Beige Book Report: Atlanta
December 10, 1975
An economic recovery is in progress throughout most of the Sixth District, although the pace at which individual states are moving remains very uneven. Rapid growth is most evident in Tennessee, while Florida continues to lag behind the other states. The pattern of recovery in nonagricultural employment reveals the principal areas of strength and weakness in each state. In Florida, the depth of the construction industry decline is clearly reflected in retail sales. Sales of department stores in other states indicate a broadly based upturn in holiday sales. Inventories are fairly well balanced except for highly advertised goods or those for which raw materials inventories are in short supply. Two recent developments are contributing a much needed stimulus to construction activity in the Atlanta area.
Sixth District nonagricultural employment in October stands at 98 percent of the November 1973 level, having recovered somewhat from the low point of 96.3 percent reached last June. Nonagricultural employment in Alabama, Louisiana, Mississippi, and Tennessee has regained the November 1973 level. In Georgia and in Florida, where employment is still declining, employment lags by about 5 percent. Construction and manufacturing employment have been fairly stable in Alabama and Louisiana, with the remaining deficit from the November 1973 level limited to less than 4 percent. In Florida and Georgia, the pronounced weakness in construction employment has been a major depressant for business activity, with declines from the base period level of 41 and 22 percent, respectively. The effects of these reductions are echoed by lower wholesale and retail trade employment and by fewer jobs in the financial, insurance, and real estate category. Employment in these two states has also weakened in the transportation, communication, and public utilities category. Manufacturing employment has fallen about 10 percent in Florida, Georgia, and Tennessee, mainly reflecting reductions in durable goods manufacturing employment. In Florida, greater stability in nondurable manufacturing cushioned a larger decline in durable goods industries. Tennessee's weakness in durable goods manufacturing has been largely offset by much more rapid growth in Federal Government employment and in services, which reflects the vigor of the tourism industry.
The declines noted in employment in Florida have noticeably affected that state's retail sales. Unlike other states in the District, Florida has experienced a leveling of the decline rather than an appreciable upturn. This pattern is reflected in directors' reports that October auto sales remain substantially below 1974 levels and that yearly increases of retail sales continue to lag behind the rate of price increase. Limited evidence of a revival appeared in November auto sales in certain areas. Results of holiday season retail sales lack any clear pattern. Where strong sales are reported, they are sporadic. The bright spots in the Florida economy are tourism, which is strong in Central and Eastern Florida, and a citrus crop, which is large but not excessive in relation to the expected level of demand. Conditions in South Florida are less encouraging. The tourist business slackened in late summer, and retail sales have been flat. A director commented in November that "no recovery can gain sustainable momentum without participation of the construction and tourist industries, and neither appears too strong at the moment." Only limited improvement is reported in the overstocked inventory of condominiums in many areas of Florida.
Many large department stores in the Sixth District, excluding Florida, have experienced a marked improvement in sales since Thanksgiving, a telephone survey indicates. For certain stores, improving sales began as long ago as May, and gains from last year run in excess of 25 percent. A much more relaxed and confident consumer mood is reportedly the source of this improvement, although some consumers retain an attitude of uncertainty. None of the retailers contacted report an appreciable increase in the proportion of credit sales, while one stated that the ratio of credit sales has continued to decline. Most stores report improved sales across the board without noticeable weaknesses in specific types or price ranges of goods. However, some reports were received of improved but still below normal sales of more expensive furniture, appliances, and electronic equipment. The outstanding area of strength is found in fashion goods. Price resistance is not a noticeable problem; medium- and high-priced goods are expected to show the sharpest sales increases.
Some difficulty is reported in obtaining delivery of previously ordered merchandise, particularly for the most popular new styles in soft goods and for nationally advertised toys. Most retailers regard these shortages as a usual seasonal characteristic, although the decision of some apparel manufacturers to operate on a strict "cut-to-order" basis is mentioned as a source of longer lead times. A related factor is the increasing number of yarn varieties, which creates a difficult inventory problem for textile raw materials manufacturers in view of more volatile shifts in demand for particular finished goods styles. Retail inventory levels are well-balanced on the whole, although some remaining excess is reported in expensive furniture lines and to a lesser degree in appliances and other big-ticket items. Retailers expect continued gains in 1976, although some concern is noted regarding the depth of the post-holiday season downturn in consumer durable goods.
Construction activity, which has been weak in the Atlanta area, will receive a boost in the near future when work begins on a new rapid transit rail system. Two recent developments are paving the way for the beginning of construction. First, the Urban Mass Transit Administration is expected in the near future to announce the awarding of a $160 million grant, primarily to finance construction during fiscal 1976. The second development contributing to initiation of construction on the project is the recent settlement of a dispute concerning minimum wages between the public transportation authority and 14 building trade unions. This agreement has ended a seven-month postponement of construction work. The first phase of the system is scheduled for completion in late 1978.