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In This Issue
Volume 3, Number 2, Second Quarter 2001

CURRENT ISSUE
The Burden of Debt

COVER STORY
The Southeastern Auto Industry:
Moving into the Fast Lane

The auto manufacturing industry has
changed dramatically during the past 30
years in response to consumer demand.
Technological innovations, precision
production systems and just-in-time
delivery of auto parts have changed how
and where cars are made. The Southeast
stands to gain significant economic benefits
as auto manufacturing facilities increasingly
migrate to the region.

FEATURES
State of Flux?
State Revenues in a Slower Economy

For the last several years, greater-thanexpected revenues were routine for state
governments as the U.S. economy enjoyed
extraordinary growth. The recent slowdown
in growth has confronted some state
governments in the Southeast with the
challenge of falling revenues and budget
cuts.
U.S. Sneezes, World Catches Cold

The U.S. economy’s robust health during
the past decade has helped protect the rest
of the world from the worst effects of
various economic ills. But the United States
has recently caught a slight economic cold,
and the global economy should expect to
suffer some of the symptoms.

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The views expressed in EconSouth
are not necessarily those of the
Federal Reserve Bank of Atlanta or
the Federal Reserve System.

DEPARTMENTS
Research Notes & News
Dollar Index
The State of the States
Southeastern Economic Indicators

Reprinting or abstracting material from
this publication 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

Economic Research

CURRENT ISSUE

The Burden of Debt
ecent news reports on the current condition of U.S. consumers have been disturbing. Aggregate data show that
consumer debt levels and debt service burdens have trended upward in recent years. Some economic analysts
believe that a large consumer debt burden presents a notable risk to the economy as it struggles through a
transition to a more sustainable growth rate. They are quick to point out that high debt levels and related debt service
payments may spur a retrenchment of consumer spending. Are concerns warranted?
Consumer debt statistics, put in perspective, can be used for drawing inferences about how well consumers are
positioned in terms of servicing their debt levels. In this regard, debt service payments must be examined relative to
income flows in order to get a sense of how sustainable debt levels are.
The “why” of consumer debt
Despite current media pessimism, the existence of consumer debt is generally a good thing.
For example, the widespread availability of credit market instruments, particularly
conventional mortgage financing, has allowed many U.S. consumers to own homes at a
much earlier age than homeowners did in previous generations. Rising home equity values
and moderate mortgage interest rates have further encouraged consumers to refinance,
allowing them to borrow more against this asset to finance other purchases at typically
attractive interest rates. In addition, wide access to credit card debt has enabled consumers
to purchase goods when they need them rather than only when they have the cash.
But debt also has potential drawbacks. Other things being equal, when consumer debt levels
are high there is a greater risk that some debt cannot be serviced; that risk carries with it the
costs related to default or bankruptcy. High debt burdens also raise the possibility that
consumers could rein in their future spending to a considerable degree. These risks become even higher, for a given
debt level, when the economy slows and sustained income growth is uncertain.
What the data say
Consumer debt service payments (including consumer credit and mortgage debt) as a percentage of disposable personal
income reached 14.3 percent in the fourth quarter of 2000, nearly a record high. By itself, this figure is unsettling, given
the more modest outlook for economic growth. The data also may hide troubling concentrations of debt simply because
the figures are aggregated across households with wide income dispersion.
The 1998 Survey of Consumer Finances shows that nearly 20 percent of families earning a gross income of less than
$50,000 per year had more than 40 percent of their income earmarked to cover debt payments. These consumers could
be the first to suffer if the labor market should soften considerably, pushing them to dramatically curtail their consumption
and possibly default on loans.
What to watch for
On the whole, households currently appear to be able to service their debt without major difficulty. The overall loan
delinquency rate has increased only slightly and remains low by historical standards although this figure is admittedly a
lagging indicator of a problem. Further, consumers continue to spend on goods and services, though not at the booming
pace of the late 1990s, and show no clear signs of retrenching.

But what might the future hold? In one upbeat scenario, households will adapt quickly to slower economic growth and
rearrange their finances to prevent financial dislocations. In response, consumer debt burdens should level off and then
recede over time, preventing widespread financial distress and consumer retrenchment. Still, any transition involves
uncertainty with respect to the economic outlook. The performance of economic fundamentals, mainly employment and
income growth, will be of primary importance to low- to middle-income families in particular as well as to the well-being of
the overall economy.
By Ellis Tallman, assistant vice president of macroeconomic research
of the Federal Reserve Bank of Atlanta; Nicholas Haltom, economic analyst,
also contributed to the article

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COVER STORY

In consumers’ imaginations, cars are inextricably linked with visions of things to come, and automakers must stay two steps ahead of
customers’ cravings. Experimentation in the industry is standard operating procedure. During the past 30 years auto manufacturing
has undergone a series of pervasive transformations that have affected every aspect of the industry: how cars are made, what kinds
of cars are made, who makes the cars and where cars are made. One outcome of these shifts is that the Southeastern United States
has become an incubator for revolutionary approaches to auto production, and the region stands to reap significant economic
benefits as a result.
hange in the auto industry is reflected in the restless successions of plant
openings and closings in the Midwest, the industry’s traditional home.
Foreign and domestic manufacturers have settled in rural Southeastern
locations, bringing with them new approaches to labor and production.
Assembly plants, once maintained in dispersed locations across the country, have
pulled away from the coasts and into the center of the nation. Old plant locations
based on obsolete assembly systems have been abandoned, and new ones have
sprung up to replace them — sometimes on the same site, sometimes across the
country. The “auto corridor,” which corresponds roughly with the area 200 miles on either side of I-65 and I-75, has extended steadily
to the South. The whole approach to auto manufacturing has been transfigured by technology in response to changing consumer
demand and new marketing strategies.
Mass production in reverse
Increased competition in the auto industry has driven car manufacturers to maximize both cost and production efficiencies. Being
responsive to consumer tastes is another essential factor in maintaining a competitive edge. Technological innovations and new
production systems have been critical resources for automakers as they negotiate the traffic jams of a tightening economic
environment and consolidation. Many have found that the key to success lies in precision production systems that pinpoint consumer
demand and respond with a high degree of accuracy. Some analysts describe this new approach as “mass production in reverse.”
Excess inventory is a serious problem in the auto industry. Unlike some other dated or unsuccessful consumer goods, outmoded
vehicles that have foundered in the marketplace are not easy to dispose of. They present storage, transport and distribution
headaches of major proportions. Electronic communications and highly sensitive, just-in-time production techniques allow
manufacturers to be much more precise in reading and responding to consumer demand and thus avoid a build-up of obsolete
products.

