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Economic Research
Federal Reserve Bank of Atlanta
EconSouth

STAFF
Pierce Nelson
Editorial Director
Lynn Foley
Managing Editor

In This Issue

Volume 1, Number 3, Third Quarter 1999

CURRENT ISSUE
Some Benefits of Credit Scoring
Begin to Surface

Jean Tate
Lee Underwood
Staff Writers
Carole Starkey
Kristin Shelton
Designers
COVER STORY
EDITORIAL COMMITTEE
Bobbie H. McCrackin
Vice President and
Public Affairs Officer
B. Frank King
Vice President and
Associate Director
of Research
Thomas J. Cunningham
Vice President
Research Department
Regional Section
Free subscriptions
and additional copies are
available upon request to
Public Affairs Department
Federal Reserve Bank of Atlanta
104 Marietta St., N.W.
Atlanta, GA 30303-2713

Downtown Revitalization:
Cities Search for Solutions
During the past
three decades,
numerous
Southeastern cities
have implemented
downtown
revitalization
projects. While
these projects have
experienced mixed
success, cities
throughout the
region continue to
use both public and
private funds as
they pursue
successful solutions
to rejuvenate their
downtown districts.

or by calling 404/498-8020
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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.
Reprinting or abstracting material from this
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EconSouth is credited and a copy of the
publication containing the reprinted material
is sent to the Public Affairs Department.
ISSN 0899-6571

Photography for the cover,
"Downtown Revitalization" and
the first page of "The Score
on Credit Scoring" by
Ron Sherman

FEATURES
The Score on Credit Scoring
In Small Business Lending
As credit scoring
has been applied to
small business
lending during the
1990s, some groups
claim that the
scoring process
discriminates
against certain
segments of the
population seeking
those loans. A
recent study by
three Atlanta Fed
researchers,
however, found that,
among other things,
credit scoring might
actually help small
business owners in
low- and moderateincome areas get
loans.

Is the International
Economic Crisis Over?
Two years ago,
Asian economies
began to feel the
impact of a fullblown financial crisis
sparked by a
currency and
financial crisis in
Thailand. That crisis
soon spread to
other emerging
economies in
Russia and Latin
America. In this
issue of EconSouth,
the Atlanta Fed's
Latin America
Research Group
looks at how these
economies have
managed during the
crisis and whether
the international
economic crisis is in
fact over.

DEPARTMENTS
Research Notes
Dollar Index
The State of the States

Southeastern Economic Indicators
Southeastern Manufacturing
Survey

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Economic Research

CURRENT ISSUE

Some Benefits of Credit
Scoring Begin to Surface
s banks have adopted automated customer services and faced more intense competition over the past
decade, some banks, for better or worse, have lost many personal touches. Today, banks steer customers
to ATMs or a Web site, employers directly deposit pay, and individuals and businesses apply for loans
electronically.
Customers are becoming accustomed to these developments, and while some customers like them,
others are bothered. Credit scoring is a development of recent decades that has separated bank customers and banks'
credit decision makers. Credit scoring was initially applied to credit cards and then mortgage lending, but more and more
banks have begun to credit score loan applications by small businesses during the 1990s. The scoring process uses
borrower information and a computer model to evaluate a borrower's prospects of repaying a loan.
Small business credit scoring and its advantages and disadvantages for various groups are
topics that have been debated in recent years by the banking industry, consumer and small
business advocacy groups, and those in the political arena. Three researchers at the
Federal Reserve Bank of Atlanta recently shed some light on the impact of credit scoring
when they evaluated small business lending in low- and moderate-income (LMI) areas in
Southeastern metropolitan areas. A summary of their research is presented in this issue of
EconSouth.
Dispelling credit scoring myths
Contrary to beliefs that credit scoring might bias lending decisions against small businesses
in LMI areas, the Atlanta Fed's research findings show that it might help small business
owners seeking loans. The research indicates that small business owners in the Southeast
who apply for loans at big banks may have a better chance of getting a loan from a creditscoring institution than from a nonscoring institution. If each bank has a branch in the
neighborhood, the credit scoring impact is small. If neither bank has a neighborhood branch, the scoring bank is much
more likely to make a larger loan.
Are the findings a surprise?
While this research represents the first systematic approach to examining the bias claims against credit scoring in small
business lending, I must admit that I am not surprised by the researchers' findings. In fact, the findings help to confirm what
I have believed for some time: credit scoring can provide a more even playing field for small business owners in LMI areas
since the practice eliminates much of the subjectivity and guesswork long associated with lending to small businesses.
During this decade, many banks have realized that credit scoring can be a less costly and more consistent way to evaluate
small business loans. And if research like this recent work from the Atlanta Fed can be borne out in a national context, it
might help to convince banks that don't credit score of the potential lending opportunities they are missing in LMI areas. It
may also help show consumer and small business advocates that credit scoring is not the evil that some of them have
assumed.

But there are other questions raised by credit scoring's application to small business lending. What effect does credit
scoring have on borrowers with less than perfect credit? How accurate are the models? Will their use allow active
secondary markets for these loans to develop? Will the cost savings credit scoring brings to the lending process be passed
on to borrowers? Clearly, more research is needed to fully explore the use of small business credit scoring in the United
States. However, based on these initial results, it appears that the negative effects of credit scoring that many have
claimed cannot be substantiated.
By B. Frank King, vice president and associate director of research of the Federal Reserve Bank of Atlanta

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Economic Research

DOWNTOWN REVITALIZATION:
Cities Search for Solutions

popular song from the '60s claims that "You can forget all your troubles, forget all your cares and go downtown."
But worries and cares seem to have taken up residence in many cities' downtown areas, and Southeastern cities
are no exception.
The 1940s and '50s were seemingly the heydays for downtowns, with living, working, entertainment and shopping existing in
a general state of equilibrium. But for a variety of reasons beginning in the 1960s, the allure of downtowns began to wane,
and many residents and businesses began to leave cities for the perceived safer, newer and cleaner world of suburbia with
its large homes, sprawling yards and shopping malls. Downtown districts became synonymous with boarded-up storefronts,
high crime rates, homelessness and dwindling numbers of full-time residents.
To rejuvenate their downtown districts, many communities throughout the nation beginning in the 1960s began to embark on
downtown revitalization projects. Some cities' projects included more planning and foresight and were more comprehensive
than others, but in each case the general intent was the same — to create an environment where residents, businesses
and, in some cases, tourists could support each other to achieve an attractive, livable and workable environment.
Revitalization efforts
In the Southeast, a number of cities have undertaken revitalization efforts. Some have turned to entertainment complexes
and attractions. Others, more recently, have worked to include housing in their downtown districts, believing that it is difficult
for a city to have a successful downtown area without full-time residents.
But revitalization projects are complex, with no easy answers or guaranteed results for cities. In the Southeast, revitalization
efforts have achieved mixed success.

