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About


The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.

The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.

Postings are weekly.


March 6, 2014

Beige Book: Did Weather Cool the Nation's Economic Growth?

Eight times a year, the 12 Reserve Banks gather anecdotal information on current economic conditions in their districts through reports from Bank and branch directors as well as interviews with key business contacts, economists, market experts, and other sources. These findings are reported in the Beige Book. Then, one of the Reserve Banks is randomly selected to write the national summary, a digest of all 12 Banks' reports. This time, my Atlanta Fed colleagues and I wrote the most recent national summary.

Similar to recent incoming economic data citing possible weather-related effects on consumer spending, manufacturing, and transportation (to mention a few), the national summary of the Beige Book cites the weather as also having an impact on activity in several sectors. Here are some Beige Book excerpts that mention weather-related economic effects (emphasis mine):

Consumer spending and tourism:

Retail sales growth weakened since the previous report for most Districts, as severe winter weather limited activity. Weather was also cited as a contributing factor to softer auto sales in many Districts, with the exception of Cleveland, which saw strong gains.

Recent winter weather conditions benefited many ski resorts in Kansas City, Richmond, and Minneapolis. Atlanta and Boston also indicated that hotels fared well from the >weather, but that restaurants, museums, and other attractions were negatively impacted. Airline contacts from Dallas indicated solid to slightly stronger demand, with some temporary disruptions due to severe winter weather across the nation.

Nonfinancial services and transportation:

Both New York and Philadelphia reported that severe winter weather reduced demand for services in their region.

Severe weather reportedly disrupted supply chains and delayed shipments in several Districts. In Dallas, railroad cargo volumes fell slightly below year earlier levels, with winter weather conditions across the country largely to blame. Manufacturing sales and production in several Districts were negatively impacted by severe winter weather; however, modest improvements were noted in Boston, Atlanta, Minneapolis, and Dallas.

Real estate and construction:

Residential real estate markets continued to improve in several areas, albeit modestly. Most of the Districts indicating otherwise attributed the slowing pace of improvement to unusually severe winter weather conditions.

Philadelphia noted that there was very little activity to report in construction or leasing due to severe winter weather.

Agriculture and natural resources:

Severe winter weather affected several Districts with some crop damage being reported by Richmond and Atlanta, while Chicago noted disruptions in the flow of agricultural products. Both Kansas City and Dallas cited dry conditions adversely affecting wheat crops, while San Francisco reported concerns about water shortages and water costs.

District reports showed continued strength in energy production and demand for oil and gas; much of the increased demand was driven by unusually cold winter weather. In contrast, Minneapolis indicated that oil and gas exploration decreased slightly from recent months, primarily due to the extremely cold weather. Inventory drawdowns and supply shortages of natural gas and propane were reported in Atlanta, Chicago, and Dallas due to increased withdrawals that were exacerbated by the severe weather. Nearly all Districts attributed energy price surges to increased demand during the unusually cold weather; yet, Boston reported that natural gas prices were also driven up by pressure on pipeline capacity in New England.

Employment and prices:

Since the previous report, the pace of hiring had reportedly softened in Boston, Richmond, and Chicago, with those Districts attributing at least part of the recent slowdown to unusually bad winter weather.

Chicago, Minneapolis, and Dallas noted that unseasonably cold weather had pushed up costs for some energy products.

Although it seems that the weather has had a negative effect on economic growth so far this year, we won't know the full impact until a little more time has passed and Mother Nature decides to bring on the sunshine.

Here are some notable highlights from the Atlanta Fed's portion of the Beige Book:

Employment: Since the last report, job growth remained muted across the District. Contacts in construction, manufacturing, energy, hospitality, and real estate noted modest growth in employment.

Prices: Most contacts reported modest and relatively stable labor and material cost pressures. Construction industry contacts remained a notable exception, indicating strong upward pressure on labor costs and some material prices.

Consumer spending and tourism: Merchants reported a slow start to the year with sales growth declining. Many contacts noted that the drop in sales growth was partially attributed to the unusual winter weather experienced in parts of the region. Hospitality contacts reported an increase in business and convention bookings.