In the past, car manufacturers produced automobiles “on spec,” so to speak. They trusted the ingenuity of designers, the wizardry of
advertisers, and the retailing expertise of dealers to win consumers. Assembly plants across the nation were geared to produce
identical models of a vehicle with identical parts and manufacturing processes. When a model flopped in the showroom,
manufacturers suffered full-scale financial catastrophes because thousands of cars rolled off the assembly line before anyone could
stop them. Now manufacturers are focusing on smaller runs of specialty models that meet customers’ varied tastes and needs so
that plant locations specialize in producing particular models. The term mass customization has been coined to describe this process,
which allows auto manufacturers to produce only the number and kind of vehicles that consumers will likely buy.
Computer modeling applications in the design and testing of vehicles greatly facilitate manufacturers’ ability to respond to shifts in
consumer tastes. Older systems of auto design required a lead time of about five years to move a car from the conceptual stage to
the manufacturing stage, according to Emil Hassan, senior vice president of Nissan in charge of North American manufacturing,
purchasing, quality and logistics. Models of the car must be created and tested and trial driven. Computer modeling now allows
designers to create “virtual cars” that can move from conception to fabrication in less than half the time. The appeal of a design and
its safety, efficiency and marketability can all be determined before the car is produced. Computers even conduct crash tests to
detect safety flaws in design so that they can be corrected before the car is ever actually produced. This speed in the design process,
combined with the capacity to create smaller runs of vehicles more efficiently and economically, also allows producers more
versatility in the range of models and features that can be offered to consumers.

Under the wire
Critical to the process of mass customization is a system of production that provides for “just-in-time” delivery of auto parts to the
manufacturer. In traditional approaches to auto manufacturing, workers at one plant assembled every facet of the finished vehicle
from chassis to chrome stripping to seat covers. This method served well when parts were produced at distant locations and shipped
to the plant. Smaller parts can be transported with less expense and require less storage space. This production mode emphasizes
uniform quantities of products and a work environment in which assembly-line specialists are trained for very specific, repetitive
tasks.
Just-in-time delivery, on the other hand, is based on a modular paradigm of production. Parts suppliers no longer provide nuts and
bolts that must be assembled at the plant but furnish fully assembled exhaust systems, axle systems, dash consoles or seats. These
modules are delivered on an as-needed basis, even as a car is coming down the assembly line, so that a seat module, for example,
can be ordered two hours prior to the time it will be installed. The success of this strategy depends on having a cluster of parts
producers close to the manufacturer so that the modules can be delivered and installed quickly — often robotically.
A new Nissan plant in Canton, Miss., scheduled to open in 2003, will have suppliers of modules on site so that modules can be
assembled simultaneously with vehicles. According to Hassan, who is a manufacturing logistics expert, this approach has
extraordinary advantages: while it doesn’t eliminate warehousing, it does cut down markedly on inventory and handling. Hassan also
cites hidden value: quality is greatly improved because each module is tested by the parts supplier before it goes into the vehicle at
the assembly plant. “We can fix problems in minutes instead of days,” he notes. Module producers develop expertise in their area of
specialization and are thus able to spot defects and recommend design improvements. These efficiencies in installation, handling
and quality control result in major cost savings, helping to keep the price of vehicles steady or even lower if improved quality and
luxury features are taken into consideration, says Hassan.
The sum of their parts
Outsourcing of module and component production is handled in different ways by different auto producers. The Big Three American
automakers — Ford, General Motors and Daimler Chrysler — originally maintained so-called “captive” component manufacturers that
produced parts solely for the target company. According to a 1996 Chicago Fed working paper, “The Evolving Geography of
Production — Is Manufacturing Activity Moving Out of the Midwest? Evidence from the Auto Industry,” by James M. Rubenstein and
Thomas Klier, “this practice insulated the components divisions from market pressures — potential independent competitors were
stifled, standards of quality and efficiency were low, and cost accountability was minimal.” The Big Three producers now encourage
their components suppliers to seek bids from other companies as well.

About 69 percent of the parts plants surveyed by Rubenstein and Klier were American-owned independent plants, while foreign
companies owned about 17 percent of the parts manufacturers surveyed. The remaining plants were affiliated with U.S. automakers.
Not everyone is enamored with the modular approach to component manufacturing. Mike Miller, a Mercedes-Benz mechanic with
Atlanta Classic Cars, says that the modular approach has made his job rebuilding and replacing parts more complicated. “We’ve
gone from hand-held wrenches to hand-held computers,” he says. Cathy Ellis, the company’s owner and president, adds that her
service staff have to exercise great ingenuity to keep increasingly complex electronic systems ticking.
Replacing modular parts can be expensive for consumers as well. Bryan Burkhardt, a team leader at Saturn’s service parts
warehouse, stressed that even though Saturn builds with modules, repairs focus on the replacement of smaller component parts to
assure economy for customers. Saturn uses a computerized stocking system that assures each dealer will have parts available for
timely repairs. Rather than locating parts suppliers in tiers near dealerships, Saturn maintains a centralized facility at Springhill, Tenn.
Burkhardt says that despite some additional cost in shipping, cost savings on facilities, labor, equipment and everything else easily
compensate.
Strategies for supplying parts are an important consideration in determining how much economic benefit a new plant location will
provide. If a new plant is large enough to draw component manufacturers as well, the new location will enjoy more significant spin-off
effects. But if parts are provided from central locations, the local benefits are less. Since the Southeast has drawn foreign
manufacturers that are more likely to seek parts on site, the region stands to gain considerably from new plants.
Why the Southeast?
On the surface, the Southeast’s leading role in new approaches to auto manufacturing is easily explained: because the automobile
industry is relatively new in the region, innovative methods of production are more readily introduced and implemented here than in
older Midwestern assembly plants geared to more traditional approaches to manufacturing.
According to Hassan, “innovations in the Southeast are a byproduct of the fact that many Southeastern plants are new sites. They
have a lot more capability to apply new technologies than existing sites.”
The auto corridor has been moving southward since the 1970s. Chicago Fed economist Klier and demographer Kenneth Johnson
note in their 2000 article “Effect of Plant Openings on Net Migration in the Auto Corridor, 1980–97” that General Motors began the
trend in the 1970s when it sought to lower procurement costs by locating component plants south of the traditional auto states —
Michigan, Illinois, Indiana, Wisconsin and Ohio. Japanese-owned assembly and supplier plants also chose Southern locations,
adding to the momentum. Klier and Johnson’s research indicates that between 1970 and 1997, Kentucky and Tennessee boosted
their share of light vehicle production from 4 percent to 13 percent, tripling their production, while the traditional automakers moved
from 43 percent to 50 percent. (Both regions gained from a trend toward greater centralization of production in the heartland and
away from the coasts.) Between 1980 and 1997, seven new plants opened in the Southeast — three in Kentucky, two in Tennessee,
one in South Carolina and one in Louisiana. Mercedes-Benz recently opened a plant in Alabama, a Honda plant is scheduled to open
there this year, and Nissan is starting a plant in Mississippi. Ten plants opened in traditional auto-producing states between 1980 and
1997 — four in Ohio, four in Michigan, one in Illinois and one in Indiana. But Midwestern states have also experienced numerous
plant closings.
A favorable labor climate is an important part of the equation that explains new growth in the Southeast’s auto industry. Not only is
labor readily available, but some states provide incentives to auto manufacturers by agreeing to set up programs to train workers and
pay for their instruction. Some manufacturers prefer workers who haven’t been trained in older methods of auto production because
they believe workers who enter the industry with a clean slate can adapt more readily to new modes of manufacturing.
According to Hassan, who began his career in the auto industry as a Ford factory manager before rising through the ranks at Nissan,
workers must be flexible and technically skilled to keep pace with innovations. He states that technological breakthroughs have
helped to create a safer, healthier working environment and more high-tech positions. For example, robots now routinely handle
painting and welding. Rather than breathing paint fumes or handling dangerous equipment, workers operate robots. Hassan says
that a creative approach to human relations makes it possible to retrain workers and keep layoffs to a minimum. “We haven’t had a
layoff in 20 years. And we owe that in part to our good workforce.”

