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Economic Research
Foreclosures Chill Once-Hot Southeast
Housing Market

Volume 10, Number 3
Third Quarter 2008

FEATURES
Foreclosures Chill Once-Hot
Southeast Housing Market
Remittances Ebb and Flow
With the Immigration Tide
Plumbing the Gulf's Depths
for Oil and Gas

DEPARTMENTS
Fed @ Issue

The housing market once added considerable
sizzle to the Southeastern economy. But the
foreclosure crisis has roiled the region and
spread its tentacles into many industries and
residents' lives. Foreclosures' eventual cost to
the region's economy remains to be seen.
Podcast on Home Foreclosures and
Resources in South Florida (MP3 9:12)

Remittances Ebb and Flow With the Immigration Tide
Many people in developing countries rely on the remittance
payments sent back home by family members working abroad.
An economic slowdown in the United States has dampened the
growth of this payment method. Changing migration patterns,
economic developments, and new technologies and policies are
affecting how—and how many—remittances are sent abroad.
Español | Português

Grassroots: Chattanooga,
Tenn.
Q & A: Barb Godin

Plumbing the Gulf's Depths for Oil and Gas

State of the States

Energy firms are busy exploring and drilling in the Gulf of
Mexico, propelled by high oil prices and gradually dwindling
supplies of easily accessible oil and gas deposits around the
world. Technological and engineering breakthroughs have
enabled these firms to reach depths never before possible,
keeping energy production a major economic component of the
Gulf Coast.
Podcast on Gulf of Mexico Energy Exploration and
Production (MP3 8:14)

Research Notes & News
Southeastern Economic
Indicators
Staff
BackGround
EconSouth Now

Disclaimer & Terms of Use : Privacy Policy : Contact Us : Site Map : Home
Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309-4470 Tel. (404) 498-8500

Economic Research
Foreclosures Chill Once-Hot Southeast Housing Market

Volume 10, Number 3
Third Quarter 2008

FEATURES
Foreclosures Chill Once-Hot
Southeast Housing Market
Remittances Ebb and Flow
With the Immigration Tide
Plumbing the Gulf's Depths
for Oil and Gas

DEPARTMENTS
Fed @ Issue with John
Robertson
Grassroots: Chattanooga,
Tenn.

Photo by Brad Newton

Housing markets in the Southeast once sizzled like an August afternoon,
helping to heat up the region's economy. But a cold wave of foreclosures has
crashed through many of the region's housing markets, and its ripples have
spread through most corners of the region. The eventual toll this foreclosure
wave will take on the region's economy remains to be seen.
During the housing boom of 2004–06, Atlanta's Pittsburgh neighborhood briefly emerged as a magnet
for new home construction. Builders saw opportunity in a previously neglected area across Interstate
75-85 from Turner Field (the Atlanta Braves stadium), an area that provides easy access to Atlantaarea jobs.
For a while, prices of newer homes with top amenities in the gentrifying Pittsburgh neighborhood
approached $400,000. But in 2007 these prices began tumbling, and within months foreclosures began
to spread quickly from house to house.

Q & A: Barb Godin

Staff

Today, boarded-up windows and overgrown landscaping characterize this once up-and-coming
community. For sale, for lease, and foreclosure signs proliferate like the dandelions in the lawns.
LaShawn Hoffman, chief executive officer of the Pittsburgh Community Improvement Association Inc.,
which promotes economic and community development in the Atlanta neighborhood, said new working
families began moving into the area a few years ago. Many of them were renters who have now been
forced out as banks repossess properties from absentee speculators who failed to pay their risky
mortgages. The dwindling number of remaining residents find themselves constantly on guard against
squatters trying to move into abandoned properties.

BackGround

Foreclosure spreads its tentacles

State of the States
Research Notes & News
Southeastern Economic
Indicators

EconSouth Now

While the Pittsburgh neighborhood of Atlanta—also
known as Adams Park—offers an unusually
concentrated microcosm of foreclosure issues, it is by
no means an isolated case. A sudden and widespread
increase in bank-owned real estate has broad economic
and social consequences. While many areas in the
Southeast have not been directly touched by
foreclosures, the problem has exacerbated an overall
decline in house prices and economic weakness
throughout much of the region.
Since 2005, foreclosure rates in Southeastern states
have risen. The hardest-hit state is Florida, followed by
Georgia, where the chief problems are in parts of the
Atlanta metropolitan area.

Related Links
Home Foreclosures and Resources
in South Florida (MP3 9:12)
Atlanta Fed Foreclosure Resource Center
Federal Reserve mortgage foreclosure
resources
The Federal Reserve's Homeownership
and Mortgage Initiative
NeighborWorks America
Hope Now
Maps of subprime mortgage activity

Foreclosures have swept through communities with surprising speed. Just three years ago, Florida
was below the national average in foreclosures. But the state now has the highest foreclosure rate in
the Southeast, with almost 4 percent of mortgages in foreclosure in 2007, according to the Mortgage
Bankers Association (MBA). Florida's foreclosure rate in 2008 has continued to climb.
In Georgia, 3.23 percent of all mortgages were in foreclosure in 2007—up from 2.56 percent in 2006.
As in Florida, Georgia's foreclosure rate surged in the first half of 2008 (see the maps).
But the rate is not as high throughout the region. For example, according to data from the MBA, the
foreclosure rate for Alabama at the end of 2007 was 2.37 percent—the lowest rate in the Southeast
and below the national average of 2.84 percent. Foreclosures in Tennessee and Louisiana are also
below the national average but are up from a few years ago. Mississippi's foreclosure rate has
increased sharply, to about 3.5 percent at the end of 2007.
Housing price depreciation is a key culprit

The increase in foreclosures can be attributed to many factors, such as mortgage fraud and predatory
lending. While acknowledging these issues, Atlanta Fed financial economist and policy adviser Scott
Frame said one economic dynamic underlies almost all foreclosures: the decline in house prices.
Frame traces today's foreclosure problems to the
rapid increase in house prices that took place a few
years ago. U.S. house prices appreciated more than
55 percent between 2001 and 2006, driven primarily
by income growth, low interest rates, and, in certain
markets, supply constraints.
As housing affordability declined, subprime lending
increased significantly with the availability of new
and untested mortgage products. By 2006, about 20
percent of new residential mortgages were subprime;
in other words, one in five mortgage borrowers had
either low credit scores, high levels of debt
compared with income, high mortgages compared
with their homes' value, or unverified income. Many
of these high-risk borrowers were buying houses
with minimal or no down payments just as prices
were peaking.

Photo by Brad Newton

Foreclosures began ravaging the
gentrifying Pittsburgh neighborhood in
downtown Atlanta in 2007. House prices
there continue to decline as developers,
lenders, and homeowners await the
market stability that must precede the
area's rebound.

"The path of house prices appears to be very important—in both theory and in practice," Frame said.
"Negative equity [owing more than the house is worth] is a necessary, but not sufficient, condition for
foreclosure."
In principle, if they have positive equity, homeowners can either borrow to cover temporary shortfalls or
sell the house. But owner-occupiers do not default simply because they have negative equity. Typically
foreclosure involves a significant trigger event related to household budgets such as job loss, divorce,
or large medical expenses.
When such events lead to numbers of foreclosures in a subdivision or community, the consequences
can be severe—not just for those who lose their homes but also for builders, lenders, and others in the
community with good credit. Examining how these various stakeholders are adjusting to the impact of
foreclosures in the Southeast provides a window into the housing crisis in the region.
Homeowners work out the workout process

During the first half of 2008, the Consumer Credit Counseling Service (CCCS) of Greater Atlanta
experienced a surge of calls from homeowners delinquent on mortgage payments, said Suzanne
Boas, the agency's president. Nearly as many people—some 30,000—turned to CCCS for housing
counseling sessions in the first six months of 2008 as in all of 2007.
The increased housing counseling at CCCS this year reflects a deepening foreclosure crisis that began
with low-income borrowers and spread to families with more substantial means. For the first time in
2008, the average household income of CCCS clients seeking housing counseling exceeded $40,000.

Along with additional foreclosure-related activity, CCCS has continued to receive calls from people
struggling with credit card bills, medical expenses, and other types of unsecured debt.
"Demand for our counseling services is rising significantly as people try to avoid foreclosure and
bankruptcy, as well as cope with rising gasoline and food costs," Boas said.

Map 1
Percent of Subprime Loans in Foreclosure by State

In response, CCCS is hiring about 80
more counselors using the proceeds
of a $2 million grant from the Ford
Foundation. Counselors help
borrowers negotiate with loss
mitigation departments of mortgage
servicers and often help provide
information that can lead to a loan
modification, or workout. Typically,
workouts involve investigation and
time-consuming back-and-forth
negotiations that vary depending on
the situation. Such delays can be
costly for borrowers and lenders
alike. Recently, however, CCCS
began testing a new software
program to standardize and speed
the workout process, Boas said.
A window on Florida's housing
woes

Note: Data are current as of August 2008.
Source: FirstAmerican CoreLogic, LoanPerformance Data

Map 2
Percent of Homes in Foreclosure per 1,000 Housing
Units by State

With their patience and knowledge of
the financial landscape, credit
counselors and other nonprofits have
played a crucial role in helping
address the foreclosure crisis in
south Florida, said Ana Cruz-Taura,
regional community development
director in the Atlanta Fed's Miami
Branch.
In the climate of rapid house price
appreciation between 2002 and 2006
in south Florida, many potential
homebuyers abandoned the
traditional go-slow approach of
saving for a down payment to buy a
house. Rather than paying more later
by delaying their purchase, they
instead chose to take a chance on a
subprime loan in the hopes of getting
into a home before property values
increased further. Speculators fueled
house price increases and worsened
the affordability problem that drove
ordinary borrowers into risky
mortgages.