Real estate and construction: Most brokers said sales were slightly up compared with a year earlier, and more contacts noted that sales activity was in line with their plan for the period. By most accounts, inventory levels had fallen on a year-over-year basis. The majority of contacts reported that home prices remained ahead of the year-earlier level but that price gains have slowed on a month-over-month basis.

The majority of builders reported that construction activity and new home sales were ahead of the year-earlier level, although most reports indicated that unsold inventory levels had remained unchanged from a year ago. The majority of contacts also reported modest home price appreciation.

District brokers noted that demand for commercial real estate continued to improve. Construction activity continued to increase at a modest pace from last year. Most contacts reported that their backlog was ahead of year-earlier levels.

Manufacturing: Manufacturing contacts in the region cited expanding activity from January through mid-February, but the pace of growth was moderate. Contacts reported improvements in new orders and production. However, a number of contacts stated that the unusual winter weather affected production in late January, and output was lower than planned for that month.

Banking and finance: A number of lenders reported increases in purchase mortgages, but not enough to offset the declines in refinances.

The next Beige Book will be published April 16.

Photo of Shalini PatelBy Shalini Patel, an economic policy analysis specialist in the Atlanta Fed's research department.

November 19, 2013

Southeastern Insights: Slow Growth with a Dash of Uncertainty and Caution

The Atlanta Fed's Southeastern Insights report provides a broad summary of economic intelligence gathered through our network of business contacts and other sources throughout the Southeast each Federal Open Market Committee (FOMC) cycle. The latest report covers the period from September 19 to October 30.

As a complement to Southeastern Insights, Adrienne Slack, vice president and regional executive at the Atlanta Fed's New Orleans Branch, discusses the regional economy.

Here are some highlights from the report:

  • Since the previous FOMC cycle, most business contacts expect continued slow growth in the short term. However, several contacts noted a rise in uncertainty tied to the effects of the debt ceiling debate and the government shutdown.
  • Mixed reports from labor markets, combined with renewed uncertainty, have not strengthened employment trends since the previous cycle and have caused many business leaders to delay decisions about hiring new employees. Overall, very few companies reported adding to employment levels as a result of organic growth, regardless of how robust that growth was. Some companies cited paying overtime before hiring new employees unless the new hires were expected to generate revenue.
  • Contacts continued to report stable pricing with no major concerns about inflation; cost pressures were mostly well contained. However, isolated industries that reported minimal cost increases did note that they were able to pass through the increases to their customers (such as fast food, grocery stores, and some construction). Overall, margins remained tight.  Reports indicate wage increases remained stable (mostly in the 2 percent to 3 percent range) across most industries. However, there were scattered reports of upward wage pressures for high-skilled workers.
  • While our contacts expressed some uncertainty and caution, their medium-term outlook is that the economy will continue to improve.

Atlanta Fed President Dennis Lockhart shares this view, and he harbors concern about the likelihood of more robust growth in the near term. In a November 12 speech in Montgomery, Alabama, President Lockhart said that:

My baseline outlook calls for an improved economy in 2014—growing a bit faster than it has been. But that may not happen. There is a nontrivial chance that 2014 will look like 2013. Next year's economic outcomes will swing importantly on fiscal drag and consumer spending.

The concern surrounding fiscal drag is twofold: the level of government spending and the role that uncertainty plays in business decision making. A recent macroblog post noted that:

  • Most firms are expressing more uncertainty,
  • For a significant portion of firms, uncertainty today is having a greater impact than six months ago, and
  • The government is heavily featured as a source of the uncertainty.

Regarding consumer spending, indications are that spending remains cautious. As reported in Southeastern Insights:

Retail industry reports were mixed, yet most contacts described a decline in sales and demand following a slower than expected summer and back to school season. Some retailers also indicated they plan to hire fewer seasonal staff and are less optimistic about the upcoming holiday season. A bright spot in consumer spending continues to come from the strength of high-end consumers; however, their spending has not been significant enough to offset the scaling back by low- to mid-end consumers.