The green flag
While locating plants in rural areas assures a flexible workforce, expanding into such “greenfield” locations can create a labor crunch.
Even though localities vying for auto producers often agree to train the workforce as an incentive, it is still sometimes difficult to find
sufficient skilled labor. In the mid-1990s, sophisticated components requiring skilled labor, such as engines and brakes, were more
likely to be produced centrally in the Midwest while bulky or low value-added items such as seats and tires were produced more
widely in Southeastern locations.
Recent developments in engine production suggest that this trend may be shifting, however. Increasingly, foreign manufacturers are
locating engine producers near their Southern assembly plants to avoid the cost of transporting engines from remote locations. Two
new engine plants are slated for Alabama, and plants in Tennessee and West Virginia will be expanded.
One strategy adopted by Toyota to assure a good pool of workers was to build three plants at intervals of several hundred miles
along I-64. Geographical separation allows each location to have its own labor market, but the interstate highway makes it possible
to transport components quickly from one location to another.
Another significant impetus to locate auto plants in the Southeast is the proximity of good markets, says Atlanta Fed economist John
Robertson, who heads the regional section of the Bank’s research department. Automobile manufacturing, even more than other
types of production, is most economically located near centers of demand. Moving cars across distances is more expensive than
moving most other manufactured goods, so it is most cost-effective to locate industrial production near the marketplace. While this
logic once induced manufacturers to locate in the center of the nation — in Illinois, Michigan and Indiana — during the past 25 years
it has lured producers to the Southeast, where population and markets have been growing at rates faster than those of the nation as
a whole.
Southeastern states have also courted auto manufacturers with a variety of incentives in hopes of establishing new catalysts for
economic growth. The establishment of a large auto manufacturing firm can have a significant impact on both rural and metropolitan
population growth. This effect is important in the Southeast, where workers welcome the option of being able to work at lucrative jobs
while maintaining rural lifestyles.
The modular approach to car manufacturing promises that spin-off companies will come in the wake of new plants if production
volume is high enough. Larger firms tend to have a more significant impact on local economies, increasing population not only in the
county in which the firm is located but also in adjacent counties.
Whether new approaches to car manufacturing herald deeper trends destined to transform the industry or whether they prove as
transitory as the big fin, automakers are exploring innovations at full throttle, and the Southeast has become an important proving
ground for their experiments.
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Economic Research

REGIONAL FOCUS

When an economy moves from boom times to slower growth, as the U.S. economy is doing now, businesses and individuals
can adjust to the change by cutting their own spending. For governments, though, a slowdown is more problematic —
expenses may rise as pressure on unemployment benefits and other economic and social assistance programs begins to
build. So for states, revenue collections may serve as a sort of fiscal early-warning system: falling revenues may portend
higher expenses — and more budget cuts — in the months ahead.
ross domestic product (GDP) grew 5 percent in the United States in 2000, capping an extraordinary four-year period
in which GDP grew by more than 4 percent annually as unemployment and inflation fell to new lows. While the
numbers were recognized as benchmarks for economic performance, they raised expectations accordingly.
Investors, businesses and consumers all spent more freely, assured that the economy had entered a new era of upside
surprises.
Government expectations changed too. At the federal level, budget surpluses made tax cuts a central issue in the 2000
presidential campaign. And for states, “higher than expected” became the standard-issue boilerplate in revenue collection
announcements. Eventually, these expectations began to affect state budget debates as well. Consider the states in the
Southeast.
Forecasting revenues
The Tennessee General Assembly had history on its side when it voted to base its fiscal year 2001 budget on revenue
projections (see table 1) that exceeded the State Funding Board’s forecasts.
Like most economic forecasters, the State Funding Board offers a range in its predictions of likely growth. Also like most
forecasters, its highest likely prediction had fallen short in the past, with the economy generating more tax revenues than
expected in three of the previous five budget periods.

So in June 2000 the Tennessee General
Assembly departed from its usual practice
of basing the state budget on a figure
somewhere within the State Funding
Board’s range of estimates, which for
fiscal year 2001 was from 4 percent to
4.75 percent. Instead, the General
Assembly voted to base the 2001 budget
on revenue that was 5.15 percent higher
than in fiscal year 2000.
As it turned out, both groups missed their estimates. In the first three quarters of fiscal year 2001, tax revenue in Tennessee
was only 1 percent higher than in the first three quarters of fiscal year 2000. As a result, Tennessee’s $18.9 billion fiscal year
2001 budget, which ends on June 30, faced a revenue shortfall of nearly $220 million — with one quarter of the year still
remaining.