Life's a beach in Miami
From the 1940s through the 1960s, Miami Beach was one of the top tourist destinations in the United States. But the area
began to decline in the '70s, and by the '80s Miami Beach, particularly the South Beach art deco district that dates to the
1920s, was near rock bottom, featuring one of Florida's oldest populations with among the lowest per capita income rates in
the state.

THROUGH RECENT REVITALIZATION
EFFORTS, INCLUDING THE TENNESSEE
AQUARIUM SHOWN BELOW,
CHATTANOOGA HAS BEEN
TRANSFORMED FROM WHAT WAS
CONSIDERED TO BE ONE OF THE
DIRTIEST CITIES IN THE UNITED STATES
TO A REGIONAL TOURIST DESTINATION.

Ironically, it was the near destruction of the art deco
buildings the area is famous for that launched the first
revitalization efforts in the mid-1970s. The art deco district
was named to the National Register of Historic Places in
1979, but it wasn't until local laws were passed several
years later that the art deco buildings were fully protected.
These developments were important because they helped
the area retain its history and character that provided a
solid base for revitalization.
In an article in the Miami Herald in 1987, the mayor of
Miami Beach at that time described the South Beach area
revitalization efforts that were just beginning to gain some
momentum. "This isn't the land of milk and honey, but it is
a land of opportunity. We are looking for new people who
are willing to leave the suburban comfort zone and take a
chance on the city. We have some great deals here, deals
that wouldn't exist if things were perfect."
Eventually, people and businesses did move into the area,
but not without the combined work of the city, the private
nonprofit Miami Beach Development Corp., a host of
developers and citizen groups. Through these efforts,
South Beach has been transformed into one of the most
trendy and popular destinations in the Southeast. But the
revitalization of South Beach was not quick or easy, and
there are some areas of South Beach that are still in need
of improvement. However, with more time and funding,
the area appears well on its way to regaining much of its
1920s splendor.
A river runs through it
Chattanooga, Tenn., began the process of revitalizing
parts of its downtown and environs in the 1980s. The
turnaround for Chattanooga took a long time, but the city
had a long way to go. In fact, Chattanooga in the late
1960s was known as one of the dirtiest cities in the United
States. The Tennessee River running through the city was
anything but scenic and was bordered by buildings
abandoned by industries that had left town.

Through a process called Vision 2000, a 20-week series of community meetings that sought citizens' input on the city's
future, Chattanooga began its comprehensive revitalization plan. The ambitious strategic effort involved more than 800
Chattanooga citizens. Over time the group considered hundreds of potential revitalization programs, but they eventually
narrowed their emphasis to projects centered on the Tennessee River.
The city contributed the seed money, including road improvements and an overhaul of sewers. The private sector, which has
provided much of the funding for the city's revitalization, helped to transform riverfront wastelands into parklands. Other

investments in the city by both public and private interests included the $45 million Tennessee Aquarium, the refurbishing of
the Walnut Street Bridge and the development of shopping areas housed in old factory space, such as a downtown outlet
mall featuring designer shops.
Through these cooperative efforts, Chattanooga can now offer its residents and businesses a more livable and workable
downtown district. The city also provides tourists a venue that is appealing as a regional destination and not simply
interstate exits they pass on the way to somewhere else. As proof of Chattanooga's appeal to travelers, in Hamilton County,
where the city is located, tourists spent $466 million in 1997, compared to $335 million in 1990 — an increase of 36 percent
— according to the Travel Industry Association.
A tale of two projects
Atlanta has seen both the ups and the downs in
two of its revitalization efforts during the past
decade. The city's downtown received a major
boost from the revitalization in preparation for the
1996 Summer Olympic Games, but the city has
also been disappointed by another reclamation
effort, Underground Atlanta.

Revitalization projects are complex, with
no easy answers or guaranteed results
for cities.

One of the oldest sections of downtown, the area that came to be called Underground Atlanta had been home to a variety of
businesses after Atlanta was rebuilt following the Civil War. During the 1920s, the construction of a system of viaducts in that
area raised street traffic to the second-floor level and left the "underground" first-floor level for service and storage. In the
late 1960s, Underground Atlanta was designated a historical area by the city and was converted into an entertainment
center. After an early success, Underground closed in 1980, facing a variety of financial and security problems.
A major effort aimed at revitalizing the Underground district gained momentum in the mid-1980s. Underground's champions
stated that their goal was to "make Underground Atlanta the town center for the metropolitan area." These supporters also
envisioned that the area would be a linchpin for downtown Atlanta, linking the government section of town with the CNN
Center, the Georgia World Congress Center and the business and hotel district — ambitious goals for what was then one of
the most neglected areas in the downtown district.
Using approximately $142 million of combined public and private financing, including $85 million in city revenue bonds,
Underground opened in 1989 as an entertainment center. It featured restaurants, bars, fast-food establishments and small
to medium-sized retail stores, similar to centers in other southeastern cities like New Orleans and Augusta, Ga. The
development was heralded as a success story in public-private redevelopment — but somewhere along the line
Underground veered off course.
A variety of reasons for Underground's less than successful performance have been cited,
including poor design, low attendance and spending from Atlanta's population, a perceived lack of
security at the complex, interference from city government and claims that Underground's
management did not operate like a real business. Whatever the reasons, Underground has not
lived up to the initial projections for success. Although Underground has brought some new
development into an area of the city that was in great need of help, it has also struggled to repay
the debt amassed for its redevelopment.
Currently, Underground Atlanta is in the process of its third makeover within 30 years. Whether
this latest installment can be financially successful is unclear. But another Atlanta effort to renew
its downtown has been more successful — the revitalization that began in preparation for the
1996 Summer Olympics.

"ULTIMATELY,
THE SUCCESS OR
FAILURE OF AN
ENTIRE
REVITALIZATION
EFFORT CAN
DEPEND ON THE
STRUCTURE OF
ITS FUNDING
PACKAGE."