It's clear that what we are hearing from our business contacts demands that we remain cautious regarding the overall economic outlook. As President Lockhart noted in Montgomery:

I remain cautiously optimistic that growth will pick up next year. This is my baseline outlook. But, at this juncture, I can't fully discount the possibility that the expected economic improvement won't materialize and that we'll see a replay of the weak growth of the past three years.

Photo of Mike ChrisztBy Mike Chriszt, a vice president in the Atlanta Fed's public affairs department


October 17, 2013

Transportation Keeps On Truckin'

On September 24, the Atlanta Fed’s Advisory Council on Trade and Transportation met, as it does twice a year, to discuss current economic conditions in the various industries represented by transportation executives from across the Sixth Federal Reserve District. Dave Altig, the Atlanta Fed’s executive vice president and director of research, provided an economic overview and outlook, and the Jacksonville Branch’s Regional Executive Chris Oakley and Atlanta Fed President Dennis Lockhart facilitated the discussion.

The general tone of the conversation was one of cautious optimism, though some slowing in growth was reported since the last meeting in April 2013. Half of the council members reported higher year-over-year demand, and the other half indicated that activity was flat. The outlook for the next three to six months was split evenly as well, with some expecting higher levels of activity based on recent trends and the upcoming peak season for holiday shipping. Regarding inventory levels, council members indicated that supply chains remain lean and that these conditions will likely become a long-term strategy. Frustration with the regulatory environment and current fiscal issues that were raised in the several past meetings continue to be expressed.

At Sixth District seaports, activity was reported as mixed, with minimal cargo growth and a slowing of exports at one port; the export of chemicals and energy products was characterized as “off the charts” by another council member, who also claimed higher levels of container trade and imports of steel, coffee, rubber, and plywood.  

There was not much new news regarding labor markets. Compared with the same time last year, three council members reported higher workforce levels, three reported the same, and two reported lower levels of staffing. The employment outlook over the short term is the same as it was in April, with half of the council members anticipating higher levels and only one member expecting lower. The proportion of part-time or temporary workers was described as the same across the board.

Hiring challenges remain in trucking. Diesel mechanics and drivers are hard to find for various reasons, including the inability of the industry to attract the younger generation. Additionally, the industry faces a wave of vacancies over the coming years as a result of pending retirements. Hours of service regulations that went into effect in July 2013 are affecting the utilization of trucking equipment between 2 percent and 10 percent and overall capacity by approximately 25 percent.

Fuel price increases earlier this year have had no discernible effect on current or projected cargo volumes at Sixth District ports; marine fuel prices, although high, have been relatively stable for an extended period. Because of declines in freight, decreased demand, and a sagging global economy, air freight carrier revenue has not been buoyed by a recent 9 percent decrease in global jet fuel prices. For those motor carriers that are not hedged on fuel, higher prices have had a material effect on business.

The majority of council members indicated that they have already or will be initiating slight near-term price increases through annual rate adjustments, at a minimum, to cover rising input costs including driver wages and health care costs. Longer term, most anticipate more aggressive pricing as market conditions allow, compensating for increases in equipment and regulatory costs.

Council members’ outlook for growth over the next three to six months mirrors the responses from April: 75 percent expect higher growth, and the remaining 25 percent anticipate the same level of growth. In the medium term, two-thirds of the council members expect higher rates of growth, with the remaining anticipating the same rate of growth. Much like our conversations with other business leaders throughout the region, however, economic and policy uncertainty clouds the council’s outlook.

By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed’s Jacksonville Branch

October 8, 2013

Middle Tennessee’s Economy: What a Difference a Year Makes

At the end of September, Middle Tennessee State University’s Business and Economic Research Center hosted the school’s annual economic outlook conference. In October of 2012, we reported on the presentation by the center’s director, Dr. David Penn, who spoke at last year’s conference about his forecast for Middle Tennessee’s economy. In 2012, his forecast was not particularly upbeat, although he did highlight a few positive signs emerging in the region, particularly in manufacturing and housing. Fast-forward a year, and the economic picture is much brighter, according to Dr. Penn’s presentation at this year’s conference.