Table 1
General Fund Revenue Growth Projections Incorporated in State Budgets
(At Time of Budget Enactment)
Fiscal
Year
2001

2002

Alabama1
General:

1.5

Education:

4.6

General:

4.5

Education:

3.0

Florida

Georgia

Louisiana2

Mississippi

Tennessee3

4.7

7.3

4.9

3.9

5.2

4.5

7.3

1.9

3.7

8.3

1Most tax revenue in Alabama is designated for these two funds.
2For Louisiana’s fiscal year 2001 budget, other sources of revenue were enacted, so the actual budget

exceeds the governor’s proposed budget mentioned in the article.
3Tennessee’s fiscal year 2002 budget assumes new sources of revenue.

But revenue shortfalls are not unique to Tennessee. In February, the National Council of State Legislatures reported that
fiscal year 2001 revenue was coming in below projections in 20 states. And while the fiscal situation in the states does not
begin to approach the level of seriousness of the early 1990s, it stands in dramatic contrast to the last several years, when
greater-than-expected revenue growth was routine throughout the states.
As with so many other economic developments, the six states that make up the Sixth Federal Reserve District are
representative of the entire nation. While overall fiscal condition cannot be assessed without some consideration of
spending levels, revenue collections can provide some preliminary indications about the general direction of state
government budgets.
The Tennessee General Assembly was not legally bound to accept the State Funding Board’s revenue estimates, but it is
required — like most legislatures — to pass a balanced budget. Critics say this is one reason the legislature based its 2001
budget on higher revenue projections. When revenues came up short, it then fell to the governor and the legislature to bring
the budget back in balance through some combination of spending cuts and revenue increases.
In January 2001, Governor Don Sundquist unveiled an initial administrative cost-cutting package intended to generate
savings through everything from reduced employee travel to delayed software and vehicle purchases to lower-thananticipated bond costs.
But the shortfall has also become entangled in the Tennessee General Assembly’s ongoing tax reform debate. As one of a
handful of states that does not tax individual salaries or wages, Tennessee is deprived of what state revenue analysts at the
State University of New York’s Nelson A. Rockefeller Institute of Government have called “the engine driving this

extraordinary growth” in state revenue. The primary engine driving Tennessee’s revenue, the sales tax, has sputtered in
fiscal year 2001, especially compared to the gains in outlays generated by healthcare and education programs. As
EconSouth went to press, the Tennessee General Assembly was still considering tax reform, as well as the 2001 and 2002
budgets.
State income tax no certain fix
Mississippi and Alabama are also in budget-cutting mode despite the presence of a personal income tax (for revenue
sources, see table 2). Like Tennessee, revenues for fiscal year 2001 have come in below expectations in those states.
Through March 31, revenues to Mississippi’s general fund were $148.8 million lower than anticipated in its $8.9 billion
budget. The legislature had assumed revenue growth of 3.9 percent for fiscal year 2001. Through the first three quarters of
the year, however, revenue grew only slightly over 1.5 percent more than in the same period for fiscal year 2000. As of midApril, Governor Ronnie Musgrove had already cut more than $130 million from the fiscal year 2001 budget.
Fiscal year 2002 may very well hold more of the same for Mississippi. In March, the legislature overrode Governor
Musgrove’s veto and adopted a budget based on general fund revenue growth of 3.7 percent. The governor had favored
general fund revenue growth assumptions of between 1 and 2 percent.
In Alabama, revenues in the first seven months of fiscal year 2001 — Alabama’s fiscal year begins Oct. 1 — actually
declined, falling just over 0.1 percent compared with the same period a year ago. However, combined fiscal year 2001
appropriations for the state-tax generated portion of the State General Fund and its Education Trust Fund grew 8.2 percent
from fiscal year 2000.

Table 2
State Tax Collection by Source, 1999 (Percent)1
Alabama

Florida

Georgia

Louisiana

Mississippi

Tennessee

2.7

4.0

0.3

0.4

0.0

Sales

27.3

58.3

34.9

37.6

48.8

58.6

Selective Sales

24.5

17.0

8.2

15.9

17.4

18.4

Individual Income

31.6

45.7

25.5

21.5

2.2

Corporate

3.9

5.3

6.4

4.7

5.0

7.9

Other

9.9

15.3

4.5

15.8

7.2

12.9

Property

1Because of rounding, figures may not total 100 percent.

Source: Stateline
Alabama’s government is operated by five funds, the revenues for which are dictated by statute. Of these five, two major
funds provide appropriations for the vast majority of state government operations. The General Fund provides for the
operations of the state’s Medicaid, health care and criminal justice systems, among other critical functions. The Education
Trust Fund provides for the funding of K-12 education, colleges and universities, public libraries, and other cultural and
educational programs.
Because the state constitution designates nearly all income tax revenue for teacher salaries, and because state law
designates most sales tax revenue for educational purposes, the risk of a shortfall lands disproportionately on the Education
Trust Fund, since revenue cannot be re-allocated between funds. The impact is even greater considering that stategenerated tax revenue accounts for more than half of Education Trust Fund spending, compared to around 15 percent for
the General Fund. (The balance in both funds comes from the federal government and other sources.)
Consequently, programs in the General Fund, the state-generated portion of which grew over 25 percent in fiscal year 2001,
have not been cut. Payments from the Education Trust Fund, however, which grew at a much more modest 4.4 percent in
fiscal year 2001, have been prorated 6.2 percent.
By many accounts, Alabama has the lowest state taxes in the United States, so the school-funding crisis has been the