Note: Data are current as of August 2008.
Source: FirstAmerican CoreLogic, LoanPerformance Data

But when the housing market cooled
and prices began to decline,
overextended borrowers began to
have credit problems. Between May
2007 and May 2008, Miami-area
house prices fell by more than 28

percent, according to the S&P; Case Shiller 20 City Composite Index, which tracks home values in 20
markets around the country. Still, even with this recent drop, house prices in Miami now are still much
higher than in 2000.
Now, many homeowners who bought at the peak of the market a few years ago have negative equity.
Others lost equity by borrowing against the price appreciation that had already occurred. Homeowners
drained the equity gained with price appreciation and found themselves in trouble when their homes
depreciated. Faced with the possibility of further price declines, many potential buyers have stepped
aside, leaving distressed sellers with few options. Many borrowers who fell behind on payments have
responded to this adversity not by reaching out to their lenders but instead by simply walking away
from their homes.
"It's human nature that people tend to be afraid to confront bad news," said Janet Hamer, community
development manager at the Atlanta Fed's Jacksonville Branch, who has worked on mitigating
foreclosure problems in northeastern and central Florida. "There's an embarrassment factor that
prevents people from asking for help."
With the oversupply of housing in Florida amid a worsening foreclosure problem, construction
employment in the state has pulled back sharply, and the state's labor market has suffered. From
January 2006 to July 2008, Florida lost more than 115,000 jobs, including 49,000 construction jobs,
according to the U.S. Bureau of Labor Statistics. The combination of job losses and foreclosures has
provided a painful double whammy in certain markets such as Palm Bay, along the Atlantic Coast,
which has also suffered from cutbacks in funding to NASA's space shuttle program.
In community after community, foreclosures set off a domino effect. Foreclosures led to an oversupply
of housing on the market, and the oversupply deepened price depreciation and intensified foreclosure,
which led to even more oversupply of housing and a resulting sharp construction pullback and laid-off
workers.
The decline of house prices throughout Florida has created one bright spot: the opportunity for value
investment. This time, many investors, including those from overseas, plan to wait for the right time to
buy—at the bottom of the market, ahead of the next cycle of appreciation.
The shifting lending landscape

For Southeastern lenders that have targeted residential markets, the recent spike in foreclosures has
been costly. A number of the region's mortgage providers have gone out of business, and many
Southeastern banks have struggled with the loans they made to small builders. Also, many of the
home loans ending up on bank balance sheets are not primary mortgages but instead are
nonperforming second mortgages or home equity lines of credit, including many loans backed by
vacation homes.
Repossessing, maintaining, and selling foreclosed properties in a declining housing market have been
major challenges for lenders, who have been looking for alternatives to adding to their real estate
inventories. For example, lenders have devised new outreach programs such as enhanced Web sites
targeting at-risk borrowers (see the interview with Barb Godin).
Lenders also have strengthened ties with credit counseling organizations, which have provided a vital
link between lenders and distressed borrowers who are interested in making an informed and good
faith effort to renegotiate their mortgages in the hope of obtaining more favorable loan terms.
But following an extended period of easy credit, lenders face their own constraints. Underwriting
standards and regulatory oversight are changing the way mortgages are made and, concurrently,
subprime lending has ceased because lenders have lost their appetite for these loans. Regulated
financial institutions are bound by underwriting guidelines that require more careful scrutiny of loan
documentation and more substantial down payments among other steps to ensure credit quality, said
Pamela Cross, vice president and senior community development officer in the Atlanta office of North
Carolina–based Wachovia Corp.
Cross noted that the concentration of foreclosures has become a factor in residential appraisals,
especially in harder-hit areas of Atlanta. "Values now are lower than they were a year ago, and our
lending ability is based on appraisal," she said.

Lower appraisals and other restrictions make it harder for owners to refinance and possibly avoid
foreclosures—a scenario that might not have occurred with more stable real estate conditions. "In
some cases we are seeing a huge difference between the present value of the mortgage and the
newly appraised value of the home," said Arthur Fleming, first vice president and director of community
investment for the Federal Home Loan Bank of Atlanta. In such cases, he added, "refinancing is a big
issue."
Lenders can take solace in the relatively uneven distribution of foreclosures. Subprime loans account
for less than 10 percent of homeowner mortgages, but they make up more than half of all foreclosures,
according to the National Association of Realtors. In more affordable markets where subprime
mortgage lending was not widespread, foreclosures have been much less problematic.
State by state, the landscape changes

Even in the overbuilt Atlanta area, population growth has helped to support housing demand in the
more stable communities, especially those with convenient access to intown jobs. And some areas
have been relatively unaffected by the foreclosure crisis. "Outside of Atlanta, the foreclosure issue in
the rest of Georgia is not as severe," said Connie Bryant, community development officer with
Wachovia Corp.
Bryant said isolated foreclosures have been problematic in Macon and Dalton, where subprime
borrowing was prevalent and the carpet manufacturing and chicken processing industries were laying
people off. But the scale of the problem in these areas is moderate, as it is in much of Savannah and
Augusta.
During the peak period of subprime lending,
Louisiana experienced only modest growth in
both population and house price appreciation.
As a result, the state did not attract much of the
type of lending activity that set the stage for
foreclosure problems in other states, said Nancy
Montoya, the Atlanta Fed's senior regional
community affairs manager for the Gulf Coast. In
the New Orleans area and along the Mississippi
coast, many of the outstanding loans were on a
voluntary foreclosure moratorium because of
heavy losses from Hurricane Katrina in 2005.
Once vulnerable homeowners received their
insurance proceeds, many chose to pay off their
loans.

Photo by Brad Newton

When an area is hit with numerous
foreclosures, it's not only the foreclosed
homeowners who are affected. The pain is
shared by other residents, whose home
values can also decline.

Greg Gonzalez, Tennessee's banking commissioner, said declining asset quality was a concern in his
state. But he noted that his office has not received a large number of complaints about foreclosure and
that the incidence of foreclosure statewide has not been severe. "The problem is evolving, and we're
trying to get information and respond appropriately," Gonzalez said.
Builders offer discounts, concessions

During the housing boom, residential developers had plenty of options for borrowing money. Lenders
competed to finance construction projects in fast-growing markets across the Southeast, and regional
banks were also heavily concentrated in real estate lending. Their activity is now clearly evident with
the boom of condominium construction on Florida beachfronts and along Atlanta's Peachtree Street.
These properties, some of which have taken years to build, are now being marketed in a real estate
environment much more difficult than developers anticipated when they received financing and broke
ground on their projects. In recent months, demand for new construction in major Southeastern
markets has been weakened substantially by declining consumer confidence, less credit availability for
purchasers, and increased competition from resales, including market sales, short sales, and
foreclosures, said developers in the Atlanta area. In response, developers have offered concessions,
including price discounts.
With the decrease in qualified demand and more supply coming into major markets from the large
influx of condominiums that were started from 2002 to 2006, house prices have stagnated and in some

cases declined. These developments, in turn, have boosted the foreclosure rate and a greater
concentration of foreclosures, particularly for condominiums and homes delivered and purchased in
the past three years, developers said.
In the close confines of a condo building, a few foreclosures can have a ripple effect on sales.
Residents who stay in buildings with rising vacancies or foreclosures often end up paying more for
shared expenses such as maintenance and insurance under the broad umbrella of association fees,
said the Atlanta Fed's Cruz-Taura. Also, because of the uncertain value of the collateral, lenders have
become increasingly wary of originating mortgages to buy condominiums in buildings that have been
tainted by foreclosure. In many cases, prospective buyers have simply walked away from their
deposits—because they either couldn't get a loan to close the purchase or were deterred by the
declining market.
With less financing available for purchases, demand for rental properties has increased. Also,
developers have begun to convert some condominium properties into rental units. "People who can't
get mortgage financing are back in rental," said Egbert Perry, president of Integral Group, a real estate
development and management business in Atlanta. "We're starting to build in rent increases after a
period when rental rates were artificially held down because of demand and credit for buying houses
for sale."
An upside of the foreclosure problem is improved affordability of housing, especially in the most
expensive markets in the region. In this environment, however, most of the improvement in affordability
has been offset by higher taxes and other costs, said John O'Callahan, president of Atlanta
Neighborhood Development Partnership. The need for more affordable housing is as pressing as ever,
he noted.
But first-time buyers with good credit and ample savings for a down payment are well positioned to
become homeowners. Whether or not they face more house price declines is uncertain. The
abundance of foreclosed properties provides opportunities for bargains but also tends to drag down the
rest of the market. Given the severity of the problem in neighborhoods such as Atlanta's Pittsburgh and
the additional supply coming into already glutted markets in parts of the Southeast, projecting the
bottom of the housing market is difficult.
Signs of progress are appearing, though. Distressed mortgage borrowers have become more aware of
their options, and lenders seeking to avoid additional and perhaps preventable foreclosures have
devised creative ways to keep families in their homes.
Fed Chairman Ben Bernanke stressed the importance of such efforts in a May speech: "Most
Americans are paying their mortgages on time and are not at risk of foreclosure. But high rates of
delinquency and foreclosure can have substantial spillover effects on the housing market, the financial
markets, and the broader economy. Therefore, doing what we can to avoid preventable foreclosures is
not just in the interest of lenders and borrowers. It's in everybody's interest."
This article was written by William Smith, a staff writer for EconSouth.

