Southeastern economy’s recovery has a way to go
The Southeastern economy was pretty much the same in 2013 as it was in 2012, leaving the region with a long way to go to recover from the recession, according to the Federal Reserve Bank of Atlanta.
"Data and reports from the Atlanta Fed's business contacts show that overall economic activity — as well as hiring — continues to be restrained despite demonstrated strength from sectors such as tourism, auto sales, and housing," the regional Fed bank said in its fourth quarter issue of EconSouth.
The Atlanta Fed, one of 12 regional reserve banks in the Fed system, covers Florida, Georgia and Alabama and parts of Louisiana, Mississippi and Tennessee.
Much of its analysis in EconSouth is based on information from the Atlanta Fed's contacts throughout the region.
Jobs slow to recover
The fourth-quarter report found that the employment sector in the region "remains stubbornly sluggish" heading into 2014.
"Employment in the Southeast has been slow to recover from the Great Recession, in part because the region was hit harder than the nation overall," EconSouth said.
"The region's dependence on population growth and the booming construction industry made it particularly vulnerable to the bursting of the housing bubble, making its road to recovery longer."
The Atlanta Fed said few businesses are adding jobs because of organic growth, and some are instead paying overtime to existing workers.
"Temporary staffing remains robust, in part reflecting a move among many companies to more permanent use of contingent workers," it said.
Employment growth at small businesses has been particularly slow, due to uncertainty about factors such as health care costs and interest rates, it said.
Citing data from Intuit's Small Business Employment Index, EconSouth said employment at small businesses remains 5 percent below its pre-recession level, while employment at companies of all sizes is only 1 percent lower than the peak.
Real estate fares well
The housing market in the Southeast "fared well" last year, EconSouth said.
"In particular, Florida saw some notable improvements after having suffered some of the nation's biggest declines with the bursting of the housing bubble," it said.
The Atlanta Fed said its commercial real estate contacts in the Southeast reported activity was "mild" in 2013.
"Demand for space improved at a modest pace toward the end of the summer," it said.
Reports from retailers showed "mixed" results in 2013.
"Contacts reported that factors such as increased health care costs and fuel prices, the resumption of the full Social Security tax and unusual weather affected consumption, resulting in volatile sales activity," according to EconSouth.
It said retailers were mildly optimistic heading into the holidays.
"Going into the end of the year, consumers remain cost conscious and on the lookout for deals," it said.
Auto sales were one of the few "relatively bright spots" last year, as low loan rates helped the industry repeat its strong sales trends from 2012, it said.
The hospitality industry also was a bright spot.
"The tourism sector grew at a reasonably fast clip as growth in business and leisure travel offset declines in government travel," EconSouth said.
"Most contacts reported robust growth, citing increases in hotel bookings, revenue per available room, and attendance at conventions and attractions," it said.
EconSouth also said that the industry was anticipating a strong winter season.
"According to Atlanta Fed industry contacts, the first two quarters of 2014 are showing strong advance bookings in the hotel sector," it said.
However, "despite a generally optimistic outlook for 2014 overall, contacts in the sector sounded a tone of wariness about the impact of fiscal policy uncertainty on business and consumer confidence."
The Atlanta Fed saw improved banking conditions in the Southeast in 2013 as the industry continues its recovery from the recession.
"Most financial institutions were better off than they were at the height of the financial crisis. Deposit levels remained high as customers willingly traded the safety of insured deposits for little to no return," EconSouth said.
"Banks' balance sheets were healthier and returned to more normal levels of liquidity. They had money to lend, but some banks indicated they were still hesitant to make fixed-rate loans for extended lengths of time in anticipation of interest rate increases in the coming years," it said.
The outlook for manufacturing in the Southeast is mixed, according to EconSouth.
It said Kennesaw State University's Southeastern Purchasing Managers Index expanded for the first eight months of 2013 before slightly contracting in September and "mildly" bouncing back in October.
"Despite this hint of progress, manufacturers in the region nevertheless noted that they expect production to soften somewhat over the short term," the Atlanta Fed said.
The transportation sector saw slightly higher activity in the second half of the year after slow growth earlier in 2013, and contacts in the industry were expecting higher near-term growth heading into the holidays.
However, as in other industries, transportation contacts were experiencing uncertainty.
"They indicated that frustration with the regulatory environment and fiscal policy uncertainty were beginning to cloud their outlook," EconSouth said.
Hope for growth
Business contacts in the Southeast will be hoping for better growth in 2014.
"2013 was the year when many economists hoped to see the Southeastern economy fully emerge from the shadow of the Great Recession, but the region spent much of the year struggling to get its legs back under it," the Atlanta Fed said.
"The region made notable economic progress but has a considerable way to go before we can declare a full recovery," it said.