Beige Book Report: Atlanta
December 9, 1970
The economy of the Southeast is marking time. Although layoffs continue to dominate the employment news, there are enough bright spots in the District's economy to keep it on an even keel. Construction of low-income housing and road building is active, and a slow but steady flow of announcements of new plants or plant expansions is encouraging. A soon-to-be-released survey indicates Tennessee businessmen have a cautiously optimistic outlook. On the other hand, numerous announcements of further price increases have appeared. There is some sentiment among our directors for wage and price controls.
The aluminum industry is fearful that it may have to settle for a package similar to the GM contract in its upcoming labor negotiations in spite of the fact that the industry is in the doldrums. Aluminum exports are off. One large producer has gradually reduced its labor force from 6,800 to 5,500, 1,000 being released in the last year. A producer in the New Orleans vicinity has recently shut down one of its lines, idling 125 aluminum workers.
Layoffs are also occurring in such industries as chemical, paper, airlines, and aircraft. A chemical firm in south Louisiana is idling 800 employees, including administrators and supervisors. A north Florida paper producer is temporarily cutting its production—affecting 680 workers—and a southern Mississippi paper mill has gradually been reducing its work force. An aircraft R & D Center will be dropping 300 employees by the end of the year. In Florida, 200 employees of an airline were laid off because of a slowdown in business and tourist traffic. The weakness in the job market for college-educated people is underscored by a decrease in campus recruiting, especially by aerospace and defense-related firms and Federal agencies.
Newspapers in the District have been carrying reports of price increases, and one paper decried the October increase in consumer prices in an editorial entitled "Up, Up and Away". Papers have recently highlighted price and wage increases in the following areas: white collar wages, freight rates, proposed Atlanta bus fares, intrastate bus fares in Georgia, Atlanta food prices, and proposed phone, utility, and milk prices. However, some articles have called attention to lower interest rates. For example, one article stated that Tennessee taxpayers saved about $4 million in interest costs because of lower interest rates on bonds. Also, it has been reported that differences in bids by construction subcontractors have been very small, indicating keen competition.
The sluggish pace of economic activity has slowed the growth of revenues to state and local governments. As a consequence, these governments have begun to cut spending. For example, Georgia's budget for the current fiscal year was based on an anticipated revenue increase of 9.5 percent. But November receipts ran only 1.3 percent above the year-ago level. This prompted cost-cutting measures in all areas of the state's government.
The fire on the Shell Oil platform in the Gulf is more serious than the similar Chevron fire, because there are more wells on the platform and the prevailing currents at the site are toward the Coast. The Chevron fire resulted in a moratorium on well digging which depressed economic activity along the Louisiana and Mississippi Gulf Coasts. It is likely that those industries and localities which depend upon offshore oil drilling will again be adversely affected.
On the bright side, production of light fixtures at a large plant in Mississippi is stabilizing after a gradual decline. In Florida outlays for road construction are increasing and two bond issues have recently received cabinet-level approval. Alabama's expenditures on roads will be about 25 per cent greater this year than last. A tire plant in Alabama has returned to production after being closed for more than a month. Those apparel plants specializing in new styles are doing very well.
Furthermore, new plants are opening or have been announced for producing modular homes, metal products, chemical cellulose, travel trailers, and plastics. A director from south Alabama reports that the outlook for new plants and plant expansion in his locality is better than at any time during recent months.
Reasons given by Tennessee businessmen for their cautiously optimistic outlook include: "a lowering of interest rates", "improving credit collections", "an increasing investment capital supply in the state", and "expected reversal of the decline in the national economy". Many panelists, however, believe that several months will pass before these factors take effect and, thus strong expansion will not occur before midyear at the earliest. Rising costs, compared with resale prices, are identified by the panel as by far the most critical issue facing Tennessee businesses at present.
Low-income residential construction has been active. For example, in
Birmingham and Chattanooga, construction has recently commenced on
two large residential projects for
low-income families. In a rural
area of Alabama, 99 percent of the homes financed by the Farmers
Home Administration this year have been in the low-price range. Last
year, only 50 percent of the homes similarly financed were in the
low-price range. Although the 235 program is evidently responsible
for many housing starts, three builders are reported to be leaving
this type of construction because inspection regulations have added
to costs. There has been a softening in the market for luxury
condominiums in south Florida, with most buyers looking for units
below $35,000.