Disclaimer & Terms of Use : Privacy Policy : Contact Us : Site Map : Home
Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309-4470 Tel. (404) 498-8500

Economic Research
Remittances Ebb and Flow with the Immigration Tide

Volume 10, Number 3
Third Quarter 2008

FEATURES
Foreclosures Chill Once-Hot
Southeast Housing Market
Remittances Ebb and Flow
With the Immigration Tide
Plumbing the Gulf's Depths
for Oil and Gas

DEPARTMENTS
Fed @ Issue with John
Robertson
Grassroots: Chattanooga,
Tenn.
Q & A: Barb Godin
State of the States
Research Notes & News
Southeastern Economic
Indicators
Staff
BackGround
EconSouth Now

For families in many developing
countries, remittance payments
sent back home by family
members working abroad are
the difference between
subsistence and privation. After
years of rapid growth,
remittances have leveled off
amid an economic slowdown in
the United States. How are
changing migration patterns,
economic developments, and
new technologies and policies
affecting this important
payment method?
For the citizens of many developing
countries, remittances are a vital source of personal income and, in some cases,
survival. Remittances—literally, transmittals of money to a distant place—are
generally understood to mean transfers of income from workers who have migrated
from a poor to a rich country back to family members who remain in the home
country.
The World Bank estimates that recorded remittances reached $318 billion worldwide
in 2007. (Unrecorded flows through formal and informal channels likely mean that
actual numbers are significantly larger than the reported numbers.) Of this amount,
remittances sent home by migrants to developing countries represented $240 billion,
more than double the amount sent in 2002 (see chart 1). In 2007, remittances totaled
more than the amount of official government aid and more than half the amount of
foreign direct investment in emerging economies.
Latin America has some of the highest levels of remittances, both in aggregate and
per capita, according to the World Bank report. Mexico, for example, received $25
billion, or approximately 2.5 percent of gross domestic product (GDP), in remittances
during 2007. These financial flows are particularly large in Central America and the
Caribbean. In 2007, remittances made up 25.6 percent of total gross domestic
product in Honduras, 24.3 percent in Guyana, and 21.6 percent in Haiti.
These high levels of remittances to
Latin America are clearly related to the
rate of immigration from the region.
The World Bank's 2007 report, titled
Close to Home: The Development

Related Links
World Bank Close to Home remittances
report

Impact of Remittances in Latin
Multilateral Investment Fund remittances
America, estimates that Latin
information
American migrants (both documented
FRBA's "Remittances and the
and undocumented) in the United
Macroeconomy" conference
States increased from 8.6 million in
1990 to about 16 million in 2000,
nearly 10 million of whom were Mexican. About one-third of El Salvador's natives live
abroad, mostly in the United States, and almost 50 percent of Grenada's population
has migrated to a foreign country.
Boosting welfare and the economy back home

People who migrate from their home countries are typically seeking a higher standard
of living for their families. The remittances they send back home can have a
remarkably positive impact. (Migration and remittances can also bring their share of
problems; see the sidebar.) Because remittances are mainly directed to relatively
poor households, they play an important role in reducing absolute poverty and
income inequality in recipient economies.

Chart 1
Capital Flows to Developing Economies

Source: World Bank, Global Economic Prospects 2006; International
Monetary Fund, Balance of Payments Statistics Yearbook 2008,
World Development Indicators 2008, and Global Development
Finance 2008

The World Bank's
analysis of household
surveys shows that
for most recipient
countries, remittance
income may help
alleviate some
inequality in income
levels among
households. In
Mexico, El Salvador,
and the Dominican
Republic, the report
estimates that
extreme poverty
would be 35 percent
higher and moderate
poverty would be 19
percent higher in the

absence of remittances among recipient households.
Several studies, including Close to Home, indicate that remittances ease constraints
on recipient households' budgets and allow families to spend a smaller share of total
income on food and more on housing and related expenses (for example, durable
goods), health, and education.
Households with migrants abroad have significantly better knowledge of basic health
care and a higher probability of a doctor delivering a baby, according to the Close to
Home report. "Children from households that report receiving remittances tend to
exhibit higher health outcomes than those from non-recipients households with
similar demographic and socioeconomic characteristics," the report said.
The World Bank report also points to evidence that "for some specific groups ...
remittances increase children's educational attainment. However, the impact is often
restricted to children with low levels of parental schooling."

A 2006 World Bank working paper by Pablo Acosta shows that remittances also
reduce the incidence of child labor, allowing children to focus on schooling. For
example, school enrollment is between 12 percent and 17 percent higher in families
receiving remittances in Nicaragua, Guatemala, and Honduras.
Beyond their
effects on
households,
remittances
While remittances may bring many benefits to recipient
can enhance
households and economies, they also come at a price.
financial
Migration imposes important, immeasurable costs on the family
development
members left behind, particularly on children who grow up with
in migrants'
one or both parents absent. In addition, some studies, such as
home
the World Bank 2007 Close to Home report, associate
countries.
remittances with a perceptible decline in employment
When
participation of recipients who become accustomed to the
remittance
steady flows of remittances without any work effort in exchange.
payments are
A potential economic problem related to these financial inflows
made through
is the so-called Dutch disease. This phenomenon, named for
financial
the Netherlands' economic condition in the 1970s, involves a
institutions,
sizable appreciation in the real exchange rate and a resulting
the receiving
loss in international competitiveness as a result of massive
banks can
inflows of foreign currency to relatively small and
reach out to
underdeveloped economies. This rise in the exchange rate
recipients
leads to a decline in manufacturing and the export of other
without bank
goods that are internationally traded and is accompanied by a
accounts to
decline in employment. Dutch disease can undermine the
offer them
potential performance of business undertakings and, for
financial
motivated individuals and would-be entrepreneurs, reinforce
products and
incentives to migrate.
services.
According to a
Fortunately, recipient economies have several policy options to
2006 World
remedy some of these problems, including fiscal policies that
Bank working
encourage employment participation and monetary policies that
paper by
reduce exchange rate misalignments.
Reena
Aggarwal, Asli
DemirgüçKunt, and Maria Soledad Martinez Peria, total credit in the economy can significantly
increase as banks direct deposited remittances to funds that can then be loaned.
This increased availability of credit funding in turn boosts investment expenditures
and spurs economic growth. Banked remittances also provide a means for
households to finance the opening and expansion of small business and
entrepreneurial activities.
Dealing With the Downside

From a macroeconomic perspective, remittances tend to be countercyclical in relation
to the recipient economy. Immigrants tend to send additional funds back home when
their relatives face severe socioeconomic hardship; these contributions reduce
disposable income volatility and smooth households' consumption paths in
economies historically characterized by economic and institutional instability. Thus,
the inflow of remittances can dampen the current account reversal and the decline in
most macroeconomic variables (such as output, consumption, and investment) in the
aftermath of a financial crisis.

The inexact science of tracking immigration and remittances

Given that remittance payments are originated mainly by immigrants, it is clear that
remittances and immigration are strongly linked. Thus, remittances are often used to
track immigration trends. But this method has its shortcomings because immigration
and remittances are both difficult to measure precisely.
Accurately tracking immigration levels in the United States is virtually impossible
because the number of undocumented immigrants is unknown. A 2008 study from
the Multilateral Investment Fund (MIF), which is administered by the Inter-American
Development Bank, estimates that 47 percent of Latin American and Caribbean
immigrants living in the United States are undocumented.
Money can be transferred among countries without any formal record, which makes
remittances hard to track, but most remittance transfers are made through formal
channels. According to the MIF, in 2006 the percentage of the immigrants who sent
remittances through established institutions ranged from 57 percent to 88 percent,
depending on the state.
Changing patterns

Growth in remittances from Southeastern states has varied in recent years. Data from
the MIF show that in 2004 Florida had the fourth-highest total remittances in the
United States at $2.45 billion, and Georgia had the seventh-highest total at $947
million. By 2006 remittances from Florida had increased 26 percent, and Georgia's
had increased 83 percent.
This rapid growth in remittances from Florida and Georgia is largely the result of the
swift influx of Latin American and Caribbean immigrants. Today about 83 percent of
all Latin American immigrants in the United States live in just 10 states. In 2006
Florida ranked fifth and Georgia sixth nationally in the highest concentration of
recorded immigrants from Latin America and the Caribbean, according to the MIF.
Recent developments in the United States seem to be affecting the flow of
remittances abroad. A 2006 National Bureau of Economic Research working paper
by Gordon Hanson argues that a declining number of apprehensions of people
attempting illegal entry along the U.S.-Mexican border—despite more stringent
border patrols—indicates a decline in the number of people attempting to enter the
United States.
The flow of remittances seems to mirror this drop-off; remittances sent to Mexico
grew only 1.4 percent year-over-year during the first nine months of 2007 compared
with more than 20 percent annual growth during 2002–06, according to the MIF. The
recent slowdown in remittances can also be seen on a wider scale. According to the
World Bank, total recorded remittances from the United States to Latin America and
the Caribbean grew from $17.3 billion in 2002 to $26.25 billion in 2004—a 52 percent
increase—and to $38.5 billion in 2006, a 47 percent increase (see chart 2). An April
2008 MIF report, Survey of Latin American Immigrants in the United States,
estimates that total remittances from the United States to Latin American countries
will increase barely over 1 percent from 2006 to 2008.
The slowing growth in remittance flows was accompanied by a significant decrease in
the percentage of immigrants in the United States from Latin America and the
Caribbean sending remittances home. According to MIF estimates, from 2006 to
2008 the percentage of immigrants who sent money home fell from 73 percent to 50
percent in Florida, from 85 percent to 53 percent in Georgia, from 57 percent to 31

percent in Utah and New Mexico, and from 88 percent to 59 percent in North
Carolina and Virginia.
Some of this decline
Chart 2
in the number of
Remittances to Latin America and the Caribbean
remitting immigrants
is likely tied to the
current weakness in
the housing market,
which has slowed
employment in the
construction industry
(see chart 3). A 2008
MIF survey found that
approximately 14
percent of Latin
American and
Caribbean immigrants
Source: World Bank
who come to the
United States work in
construction. When the construction market declines, undocumented workers are
often the first to lose their jobs because they are typically just day laborers rather than
company employees. Florida and Georgia, which were hit especially hard by the
housing slump that began in 2006, also had some of the largest declines in the
number of remitting immigrants.
Finding the best policies

Policy can play an important role in promoting an institutional environment that
facilitates remittance flows. Remittance services are currently extremely expensive,
with fees that can represent 15 percent to 20 percent of the principal transmitted. The
World Bank Close to Home study recommends policies that encourage competition
among money transfer providers and enhance transparency and consumer
protection. Such policies would result in more efficient and effective tracking of
remittances and prevent criminal abuse of remittance channels.
Policymaking could also promote technological advances. Mobile banking and
partnerships with cell phone companies may constitute an important channel to
extend remittance services to unbanked individuals in rural areas. The mobile phone
company Vodafone has launched a joint venture pilot program with Citigroup to
explore the possibility of promoting such services in the United Kingdom.
In an effort to promote efficient remittances, the Federal Reserve has signed an
agreement with the central bank of Mexico to provide low-cost automated
clearinghouse (ACH) payments from the United States to Mexico. This service,
Directo a México, allows U.S. commercial banks to transfer money from their
customers to bank customers in Mexico using the Federal Reserve System ACH
network.