An Olympic effort pays off
While the revitalization of its downtown was not the motivating force that made Atlanta seek to host the Olympics,
downtown's renewal was a by-product of the city's work to put its best foot forward for the 1996 Summer Games.
When the International Olympic Committee announced in 1990 that Atlanta would host the 1996 Games, residents in the

city, while ecstatic, were probably as surprised as anyone in the world. That's because much of downtown Atlanta's
infrastructure had been somewhat neglected for decades. Bridges and viaducts were crumbling, sidewalks were in disrepair,
the city's water and sewer capacity was inadequate, parks were unkempt, and, along with its office towers and hotels, the
downtown area contained a mishmash of empty, dilapidated buildings. With the Olympics on its horizon, the city had to
address these problems.
A variety of different city, state and private groups, which came to be known by their acronyms, like ACOG, CODA, COPA
and MAOGA, were involved in planning, developing and carrying out the preparations to get Atlanta ready for the Olympics.
While the Games generally were privately funded through entities like corporations and television networks, significant city,
state and federal public funds were required to prepare the city and then to put on the Olympics.
As a result of these combined efforts, the 1996 Summer Games left a legacy on which the city can continue to build into the
next century. Among the downtown improvements for the Games was a new park, called Centennial Olympic Park, around
which new development is currently taking place. The park replaced a section of old buildings and warehouses, many of
which were abandoned. The park provides an attractive public space for residents and tourists and a transition area for
conventioneers between the hotels near Peachtree Street and the Georgia World Congress Center.
Other improvements throughout the city included a new baseball stadium, physical improvements in several inner city
neighborhoods, new downtown dorms for two local universities, renovation of the city's airport, and new signage, sidewalks
and lighting in the downtown area.
Another initiative that has helped the city is the
development of the Atlanta Downtown Improvement
Community Improvement Districts
District, a nonprofit organization formed just before the
Hold Promise for Revitalization
Olympics. This organization implemented the
Ambassador Force, a team of approximately 50 people
Projects
who walk beats throughout the 120-block downtown
district, providing directions and information for visitors,
workers and residents. The presence of the Ambassador
ver the past 15 to 20 years communities across the
Force, combined with initiatives of Atlanta's police force,
country have turned increasingly to community
has contributed to the drop in crime in downtown Atlanta
improvement districts (CIDs) as a source of funding for
augmenting existing city services and enhancing infrastructure. for three straight years.
CIDs provide additional funding where local government taxes
Since the Olympics, a number of loft apartments, town
are insufficient.
homes and condominiums are being developed in
A CID is a geographically defined district in which commercial downtown Atlanta. Georgia State University, located
property owners choose to tax themselves to achieve a specific downtown, also recently began constructing and
refurbishing classroom and arts-related buildings.
purpose or purposes. CID funds can be spent on a variety of
projects. Georgia's constitution, for instance, allows for these
projects to include street and road construction and
maintenance, sidewalks and streetlights, parking facilities,
water and sewage systems, terminal and dock facilities, public
transportation, and park facilities and recreational areas.

Whether or not this development will continue remains to
be seen. But given the Atlanta area's problems in meeting
clean air standards, the prospects appear good that more
and more people will move downtown. While the city still
has a long way to go in revitalizing its downtown area,
progress since the Olympic Games may mean that the
Businesses find CIDs an attractive funding mechanism
because commercial property owners vote on the self-imposed best is yet to come for downtown Atlanta.
tax, and the cost is proportionately distributed across the
Getting funding
district.
While developing and implementing a revitalization plan is
In Atlanta, the Midtown Alliance, a nonprofit, community-based full of challenges, funding the plan can also be, literally, a
taxing process.
group, is currently in the process of establishing a CID for the
midtown area. Susan Mendheim, president and CEO of the
group, explained why the CID is so valuable to the community.
"CIDs augment what city or county governments are able to

Funding for revitalization is available from many sources.
For instance, cities can apply for state or local money
through a variety of programs; they can also obtain local

do," she said. "They also allow communities to decide where
the additional tax money is most needed. Unlike impact fees or
property taxes, the CID funds are controlled by a private,
nonprofit board of property owners who have a vested interest
in the area and its development."

or state funding and then apply for matching funds from
the federal government. Sometimes local funding comes
from an additional tax on certain types of expenditures or
from the sale of bonds. Additionally, cities can seek
private or corporate funding to help support projects for
public use (see the sidebar).

But structuring funding is a complex process; some funds may not be appropriate for all revitalization projects since there
may be restrictions on how the funds can be used. The key to developing a successful financial package for a revitalization
project is to determine what type of funding works for each project, not just at the outset but for the life of the entire project.
Ultimately, the success or failure of an entire revitalization effort can depend on the structure of its funding package.
One size doesn't fit all
Many people argue that the economic health of an entire region depends on the economic performance of the central city's
downtown area. Others, however, argue that a downtown area is not in the least important to the overall economic health of
a metropolitan area. Whichever view one supports, there is no argument that cities continue to place importance on their
downtowns, striving to find ways, either through refined processes or shotgun approaches, to improve those areas.
Proving the popularity of this mindset, southeastern cities like Columbus, Ga., Orlando, Fla., Jacksonville, Fla., and
Montgomery, Ala., have all tried their hands, with mixed success, at downtown revitalization in one form or another during
the past three decades.
While some lessons can be learned from other cities' efforts, the revitalization process is an individualized process by its
very nature. Just as there are no two cities that are alike, there also is no secret formula for achieving success that can be
applied to each and every city. The path to success varies from project to project and city to city, and finding the right
solution can be a hit-or-miss proposition.
In spite of the potential pitfalls, large and small revitalization projects that use public and private funds have more recently
been launched in several cities, including Macon, Ga., Nashville, Tenn., and Birmingham, Ala. These initiatives and other
evidence from throughout the Southeast show that revivalists are likely to keep trying until they get it right and are able to
return their downtown areas to some of their former glory.
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Economic Research

DESPITE OPINIONS TO THE CONTRARY, CREDIT SCORING MAY ACTUALLY BENEFIT SMALL BUSINESSES
SEEKING LOANS EVEN IN LOW- AND MODERATE-INCOME AREAS, ACCORDING TO A RECENT FEDERAL
RESERVE BANK OF ATLANTA STUDY.
s productivity innovations go,
credit scoring has been as
important to the banking
industry in the 1990s as
automated teller machines were in the
1980s. Just as output per bank worker —
the most common definition of productivity
— surely increased in the banking
industry after ATMs began handling
routine banking transactions, automated
underwriting has allowed banks to write
more loans more quickly and at less cost
than ever before.
But some critics of the banking industry
say that credit scoring leads to
discrimination. They charge that the
industry's reliance on a nameless,
faceless and colorblind set of computer
programs allows banks to satisfy the law
while still discriminating against borrowers
in low- and moderate-income (LMI)
neighborhoods.
Recent research by Michael Padhi, Lynn
Woosley and Aruna Srinivasan of the
Federal Reserve Bank of Atlanta
suggests, however, that credit scoring
applied to small business lending not only