primary impetus for the latest round in Alabama’s ongoing tax-reform debate, which is itself related to a state constitutional
reform debate. And while the legislature had not adopted a fiscal year 2002 budget as EconSouth was being published,
Governor Don Siegelman is taking no chances with his own proposal: the Alabama-generated portion of the Education Trust
Fund is actually lower than the 2001 appropriation.
Louisiana gets more than it expected
It’s a situation the Louisiana legislature and Governor Mike Foster faced last year as they prepared the fiscal year 2001
budget. The state’s Revenue Estimating Conference assumed general fund revenues of $5.57 billion, a drop of $238 million
— or 4.1 percent — from anticipated fiscal year 2000 revenue (the budget was prepared, of course, before fiscal year 2000
ended).
More than $300 million of the fiscal year
2001 revenue loss projection was
attributable to the expiration of some sales
taxes at the end of fiscal year 2000. The
governor’s budget noted, “If the current
sales tax base is restored, then sales tax
collections are expected to increase by 1.1
percent and general fund revenue . . . by
1.5 percent.” Severance and royalties
taxes accounted for more than $50 million
of the revenue loss, assuming “an
expected decline in oil prices to $20 per barrel.”
Fortunately for Louisiana, though, oil prices have not fallen much. The Revenue Estimating Conference’s latest revision
forecast fiscal year 2001 revenue at $6.17 billion, nearly $500 million higher than the initial estimate for the year and 5.4
percent ($314 million) higher than final fiscal year 2000 collections.
The legislature did extend the expiring sales taxes, but at an estimated 8 percent growth — $166 million — sales tax
revenues are increasing much faster than anticipated. Royalties and severance taxes are now projected to produce over
$100 million more in fiscal year 2001 than last year, with royalties growing 32 percent. Corporate income taxes are also
expected to surge, generating nearly $42 million — 19 percent — more than last year.
What accounts for revenue increases that were previously unanticipated? A sentence in the state’s fiscal year comparative
statement states it plainly: “All the revenue gains are consistent with increased economic activities in the state’s economy,
due partially to increases in prices of oil and natural gas.”
As for fiscal year 2002, the governor’s proposed budget assumes revenue growth of $115.9 million, or 1.9 percent, above
the official revenue estimate for 2001, consistent with the “mediocre growth” expected in the state’s economy.
On target in Florida and Georgia
Considerably less anxiety attended budget sessions in Florida and Georgia, where revenues are on target. While both
economies are considerably more diverse than the rest of the Sixth Federal District’s, it may very well be that Georgia’s
revenue grew fastest because its tax code draws from a much broader range of economic sources.
Florida, of course, is the Goliath of the Sixth Federal Reserve District, with 16 million people and an economy to match.
Without an income tax, however, most of its revenue — about two-thirds — is generated by the state’s 6 percent sales tax.
Through the first six months of fiscal year 2001 (the latest period for which figures were available) total state taxes in Florida
were up 3.8 percent over the same period in fiscal year 2000. Florida’s recently enacted fiscal year 2002 budget assumes
revenue growth of 4.9 percent.
In Georgia, the legislature adopted Governor Roy Barnes’ 7.3 percent revenue growth estimate for its fiscal year 2002
budget. This estimate assumes a slight increase of revenue growth over fiscal year 2001, which through March was 6.9
percent higher than the first three quarters of fiscal year 2000. That figure would have been significantly higher, however,
had revenue collections not declined 8.5 percent in March from year-ago levels. Not surprisingly, perhaps, Governor Barnes

announced in April that he was preparing a list of potential budget cuts should revenue
come up short in fiscal year 2002.
What slower growth means for states
The United States’ record 10-year expansion has generated extraordinary gains at every
level of economic activity. For individuals, employment growth and wages grew at a rapid
clip. For companies, profits soared as productivity increased and unit costs declined. And for
governments — federal, state and local — surpluses accumulated as economic gains for
individuals and firms generated revenues beyond expectations.
As U.S. economic growth slows, individuals, firms and governments will have to tighten their
belts some. Governments could face big adjustments as they may need to pay out more for
economic and social assistance programs while bringing in fewer revenues. State
governments in the Southeast are already grappling with these challenges — and keeping
close track of the economic forecasts as they manage their budgets.
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INTERNATIONAL FOCUS

he U.S. economy has slowed considerably over the last few quarters; after peaking in the fourth quarter of 1999 at 8.3
percent, growth rates slumped to 1.0 percent in the fourth quarter of 2000 and 1.3 percent in the first quarter of this year (see
chart 1).
The U.S. economic slowdown is being felt around the world. As the world’s largest economy, the United States is the leading export
market for many foreign economies. For much of the ’90s the United States was the engine for world growth, helping pull the
international economy through several negative episodes. Strong U.S. gains meant that countries suffering the effects of the Asian
crisis, for example, could boost their economies by selling goods to the United States.
U.S. investors also played an important role in boosting the global economy. Flush with profits from the strong performance of the
stock market, investors expanded their portfolios to include areas of the world with even higher growth potential, emerging markets in
particular. But as the U.S. economy weakened, the demand for imports moderated, and investors’ ability to send funds overseas
declined.
As a consequence, countries that depend heavily on selling goods to the United States and on U.S. capital have seen their economic
growth slump. In turn, weaker growth in foreign economies has resulted in weaker demand for U.S. goods abroad. The decline in
both U.S. imports and exports has been pronounced (see chart 2).
Another factor weighing on the U.S. export outlook is the strength of the dollar. The dollar’s value is at its highest level versus foreign
currencies since the mid-1980s (see chart 3). The strong dollar makes U.S. exports more expensive overseas and makes imports to
the United States cheaper. The result is a widening trade deficit.
The outlook for the global economy has softened in 2001, and slowing growth in the United States is a contributing factor. But a
subdued U.S. economy is not the only reason global growth has slowed. Many countries face domestic problems, such as political
situations in some Latin American countries, that continue to constrain growth. In addition, higher energy costs worldwide have

dented both personal spending and business
investment in most economies as consumers and
firms are forced to pay more for power and fuel.

CHART 1
U.S. Real GDP Growth

Source: Bureau of Economic Analysis
Checking the vital signs
Until recently, industrial weakness was concentrated in the United States, but frailty is now emerging overseas as well. Recent
indicators of industrial activity and business confidence have been disappointing for a wide range of countries outside the United
States. Surveys suggest that unwanted inventories are now building in countries that use the euro and in Japan. As domestic
demand weakens, production may fall in both these economies through the third quarter of 2001. In addition, the weakness in U.S.
capital spending reflected in first quarter gross domestic product (GDP) data and the still-declining trend in activity in emerging Asian
economies suggest that the global slowdown in high-technology spending is not over.

