Beige Book Report: Atlanta
December 16, 1981
The recession is continuing in the Sixth District. Consumer spending is flat compared to last year, housing remains severely depressed, and labor markets are slack, with layoffs occurring frequently throughout the District. Agricultural loan delinquencies are increasing.
Consumer Spending and Inventories
Retail sales are flat to down in
real terms. Merchants hope that a late surge in holiday spending
will brighten the outlook. The high- and low-priced ends of the
merchandise spectrum are holding up better than middle-ranged goods.
Employment in department stores for the holiday season this year is
about the same as last year. Consumers appear to be taking advantage
of markdowns and discounts, watching their pocketbooks closely.
Tenants in large Atlanta malls express concern over high inventories
in relation to sales and many are actively promoting to generate
business.
Financial and Construction
Throughout the Sixth District,
construction activity continues at a low ebb. Only nonresidential
construction shows signs of life, mostly on the part of large firms.
Overall residential sales and starts are at a standstill. Many
county zoning departments report a November 1981-over-1980 increase
in building permits for additions and improvements, while permits
for new residential dwelling units are down. In south Florida, for
the first time in three years, asking prices for houses have shown a
decline, with virtually no change in the number of listings.
Apartment vacancy rates have dropped sharply over the last few
months as potential home buyers wait out high interest rates. Only
10,000 realtors attended the National Association of Realtors
Convention on Miami Beach in November-20,000 less than in 1980.
Large numbers of realtors are leaving the business. In Georgia, for
example, new real estate licenses are down 47 percent from last
year.
Employment and Industry
Employment growth is slowing, unemployment
rates are easing upward, and layoffs have been more common. Although
some areas are more depressed than others, slow employment growth
and higher unemployment were frequently mentioned. Even in sunny
Florida, past observations of robust job growth and falling
unemployment rates were noticeably absent from directors' reports.
Air Florida, with most of its employees based in south Florida,
recently announced widespread layoffs and pay reductions.
Alabama has been particularly hard hit. The state unemployment rate was bordering 12 percent at last reading and some directors reported rates above 13 percent. Those high unemployment rates are supported by a growing number of layoffs. In Alabama, weak demand forced General Electric Company, to place its entire work force on furlough last month. Fruehauf, producer of bodies for tractor-trailers, has half of its work force on indefinite layoffs. Exxon closed one of its subsidiaries in the Orlando, Florida area, and the Ford Glass Plant in Nashville laid off a large portion of its work force and will close earlier than usual for the holiday season.
In north Georgia, where 50 percent of the nation's carpets and rugs are produced, shipments dropped sharply in October after having shown some growth during the prior nine months. The fourth quarter will likely show a drop-off of 20 to 30 percent in shipments. A slowdown in the paper industry is causing temporary closings at paper mills during December. Although the factory employment picture looks bleak at this time, for the most part, manufacturers believe the forecasts of economic recovery in the spring of 1982.
Persistent high interest rates have dealt a severe blow to car rental companies. In Florida, believed to be the largest car rental market in the nation, a large rental franchise recently declared bankruptcy. Attendance at Florida's major tourist attractions is down somewhat from the same period last year, and the outlook for the winter season is not bright.
Agriculture
Contacts with lenders across the District reveal that
the number of agricultural loan delinquencies is continuing to rise,
but the major problems rest with the Farmers Home Administration
where many borrowers' financial problems have grown more severe
during 1981, thanks to the drought and low agricultural prices.
Borrower liquidations will increase in cases where collateral for additional indebtedness is unavailable, but lenders hope to keep foreclosures to a moderate scale.
Southeastern farmers have planted as much or more winter wheat as they did in the fall of 1980 when acreage jumped by 225 percent from the year-earlier level. Farmers are again in need of a quick cash-earning crop.