Chart 3
Growth Rates of Remittances and Housing Starts

"The number of
financial institutions
offering account-toaccount transfer
services, including
Directo a México, is

growing steadily, and
their customers are
responding positively,"
said Elizabeth
McQuerry, assistant
vice president in the
Atlanta-based Federal
Reserve's Retail
Payments Office,
which administers the
program.
"Additionally, banked
transfers bring
Source: Banco de México and U.S. Bureau of Labor Statistics
remittances into the
formal financial
system, where individuals can not only have access to credit, but the transfers take
place between regulated financial institutions in both countries."
Economics and politics cloud remittances' outlook

Like other money transactions, remittances tend to rise and fall with the economy:
The economy drives labor market trends, which drive immigration trends, which drive
remittance flows. Current virtually stagnant remittance growth has several possible
culprits—a slowing U.S. economy, a number of Latin American and Caribbean
countries experiencing relatively robust economic growth, and a lack of jobs in
industries such as construction and manufacturing, which typically employ high
concentrations of immigrants from these countries.
These conditions are directly affecting remittance growth because they make it more
difficult for immigrants to send money home and provide little or no incentive for
individuals in poorer countries to immigrate to the United States. Although this
slowdown may be cyclical, the growing anti-immigration sentiment in the United
States and other advanced economies may pose long-term difficulties for potential
remitters. How these factors play out will influence the outlook for a vital source of
income for impoverished residents of other countries.
This article was written by Federico S. Mandelman, a research economist and assistant
policy adviser at the Atlanta Fed, and Courtney Nosal, an economic analyst at the Atlanta
Fed.

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Economic Research
Plumbing the Gulf's Depths for Oil and Gas

Volume 10, Number 3
Third Quarter 2008

FEATURES
Foreclosures Chill Once-Hot
Southeast Housing Market
Remittances Ebb and Flow
With the Immigration Tide
Plumbing the Gulf's Depths
for Oil and Gas

DEPARTMENTS
Fed @ Issue with John
Robertson
Grassroots: Chattanooga,
Tenn.
Q & A: Barb Godin
State of the States
Research Notes & News
Southeastern Economic
Indicators
Staff

Historically high oil prices and
gradually dwindling supplies of easily
accessible oil and gas deposits
worldwide have inspired energy firms
to renew and expand exploration and
drilling in the Gulf of Mexico.
Advances in technology and
engineering have not only increased
the chances of finding oil deposits
but also made it physically possible—
and more economically feasible—to
plumb depths never before reached
in the search for liquid gold.
As oil prices soared during 2007 and 2008, Allen
Verret pondered whether the high prices would
spark a new boom for Gulf of Mexico oil and gas
production.
"You would assume that with a price at an all-time
high there would be an all-time high in permits
secured to do drilling, in work orders and other
activity," said Verret, executive director of the
Offshore Operators Committee, a trade group of
petroleum firms that work in the Gulf.

Photo courtesy of Global Santa Fe

Increased interest in
extracting oil and gas from
deepwater sites has proved
a boon for drillships like
the Jack Ryan (pictured
here). These ships are
designed both to carry
drilling platforms to
deepwater locations and to
perform drilling operations
on their own.

Without question, plenty is happening in the Gulf's murky depths, some of it driven by
rising fuel prices. Yet, for many reasons, high crude oil prices have not set off a mad
rush to extract the Gulf's long-buried hydrocarbons, as oil and gas deposits are called
in industry parlance.
"I don't think because oil hits $130 a barrel that you're going to see, all of a sudden, a
surge in activity," said Jeffrey Goetz of Poten & Partners in New York, a consultancy
that works with shipping and energy services firms.

BackGround
EconSouth Now

The business of oil and gas production simply does not lend itself to sudden surges.
Finding and pumping oil and gas from miles under the Gulf seabed takes too long—
generally five years to a decade from discovery to production—and costs too much,
often more than $1 billion in capital investment to develop a field.
Signs of resurgence

A slow expansion of exploration and production work is afoot, though, especially in
the Gulf's deeper water 100 miles and more from shore. After leaving in recent years,

a few mobile drilling rigs are returning to the Gulf from other parts of the world, still
more are under construction, and major petroleum companies recently paid record
prices to explore in depths where it has historically been cost prohibitive to produce
oil or gas.
"Gulf of Mexico activity today is
greater than most observers
anticipated even six months ago," said
Dean Taylor, chairman, president, and
chief executive officer of New
Orleans–based energy services
company Tidewater Inc., in a July 31
conference call with analysts and
investors.

Related Links
MMS's Gulf of Mexico oil and gas
production forecasts
MMS report on Gulf of Mexico energy
exploration
Entergy-Tulane Energy Institute Web site
Rigzone.com: Information about the oil
and gas industry

After falling for four straight years, Gulf
of Mexico oil production climbed 7
Gulf of Mexico Energy Exploration
and Production (MP3 8:14)
percent in 2007, to 1.34 million barrels
a day (see the chart), and will likely
rise in each of the next five years, according to projections from the U.S. Department
of the Interior's Minerals Management Service (MMS), which regulates and serves as
landlord for the Gulf's offshore drilling.
The production of natural gas—which comes from the earth in gaseous form from
many of the same rigs that pump oil—also appears to be on the upswing in the Gulf,
although not as sharply as oil production. The MMS estimates that the Gulf's gas
production was roughly 8 billion cubic feet per day (cfpd) in 2006–07, down from a
plateau of about 14 billion cfpd from 1996 through 2001. But, based on new
discoveries and producers' announced plans, the MMS projects that gas production
will rise slowly over the next few years to 9.8 billion cfpd in 2014.
Drilling deeper

In recent years, the Gulf of Mexico offshore energy industry has evolved into two
distinct segments—shallow water and deepwater. Easy-to-reach gas and oil in
shallower waters have been largely depleted, so the major companies have moved
farther offshore. At the same time, advances in discovery and drilling technology
—along with higher market prices that fuel greater investment—are making it more
economical to find and extract oil and gas in deep waters, defined as more than
1,000 feet, and even in ultradeep seas of 7,500 feet and more.
At the end of 2007, the MMS reported that 130 projects were producing oil and gas in
the deepwater Gulf of Mexico, double the number from five years earlier. Firms are
plunging their diamond-tipped drill bits through ever deeper water: In 2007, a record
15 rigs were drilling for oil and gas in water depths of 5,000 feet or more.
Experts believe far more deepwater work will likely occur. At least 13 drilling rigs are
currently being built and should be in use in the ultradeepwater Gulf in the next two to
three years, the MMS reports. These rigs can work in water 12,000 feet and drill to
seven-and-a-half miles, or 40,000 feet, under the sea floor.
These ultradeepwater rigs don't come cheap. Thunder Horse, the world's largest
moored semi-submersible platform, located 150 miles southeast of New Orleans,
cost $1 billion just to build the production rig alone. The total development costs,
though—including not only construction but also seismic surveys, preliminary drilling,

towing it to sea, and repairs of mechanical problems and hurricane damage during
construction—are around $5 billion, according to several news reports.
Despite such hefty price tags to develop these massive platforms, recent sales of
drilling rights indicate a long-term interest in deepwater expansion. Exploration
companies in March 2008 paid $3.7 billion in winning bids for leasing rights in the
deepwater Gulf, the most money raised in a single auction since the federal
government began offshore leasing in 1954. Two 2007 lease sales attracted a
combined $3.2 billion in winning bids.
The areas in
ultradeep
water are
attracting the
most interest
and dollars.
In 2007,
exploration
companies
bid on 152
"blocks," or
sections of
the Gulf, in
waters
greater than
7,500 feet
deep,
Source: Minerals Management Service (MMS), Gulf of Mexico Oil and Gas
Production Forecast: 2007-2016, figure 2 (May 2007)
according to
the MMS, up
from just six blocks bid on in 2006. In the 2008 auction, more than 93 percent of the
total of the winning bids was spent on deepwater blocks.
Historical and Projected Oil Production in the Gulf of Mexico

Motivated to produce

Tidewater Inc. CEO Taylor said exploration in the Gulf of Mexico is spurred in part by
the rise in natural gas prices in late 2007 and the first half of 2008. He noted that the
industry expects three to five of the rigs that had left in recent years to return to the
Gulf later in 2008.
In another sign that energy producers are busier in the Gulf, Tidewater reported that
the day rate it charges customers to use its boats in the Gulf increased 9 percent in
the second quarter of 2008 from the previous three months. Tidewater operates the
world's largest fleet of boats, more than 450, serving the offshore energy industry.
Much of the demand for services like Tidewater's appears to be coming from major oil
companies plumbing the Gulf's deep waters. Giants such as British Petroleum (BP),
BHP Billiton, Royal Dutch Shell, Chevron, and Devon Energy began producing oil
and natural gas from several new fields in the Gulf in 2007, and more projects are
due to come online in 2008 and 2009.
For example, BP announced that in late 2008, after a series of delays, it will begin
extracting oil and gas at Thunder Horse, which can produce up to 250,000 barrels of
oil a day, nearly a fifth of the Gulf's total production in 2007.
Meanwhile, in late 2007 and the first half of 2008, Australia-based BHP Billiton began

pumping oil from three deepwater fields, boosting its Gulf production more than
eightfold—to 100,000-plus barrels of oil a day from an average of 12,000 a day in its
2007 fiscal year. Another major field, Tahiti, in which Chevron owns a 58 percent
interest, is expected to produce its first oil in 2009. Chevron predicts that the $4.7
billion project will generate as much as 125,000 barrels of oil and 70 million cubic feet
of natural gas a day.
Oil and gas prices that most experts expect to remain elevated over the longer term
are motivating exploration in the Gulf and worldwide, said Eric Smith, associate
director of the Entergy-Tulane Energy Institute at Tulane University in New Orleans.
Global oil and gas exploration and production spending will rise 20 percent in 2008
versus 2007, according to a midyear survey of 398 energy companies by the former
investment bank Lehman Bros. And the world's largest oil company, ExxonMobil,
reported that capital and exploration spending was up 35 percent, to $12.5 billion, in
the first half of this year.
Energy still golden in
Louisiana