The two positive signs, manufacturing and housing, have turned into powerful trends that are driving Middle Tennessee’s economy, especially in Nashville. The manufacturing sector is performing exceptionally well, propelled by the expansion in auto manufacturing. The Nashville-area manufacturing sector has seen 11,000 new jobs the since 2010. While employment gains in the sector have slowed in 2013, recent job announcements from a number of manufacturers, including Nissan and GM, suggest acceleration in the near term.

The housing sector has also shown a lot of strength over the past year. Home sales are booming, with home inventory relative to sales now at the lowest level since 2006. Single-family home construction is rapidly increasing. Dr. Penn estimates that home price growth could accelerate and may even approach prerecession levels next year.

The Nashville area’s quickening economic tempo has fueled job creation. In terms of the pace of job growth, two counties in the Nashville metropolitan statistical area (MSA), Rutherford and Williamson, are in the top 15 counties among more than 300 largest U.S. counties. Total employment in the Nashville MSA was growing faster than in any other major metro area (with payroll employment of at least 500,000) in the second quarter on a year-over-year basis. There are now nearly 50,000 more jobs than in 2007. Employment growth is also broad based across industries led by job gains in professional and business services and manufacturing. In fact, in the second quarter the year-over-year pace of job growth in those two industries in Nashville ranked first and second, respectively, among the country’s largest MSAs.

Measured by the unemployment rate, however, Nashville’s labor market does not look as rosy—the unemployment rate has moved higher in recent months. But the news is not all bad since the increase in the unemployment rate is mostly a result of people entering the labor force at a faster rate than the pace of job creation. Perhaps because of improved job prospects, the labor force participation rate in Nashville has been increasing for more than two years after a sharp drop-off in 2010.

What about Nashville’s economy a year from now? Dr. Penn projects ongoing strength in housing, continued improvement in manufacturing, and a declining unemployment rate as a result of strong job growth.

photo of Galina AlexeenkoBy Galina Alexeenko, a Regional Economic Information Network director in the Atlanta Fed’s Nashville Branch


March 6, 2014

Beige Book: Did Weather Cool the Nation's Economic Growth?

Eight times a year, the 12 Reserve Banks gather anecdotal information on current economic conditions in their districts through reports from Bank and branch directors as well as interviews with key business contacts, economists, market experts, and other sources. These findings are reported in the Beige Book. Then, one of the Reserve Banks is randomly selected to write the national summary, a digest of all 12 Banks' reports. This time, my Atlanta Fed colleagues and I wrote the most recent national summary.

Similar to recent incoming economic data citing possible weather-related effects on consumer spending, manufacturing, and transportation (to mention a few), the national summary of the Beige Book cites the weather as also having an impact on activity in several sectors. Here are some Beige Book excerpts that mention weather-related economic effects (emphasis mine):

Consumer spending and tourism:

Retail sales growth weakened since the previous report for most Districts, as severe winter weather limited activity. Weather was also cited as a contributing factor to softer auto sales in many Districts, with the exception of Cleveland, which saw strong gains.

Recent winter weather conditions benefited many ski resorts in Kansas City, Richmond, and Minneapolis. Atlanta and Boston also indicated that hotels fared well from the >weather, but that restaurants, museums, and other attractions were negatively impacted. Airline contacts from Dallas indicated solid to slightly stronger demand, with some temporary disruptions due to severe winter weather across the nation.

Nonfinancial services and transportation:

Both New York and Philadelphia reported that severe winter weather reduced demand for services in their region.

Severe weather reportedly disrupted supply chains and delayed shipments in several Districts. In Dallas, railroad cargo volumes fell slightly below year earlier levels, with winter weather conditions across the country largely to blame. Manufacturing sales and production in several Districts were negatively impacted by severe winter weather; however, modest improvements were noted in Boston, Atlanta, Minneapolis, and Dallas.

Real estate and construction:

Residential real estate markets continued to improve in several areas, albeit modestly. Most of the Districts indicating otherwise attributed the slowing pace of improvement to unusually severe winter weather conditions.

