Beige Book Report: Atlanta
December 5, 1985
The weather has combined with some other factors to cloud the economic picture of the Southeast economy in the fall. As summarized by the broad unemployment rate yardstick, the regional economy weakened somewhat in September. With the ending of cheap auto financing deals, car-buying plummeted in October, pulling down consumer spending. Total consumer borrowing has slowed as buyers' appetites apparently have been temporarily satiated. Construction activity indicators show that sector rebounding in response to easing credit conditions. The pace of tourism has been uneven and below last year's Fair-boosted levels in some states, and wet weather has further depressed farm revenue estimates, particularly in Louisiana.
Employment and Industry
Labor markets continued to weaken in September, with the District
unemployment rate edging upward to 8.1 percent. Total employment
dropped, moderately, for the first time since June. However, trends
in factory employment are little changed since the last reporting
period. Textile employment, while down sharply from a year ago, has
stabilized in recent months. Textile industry contacts are
encouraged by the recent weakening of the dollar but they look to
the protectionist measures now in Congress for fundamental relief
from import pressure. Employment growth in the region's auto
assembly and parts plants has plateaued temporarily, but industry
spokesmen are encouraged by the planned renovation of an auto
assembly plant in Atlanta that will add 900 jobs and the selection
of a Tennessee site for a major new assembly plant. Estimates
indicate the latter facility will provide 6,000 jobs directly and an
additional 14,000 support jobs at part. suppliers' plants. At 11
percent in September, Louisiana continues to have the highest
unemployment rate in the region. The petrochemical and oil field
machinery industries continue to suffer, with the latter losing an
additional 2,400 jobs in the year ending in September. Southeastern
timbermen expect lumber and wood prices to remain depressed in the
year ahead despite the encouraging building outlook suggested by
falling mortgage interest rates. Canadian import pressure is likely
to continue keeping prices below break-even levels for many domestic
producers.
Consumer Spending
Most merchants posted moderate gains in October although some
stores, including a large national chain, fell short of October 1984
sales levels. On a year-to-date basis, sales activity remains above
last year's levels throughout the region, with women's and
children's apparel, electronics, appliances, and jewelry the best
selling items. Retailers generally are projecting only moderate
gains in year-end holiday sales and are consequently holding leaner
inventories relative to 1984, when holiday sales were not as strong
as expected. October car sales in most areas of the region were off
sharply from October 1984 and September 1985 levels. During
September, more cars were registered than in any other month in the
1980s.
Construction
Residential housing markets are slowing as usual as winter
approaches, but sales levels are above those at this time last year,
probably because of lower mortgage rates. The strong economic
performances of Atlanta and Nashville are reflected in their
healthy, migration-induced single-family home sales, and projections
are for a continuation of high sales levels. Meanwhile, the Miami
market is also showing notable growth over last year and the outlook
is favorable, while the performance and outlook for Louisiana and
Mississippi are poor. Office construction activity also has
maintained its mixed growth course. Completion of new space has led
to what are thought to be temporary increases in vacancy rates in
Tampa and Orlando and to a more lasting increase in Miami. An
unusually low vacancy rate makes Birmingham a good market for new
construction, and the Nashville retail market is expected to boom in
the next year. The Atlanta market keeps zooming along.
Financial Services
The growth rate in loan demand continues to trend downward for a
sample of large commercial banks in the Southeast. October's growth
in total loans, although still strong, represents the continuation
of an unbroken pattern of softening growth since January. Both
consumer and real estate lending account for recent weaknesses which
follow unprecedented high growth in such lending earlier in this
economic expansion.
Tourism
Consumer purchases of travel services in the Southeast do not seem
to have accelerated appreciably in the fall, although the reports
available indicate that air travel increased in September at most
regional airports. Auto travel fell in both September and October in
most District states, although sharp declines in Louisiana, Alabama,
and Mississippi no doubt reflect the unusually high levels of auto
travel last year in conjunction with the World's Fair. Attraction
attendance showed little growth. State parks, for example, had fewer
visitors in October, and most private attractions surveyed had only
modest gains. In the lodgings sector, activity was mixed, and hotel
occupancies in several markets, including Orlando, remain extremely
depressed.
Agriculture
Low market prices continue to dim revenue prospects for District
crop farmers. Louisiana farmers have had to cope additionally with
multiple hurricane damage. Apparently, the sugarcane crop suffered
most, with its projected yield falling by one-twelfth from earlier
estimates. Prospective regional production of grain sorghum and
cotton is the highest in this decade; yields of other major crops
are also generally favorable throughout the region. The cattle,
pork, and egg industries are experiencing low prices and poor
returns but the poultry meat producers enjoy profitable conditions.