Louisiana, more than any other
state in the Southeast, benefits
from a strong energy industry, even
though energy does not dominate
the state's payrolls as it once did.
Less oil is being produced in state
waters and on land than in the
past, and that production has
become less labor intensive. Also,
Photo courtesy of British Petroleum
some large energy companies
have moved their corporate offices
Thunder Horse, jointly operated by BP
and ExxonMobil, is the world's largest
out of the state. Still, on most days,
semi-submersible drilling platform. It
Smith figures, 10,000 to 15,000
has the capacity to process and export a
quarter million barrels of oil a day.
people are working off Louisiana's
shore and another 25,000 to
35,000 on land in the industry. Louisiana's oil and gas production employment,
although currently almost 40 percent lower than in 1985, has climbed each year since
2004. The monthly average in 2007 through September was 46,759, up about 6,500
jobs from 2004, according to the Louisiana Department of Natural Resources.
Many of those jobs are high paying. For instance, operators of small unmanned
submarines and heavy, sophisticated cranes aboard offshore rigs typically earn more
than $100,000 a year, Smith said.
Back on land, the energy services industry in Louisiana is growing. Port Fourchon in
Galliano, about an hour southwest of New Orleans, serves much of the offshore oil
and gas business in the Gulf. The port is in the midst of doubling its size to more than
1,500 acres.
Although most of Tidewater's revenue and profits are generated outside the United
States, the New Orleans–based company also enjoys strong domestic operations.
Tidewater's two shipyards in Houma, La., have produced four 220-foot platform
supply vessels in the past three years and are now building two 250-foot supply
ships. In the past eight years, Tidewater has purchased or built 140 vessels for about
$1.6 billion, according to company reports.

McMoRan Exploration Co., also headquartered in New Orleans, has been able to
reduce debt and invest in potentially rich natural gas fields in the Gulf of late,
according to James Moffett and Richard Adkerson, the company's co-chairmen.
McMoRan's specialty is returning to depleted fields in the shallower Gulf and drilling
deeper into the seafloor for untapped reservoirs of gas.
This year, in fact, the company drilled what is billed as the deepest well ever at a field
called Blackbeard, in just 70 feet of water in the Gulf. (Like most major offshore oil
and gas projects, Blackbeard is a partnering venture among McMoRan and other
firms, though McMoRan is the operator.) ExxonMobil gave up on Blackbeard after
drilling to 30,000 feet, or 5.7 miles, under the seabed. McMoRan reported in July that
it had reached 35,000 feet at Blackbeard and was going deeper in search of natural
gas.
Technology gives and takes

Another Louisiana firm that is prospering along with the energy industry is C&C;
Technologies of Lafayette, a privately held company with 400-plus employees. The
company designs highly sophisticated autonomous underwater vehicles, or AUVs.
The machines, which look like capsules with fins at the stern, are programmable
submarines that are dropped from a ship or platform and cruise the sea floor for up to
50 hours at a time, helping to locate the best routes for pipelines and performing
other work in depths divers cannot safely reach.
Only a handful of AUVs are operating around the world, Smith said. The machines
advance the more common technology of remotely operated vehicles (ROVs). Unlike
an AUV, ROVs are generally tethered to a ship or platform and guided by an onboard
operator. They maintain drilling and pumping equipment and do other submarine
chores. An AUV needs no driver because internal computers store its instructions.
While
Two Oil Rigs, One Objective
economics
and
technology
are
stimulating
more
exploration in
the Gulf,
other forces
are working
against it.
Among those
are
shortages of
expert labor
and
equipment and a resulting rise in prices for equipment and materials, Smith and other
experts said.
Indeed, in August the BP Web site included a help-wanted notice for offshore
technicians in its Gulf of Mexico operations. In the past 20 years, the United States
has not produced enough petroleum engineers to satisfy the current demand, not to
mention other workers such as technicians and operators of ROVs, Smith said,

noting that during sluggish times in the industry fewer people enter the field.
"The industry is so cyclical that we have a missing generation, if you will," Smith said.
"We just don't have the people to do the work."
What's more, he said, most of the companies that produce the more sophisticated
offshore equipment are European. Norwegian firms, particularly, took the lead in
offshore technology while working in the North Sea through the 1970s, '80s, and '90s,
said Smith, who held strategic planning positions at major energy companies before
joining Tulane's faculty.
Marvels of engineering

Today's oil platforms are considerable engineering feats. The biggest, like Thunder
Horse, are as long and wide as three football fields, with tons of pipes, pumps,
storage tanks, compressors, and drilling equipment, along with living quarters,
kitchens, lounges, and small medical facilities. The design of the structures has
evolved from rigid legs that extended to the sea bottom in shallower water to the
latest semi-submersible platforms.
Those platforms are typically built on land and towed to the drilling location, where
ballast tanks filled with water hang about 80 feet underwater to stabilize the structure.
Enormous chains anchor the platform to the sea bottom. Some of the newest rigs are
not anchored to the bottom but include systems of pontoons and ballasts designed to
keep them stationary.
These designs are critical because the most difficult engineering problem involved in
the offshore drilling process is keeping a rig in place amid powerful currents and
waves, according to BP. Hurricanes Katrina and Rita proved that even giant rigs can
be tossed about by nature.
There is plenty more infrastructure underwater too. Modern production platforms do
not simply drill and pump oil from directly below. Gas and oil wells spread over miles
of sea floor are often tied back to a single platform.
For example, the Independence gas hub in the Gulf, which began production in 2007,
is at the center of 10 undersea fields spread over an area as large as metropolitan
Atlanta or Houston. Its longest subsea tieback, linking a well to the platform, stretches
45 miles. Most subsea wells are within 10 miles of the host platform, but the longest
tieback in the world currently is 62 miles, part of the Mensa platform in the Gulf,
according to a 2008 MMS report.
Drilling ships are also sometimes
used in ultradeep water. Networks
of propellers are programmed to
keep these vessels still while they
bore into the seabed.
The science of sighting

Of course, energy companies do
not invest huge sums to drill blindly.
The search for oil and gas has
advanced as much as the methods
of extracting it. In the late 1940s
and '50s, offshore seismic surveys
involved throwing dynamite from a

Photo courtesy of British Petroleum

boat and reading the sound waves
The Mars platform, a joint venture
that bounced back to the surface.
between Shell Oil and BP, operates in the
Gulf of Mexico and produces 220,000
Nowadays, air guns fire acoustic
barrels of oil and 220 million cubic feet
pulses to the ocean bottom and
of natural gas a day.
through the rock below. Sound
waves bounce off surfaces within
underwater rock to microphones nearer the water's surface. Using supercomputers,
geologists analyze the data collected by the microphones and map the rock
formations, projecting 3-D images that look like tie-dyed patches onto large screens
and looking for patterns that suggest reservoirs of oil or gas might be present.
Advances in seismic techniques have increased the hit rate from 10 percent or less in
early offshore days to about 50 percent for wells drilled in areas with no existing oil or
gas production, according to Smith and to BP's Web site.
All this design and technology are aimed at finding big reservoirs of hydrocarbons
and then tapping them in a way that will allow enough oil or gas to be extracted to
make the venture profitable. Until recently, production rates (the volume at which oil
can be pumped out) from the deepwater fields were not sufficient for commercial
success, Smith said.
Aside from finding the oil or gas and then accessing it, bringing it out has been a
huge challenge. Extraordinarily high temperatures of rock and liquids, along with
crushing pressure that collapses the pipe that sucks out the oil, are among the
difficulties. Reservoirs of oil or natural gas are often trapped within the pores of rocks,
like a fossilized sponge, and not in large underground pockets that would be easier to
drain.
Once they get oil or gas out of those rocks, producers must then tie into the Gulf's
existing pipeline network, which now totals about 33,000 miles. As drilling goes
farther and farther from shore, and thus from the pipelines, some companies are
experimenting with sending their oil and gas to shore via tanker ships, Goetz said.
It appears that oil and gas exploration and production in the Gulf of Mexico will
continue to move farther offshore and deeper under the sea floor. But there might not
be a boom coming. Compared to some other oil-rich regions of the world, the Gulf's
petroleum is expensive to find and produce. And while high prices make producing
that petroleum more economical, they also have shown signs of reducing U.S.
demand for oil and gas. It seems certain, though, that if oil and gas remain
expensive, efforts will only intensify to find it and pull it from the nethermost crannies
of the earth under the Gulf of Mexico.
This article was written by Charles Davidson, a staff writer for EconSouth.

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Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309-4470 Tel. (404) 498-8500

Economic Research

Volume 10, Number 3
Third Quarter 2008

FEATURES
Foreclosures Chill Once-Hot
Southeast Housing Market
Remittances Ebb and Flow
With the Immigration Tide

John C. Robertson is a vice
president and senior economist
in charge of the macropolicy and
applied microeconomic research
group in the Atlanta Fed's
research department.

Figuring Out the Oil Price Puzzle

A quiz: Gasoline prices during the first half of 2008 were higher than a year ago because of
a.
b.
c.
d.

Plumbing the Gulf's Depths
for Oil and Gas

DEPARTMENTS
Fed @ Issue with John
Robertson

strong growth in global demand,
the weak U.S. dollar,
weak supply growth, or
excessive speculation in oil futures markets.

"All of the above" would be a reasonable choice. But I would argue that (a) and (c) are the key factors in
the current story of high energy prices.

Grassroots: Chattanooga,
Tenn.

At present, underlying global demand for oil is strong but is being tempered by high prices. Global oil
demand is now more resilient than in the past in part because of subsidies protecting consumers in some
countries and because of robust economic growth in very populous countries outside the Organisation for
Economic Co-operation and Development (OECD). The weaker dollar has also contributed to higher oil
prices, but it's important to note that oil prices in other currencies also hit record levels.