Philadelphia noted that there was very little activity to report in construction or leasing due to severe winter weather.

Agriculture and natural resources:

Severe winter weather affected several Districts with some crop damage being reported by Richmond and Atlanta, while Chicago noted disruptions in the flow of agricultural products. Both Kansas City and Dallas cited dry conditions adversely affecting wheat crops, while San Francisco reported concerns about water shortages and water costs.

District reports showed continued strength in energy production and demand for oil and gas; much of the increased demand was driven by unusually cold winter weather. In contrast, Minneapolis indicated that oil and gas exploration decreased slightly from recent months, primarily due to the extremely cold weather. Inventory drawdowns and supply shortages of natural gas and propane were reported in Atlanta, Chicago, and Dallas due to increased withdrawals that were exacerbated by the severe weather. Nearly all Districts attributed energy price surges to increased demand during the unusually cold weather; yet, Boston reported that natural gas prices were also driven up by pressure on pipeline capacity in New England.

Employment and prices:

Since the previous report, the pace of hiring had reportedly softened in Boston, Richmond, and Chicago, with those Districts attributing at least part of the recent slowdown to unusually bad winter weather.

Chicago, Minneapolis, and Dallas noted that unseasonably cold weather had pushed up costs for some energy products.

Although it seems that the weather has had a negative effect on economic growth so far this year, we won't know the full impact until a little more time has passed and Mother Nature decides to bring on the sunshine.

Here are some notable highlights from the Atlanta Fed's portion of the Beige Book:

Employment: Since the last report, job growth remained muted across the District. Contacts in construction, manufacturing, energy, hospitality, and real estate noted modest growth in employment.

Prices: Most contacts reported modest and relatively stable labor and material cost pressures. Construction industry contacts remained a notable exception, indicating strong upward pressure on labor costs and some material prices.

Consumer spending and tourism: Merchants reported a slow start to the year with sales growth declining. Many contacts noted that the drop in sales growth was partially attributed to the unusual winter weather experienced in parts of the region. Hospitality contacts reported an increase in business and convention bookings.

Real estate and construction: Most brokers said sales were slightly up compared with a year earlier, and more contacts noted that sales activity was in line with their plan for the period. By most accounts, inventory levels had fallen on a year-over-year basis. The majority of contacts reported that home prices remained ahead of the year-earlier level but that price gains have slowed on a month-over-month basis.

The majority of builders reported that construction activity and new home sales were ahead of the year-earlier level, although most reports indicated that unsold inventory levels had remained unchanged from a year ago. The majority of contacts also reported modest home price appreciation.

District brokers noted that demand for commercial real estate continued to improve. Construction activity continued to increase at a modest pace from last year. Most contacts reported that their backlog was ahead of year-earlier levels.

Manufacturing: Manufacturing contacts in the region cited expanding activity from January through mid-February, but the pace of growth was moderate. Contacts reported improvements in new orders and production. However, a number of contacts stated that the unusual winter weather affected production in late January, and output was lower than planned for that month.

Banking and finance: A number of lenders reported increases in purchase mortgages, but not enough to offset the declines in refinances.

The next Beige Book will be published April 16.

Photo of Shalini PatelBy Shalini Patel, an economic policy analysis specialist in the Atlanta Fed's research department.

November 19, 2013

Southeastern Insights: Slow Growth with a Dash of Uncertainty and Caution

The Atlanta Fed's Southeastern Insights report provides a broad summary of economic intelligence gathered through our network of business contacts and other sources throughout the Southeast each Federal Open Market Committee (FOMC) cycle. The latest report covers the period from September 19 to October 30.

As a complement to Southeastern Insights, Adrienne Slack, vice president and regional executive at the Atlanta Fed's New Orleans Branch, discusses the regional economy.