does not increase discrimination against
business in LMI neighborhoods, but it also
seems to increase the level of small
business funding available in these areas.
The research by Padhi, Woosley and
Srinivasan may have serious implications
for banks as they endeavor to comply with
the Community Reinvestment Act (CRA).
The Community Reinvestment Act
Twenty-two years after Wisconsin Senator William Proxmire authored the anti-redlining provision that would become the
CRA (see below), its goal remains to ensure that banks serve LMI areas. In 1999 CRA compliance for large banks —
defined as having $250 million or more in assets or being owned by a holding company with $1 billion or more in assets —
is determined largely by three separate tests. A lending test examines banks' mortgage, small business and community
development lending; an investment test examines the availability of grants to and equity participation in community
development activities; and a service test examines branch locations and the provision of banking services to low- and
moderate-income groups.
While the tests for CRA compliance are notably more specific than they were two decades ago, scoring the tests —
assessing the results — remains a somewhat subjective exercise. Bankers argue that regulators use the threat of
noncompliance to force them to make loans that don't make economic sense. Bank critics, meanwhile, argue that regulators
are too easily swayed by bankers' reliance on credit scoring and other objective lending criteria. Moreover, bank critics argue
that as lenders have increased their reliance on credit scoring, lending to low- and moderate-income areas has declined. It's
this last charge that the Atlanta Fed researchers address.
Adding it up
To better understand the results of this research, it's worth
Proxmire's Progeny
considering how credit scoring works and how it's said to
discriminate. Credit scoring derives a single quantitative
n June 7, 1977, after two days of debate, the U.S.
measure — the score — from a vast statistical sampling
Senate approved H.R. 6655, the Housing and
Community Development Act of 1977, by a margin of 79 of past borrowers in order to predict the future payment
performance of an individual loan applicant. For banks,
to 7. It was a mostly unexceptional bill, reauthorizing the
credit scoring increases profitability by reducing the labor
popular Community Development Block Grant program for an
costs associated with reviewing a loan applicant's credit
additional three years.
reports and financial statements. This labor savings not
only compresses the approval time of loans, but it also
But the Senate version of H.R. 6655 included a provision that
frees personnel to perform other functions, including
had not been included in the House-approved version. At the
behest of Chairman William Proxmire of Wisconsin, the Senate marketing more new loans.
Banking Committee added Title VIII, an anti-redlining provision
But while credit scoring has been used for more than a
that directed banking regulators to consider an institution's
decade to underwrite credit cards, auto loans and home
record of meeting the credit needs of "its entire community,
equity loans, its use in small business loan underwriting is
including low- and moderate-income neighborhoods" when
a much more recent development. The common factor
evaluating the institution's application to open a new branch.
linking these different types of loans is personal credit
history. In the case of the small business owner, her
The report that accompanied the bill explained that Title VIII
had been added because the committee was "aware of amply personal loan payment history is a very strong predictor of
her business loan payment prospects — especially if the
documented cases of redlining in which local lenders export
loan is for less than $100,000 — and her consumer credit
savings despite sound local lending opportunities." And in
scorecard can be adapted with little difficulty.
arguing against an amendment by North Carolina Senator
Robert Morgan to cut Title VIII from the bill, Proxmire said it
Charges that credit scoring reduces lending in low- and
was needed "to reaffirm that banks and thrift institutions are
moderate-income areas arise from concerns that credit
indeed chartered to serve the convenience and needs of their
scorecards and the databases they're built on can contain
communities . . . and needs does not just mean drive-in teller
bias. These charges may seem ironic. For bankers, one
windows and Christmas Club accounts. It means loans."

of the real virtues of a credit scorecard is its objectivity: it
allows the same lending criteria to be applied to all
applicants without regard to their membership in a
protected class. Moreover, income, race, gender, length
of employment and home rental-ownership are not
included in the leading credit scorecard for small business
lending produced by Fair, Isaac & Co., a firm at the
forefront of developing credit scoring models.
Nevertheless, critics argue that credit scoring models unlawfully discriminate by assessing LMI applicants against a pool of
more affluent non-LMI borrowers. Critics also charge that in small business lending and other areas in which the need for
business-lender relationships is thought to be important, banks may use credit scorecards as a surrogate for close
relationships.
Ultimately, of course, Title VIII was retained in the legislation
signed into law by President Jimmy Carter. But while the bill's
main provision — the Community Development Block Grant
program — would become a casualty of Washington's 1980s
budget wars, Proxmire's anti-redlining provision would continue
as the Community Reinvestment Act.

What the Atlanta Fed found
Padhi, Woosley and Srinivasan tested these arguments of credit scoring critics. They examined the small business lending
practices of 99 of the 190 largest U.S. banks lending in metropolitan areas in the Federal Reserve Bank of Atlanta's district.
The data for their research was built on a previous study by Srinivasan, Woosley and Scott Frame of the U.S. Treasury
Department, which found that 63 percent of banks surveyed used credit scoring to underwrite small business loans. That
study found that for loans of less than $100,000, all of the credit-scoring banks used scorecards; for loans of less than
$250,000, 73 percent of those banks did. In addition, Srinivasan, Woosley and Frame found that just 42 percent of scoring
banks used scorecards to automatically approve or reject loans, but 98 percent employed them as part of the loan decision
process. Both studies considered banks that used scoring for part or all of the loan decision process to be credit scorers.

What about
COMMUNITY BANKS?
s large banks increasingly turn to automation in their
dealings with customers, smaller banks may find a
lucrative opening for old-fashioned character loans. Last
year, in a speech before the Georgia Bankers Association,
Federal Reserve Bank of Atlanta President Jack Guynn likened
community banks to AAA, the American Automobile
Association.
In that speech Guynn said, "You know how AAA works: you're
in Hawkinsville, Ga., and you want to drive to Staunton, Va.
There are probably a 1,000 ways to get there, but only two or
three are any good. AAA will send you a map, highlight the
best routes, and note all the trouble spots along the way:
construction in Greenville, traffic in Raleigh and so forth.

By comparing the small business lending activities of
banks that use credit scoring with banks that do not,
Padhi, Woosley and Srinivasan were able to assess the
impact of scorecards on small business lending practices
inside and outside of low- and moderate-income areas.
They found that while nonscoring banks were likely to
lend significantly less in LMI areas than in higher-income
areas, the difference in loan levels for scoring banks was
not statistically significant. In other words, the dollar value
of small business loans made by credit scorers was about
the same in LMI areas as in non-LMI areas when
neighborhood and bank characteristics were statistically
accounted for, whereas nonscorers lent significantly less
in LMI communities.