Q & A: Barb Godin

Prices up, consumption down

State of the States
Research Notes & News
Southeastern Economic
Indicators
Staff
BackGround
EconSouth Now

As oil prices reached record highs recently, oil consumption responded by falling in developed OECD
countries, where consumers usually face market-based prices. An interesting question is what would have
happened if prices had not risen. Here are some simple economic calculations. In the second quarter of
2008, U.S. gross domestic product grew by 2.2 percent year over year. Assuming a growth response of
0.5, oil demand would be 1.1 percent higher if the price remained unchanged. In the second quarter of
2007, U.S. oil consumption was around 20.6 million barrels per day (mbd), so, with constant prices,
consumption would have been predicted to rise to above 20.8 mbd by the sescond quarter of 2008. But
during that quarter consumption was only 20.4 mbd. That drop was surely related to the fact that oil prices
averaged $124 per barrel in the second quarter—up almost 70 percent from the average 2007 price.
The supply-demand seesaw

All told, supply has not kept pace with demand growth, and this development is another important factor
behind today's high prices. Cuts in OPEC production in 2006 and 2007 initially spurred the run-up in oil
prices. And even though more recently OPEC has increased output, spare capacity remains very low.
Moreover, non-OPEC oil-producing nations have failed to increase output despite favorable prices.
The fundamental supply problem is not one of global resource constraints. Most estimates suggest the life
span of global proved oil reserves has not declined. In fact, proved reserves should be sufficient to
sustain current levels of world consumption for several decades. The problem is more about accessibility
(such as environmental and location issues and technological and labor constraints) and deliverability
(refinery bottlenecks). These difficulties have caused the short-term cost of producing more oil to
skyrocket.
Is speculation skewing the balance?

The usual counterargument to the supply-and-demand explanation outlined earlier is that oil prices were
driven higher by speculation in oil futures markets by noncommercial interests (those unrelated to the
physical oil market and without an economic need to hedge against oil price changes), with hedge funds

and index funds identified as the primary culprits.
However, recent studies by the International Energy Agency and the Commodity Futures Trading
Commission (CFTC), among others, have investigated this concern but have failed to find compelling
support for the argument that excessive speculation in futures markets is behind the oil price run-up. For
one thing, prices have also risen for most primary commodities, including those traded in futures markets
as well as those traded in physical markets where little or no speculative involvement takes place:
liquefied natural gas, coal, iron ore, minor metals, silicone, rice, bananas, and fish meal, among others. In
addition, price increases across the commodity spectrum have not been particularly synchronized.
Perhaps even more importantly, if speculators are persistently driving spot prices higher than the
equilibrium of the underlying supply by producers and demand by refiners and consumers, then an
imbalance in the form of higher stocks should be apparent. In prior historical episodes of speculative
bubbles (such as with tulip bulbs and silver), higher stocks were evident. In the recent run-up in oil prices,
however, OECD oil inventories have remained well within historical norms during the past two years.
What specific role have noncommercial traders (such as hedge funds) played in price setting? The CFTC
study shows that changes in commodity prices tend to be positively correlated with net long positions of
noncommercial traders. But this correlation doesn't appear to have behaved differently in the recent
period. In fact, the study suggests that noncommercial positions do not predict prices. If anything, the
relationship is one of trend chasing—that is, price changes leading to changes in noncommercial
positions.
Some people have also argued that increased investments in commodity index funds have pushed
commodity prices above levels consistent with supply and demand. The amount of money invested in
commodity futures contracts through index funds has indeed increased sharply in recent years, consistent
with the marketing of commodities as an asset class and a tool for portfolio diversification. Most of these
increases, however, appear to reflect valuation changes associated with higher prices. In fact, during the
past year the number of futures contracts held by index traders has been relatively stable for the few
commodities for which such data are available. In addition, these traders do not take delivery of the
physical product. Thus, every long position held by a speculative trader unwinds before expiration of the
futures contract. Averaged over time, the net demand from speculators tends to balance out.
Waiting for relief

In summary, the crude outlook remains relatively tight with little supply relief in the very short term,
although more supplies appear to be on the horizon. Inventories are not unusually high, and demand is
slowing, especially in developed countries. Finally, the available evidence does not support the argument
that speculators have driven prices above the levels consistent with supply and demand.
So while price increases are still possible, demand and supply factors that will dampen the upward
pressure on prices appear to be evolving.

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Economic Research
Grassroots

Tourism, Manufacturing Revive Chattanooga

Volume 10, Number 3
Third Quarter 2008

FEATURES
Foreclosures Chill Once-Hot
Southeast Housing Market
Remittances Ebb and Flow
With the Immigration Tide
Plumbing the Gulf's Depths
for Oil and Gas

DEPARTMENTS
Fed @ Issue with John
Robertson
Grassroots: Chattanooga,
Tenn.
Q & A: Barb Godin
State of the States
Research Notes & News

If there were an award for the city
that has won the most awards, it
might well go to Chattanooga,
Tenn.
A host of media outlets have hailed
Chattanooga, located on the
Tennessee River in the Ridge-andValley Appalachians, as an ecofriendly ideal of urban
transformation. Southern Living
readers named the city their thirdfavorite place in the South to take
children, behind only the tourist
meccas of Walt Disney World and
Orlando, Fla.

Photo courtesy of the Chattanooga Area Chamber of
Commerce

The renovation of the Walnut Street
Bridge, the world's longest pedestrian
bridge, has contributed to the revival of
downtown Chattanooga.

Since 1990, local and state government, private businesses, and local charitable
foundations have invested more than $2 billion in downtown Chattanooga—in an
aquarium, parks, a river walk, historic theaters, bike paths, small inns, museums,
residences, and one of the world's longest pedestrian bridges. The city even runs
free electric buses downtown.
And the city is about to receive an economic boost. The German automaker
Volkswagen announced in July that it will build a $1 billion plant—its first in North
America since it closed a Pennsylvania plant in 1988—just outside Chattanooga. The
plant will employ between 2,000 and 2,500 people when it begins production in 2011.

Staff

"Chattanooga is a model of what a mid-sized downtown can achieve when its
community unites in a common cause," said RevitalizationOnline.com, a Web site
about restoring communities. And Utne Reader magazine noted several years ago,
"Chattanooga's progress, past and present, demonstrates that problems, however
onerous, needn't defeat people who care."

BackGround

Clearing the air

Southeastern Economic
Indicators

EconSouth Now

Chattanooga has had its problems. A former iron smelting hub, the city enjoyed
prosperity through the 19th and 20th centuries that had its downside: dirty air. The
city began cleaning up after the federal government in 1969 dubbed Chattanooga's
air quality the nation's worst. A local newspaper editor once told National Public
Radio that pollution used to make his white windowsill look like it had pepper
sprinkled on it.
In the

1970s,
local
Chattanooga, Tenn.
factories
Population
151,944
agreed to
install
Hamilton County
312,905
pollutionpopulation
control
Households (city)
65,518
devices.
In
Median household
$36,981
income
addition,
iron and
Source: U.S. Census Bureau's 2006
steel
American Community Survey
foundries
declined
through
the 1970s and '80s. Although improving the air quality, the industrial decline also
hammered the city's employment base. "We've been on a climb back ever since all of
that happened," said Tom Edd Wilson, a retired banker and president of the
Chattanooga Area Chamber of Commerce. "It's been an interesting climb."
The climb took a big step in the early 1990s. City leaders launched a downtown
revitalization campaign lauded for its inclusion of citizens from various
neighborhoods, socioeconomic strata, and ethnic groups. The aquarium opening in
1992 and the christening of the Walnut Street Bridge the following year were two of
the most visible early components of the downtown resurrection. The bridge, a 100year-old span over the Tennessee River, was slated for demolition but instead was
renovated as a walkway. Downtown Chattanooga also now boasts 140 acres of
parkland, up from virtually none before the revitalization.
By most accounts, the downtown makeover has succeeded wildly. The city of about
152,000—and metro area population of 514,000—attracts some three million visitors
a year. Many of them are drawn to the riverfront, whose $120 million rejuvenation
was completed in 2005.
That renewal project included a $30 million expansion of the Tennessee Aquarium,
the linchpin of the downtown resurgence; a $19.5 million expansion of the Hunter
Museum of American Art; and $61 million spent on a pier and bridge, boat slips,
green space, and the rerouting of a four-lane highway to improve pedestrian access
to the river.
Tourism can't go it alone

The resurgence of the city's downtown has been a boon for tourism. But tourism
alone is not a solid base for the local economy, said Bruce Hutchinson, an economist
at the University of Tennessee-Chattanooga. He points out that tourist attractions,
hotels, and restaurants offer mostly lower-paying service jobs with little chance for
advancement.
After expansion through the 1990s, job growth in the Chattanooga area has slowed.
Through May, total nonfarm employment in 2008 averaged 246,800. This figure is up
from 238,400 in 2000 but is down from 2007, according to the U.S. Bureau of Labor
Statistics. Some of the city's larger employers—the Tennessee Valley Authority,
DuPont, and Wheland Foundry Co., to name a few—have shed jobs over the past
several years.

Along with Tennessee and the
nation, Chattanooga has shown
other symptoms of slowing: The
value of permitted residential and
commercial construction projects
fell 30 percent in 2007 compared
to 2006, and retail sales growth in
Chattanooga's Hamilton County
slowed to 2.6 percent from 7.9
percent during the same period,
according to the Chattanooga Area
Chamber of Commerce.

Facts About Chattanooga
In 1899 Chattanooga became the
first city to bottle Coca-Cola.
The Moon Pie was created in
Chattanooga in 1917 and has been
produced continuously since then.
The country's first miniature golf
course was built in Chattanooga in
1929.