Here are some highlights from the report:

  • Since the previous FOMC cycle, most business contacts expect continued slow growth in the short term. However, several contacts noted a rise in uncertainty tied to the effects of the debt ceiling debate and the government shutdown.
  • Mixed reports from labor markets, combined with renewed uncertainty, have not strengthened employment trends since the previous cycle and have caused many business leaders to delay decisions about hiring new employees. Overall, very few companies reported adding to employment levels as a result of organic growth, regardless of how robust that growth was. Some companies cited paying overtime before hiring new employees unless the new hires were expected to generate revenue.
  • Contacts continued to report stable pricing with no major concerns about inflation; cost pressures were mostly well contained. However, isolated industries that reported minimal cost increases did note that they were able to pass through the increases to their customers (such as fast food, grocery stores, and some construction). Overall, margins remained tight.  Reports indicate wage increases remained stable (mostly in the 2 percent to 3 percent range) across most industries. However, there were scattered reports of upward wage pressures for high-skilled workers.
  • While our contacts expressed some uncertainty and caution, their medium-term outlook is that the economy will continue to improve.

Atlanta Fed President Dennis Lockhart shares this view, and he harbors concern about the likelihood of more robust growth in the near term. In a November 12 speech in Montgomery, Alabama, President Lockhart said that:

My baseline outlook calls for an improved economy in 2014—growing a bit faster than it has been. But that may not happen. There is a nontrivial chance that 2014 will look like 2013. Next year's economic outcomes will swing importantly on fiscal drag and consumer spending.

The concern surrounding fiscal drag is twofold: the level of government spending and the role that uncertainty plays in business decision making. A recent macroblog post noted that:

  • Most firms are expressing more uncertainty,
  • For a significant portion of firms, uncertainty today is having a greater impact than six months ago, and
  • The government is heavily featured as a source of the uncertainty.

Regarding consumer spending, indications are that spending remains cautious. As reported in Southeastern Insights:

Retail industry reports were mixed, yet most contacts described a decline in sales and demand following a slower than expected summer and back to school season. Some retailers also indicated they plan to hire fewer seasonal staff and are less optimistic about the upcoming holiday season. A bright spot in consumer spending continues to come from the strength of high-end consumers; however, their spending has not been significant enough to offset the scaling back by low- to mid-end consumers.

It's clear that what we are hearing from our business contacts demands that we remain cautious regarding the overall economic outlook. As President Lockhart noted in Montgomery:

I remain cautiously optimistic that growth will pick up next year. This is my baseline outlook. But, at this juncture, I can't fully discount the possibility that the expected economic improvement won't materialize and that we'll see a replay of the weak growth of the past three years.

Photo of Mike ChrisztBy Mike Chriszt, a vice president in the Atlanta Fed's public affairs department


October 17, 2013

Transportation Keeps On Truckin'

On September 24, the Atlanta Fed’s Advisory Council on Trade and Transportation met, as it does twice a year, to discuss current economic conditions in the various industries represented by transportation executives from across the Sixth Federal Reserve District. Dave Altig, the Atlanta Fed’s executive vice president and director of research, provided an economic overview and outlook, and the Jacksonville Branch’s Regional Executive Chris Oakley and Atlanta Fed President Dennis Lockhart facilitated the discussion.

The general tone of the conversation was one of cautious optimism, though some slowing in growth was reported since the last meeting in April 2013. Half of the council members reported higher year-over-year demand, and the other half indicated that activity was flat. The outlook for the next three to six months was split evenly as well, with some expecting higher levels of activity based on recent trends and the upcoming peak season for holiday shipping. Regarding inventory levels, council members indicated that supply chains remain lean and that these conditions will likely become a long-term strategy. Frustration with the regulatory environment and current fiscal issues that were raised in the several past meetings continue to be expressed.

At Sixth District seaports, activity was reported as mixed, with minimal cargo growth and a slowing of exports at one port; the export of chemicals and energy products was characterized as “off the charts” by another council member, who also claimed higher levels of container trade and imports of steel, coffee, rubber, and plywood.  

There was not much new news regarding labor markets. Compared with the same time last year, three council members reported higher workforce levels, three reported the same, and two reported lower levels of staffing. The employment outlook over the short term is the same as it was in April, with half of the council members anticipating higher levels and only one member expecting lower. The proportion of part-time or temporary workers was described as the same across the board.