CHART 2
U.S. Trade: Export and Import Growth

Source: Bureau of Census

CHART 3
Federal Reserve Bank of Atlanta Classic Dollar Index

Source: Federal Reserve Bank of Atlanta
Asia. Japan has so far been unable to emerge from a decade of stagnation; implementing economic reform there remains difficult.
Recent economic data from Japan point to continued weakness. Consumer confidence slumped in the first quarter, factory and
machinery orders continue on a downtrend, and the leading economic indicators point to further near-term contraction. Real GDP
growth contracted in the first quarter, and forecasts point to contractions in the second and third quarters as consumer spending
retrenches and industry continues to struggle. On a positive note, Japan’s new Prime Minister, Junichiro Koizumi, is expected to
accelerate the economic reform process. Japan’s central bank has altered its monetary policy that has driven its nominal overnight
interest rate to near zero. The uncertain outlook has resulted in weak demand for loans, however, and limited the potentially positive
effect of lower interest rates in Japan.
Elsewhere in Asia, domestic financial systems in the emerging economies remain weak in the aftermath of the financial crisis of
1997–98. In addition, recent data show slowing industrial production and weak export demand for these economies — not surprising
given the region’s dependence on high-tech exports to the United States. Unemployment remains well above rates prevailing before
the financial crises, and consumption is weak as well. China was the only Asian economy to post solid first-quarter growth, fueled by
exports and government spending.
Europe. Industrial production in Europe continues to post healthy gains, with year-over-year growth at 3.8 percent in March.
However, recent surveys found that business confidence continued to slump in major economies, indicating that Europe’s economy
may slow soon. The European Central Bank lowered its benchmark interest rate 25 basis points to 4.25 percent on May 10 despite
an upward trend in inflation data. In March, the headline consumer price index rose 2.6 percent year-over-year, and the core rate hit
a four-year high with a year-over-year growth rate of 1.8 percent. Inflationary pressures are expected to ease later in the year as the
effects of high energy and food prices wane.
North America. Canada’s economy is showing signs of deceleration. Industrial production has slipped, contracting nearly 1 percent
from late 2000 levels. Decelerating inflation rates and weak growth led Canada’s central bank to lower its benchmark interest rate
125 basis points this year to date.
The Mexican economy contracted on a seasonally adjusted basis in the fourth quarter of 2000 and the first quarter of this year.
Industrial activity, in particular, has softened. Reflecting this weakness, the number of workers in manufacturing declined for the
fourth consecutive month in February on a year-ago basis. On the consumption side, retail sales are growing at their lowest rate in
nearly a year.
Latin America. For Latin America as a whole, regional growth is now expected to be roughly 2 percent, compared to the 3.7 percent
forecast in December 2000. The downward adjustment to the outlook reflects the effects of the global economic slowdown as well as
domestic situations such as the ongoing financial struggles in Argentina and expected power shortages in Brazil.
Downward revisions were made for all major economies except Ecuador, but that country’s forecast is also uncertain given the
current struggle to implement tax reforms there. Of the larger economies, the outlooks for Mexico, Argentina, Chile and Peru all fell
by at least 1 percentage point. Brazil’s forecast has been downgraded in response to a series of negative developments, including
problems in Argentina and Brazil’s power shortage.
In Argentina, recent events reflect ongoing market uncertainty over the fate of the country’s economy. Argentina is struggling to
implement policies that move to end nearly three years of recession while protecting against inflation. The appointment of Domingo

Cavallo as finance minister has brought instant credibility to Argentine economic policy. Cavallo was the father of the Convertibility
Plan that ended years of hyperinflation in the early 1990s and returned the country to economic stability.
Prognosis: Delayed recovery
At the beginning of 2001, forecasters predicted a turnaround in real economic growth in most regions of the world by midyear. But
greater-than-expected industrial contractions early this year and ongoing downgrades in consumer and business confidence have
pushed their timetable for recovery to later in the year. This turnaround should be fueled by lower worldwide interest rates, reduced
energy prices and a rundown in excess inventories.
The current forecast for 2001 global economic growth is the lowest in a decade. The April Consensus Forecast for world real GDP
growth in 2001 is 2.3 percent compared to 2000’s estimated rate of 3.9 percent (see the table). Most analysts expect slower annual
growth rates in all major economies and areas. Forecasters expect the most pronounced year-over-year slowdown in North America,
followed by the developing countries of Asia. Japan’s economy is predicted to remain stagnant while Latin American growth should
also decelerate until later this year. Europe’s economy is forecast to slow as well.

Global Real GDP Outlook
Percent Change From Previous Year
2000

2001

2002

Japan

1.7

0.9

1.6

Emerging Asia*

7.6

4.0

5.1

China

8.0

7.7

8.0

Euro Area

3.3

2.6

2.8

United Kingdom

3.0

2.4

2.7

Canada

4.7

2.4

3.3

Mexico

6.9

3.1

4.5

South America

3.0

3.7

World

3.9

2.3

3.1

*Not including China
Sources: April 2001 Consensus Forecasts; Federal Reserve Bank of Atlanta
Protectionism: Not the cure
Weak growth abroad and the strong dollar mean that the United States can expect little help from exports in its bid to return to
stronger economic growth. In the face of these pressures, calls for efforts to shield the U.S. economy through protectionist measures
may emerge. Both economic theory and experience show that protectionism is not the answer, however. Instead, maintaining close
economic ties to the rest of the world is in the best interests of the United States in both the long and short term.
The United States remains a world leader in
supporting free trade and open capital markets.
The U.S. economy has been and will continue to
be a major beneficiary of the open global system.
More international goods and capital than ever
before flow into the United States, giving
consumers more choices at lower prices than
possible under a closed economic system. The
flow of capital has helped lower borrowing costs
for individuals and businesses, and the
competition fostered by an open trading system
has helped make the U.S. economy among the most productive in the world.
Although the recent U.S. economic sneeze has helped the world catch cold, both the United States and other economies should be
moving toward faster growth by late 2001. Maintaining and expanding ties with foreign economies through international trade and
investment will help the global economy return to better health.

This article was written by Michael Chriszt, a senior international analyst and the director of the Atlanta Fed’s Latin America Research
Group.
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Economic Research

Research Notes & News highlights recently published research as well as other news from the Federal Reserve
Bank of Atlanta. For complete text of summarized articles and publications, see the links below.

Making sense of the yield curve
The yield curve shows how the yield on a government bond depends on the bond’s maturity. Monetary policymakers and
observers pay special attention to the shape of the yield curve as an indicator of the economic impact of current and future
monetary policy. But without the proper analytical tools, drawing inferences from the yield curve can be difficult.
In a recent article, Mark Fisher develops the basic ideas about the yield curve using an analogy. Next, he discusses bond
pricing in a world of perfect certainty, where no-arbitrage conditions are first worked out algebraically. The element of
uncertainty is then added via a single flip of a coin, and the no-arbitrage conditions for bond prices are worked out for this
scenario as well. These no-arbitrage conditions are shown to imply the existence of a risk premium that depends on the
price of risk and the amount of risk. Finally, Fisher demonstrates how to translate the no-arbitrage condition for bond prices
into a no-arbitrage condition for yields.
The author concludes that convexity — the nonlinear relation between bond yields and bond prices — leads to surprising
and even counterintuitive results in yield-curve analysis. A firm grasp of the no-arbitrage conditions is therefore necessary
to make sense of the shape of the yield curve.
Economic Review
First Quarter 2001

Is why we use money important?
Money and its underlying function as a medium of exchange play a central role in determining the course of
macroeconomic activity. But many of the models used to evaluate fundamental questions relating money and monetary
policy to economic activity simply assume currency is valued. Such models overlook the important properties of money
that influence the way it is used and how its supply affects the economy.
Search and matching models of money identify the characteristic assumptions for motivating the use of money in carrying
out transactions by explicitly capturing the trade frictions that cause money, rather than some form of barter, to be used.
Victor Li’s recent article summarizes some of the recent literature on search models of money and their successful
application to issues such as currency substitution and the impact of money’s quantity and growth rate on inflation and
economic activity.

