65
or older in 2011, which led all U.S.
counties in this age group
Source: U.S. Census Bureau

Percent of U.S. adults ages
18 to 31 living in their
parents’ home in 2012,
the largest share in four
decades

2,505

Average area, in square feet, of a single-family
home completed in 2012, compared with 1,660
in 1973

}

Source: U.S. Department of Agriculture

42,747

Number of occupied U.S. housing
units heated by solar energy in 2012
Source: U.S. Census Bureau, American
Community Survey

2.4

Number, in millions, of occupied
U.S. housing units heated by wood
in 2012, representing 2.1 percent of
all homes
Source: U.S. Census Bureau, American
Community Survey

}

closing

Source: Pew Research Center,
as cited in EconSouth’s article,
“The Economic Plight of
Millennials”

Hours per week U.S.
consumers spend
consuming media via
electronic devices
Source: U.S. Digital
Consumer Report, as cited
in EconSouth’s article,
“Changing Channels”

Percent decline in coal
consumption in the U.S.
manufacturing sector
from 2002 to 2010
Source: U.S. Energy
Information Administration

25.7

Time, in minutes, spent
by U.S. workers age
16 and older getting to
work in 2012, up from
25.5 minutes in 2011 and
25.3 minutes in 2010
Source: U.S. Census Bureau,
American Community Survey

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Technology has brought immeasurable transformation to nearly
every aspect of daily life, and the
payments system is no exception.
Today, the Atlanta Fed’s automated
clearinghouse processors (above)
move payments digitally, while
payments technology was a more
labor-intensive process in the 1940s,
as shown by San Francisco Fed
employees (right).

and

now then

Full text of EconSouth : January-April 2014, Volume 16, Number 1

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