Hiring challenges remain in trucking. Diesel mechanics and drivers are hard to find for various reasons, including the inability of the industry to attract the younger generation. Additionally, the industry faces a wave of vacancies over the coming years as a result of pending retirements. Hours of service regulations that went into effect in July 2013 are affecting the utilization of trucking equipment between 2 percent and 10 percent and overall capacity by approximately 25 percent.

Fuel price increases earlier this year have had no discernible effect on current or projected cargo volumes at Sixth District ports; marine fuel prices, although high, have been relatively stable for an extended period. Because of declines in freight, decreased demand, and a sagging global economy, air freight carrier revenue has not been buoyed by a recent 9 percent decrease in global jet fuel prices. For those motor carriers that are not hedged on fuel, higher prices have had a material effect on business.

The majority of council members indicated that they have already or will be initiating slight near-term price increases through annual rate adjustments, at a minimum, to cover rising input costs including driver wages and health care costs. Longer term, most anticipate more aggressive pricing as market conditions allow, compensating for increases in equipment and regulatory costs.

Council members’ outlook for growth over the next three to six months mirrors the responses from April: 75 percent expect higher growth, and the remaining 25 percent anticipate the same level of growth. In the medium term, two-thirds of the council members expect higher rates of growth, with the remaining anticipating the same rate of growth. Much like our conversations with other business leaders throughout the region, however, economic and policy uncertainty clouds the council’s outlook.

By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed’s Jacksonville Branch

October 8, 2013

Middle Tennessee’s Economy: What a Difference a Year Makes

At the end of September, Middle Tennessee State University’s Business and Economic Research Center hosted the school’s annual economic outlook conference. In October of 2012, we reported on the presentation by the center’s director, Dr. David Penn, who spoke at last year’s conference about his forecast for Middle Tennessee’s economy. In 2012, his forecast was not particularly upbeat, although he did highlight a few positive signs emerging in the region, particularly in manufacturing and housing. Fast-forward a year, and the economic picture is much brighter, according to Dr. Penn’s presentation at this year’s conference.

The two positive signs, manufacturing and housing, have turned into powerful trends that are driving Middle Tennessee’s economy, especially in Nashville. The manufacturing sector is performing exceptionally well, propelled by the expansion in auto manufacturing. The Nashville-area manufacturing sector has seen 11,000 new jobs the since 2010. While employment gains in the sector have slowed in 2013, recent job announcements from a number of manufacturers, including Nissan and GM, suggest acceleration in the near term.

The housing sector has also shown a lot of strength over the past year. Home sales are booming, with home inventory relative to sales now at the lowest level since 2006. Single-family home construction is rapidly increasing. Dr. Penn estimates that home price growth could accelerate and may even approach prerecession levels next year.

The Nashville area’s quickening economic tempo has fueled job creation. In terms of the pace of job growth, two counties in the Nashville metropolitan statistical area (MSA), Rutherford and Williamson, are in the top 15 counties among more than 300 largest U.S. counties. Total employment in the Nashville MSA was growing faster than in any other major metro area (with payroll employment of at least 500,000) in the second quarter on a year-over-year basis. There are now nearly 50,000 more jobs than in 2007. Employment growth is also broad based across industries led by job gains in professional and business services and manufacturing. In fact, in the second quarter the year-over-year pace of job growth in those two industries in Nashville ranked first and second, respectively, among the country’s largest MSAs.

Measured by the unemployment rate, however, Nashville’s labor market does not look as rosy—the unemployment rate has moved higher in recent months. But the news is not all bad since the increase in the unemployment rate is mostly a result of people entering the labor force at a faster rate than the pace of job creation. Perhaps because of improved job prospects, the labor force participation rate in Nashville has been increasing for more than two years after a sharp drop-off in 2010.

What about Nashville’s economy a year from now? Dr. Penn projects ongoing strength in housing, continued improvement in manufacturing, and a declining unemployment rate as a result of strong job growth.

photo of Galina AlexeenkoBy Galina Alexeenko, a Regional Economic Information Network director in the Atlanta Fed’s Nashville Branch