In addition, the researchers found that credit scorers
actually originate more loans — number of loans, not
dollar value — in low-income tracts than in moderate- or
high-income tracts. Nonscoring banks originated
"The financial system of the 21st century will be as big, as
efficient and occasionally as encumbered as our transportation significantly fewer total loans in LMI neighborhoods.
system. It will be a massive, interlocking network of technology Finally, the researchers found that among credit scorers,
and financial resources. And for the average customer, it could the presence or absence of a bank branch in an LMI area
has no significant effect on the level of small business
be easy to get lost. Small and community banks know their
passengers, they know their destination, and they know how to credit available. For nonscoring banks, the location of a
branch in the community is a significant positive for small
get there. They provide an invaluable service and one that I
business lending in LMI neighborhoods.
think will be increasingly in demand."
While Padhi, Woosley and Srinivasan have not attempted
to assess any underlying causes with their research, their results suggest at the very least that scoring alone does not result

in small business lending discrimination in LMI neighborhoods. Moreover, considering that the presence of a branch in an
LMI tract does not have any impact on scorers' small business lending activities, credit scoring may actually serve as prima
facie evidence of compliance with the CRA's lending test. As for the role of character or personal loans in small business
lending, the Atlanta Fed research suggests that credit scoring might discourage discrimination against protected groups and
communities.
What's next?
The Atlanta Fed research is the first such study on an issue with serious social, economic and political repercussions. While
much more remains to be done on this issue — especially at the national level — the initial results suggest that the use of
credit scoring in small business lending can help ensure fair treatment of small business borrowers.
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Economic Research

Is the International
Economic Crisis Over?
Although countries in Southeast Asia and Latin America continue to grapple with economic reform measures, the general
outlook for these regions appears to have stabilized somewhat. But have these countries turned the corner, and will they
return to economic growth?
wo years after the onset of the Asian financial crisis
in July 1997, some anxiety still looms over the global
financial markets. What was first perceived as a
localized currency and financial crisis in Thailand soon spread
— to Malaysia, Indonesia and the Philippines and eventually
much of the rest of Southeast Asia. In 1998 Russia and Latin
America were affected by the contagion, and international
stock markets plummeted as investor confidence was shaken
by the spreading crisis.
While these regions continue to sort through many serious
economic and social issues, most of the individual countries
have begun to work through their respective economic
difficulties and appear to be moving toward a recovery.
Asian economies on the mend
In Asia, there are mounting signs that economic and financial
conditions are improving. Economic activity is rebounding in
most of the region, and financial markets are recovering from
some of the heavy losses experienced over the last two years.
In 1998 analysts speculated about how quickly Asia would
recover from the crisis. Forecasters now expect a sharp
recovery, at least in 1999. As Chart 1 shows, economic growth
in the developing Asian economies appears to be following
the distinct V-shaped path of a sharp, short recession instead
of an L-shaped track that would indicate a sharp downturn
with little or no recovery for some time. The current and
projected economic recovery is most impressive in South
Korea while Indonesia remains behind the curve. (The forecasts used in this analysis represent a consensus of a number of
private economists and are not predictions by the Federal Reserve Bank of Atlanta.)
Four general factors may be contributing to Asia's projected recovery.

First, the economic policies pursued by Asian authorities have contributed greatly to the recovery. Central banks in these
countries have significantly eased credit conditions, so interest rates have declined substantially. Lower interest rates have
had two positive effects — they have made debt repayments more manageable and reduced borrowing costs. In addition,
government spending in these countries has increased.
Second, Asian economies have remained open during this tumultuous period. No government has cut its ties to the global
economy, although Malaysia did impose some controls on the flow of money into and out of their country. Open trade and
investment strategies allowed Asian economies to rely on exports to propel economic activity during the crisis when
domestic conditions were so poor. And when international investors felt that a total economic collapse would not materialize,
Asia's open economies allowed funds to return.
Third, all the affected countries of Asia are moving to restructure their
economies. Some are moving more quickly than others, but all are making
the necessary adjustments to remedy the kind of structural problems that
played a part in igniting the crisis. This process will take time, especially in
the area of financial system reform, but these countries currently appear to
be moving in the right direction. Unfortunately, the early signs of rapid recoveries in the Asian economies may tempt
policymakers there to curtail their reform efforts in the mistaken belief that with their economies on the mend the need to
pursue restructuring has somehow lessened.
The Asian turmoil appeared to reveal a
tendency among investors to treat
emerging markets as an asset class.

Finally, the strength of the U.S. economy has contributed to Asia's recovery. As the Asian countries used exports to earn
money for their wounded economies, the United States has been a major customer. This increase in imports of Asian goods
into the United States has led to a widening trade deficit here, but recovering Asian economies are now beginning to import
more U.S. goods as well.
The worst of the economic and financial crisis in Asia seems to be over. All Asian economies appear to be recovering, some
more rapidly than others.
Latin America making progress
In Latin America, while international and global factors are important in driving the economic
outlook, domestic political and economic issues are having increasing influence.
When the Asian economic problems started in the summer of 1997, the potential impact on Latin
America was uncertain. Some analysts even predicted that the crisis could benefit Latin America
in that investment and capital would stop flowing to Asia and be redirected to Latin America.
These predictions did not come to pass. In fact, Asia's troubles had serious negative
repercussions for Latin America and for much of the rest of the world.
Both trade and financial markets spread the contagion from Asia to Latin America.

ECONOMIC AND
FINANCIAL
INDICATORS POINT
TO AN END TO THE
INTERNATIONAL
CRISIS IN ASIA
AND TO A LESSER
EXTENT IN LATIN
AMERICA.

Some of the Latin American economies send a significant portion of their exports to Asia. Chile
(34 percent in 1997) and Peru (23 percent) are most dependent on Asia for export earnings.
Both countries are heavy exporters of minerals, and Asian economies, particularly South Korea
and Japan, are significant copper importers. As the Asian countries experienced recessions, they naturally imported less
from everywhere, including Chile and Peru.
However, other economies in Latin America are less trade-dependent on Asia, sending less than 15 percent of their exports
to that region. Overall, Latin America actually depends a good deal more on the United States and Europe as export
markets.
In 1998, as the Asian economies were declining, international commodity prices also dropped significantly. This
development was related to weaker Asian demand but was also a function of other factors, including weather patterns.
Weak commodity prices in 1998 affected virtually all Latin American economies, which depend heavily on primary exports
such as oil, copper and agricultural products. For example, oil prices reached an all-time low last year in real terms, with
serious repercussions for oil-dependent countries like Ecuador and Venezuela. So diminished Asian demand, in conjunction

with declining commodity prices, contributed to a significant deceleration of economic activity throughout Latin America last
year.