Nevertheless, in spite of weakening in some old-line industries, the local economy
overall has been performing better than it should have, Hutchinson said.
One reason for that performance is a handful of large construction projects in the
metro area. Blue Cross and Blue Shield of Tennessee is building a $300 million, fivebuilding campus headquarters scheduled for completion in June 2009. Alstom, a
French manufacturer of power generation equipment, is constructing a factory to
make generators for nuclear power plants, a $280 million investment expected to add
300 jobs when it begins production in 2010. Memorial Health Care System is
spending a similar amount on an expansion.
The insurance industry has become a local stalwart. Blue Cross and Blue Shield of
Tennessee is the area's largest employer, with 4,800 workers, while Unum Group and
Cigna HealthCare are also among the top 10.
Meanwhile, downtown development has not stopped. More than 400 condos were
completed in late summer and early fall. Despite the nationwide housing slump, two
big projects in Chattanooga appear healthy, said Jeff Pfitzer, director of special
projects for the River City Co., a private nonprofit and a leader in downtown
development. As of Aug. 1, a 200-unit building was 75 percent presold, and a 100unit building had 65 percent of its residences sold, though those sales have not all
closed, Pfitzer said.
Rolling out the welcome wagon

But of all the boosts to the modern Chattanooga economy, the biggest one in recent
history is Volkswagen's plant. Auto plants typically attract a fleet of suppliers, so
Chattanooga business boosters are aglow. To prepare for challenges along with an
anticipated bonanza, Wilson and several other Chattanooga officials have visited
Greenville and Spartanburg, S.C., to study that area's experience with the BMW
factory that opened there in 1994.
State and local governments and community colleges will help provide job training as
part of an incentive package awarded to Volkswagen that is expected to total at least
$400 million, according to the Chattanooga Times-Free Press. Training will be "a
huge undertaking," Wilson said. Local schools also must prepare for an influx of
students.
No one yet knows how many Volkswagen jobs will be filled by Chattanoogans or how
many people the company might move from elsewhere. Soon after Volkswagen's
news conference in July, though, it was already clear that luring the automaker
polished Chattanooga's image as a city for commerce and not just a nice place to live

and play. "The psychology is playing out very positively for Chattanooga," Hutchinson
said. "We shouldn't underestimate that in terms of businesses seeing it as a viable
place to grow."
This article was written by Charles Davidson, a staff writer for EconSouth.

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Economic Research
Q&A

"We Know These Are Difficult Times"
An Interview With Barb Godin of Regions Bank

Volume 10, Number 3
Third Quarter 2008

FEATURES
Foreclosures Chill Once-Hot
Southeast Housing Market
Remittances Ebb and Flow
With the Immigration Tide
Plumbing the Gulf's Depths
for Oil and Gas

As pressures in the housing
market mount, increasing
numbers of homeowners
are facing the threat of
foreclosure. Some banks
have instituted programs to
assist customers who find
themselves in this situation.
Barb Godin, executive vice
president and consumer
credit executive for Regions
Bank in Birmingham, Ala.,
discussed steps her bank is
taking in this area.

DEPARTMENTS
Fed @ Issue with John
Robertson
Grassroots: Chattanooga,
Tenn.
Q & A: Barb Godin
State of the States
Research Notes & News
Southeastern Economic
Indicators
Staff
BackGround
EconSouth Now

BARB GODIN

EconSouth: What kind of
consumer hardship
problems has Regions
Bank been encountering?

Title

Executive vice president

Organization

Regions Bank

Web Site

http://www.regions.com/

Before joining Regions in 2003,
Barb Godin: Generally, the Other
Godin was executive vice president
first mortgages we
and chief consumer credit officer for
KeyBank. Previously, she held
originated were sold to
various positions at Scotiabank,
Freddie [Mac] and Fannie
including senior vice president of
[Mae]. So we've been
retail lending, vice president of credit
risk management, director of
dealing mostly with home
collections, and director of consumer
equity loans. A lot of these
underwriting. She received an MBA
from the University of Western
are second mortgage loans
Ontario and is a graduate of the
in Florida, cases where the
International School of Banking.
customer is less invested in
staying as opposed to
primary residences. Along with the problems in Florida, there have been problems in
the inner cities, and we've also seen an increase [in foreclosures] along the coast in
Alabama.

ES: What are some steps you've taken to address the foreclosure problem?
Godin: We want to identify problems before they get out of hand. We will call people
who are close to their limit on home equity lines of credit. If we notice a repayment
pattern change or a credit score decline, we'll give them a call. Most people are glad
to hear from us. They know we're not fair weather bankers. For those who need more

help, we'll put them through a customer assistance plan. We're open to rewriting the
loan and extending the repayment period. If we need to, we'll go from 10 to 20 years
or 15 to 30 years—whatever works to keep people in their homes.
Depending on the problem, we can suspend foreclosure actions or do what's called a
short sale. Basically, that's an agreement to accept a lesser amount than is owed to
release a lien against the property so that it can be sold. Also, we have a program for
certain borrowers to avoid foreclosure known as Keys for Cash. We will pay them to
vacate their home. We make an offer, and we give them a check if they leave the
house in good working order.
We know these are difficult times. We recognize foreclosure is a very emotional
process. But as long as they're willing to talk, we'll listen. It's not just an ability to pay
that we're looking for but also a willingness.
ES: What are some of the things that Regions Bank has done to mitigate your
customers' foreclosure problems?
Godin: One of the most important steps we've taken is our enhanced Web site. We
have launched portals called Home Equity Payment Hardship and Mortgage
Payment Hardship. These provide a way for customers who have payment hardship
to reach out and start a conversation with us on their options. I would describe it as a
kinder, gentler approach.
ES: How do these programs
work?

Photo by Brad Newton

To help borrowers avoid foreclosure, Regions
has set up programs to help homeowners,
including a Web site and a toll-free phone
number, that permit them to discuss their
options.

Godin: To begin with, there's
an 800 number to call us tollfree. There's also a link to a
financial assistance form that
borrowers can send in to
explain their financial hardship.
So they have a choice to send
in the form or call.
ES: What other information do
you provide on the Web?

Godin: We've found that it
helps to explain some of the
jargon that comes with the mortgage process, and that information is on our Web
site. We try to answer questions such as, What is a repayment? What's modification?
We explain the meanings of these kinds of terms in both English and Spanish. Also,
there's a free DVD available with some examples of customers we've helped.
ES: What kind of reaction have you gotten?
Godin:We've received a good response and a lot of nice feedback. People have
said, "Thanks for doing this." With a telephone call, people are afraid they will be
judged for their problems—or worse. But if they go to the Web they're not threatened.
They start to recognize that there might be a payment plan that could work for them.
The Web helps to do away with the fear of being rejected.
ES: What have been the results of this effort?

Godin: We started this customer assistance program in October 2007. Since that
time through our Web site we've helped 1,070 customers and worked with loans
amounting to $270 million. These loans have involved some form of modification or
forbearance.
ES: What are the origins of this program?
Godin: This project is an extension of best practices we learned after Hurricane
Katrina when many of our customers experienced a different kind of hardship. We
dedicated a group to customer assistance, and we've expanded staff to cope with
foreclosures. The difference with the subprime meltdown is that we're not dealing
with a natural disaster like a hurricane. It's a manmade disaster.
This interview was conducted by William Smith, a staff writer for EconSouth.

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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
Volume 10, Number 3
Third Quarter 2008

FEATURES
Foreclosures Chill Once-Hot
Southeast Housing Market
Remittances Ebb and Flow
With the Immigration Tide
Plumbing the Gulf's Depths
for Oil and Gas

DEPARTMENTS
Fed @ Issue with John
Robertson
Grassroots: Chattanooga,
Tenn.
Q & A: Barb Godin
State of the States
Research Notes & News
Southeastern Economic
Indicators
Staff

• For the third quarter
of 2008, the
Compass Bank
Business Leaders
Confidence Index for
Alabama was 42.7,
only 0.2 points below
its second quarter
reading. (A reading
above 50 indicates
expansion, below 50,
contraction.) The
bank's economic
outlook index
declined by 0.9
points to 45.2,
almost 19 points
below its level from a
year earlier.
However, declining
expectations in both
indexes have leveled
off during the past
few months.

Related Links
REIN (Regional Economic
Information Network) Data and
Analysis
Compass Bank Business Leaders
Confidence Index for Alabama
Florida Consumer Confidence
Index (University of Florida)
"Examination of the Development
of Liquefied Natural Gas on the
Gulf of Mexico"
University of Southern Mississippi
July 2008 economic outlook
conference
Middle Tennessee Consumer
Confidence Reports

• In early May, Atlanta-based Home Depot broke ground on a
new distribution center in McCalla. The $33 million center,
targeted for completion by the end of 2008, will initially
employ 214 people. The 657,000 square foot facility is being
built on a 70-acre site in Jefferson Metropolitan Park. Home
Depot expects that the facility will help improve service and
efficiency at its Southeastern U.S. stores.

BackGround
EconSouth Now
• The Florida consumer confidence index
rose to 60 in July from its all-time low of
59 in June, signaling that Floridians may
be looking ahead to when the housing
market picks up. "Consumers are quite
gloomy about their current finances, but
expect some change over the next

year," said Chris McCarty, survey
research director for the University of
Florida's Bureau of Economic and
Business Research. "Floridians may be
looking ahead to a bottoming out of
home prices, which may come sooner
than expected, and a pickup in sales,
which will probably not occur until next
year."
• In May, Gov. Charlie Crist announced
that Piper Aircraft plans to keep its
headquarters in Vero Beach and further
expand manufacturing operations there.
By 2012, Piper plans to add more than
450 jobs to the 960 already on the
payrolls.

• Manufacturing activity in Georgia
remained unchanged in July, according
to the Econometric Center at Kennesaw
State University. The center's Georgia
Purchasing Managers Index (PMI)—a
snapshot of the state's manufacturing
sector—was 49.6, the same level as in
June. (A reading above 50 indicates
expanding manufacturing activity, below
50, contracting activity.) The reading
indicates some stability but also reflects
a weakness in manufacturing that
began in December 2007. "The
manufacturing sector doesn't see a
long-term sustainable trend," said Don
Sabbarese, the center's director.
• In May, Korea-based Kumho Tire Co.,
one of the world's top 10 tire
manufacturers, broke ground near
Macon on its sixth overseas plant. The
$225 million, 5.7 million square foot
facility, slated for completion by the end
of 2009, is expected to provide more
than 450 jobs and initially manufacture
more than 2 million tires per year for
original and replacement equipment
markets in the United States.

• David Dismukes, associate executive
director of Louisiana State University's
Center for Energy Studies, recently
published a study examining the role,
importance, and development of
liquefied natural gas (LNG)
regasification facilities along the Gulf of
Mexico. The study finds that the Gulf is
probably the best location in the United
States for the development of LNG
regasification facilities because the

region has a large energy infrastructure
that can support and serve as a market
for LNG.
• In June, Zagis USA broke ground on the
first of two textile mills in Jefferson
Davis Parish. The company will invest
$75 million in a two-phase cotton
spinning project that will bring 160 new
jobs to the area. The average annual
wage will be $31,000 plus benefits. The
first phase is estimated to be completed
by late fall of 2008, and the second is
projected to begin in early 2009.