This promising class of models, the author concludes, does indeed shed light on these topics and has an enormous
potential to address an even broader range of issues. Li suggests that future research use quantitative analysis to explore
not only how well these models explain the empirical facts regarding money and economic activity but also how well they
might provide guidelines for the operation of monetary policy.
Economic Review
First Quarter 2001

Analyzing the risks and rewards of selling
volatility

ATLANTA FED DOLLAR INDEX

The popular practice of selling market volatility through selling
straddles, or a portfolio of options, exposes traders and investors
to substantial risk, especially in equity markets. The returns can
be very lucrative, but the probability of large losses far exceeds
the probability of large gains. In fact, selling straddles has
resulted in substantial losses at banks and hedge funds such as
the former Barings PLC and Long Term Capital Management.
A recent article by Saikat Nandi and Daniel Waggoner outlines
the risks and rewards associated with selling volatility by first
examining the statistical properties of the returns generated by
selling straddles on the Standard and Poor’s 500 index. The
authors demonstrate that the usual practice of selling volatility by
comparing the observed implied volatility with the volatility
expected to prevail could be flawed. This flaw could arise if the
underlying asset has a positive risk premium and the returns of
the underlying asset are negatively correlated with changes in
volatility. Thus, basing the decision to sell a straddle on a
comparison of seemingly irrational high implied volatilities with
much lower expected volatility could itself be an irrational choice.
While rebalancing the straddle to maintain minimal exposure to
market direction is theoretically feasible, the authors find that this
process exposes the trader to model risk and does not eliminate
the skewness of returns from selling volatility.

The dollar continued a slight decline in January
2001. In February, however, the dollar began to
increase again and in March registered an
overall increase versus the 15 major currencies
tracked by the Atlanta Fed. The slight decline in
January was the result of weaknesses against
the European subindex. In February and March
the dollar reversed this decline.
Note: For more detailed, monthly updates and
historical data on the dollar index, see the Atlanta
Fed’s World Wide Web site at
www.frbatlanta.org/econ_rd/dol_index/di_index.cfm.

Economic Review
First Quarter 2001

Social security reforms in Latin America face challenges
Over the last decade Latin American countries have served as the world’s laboratory for pension systems based upon
individual retirement savings accounts. In the 1990s several countries in the region followed Chile’s lead in setting up
individual accounts, and since that time countries throughout the world have looked to the region for lessons.
In a recent article, Stephen J. Kay and Barbara E. Kritzer examine the broad range of pension reforms in Latin America
and highlight some of the most noteworthy and unique features of each country’s reforms. Some countries have adopted
defined-contribution individual accounts as a replacement for state-run pension systems; other countries have embraced
mixed systems or have made individual accounts optional and supplementary. The authors also examine some of the most
serious policy challenges faced by governments implementing the new systems. Policymakers are seeking to reduce
administrative costs, limit evasion, incorporate new categories of workers into the system and improve competition in the
pension fund industry.
The study concludes that pension reforms are continuously subject to revision and that reform itself can be an incremental

process. Latin America’s social security systems are likely to continue to attract international attention from policymakers
as governments worldwide confront the challenges of pension reform.
Economic Review
First Quarter 2001
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Economic Research
THE STATE OF THE STATES
Recent events and trends from the six states of the Sixth Federal Reserve District

Alabama
• The surge in the energy industry is benefiting the state’s
shipbuilding industry. Austal U.S.A., Mobile’s newest shipbuilder,
won a contract for aluminum vessels that will deliver crew and
supplies to oil and gas rigs in the Gulf of Mexico.
• Layoffs at high-tech firms continue. SCI Systems, an electronics
manufacturer, will shut down one of its largest plants in Arab, Ala.,
eliminating 330 jobs because of lagging computer sales. The Sony
plant in Dothan, which makes magnetic products used to back up
computer data, announced it will lay off at least 40 workers.
• New investment in the Southeast’s vehicle sector remains on track.
Honda’s new $440 million plant in Lincoln is 70 percent complete.
The plant will be able to produce 120,000 vehicles and engines a
year and plans to hire 1,500 workers.

Florida
• Miami contacts expect another solid tourist season. While there is
some concern that high fuel prices may slow summer tourism,
current booking numbers are encouraging. According to analysts,
cruise lines operating out of Miami may be experiencing some
excess capacity problems.
• Motorola, Sunbeam, Pratt & Whitney, and Daleen Technologies
have reported layoffs in the Palm Beach area during 2001. In
addition, SBC Telecommunications is shutting down its Tampa
operations because of the slowing economy, putting 400 people out
of work. Tampa’s Jabil Circuit, an electronics manufacturer, plans to
cut approximately 300 jobs. In Orlando, Disney World announced
plans to cut over 1,200 jobs to reduce costs as the theme park
expects slower attendance growth this year.
• Vehicle shipments continue to boost traffic and revenues at the Port
of Jacksonville, which closely trails the Port of New York as the
nation’s leading car import facility.

Georgia
• Solectron, a printed circuit board producer for telecommunications,
medical and retail industries, is closing its Suwanee plant, affecting
over 1,000 workers.
• About 360 people lost jobs at the end of March when Sony closed
its cassette production factory in Carrollton because of declining
sales. According to a company spokesman, cassette production is
no longer competitive versus CDs and DVDs, which are produced at
Sony plants in Indiana, Oregon and New Jersey.
• Pirelli Tires is moving its tire production operations and U.S.
headquarters to a location near Rome, Ga. The move from
Connecticut and California represents a $141 million investment,
creating over 300 jobs in northwest Georgia.