CHART 1: Asia Real GDP

For better or for worse, the Asian crisis prompted investors
to reassess investments in all emerging markets. If any
redirecting of financial flows occurred, it was not toward
Latin America but rather out of emerging markets and to
safer havens such as the United States. The Asian turmoil
appeared to reveal a tendency among investors to treat
emerging markets as an asset class, whether the markets
are in Asia, the former Soviet republics or Latin America.
This lumping together of emerging economies in investors'
minds became a point of controversy. Some observers
believe that Latin America was unfairly tainted by Asia's
troubles while others argue that the crisis in Asia exposed
pre-existing economic imbalances in other regions.

Source: JP Morgan, Consensus Forecasts

Perhaps the first time the Asian crisis started being
considered an emerging markets problem rather than a
regional situation was when Latin stock markets tumbled in
late October 1997 after strong returns during the first 10
months of that year. The contagion in equity markets
began when it appeared that Hong Kong's currency board regime was coming under pressure, raising concerns over the
maintenance of Argentina's currency convertibility regime, which is similar to a currency board. Ultimately, neither country
altered its exchange rate system.
Nonetheless, the losses in Latin American stocks continued through the first half of 1998 and were aggravated by the
Russian debt default in late summer of 1998. The U.S. equity markets also experienced losses in the fall of 1998. But unlike
the U.S. markets, Latin markets did not rebound significantly and showed weak performance throughout 1998.
Other financial markets — not just equities — were also affected by the Asian and Russian crises. Debt issues, sovereign as
well as corporate, fell significantly in Latin America during the fourth quarter of 1997 and all of 1998, and credit lines to
financial institutions in the region became harder to come by. In addition, higher interest rates throughout the region also
curtailed economic activity.
Given all the economic and financial turmoil, how is the region expected to perform in 1999? After growing by about 5
percent in 1997 and 2 percent last year, the region's real gross domestic product (GDP) is expected to contract by 0.5
percent in 1999 (see Chart 2); available data for the first half of the year are largely in line with expectations.

CHART 2: Latin America Real GDP

Is much of the region still in recession or decelerating
because of a continued drag from Asia? On the surface,
the answer is no. The recession in Asia appears to have
bottomed out, and the economies there are recovering.
So the direct effects of trade and the indirect effects of
financial markets are receding.
In a policy sense, though, the Asian crisis is still having
an impact in Latin America. When the crisis was in full
force in 1997 and 1998 and Latin America began
experiencing capital flight, policymakers in the region
raised domestic interest rates to try to attract
investments and thus help keep capital in their
countries. Rates were especially high last year in
several countries, like Brazil and Chile. Some countries

Source: InterAmerican Development Bank,
Consensus Forecasts

CHART 3: Real GDP Levels

also implemented severe budget cuts at the time. Since
these countries were experiencing hard times, tax
collection was down, government revenue was
declining, and these countries were getting less for their
exports. All these factors compelled policymakers to cut
budgets.
Even though rates are starting to decline, the impact of
this sustained period of high interest rates has endured
into this year. This lingering effect is part of the reason
that much of Latin America is entering a recession just
as the international outlook is improving. Economic
growth in Latin America is expected to follow a
V-shaped path similar to Asia's recovery, but lagging
behind, with a contraction in 1999 followed by recovery
in 2000 and beyond.

While this pattern for Latin America's overall economic
recovery seems fairly clear, the particulars of each
Source: DRI data and forecasts, indexed by the
country's ups and downs continue to evolve. The most
Federal Reserve Bank of Atlanta
recent report from Latin American Consensus Forecasts
shows an improvement in Brazil's 1999 outlook but
downgrades for many other economies. Brazil's real
GDP is now expected to contract by only 0.5 percent
this year compared to the 3.9 percent decline forecast in February and the 2.9 percent decline predicted in April. The
outlook in Brazil has improved faster than expected; after the currency devaluation in January 1999, conditions in Brazil
stabilized much faster than many people had thought possible, and inflation has been much lower than anticipated.
In contrast, the current-year outlooks for Argentina, Colombia, Ecuador and Venezuela continue to deteriorate as the August
Consensus Forecasts predicted deeper-than-expected recessions in these countries. Chile's economic growth forecast was
also cut to –0.1 percent in August from 0.6 percent in June and 1.7 percent in April.
The Mexican and Peruvian outlooks were little changed, with forecasters maintaining output expectations in the 3 percent
range for these economies.
For the countries whose 1999 GDP forecasts have been downgraded, their current economic difficulties appear to be largely
homegrown rather than the result of global crisis. So even if the region as a whole is experiencing a recession that can be at
least partially attributed to the aftereffects of the international crisis, this stress is being either augmented or diminished by
domestic factors within the individual economies.
Is the crisis over?
In one sense, the international crisis appears to be over because the Asian economies are recovering and are no longer
constituting a significant drag on Latin America, at least in terms of trade flows and financial market effects.
But in another sense, the crisis appears to be ongoing in that the Latin American economies still face some serious
challenges in the domestic economic and political arena. In a way, however, this fact is somewhat encouraging. Over the
last two years, international economic forces that often seemed beyond the region's control have buffeted Latin America.
Although serious challenges remain, at least these are challenges that policymakers in the region can address directly.

While the Asian and Latin American economies appear to be
on the rebound, there are serious social costs to the
international crisis.

The social effects of the crisis
While the Asian and Latin American economies
appear to be on the rebound, there are serious
social costs to the international crisis that may take
longer to work through in these regions.

In each country in these areas, a significant segment of the population is living in poverty — in many cases, extreme
poverty. Put simply, the international financial crisis has made some of the rich less rich, has pushed many of the middle
class into poverty and has made the poor in these countries poorer. It may take years for this situation to greatly improve. As
Chart 3 shows, while Korea and Brazil are expected to recover to their pre-crisis levels of GDP next year, Indonesia is not
expected to return to a pre-crisis level for some time. (The chart refers only to the size of the economy and does not account
for the uneven income distribution in these countries.)
Going forward
Economic and financial indicators point to an end to the international crisis in Asia and to a lesser extent in Latin America,
although in the latter region domestic developments appear to be the source of current weakness in many countries. Social
indicators reveal that the effects of the international crisis will be felt for some time. If policymakers in both regions continue
to restructure and reform their economies, the longer-term economic, financial and social outlooks should remain positive.
This article was researched and written by analysts in the Atlanta Fed's Latin America Research Group.
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Economic Research
Research Notes
Research Notes highlights some of the research recently published by the Federal Reserve Bank of Atlanta. For
complete text of these articles or papers on this Web site, see the links below.