• At an economic outlook conference in
July sponsored by the Bureau of
Business and Economic Research of
the University of Southern Mississippi,
William Gunther, the bureau's director,
reported that Mississippi's economy
tends to parallel the U.S. economy and
that weak job growth will likely continue
for the rest of 2008. He expects job
losses in manufacturing, retail trade,
and nonresidential construction and
only marginal gains in health care and
in business and professional services in
the second half of the year. For 2008 as
a whole, he believes total employment
growth will likely be negative.
• PK USA Inc., an automotive parts
supplier, announced earlier this year
that it will open a new stamping and
welding assembly plant in Senatobia.
The 200,000 square foot facility will
employ 150 people when it begins
production in 2010. The plant will supply
the Toyota plant now under construction
in Blue Springs as well as other
Japanese manufacturers and suppliers
in the state.

• A recent Middle Tennessee State
University survey of local consumers
showed that confidence has fallen to its
lowest level since the beginning of
2003, when the previous year's news
reports featured corporate accounting
scandals and uncertainty about the war
in Iraq. Timothy Graeff, director of the
university's Office of Consumer
Research, noted in the report that high
gasoline prices are affecting local
consumers' mindset. "Even though the
local economy is healthy, consumers . .
. have become increasingly pessimistic

about the current [and] future economy."
• In July, Volkswagen AG picked
Chattanooga as the site for its new U.S.
auto plant. The plant is expected to
employ 2,000 workers and have the
capacity to produce 150,000 cars a year
when it begins production in 2011.
University of Tennessee economist Bill
Fox said spinoff jobs in Tennessee and
neighboring corners of Georgia and
Alabama could total more than 10,000.
This information was compiled by Shalini Patel, an economic
analyst at the Atlanta Fed.
Illustrations by Jay Rogers

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Economic Research
Research Notes and News
Research Notes and News highlights recently published
research as well as other news from the Federal Reserve Bank
of Atlanta.
Volume 10, Number 3
Third Quarter 2008

FEATURES
Foreclosures Chill Once-Hot
Southeast Housing Market
Remittances Ebb and Flow
With the Immigration Tide
Plumbing the Gulf's Depths
for Oil and Gas

DEPARTMENTS
Fed @ Issue with John
Robertson
Grassroots: Chattanooga,
Tenn.
Q & A: Barb Godin
State of the States
Research Notes & News
Southeastern Economic
Indicators
Staff
BackGround
EconSouth Now

Fed chief discusses reducing systemic risk
Federal Reserve Chairman Ben Bernanke recently laid out two broad strategies for
reducing risk in the nation's financial system: strengthening the financial
infrastructure and adopting a broader approach to financial supervision and
regulation.
Although the financial market turmoil that began in 2007 is not over, the nation must
explore how to bolster the system to make such bouts of instability rarer and less
severe, Bernanke said during an August speech at the Federal Reserve Bank of
Kansas City's Annual Economic Symposium in Jackson Hole, Wyo.
The Federal Reserve is collaborating with the private sector and other regulators to
strengthen the financial infrastructure, he said. For example, the New York Fed is
leading a public-private initiative to improve arrangements for clearing and settling
trades in credit default swaps and other over-the-counter derivatives.
Bernanke also discussed the notion of a broader approach to supervising and
regulating financial institutions. But he cautioned that such reforms must be carried
out carefully. "The adoption of a regulatory and supervisory approach with a heavier
macroprudential focus has a strong rationale, but we should be careful about
overpromising, as we are still rather far from having the capacity to implement such
an approach in a thoroughgoing way," he said.
Atlanta Fed research director introduces economics blog
Research staff at the Federal Reserve Bank of Atlanta are now producing macroblog,
an economics blog that appears on the Atlanta Fed's Web site.
The blog offers commentary and observations on economic topics of the day,
including monetary policy, macroeconomic developments, financial issues, and
Southeastern economic trends. Posts so far, for example, have addressed what
employment statistics say about the economy's health, the gross domestic product
deflator, the complexities of measuring inflation, and the results of the federal
government's economic stimulus package.
David Altig, senior vice president and director of research at the Atlanta Fed,
originally launched macroblog in 2004 while he was an adjunct professor of
economics in the graduate business school at the University of Chicago. He
suspended the blog in August 2007, when he began his responsibilities at the Atlanta
Fed.
Altig made the first post to the Atlanta Fed's macroblog on Aug. 12, 2008. New posts

appear on Tuesdays and Thursdays. Postings made during the week before and the
week of Federal Open Market Committee meetings do not comment on monetary
policy.
Users may subscribe to macroblog via RSS feeds and e-mail.

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Economic Research
Southeastern Economic
Indicators

Volume 10, Number 3
Third Quarter 2008

Alabama Florida Georgia Louisiana Mississippi Tennessee
Total payroll
employment
(thousands)a

2008Q2

2,011.9 7,967.2

Percent change
from

2008Q1

–0.2

Percent change
from

2007Q2

Manufacturing
payroll
employment
(thousands)b

6th
District

U.S.

4,159.7

1,944.5

1,156.6

2,784.7 20,024.7 137,715.7

–0.8

–0.5

0.3

0.1

–0.4

–0.5

–0.1

0.4

–1.0

0.4

1.7

0.5

–0.3

–0.1

0.2

2008Q2

290.8

368.9

417.9

157.6

165.0

371.7

1,771.9

13,580.0

Percent change
from

2008Q1

–0.5

–1.6

–1.3

–0.1

–0.8

–0.3

–0.9

–0.1

Percent change
from

2007Q2

–2.1

–6.2

–3.6

–0.2

–3.6

–2.4

–3.4

–2.5

Civilian
unemployment
ratea

2008Q2

4.5

5.4

5.5

4.0

6.6

6.1

5.4

5.3

Rate as of

2008Q1

3.9

4.7

5.1

4.1

6.0

5.2

4.8

4.9

Rate as of

2007Q2

3.5

3.9

4.4

3.9

6.3

4.6

4.2

4.5

Existing singlefamily home
sales
(thousands of
units)c

2008Q2

90.0

270.8

175.2

65.6

53.2

126.8

781.6

4,913.0

Percent change
from

2008Q1

–8.5

10.1

–7.0

–1.2

–3.6

–5.4

–0.9

–0.8

Percent change
from

2007Q2

–27.2

–13.2

–21.4

–17.6

–13.6

–12.7

–17.3

–16.3

Single-family
building
permits YTD
(units)b

2008Q2

6,949

22,974

15,579

6,947

4,280

9,423

66,152

332,296

Percent change
from

2007Q2

–35.4

–47.6

–52.2

–20.5

–33.6

–43.6

–44.5

–41.0

Personal
income
($ billions)c

2008Q1

154.2

716.7

325.2

152.1

85.4

212.0

1,645.6

12,002.1

Percent change
from

2007Q4

0.8

1.1

1.2

–0.6

–0.3

0.6

0.8

1.1

Percent change
from

2007Q1

4.7

4.0

3.8

7.0

5.1

4.9

4.5

4.8

Atlanta Birmingham Jacksonville
Total payroll
employment
(thousands)b

2008Q2 2,473.3

533.4

Percent change
from

2007Q2

1.0

0.0

–0.5

Civilian
unemployment
rateb

2008Q2

5.4

3.8

Rate as of

2007Q2

4.1

Office vacancy
rateb

2008Q2

Rate as of

Miami Nashville

631.3 2,419.7

New Orlando Tampa
Orleans

766.1

527.2

1,104.2 1,289.1

–0.7

1.1

1.9

0.2

–1.5

5.1

5.0

5.1

3.6

4.9

5.5

2.9

3.7

3.6

3.6

3.6

3.6

3.8

18.7

—

16.0

9.2

11.0

—

12.0

15.0

2007Q2

18.3

—

14.3

7.2

10.8

—

9.0

12.3

Median existing
home sale price
(thousands of
$U.S.)b

2008Q2

158.3

163.5

186.8

310.1

—

162.9

223.5

180.8

Median price
as of

2007Q2

175.5

164.9

198.7

384.4

—

166.0

265.1

222.7

aSeasonally adjusted data
b Not seasonally adjusted
c Seasonally adjusted annual rate

Sources: Payroll employment and civilian unemployment rate: U.S. Department of Labor, Bureau of Labor Statistics.
Existing home sales and median existing home sale price: National Association of Realtors. Single-family 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. Office vacancy rate: CB Richard Ellis.
Most data were obtained from Economy.com and are subject to revision by the data-gathering agencies.
For more extensive information on the data series shown here, see historical data.

Total Payroll Employment

Manufacturing Payroll Employment

Civilian Unemployment Rate

Existing Home Sales

Single-Family Building Permits YTD

Personal Income

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Economic Research
Staff
Lynne Anservitz
Editorial Director

Volume 10, Number 3
Third Quarter 2008

FEATURES
Foreclosures Chill Once-Hot
Southeast Housing Market
Remittances Ebb and Flow
With the Immigration Tide
Plumbing the Gulf's Depths
for Oil and Gas

DEPARTMENTS
Fed @ Issue with John
Robertson
Grassroots: Chattanooga,
Tenn.
Q & A: Barb Godin
State of the States
Research Notes & News
Southeastern Economic
Indicators
Staff
BackGround

Lynn Foley
Tom Heintjes
Managing Editors
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Economic Research
Back Ground

Volume 10, Number 3
Third Quarter 2008

FEATURES
Foreclosures Chill Once-Hot
Southeast Housing Market
Remittances Ebb and Flow
With the Immigration Tide
Plumbing the Gulf's Depths
for Oil and Gas

DEPARTMENTS
Fed @ Issue with John
Robertson
Grassroots: Chattanooga,
Tenn.
Q & A: Barb Godin
State of the States
Research Notes & News
Southeastern Economic
Indicators
Staff
BackGround
EconSouth Now

Photo courtesy of the Library of Congress photo archives

This Louisiana petroleum refinery, shown in 1944, used a
chemical process called "cracking" to produce fuel for military
equipment during World War II. Developed in the late
nineteenth century, cracking became widely used in wartime
to increase Allied gasoline production.