• Despite declining revenues in recent months, Georgia projects a
solid budget surplus for this fiscal year. The Georgia House
approved a $15.5 billion budget for the next fiscal year, which
begins July 1.

Louisiana
• Harrah’s New Orleans casino avoided bankruptcy recently as the
Louisiana legislature approved a tax cut for the troubled facility.
Approval was also granted for the casino to operate a hotel and
open a restaurant.
• The number of active rigs in Louisiana remained at the highest level
in over a decade. The average rig count in April was 226 compared
with 176 in April 2000. The U.S. rig count was 1,206 in April
compared with 805 a year earlier. Industry experts expect oil and
gas field service firms to expand through at least year-end
• Chemical and steel producers continue to experience difficulty.
Occidental Chemical, an ammonia producer in Convent, halted
production because of high-energy costs and sluggish demand.
Bayou Steel temporarily laid off 100 workers at its LaPlace mill,
blaming a “glut of cheap imports” in the domestic steel market.

Mississippi
• The state’s shipbuilding industry continues to expand. Halter Marine
won a contract worth $400 million to build four patrol ships for the
Egyptian navy, a project that will create 200 jobs at its Mississippi
shipyards. Construction was scheduled to begin in the second
quarter of 2001. Halter employs about 2,500 people in Pascagoula
and Moss Point.
• The gaming industry continues to be an important engine for
Mississippi’s economy. The latest casino gaming revenue numbers
remain at historically high levels even though gross gaming
revenues increased by only 0.7 percent in the first quarter of 2001
versus the first quarter of 2000.
• Low prices continue to plague the local lumber industry. GeorgiaPacific recently closed a plywood plant in Louisville, Miss., affecting
350 workers. The plant was built in 1966 and had the capacity to
produce nearly 300 million square feet of plywood a year.

Tennessee
• Auto suppliers continue to locate in the state despite a slowdown in
vehicle sales. Toyo Seat U.S.A. recently broke ground for a new
plant in Pelham, located close to the Saturn manufacturing plant in
Spring Hill and the Nissan plant in Smyrna. The new facility will
employ about 200 people.
• Slowing demand for outboard motor boats has forced Outboard
Marine to close its Murfreesboro plant, affecting approximately 270
workers. The plant opened in 1988 and recently employed about
430 people before scaling back operations. The company has filed
for Chapter 11 bankruptcy protection.
• Sluggish markets for apparel and textiles forced DuPont Co. to
scale back production and lay off over 200 workers at its
Chattanooga facility. The company makes polyester and nylon at
this plant, which currently employs nearly 2,000 workers.
Compiled by the regional section of the Atlanta Fed’s research department
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Economic Research

Southeastern Economic Indicators

Alabama

Florida

Georgia Louisiana Mississippi Tennessee

6th
District

Total Payroll
Employment
(thousands)a

2001Q1

1,935.8

7,226.5

4,042.2

1,954.6

1,145.6

% change
from

2000Q4

–0.1

0.8

0.6

–0.7

0.0

0.5

% change
from

2000Q1

0.3

3.6

2.0

1.8

–1.1

0.9

2.1

Manufacturing
Payroll
Employment
(thousands)a

2001Q1

353.0

484.8

576.0

182.4

223.4

496.9

2,316.5

% change
from

2000Q4

–1.2

–0.3

–1.3

0.0

–2.5

–1.6

–1.1

% change
from

2000Q1

–2.9

–0.4

–2.7

–1.5

–6.3

–2.6

–2.5

2001Q1
Civilian
Unemployment
Ratea

5.1

3.8

3.6

5.7

5.0

4.2

2,750.7 19,055.2 132,240.0

Rate as of

2000Q4

4.6

3.6

3.4

5.8

5.4

4.2

4.1

Rate as of

2000Q1

4.7

3.6

3.9

5.3

5.8

3.7

4.1

Single-Family
Building
Permits
(units)b

2001Q1

16,193

113,442

69,895

12,957

8,105

26,096

% change
from

2000Q4

23.5

5.7

2.8

4.6

16.2

18.1

7.3

% change
from

2000Q1

8.1

3.4

–2.2

–9.7

–7.2

–5.8

–0.1

Multifamily
Building
Permits
(units)b

2001Q1

6,729

54,784

22,035

2,386

3,751

7,335

97,021

% change
from

2000Q4

22.7

–2.2

4.7

22.5

–20.9

–5.7

0.0

% change
from

2000Q1

144.3

25.4

–10.3

34.4

74.9

–20.2

15.3

18,129.0

246,688 1,257,393

459,468

Personal
Income
($ billions)b

2000Q4

105.7

460.8

233.2

105.6

60.2

152.4

1,117.8

% change
from

2000Q3

0.9

1.7

1.2

0.3

–0.3

1.2

% change
from

1999Q4

3.5

7.6

6.9

3.9

2.7

6.3

6.2

Atlanta Birmingham Jacksonville

Miami

Nashville

New
Orlando
Orleans

Total Payroll
Employment
(thousands)a

2001Q1

2,229.2

490.5

576.7

1,032.0

691.2

629.9

924.1

% change
from

2000Q4

0.6

0.4

0.9

0.7

0.4

–0.1

0.8

% change
from

2000Q1

2.0

1.2

4.4

2.9

1.7

0.4

2.8

2001Q1
Civilian
Unemployment
Ratea

3.0

3.3

5.7

3.2

5.0

2.7

Rate as of

2000Q4

2.7

3.0

3.2

5.3

3.2

5.2

2.6

Rate as of

2000Q1

3.1

3.0

5.4

2.7

5.0

2.5

8,523.2

Tampa
1,235.7

a Seasonally adjusted
b Seasonally adjusted annual rate

Note: In table and charts, “6th District” refers to all Sixth Federal Reserve District states in their entirety.
SOURCES: Payroll employment and civilian unemployment rate: U.S. Department of Labor, Bureau of Labor Statistics. Initial
unemployment claims: U.S. Department of Labor, Employment and Training Administration. Single- and multifamily building
permits: U.S. Bureau of the Census, Construction Statistics Division. Personal income: Bureau of Economic Analysis. Quarterly
estimates of all construction data reflect annual benchmark revisions. All the data were obtained and seasonally adjusted by
Regional Financial Associates. Small differences from previously published data reflect revisions of seasonal factors.
For more extensive information on the data series shown here, see the Southeastern Economic Indicators.

Total Payroll Employment

Manufacturing Payroll Employment

Civilian Unemployment Rate

Single-Family Building Permits

Multifamily Building Permits

Personal Income

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