Theories may shed light on crises in emerging markets
The world economy is going through a difficult and dangerous period. The recent Brazilian currency meltdown is one more
in a series of events that includes the Asian crises of 1997–98 and the Mexican crash in 1994, and there is uncertainty
about whether other emerging economies will be infected with the Brazilian virus.
Dealing with crises in emerging economies is, therefore, an urgent matter. But what to do about these crises is a source of
heated debate. In a recent article, Roberto Chang argues that much of the confusion arises from the fact that accumulated
knowledge about crises in emerging markets has proved inadequate for analyzing recent events. As a consequence,
economists have developed new theories intended to shed light on current debates.
Chang classifies the new theories into two main positions. The first, the bad policy view, argues that inappropriate
government intervention provided incentives for the private sector to borrow too much and to invest in socially
unproductive or excessively risky activities. The second category, the financial panic view, argues that the key issue was a
maturity mismatch of assets and liabilities in national financial systems. The article compares the two viewpoints and
concludes that the financial panic view has a more solid theoretical foundation and is consistent with a wider range of
observations than the bad policy view.
ECONOMIC REVIEW
SECOND QUARTER 1999

Rising dollar may have triggered Asian crisis
Within a few months in late 1997, a number of East Asian countries were hit by financial and exchange rate crises. Much
analysis of this episode has emphasized either internal financial weaknesses or a process of contagion that converted a
financial problem in one country into a regionwide crisis.
A recent article explores an alternative possibility: that some external shock common to all these countries triggered the
crisis. The Chinese devaluation of 1994 and the prolonged Japanese recession are sometimes cited as factors, but author
Joseph Whitt concludes that they were probably only minor contributors. Evidence suggests that the sharp rise in the
value of the dollar that began about two years before the crisis itself may have had a major impact.
The rising dollar induced substantial exchange rate appreciation for the crisis countries because, as estimates of basket
weights indicate, they were tying their currencies closely to the dollar by giving the dollar heavy weight. The result was
significant slowdowns in export growth that probably contributed to the regionwide crisis.
Whitt suggests that for the future these countries might find it advantageous to peg their exchange rates to a diversified
basket of currencies that would help ensure that their exports to their three largest developed-country customers — the
United States, Japan and the euro area — would not all drop off simultaneously.
ECONOMIC REVIEW
SECOND QUARTER 1999

ATLANTA FED DOLLAR INDEX

Money growth and inflation are still related
Despite the long history and substantial evidence supporting the
conclusion that persistent changes in the price level are
associated with changes in the money supply, the predicted
association remains disputed. Is it debated because the empirical
relationship holds over time periods so long that it may be
uninformative for practitioners and policymakers, who are more
concerned about inflation next month or next year? If the
relationship between money growth and inflation takes a
generation to become apparent, it would not be surprising that
After dipping slightly in April and May, the dollar
central bankers and practitioners put little weight on recent
rose slightly in June versus the 15 major
money growth.
currencies tracked by the Atlanta Fed. Much of
It is not clear, though, that it takes a generation. Gerald P. Dwyer this movement was due to changes versus the
Americas subindex, which includes Brazil,
Jr. and R.W. Hafer reconsider, in a recent article, the link
Canada and Mexico, while the dollar remained
between money growth and inflation, using two types of
strong against the European currencies
evidence. The first, based on the behavior of five countries' price throughout the three-month period.
levels and money stocks over much of the 20th century, provides
Note: For more detailed, monthly updates and
a perspective over time. The second uses two recent five-year
historical data on the dollar index, see the Atlanta
periods for a number of countries for which collecting comparable
Fed's World Wide Web site at
data covering long periods is not feasible. A positive, proportional
www.frbatlanta.org/econ_rd/dol_index/di_index.cfm.
relationship between the price level and money relative to real
income is evident in data over long periods of time and over
shorter periods for many countries. This evidence suggests that
money growth should not be ignored when attempting to estimate future inflation.
ECONOMIC REVIEW
SECOND QUARTER 1999

Does decline in unions explain wage-productivity gap?
Although both real wages and productivity have grown at relatively slow rates during the last two decades, some
measures indicate that earnings have failed to keep up with productivity growth. The slowdown in real wage growth is
important to workers and their families because their purchasing power is not rising if earnings are not increasing faster
than prices. The failure of growth in real wages to match productivity gains also has critical implications for workers.
A substantial decline in the unionization rate since the 1960s has been cited as underlying the wage-productivity gap. In a
recent article, Madeline Zavodny explores the trends in productivity, pay and the unionization rate, analyzing data over the
1974–94 period. She concludes that the decline in the unionization rate does not explain a significant portion of the rise in
the wage-productivity gap in the manufacturing sector.
A resurgence of unions might help workers reap more benefits from productivity gains, Zavodny concludes, but it appears
unlikely that an increase in the unionization rate alone would cause compensation increases to fully match productivity
gains.
ECONOMIC REVIEW
SECOND QUARTER 1999
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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 forestry industry in Alabama remains weak. Demand from
pulp and paper producers is still depressed by weak demand
from overseas, and foreign supply is becoming more
abundant. The relatively robust rate of single-family home
construction has helped lessen this problem somewhat.
• The auto industry continues to expand, most notably with the
announcement that Honda will be locating a large assembly
facility along Interstate 20 near Talladega, between
Birmingham and the Georgia border. Construction will begin
later this year. Auto component manufacturers located in
northern Alabama and throughout the region will benefit as the
auto industry in the South continues to expand.
• The state's year-over-year employment growth lags behind
both the district's and nation's, with manufacturing and
services showing notable relative weakness.

Florida
• Excess capacity is beginning to show up in a number of theme
parks in the central part of the state after several years of
aggressive expansion in that area. But this condition does not
indicate a slowdown in overall tourism.
• The state's employment growth is handily outpacing both the
district's and nation's as measured on a year-over-year basis.
Most of this strength is found in the central part of the state,
with Orlando and Tampa showing the strongest growth rates.
• The cruise industry continues to enjoy high occupancy rates,
even with new ships being added — and more on the way.
While bookings are available for the distant future, cruises at
the beginning of 2000 sold out long ago with very little
discounting.

Georgia
• The Atlanta metropolitan area led the nation in the number of
new homes constructed last year and is on track to do the
same again this year, although the margin may not be as
great.
• Employment growth versus a year ago continues above the 3
percent rate, bettering both the district and national rates. The
construction sector is still showing most of the growth,
although these rates are decreasing. The larger miscellaneous
business service sector is accelerating, however, taking up
any reduction in momentum from construction.

• Turner Field, home of the Atlanta Braves, has been selected
as the site of the 2000 Major League Baseball All-Star game.

Louisiana
• The decline in oil and gas drilling activity has halted as a result
of higher oil and gas prices. Industry sources report, however,
that even though prices are well above break-even points for
expanded drilling, firms are reluctant to restart drilling in a
significant way until there is more certainty that the higher
market prices will continue.
•

Baton Rouge continues to be the strongest metropolitan area
in the state, growing faster than both the district and nation.
The rest of Louisiana is underperforming both.
Strength in Baton Rouge has come from a variety of
industries. While growth in government employment has been
important, the performance of the state's service sector and
whole-sale trade has also contributed.

Mississippi
• The gambling industry along the Gulf Coast continues to
prosper. Despite the recent opening of the largest gambling
complex to date, though, an even larger project already is set
to begin construction.
• A major obstacle to expansion along the Mississippi Gulf
Coast is the very tight labor market conditions in the area,
making the staffing of more facilities problematic.
• Despite the continued Gulf Coast expansion, the state's overall
employment growth is stagnant. In part, this situation simply
reflects the tight labor markets along the Gulf, but what growth
has occurred there is being offset by a generally weak
manufacturing sector and no net growth in services in the
remainder of the state.

Tennessee
• Employment growth in Tennessee is underperforming the
district and is even slightly less than the national average as
measured on a year-over-year basis. The Knoxville area is
notably weak, actually losing jobs compared to year-ago
levels.
• Manufacturing in the state has been relatively weak for over a
year, but the recent strength in the auto industry, which is
concentrated in the middle of the state, has helped to slow
Tennessee's overall job losses in manufacturing.
• Knoxville has experienced notable reductions in manufacturing
employment compared to the rest of the state, and the city has
also suffered losses in the retail trade and transportation/public
utilities sectors.
Compiled by the regional section of the Atlanta Fed's research department
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Economic Research
Southeastern Economic Indicators

Alabama

Florida

1999Q2

1933.9

6889.9

3847.0

1916.4

1132.7

Percent
change
from

1999Q1

0.3

1.0

0.8

1.1

0.1

1.2

0.7

0.5

Percent
change
from

1998Q2

1.5

3.7

3.4

0.4

-0.3

0.5

2.6

2.2

Manufacturing
Payroll
Employment
(thousands)a

1999Q2

370.8

498.2

594.1

190.8

239.8

505.8

2399.5

18,431.7

Percent
change
from

1999Q1

-0.8

0.1

-0.4

-0.8

-2.1

-2.2

-0.4

-0.6

Percent
change
from

1998Q2

-2.5

0.4

0.3

-0.3

-0.9

-0.4

-1.0

-2.2

Civilian
1999Q2
Unemployment
Rate

4.6

4.1

3.7

4.6

4.6

3.7

4.1

4.3

Total Payroll
Employment
(thousands)a

Georgia Louisiana Mississippi Tennessee

6th
District

United
States

2665.3 18,385.2 128,243.7

Percent
change
from

1999Q1

13.1

-3.9

-8.2

-13.8

-4.8

-14.7

-5.6

-0.8

Percent
change
from

1998Q2

7.8

-5.4

-13.2

-22.6

-14.2

-12.0

-9.5

-3.0

1999Q2

16,578

102,662

68,830

14,067

9,292

28.181

Percent
change
from

1999Q1

3.7

-4.6

-4.4

-0.1

3.8

1.7

-4.5

-2.7

Percent
change
from

1998Q2

11.5

7.0

7.5

-3.5

-10.9

-6.8

6.2

7.6

Single-Family
Building
Permits
(units)b

239,610 1,239,666

Multifamily
Building
Permits
(units)b

1999Q2

1,944

54,080

19,493

4,069

2,475

6,150

88,211

395,018

Percent
change
from

1999Q1

-65.1

-20.3

23.5

47.6

-20.7

17.2

-12.0

-15.3

Percent
change
from

1998Q2

-61.4

23.7

29.1

-11.5

12.2

45.1

17.6

1.9

1999Q1

96.1

401.6

199.9

95.6

53.8

132.7

979.8

7,400.2

Percent
change
from

1998Q4

0.9

1.7

1.6

1.0

0.8

1.5

1.4

1.2

Percent
change
from

1998Q1

4.5

6.3

7.0

3.9

5.0

5.7

5.9

5.5

Atlanta Birmingham Jacksonville

Miami

Nashville

New Orlando
Orleans

Tampa

Personal
Income ($
billions)b

Total Payroll
Employment
(thousands)a

1999Q2

2,095.5

482.3

548.2

994.1

658.3

622.9

872.8

1,174.0

Percent
change
from

1999Q1

0.7

0.2

0.6

0.9

0.1

-1.0

0.8

0.6

Percent
change
from

1998Q2

3.5

1.3

3.1

2.0

1.5

0.0

4.6

4.9

1999Q2
Civilian
Unemployment
Rate

3.0

2.9

3.2

6.3

2.4

3.8

2.9

2.8

Percent
change
from

1999Q1

-9.3

6.2

5.0

-6.1

-14.0

-14.2

-2.9

-4.6

Percent
change
from

1998Q2

-11.5

8.1

0.1

-3.8

-12.0

-25.8

-4.1

-9.1

a

Seasonally adjusted

b

Seasonally adjusted annual rate

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

Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
United States
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Economic Research
Southeastern Manufacturing Survey
Below are highlights from the monthly survey of southeastern manufacturers conducted by the Federal Reserve
Bank of Atlanta in August.
"Current indicators of manufacturing activity in the region changed little in July.
"The current production index rebounded to 19.4 from 15.6 in June.
"To some degree, some production gains may have replenished inventories. The finished goods inventories index
rebounded moderately, staying at a positive level for the third consecutive month. The new orders index was
steady at a moderate level. The backlog orders index fell from improved and relatively high levels in May and
June.
"In light of positive outlook indicators, current production and inventory gains appear to be a reflection of
manufacturers' sales expectations. On the downside, the index for new export orders fell for the second month in
a row.
"Outlook indexes generally posted gains. The outlook indexes for production, shipments, new orders, backlogs,
finished goods inventories, the number of employees, the average workweek and new orders for exports were up
from June levels.
"Both current and outlook price indexes rose sharply in July. The outlook index for prices paid reached its
highest level since mid-1997.
SOUTHEASTERN MANUFACTURING INDICATORS
(through July 1999)

For more complete, monthly information see the Southeastern Manufacturing Survey index.

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