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.
May 12, 2015
Trials and Tribulations in Transportation
Members of the Atlanta Fed's Trade and Transportation Advisory Council convened on April 7 at the Atlanta Fed's Jacksonville Branch to discuss the Southeast latest developments in this sector.
Just over half of council members reported an expansion of overall activity compared with the same period last year. A few members reported reduced freight activity, citing the primary causes as both a decrease in movement of materials related to oil exploration and the appreciation of the U.S. dollar against the euro. Members noted that severe winter weather affected shipments for railroads and truckers primarily throughout the north and northeast United States, and the West Coast ports situation disrupted supply chains across the country. East Coast port volumes are now over capacity as shippers began diverting cargo away from the West Coast. Council members anticipate that it will be August before the backlog of port cargo will be cleared, a situation that may adversely affect the peak fall shipping season. However, members believed that many of the structural problems of the West Coast ports will remain in place long after the labor situation is resolved.
Employment, wage picture largely mixed
A majority of council members reported that employment levels were flat or slightly higher compared with this time last year, and two-thirds of council members expect higher workforce levels this time next year.
Truck driver shortages remained an almost universal concern for the industry. Technicians (formerly referred to as mechanics) are also in demand and harder to find as new federal emission requirements demand workers with more specialized skills.
Responses regarding wage pressures were mixed. Trucking companies continued to raise driver pay, as finding willing and qualified truck drivers remained difficult. Outside of specific areas of expertise, such as railroad engineers and technicians, employers were easily filling nondriver positions without increasing starting salaries. Logistics firms, however, perceived the labor market as tightening and reported more frequent voluntary turnover with "higher pay" being cited as a reason for leaving. Additionally, candidates were receiving multiple offers and enhanced benefits packages.
Nonlabor input costs and prices
A number of council members reported seeing some upward cost pressures in nonlabor inputs such as commercial insurance, equipment, locomotives and leases, ocean freight rates, and domestic trucking rates. The sharp decline in fuel costs, however, has helped keep overall costs down.
Almost all council members reported better pricing power since the last meeting in October 2014. Members indicated that some customers understand market forces and work to negotiate the best deal possible with their current carrier, but others shop around for the lowest cost. All council members anticipate greater ability to raise prices one year out and beyond, citing constrained capacity and expected higher commodity prices as the principal reasons, along with seeking to recover increased regulatory compliance costs.
International trade rises modestly
Council members with insight into international trade indicated modest growth in imports, related to the strong U.S. dollar against the euro and other foreign currencies and an improved domestic economy. Regions expected to drive demand for U.S. exports are South America and Asia as those economies continue to expand consumer buying power. Near-shoring is expected to become a bigger trend, and the automotive sector's investments in Mexico will drive greater cross-border growth between the United States and Mexico.
Outlook
Two-thirds of council members expect higher growth in the short term. Over the next two to three years, three-quarters of members expect higher growth. When asked about the most challenging issues facing the transportation sector, responses varied by sub-industry. Driver shortages continued to be the headliner, along with regulatory issues, which continued to drive capacity out of the market and significantly push up operations costs. Broadly, the supply chain has been adversely affected by infrastructure constraints, and this impact could persist: the United States has a great need for well-planned and properly funded hard infrastructure investment in ports and road networks to get goods to market.
The council meets again in October, and SouthPoint will report whether the summer months reflect improving conditions for the movement of goods.
By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch
April 16, 2015
Southeast Manufacturing: Solid as an Oak
When I was a kid, I spent a few fall afternoons cutting and splitting firewood with my older brother. I must say that I didn't care for the process at all. It was hard work, and I have much respect for people that carry on the time-honored tradition. I learned quickly that there were certain types of wood you wanted to stay away from. Oak was one of them. Now, I am ashamed to say that I didn't pay close attention when collecting tree leaves for science class, but I always knew when I was trying to split a piece of oak. As a matter of fact, when I would come across a piece of oak, I preferred to skip over it. Oaks are strong and stately trees and no fun at all to split. The March Southeastern purchasing managers index (PMI) report, released on April 6, reminded me of my ill-fated attempts to split oak. It is one tough piece of wood.
The Atlanta Fed's research department uses the Southeast PMI to track regional manufacturing activity. The Econometric Center at Kennesaw State University produces the survey, which analyzes current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.
The March Southeast PMI's overall index declined slightly from February, falling 2.5 points to 58.0 (see the chart). However, the index has remained above the 50 threshold for expansion 14 out of the last 15 months. It also averaged a solid 58.0 during the first quarter.
- The new orders subindex fell 6.6 points to 56.9.
- The production subindex decreased 2.9 points compared with the previous month and now reads 61.8.
- The employment subindex declined 9.2 to 57.8. The March report indicated that manufacturing payrolls have now grown for 18 consecutive months.
- The supplier deliveries subindex increased 1.2 points to 54.9.
- The finished inventory subindex increased 5.2 points to 58.8.
- The commodity prices subindex rose 4.8 points and now reads 40.2.
Optimism for future production also increased in March. When asked for their production expectations during the next three to six months, 53 percent of survey participants expected production to be higher going forward, compared with 46 percent in February.
Much of the recent national manufacturing data have been weak. In March, the industrial production report indicated that manufacturing output increased 0.1 percent during February, but output had declined in the previous two months. New orders for core capital goods also declined for the sixth consecutive month in February and the March ISM index, although still indicating expansion, fell to its lowest reading since May 2013. Some analysts believe cold weather and the strong dollar are affecting overall manufacturing activity.
Despite the recent weak national numbers, southeastern manufacturing appears to be holding strong...just like the oak trees I tried to split as a kid. If you've never split wood—and especially a piece of oak—try it sometime. I doubt it will make your top-five list of things to do. Oak is one tough piece of wood.
April 10, 2015
The Fruits of Our Labor
February 2015 state-level labor market data from the U.S. Bureau of Labor Statistics (BLS) for Sixth District states was solid—on aggregate. Overall, the region contributed 45,900 net payrolls in February, which was 17 percent of the nation's 264,000 payrolls. The combined unemployment rate of District states declined 0.1 percentage point to 6.1 percent. In fact, the unemployment rate fell in all six states, which hasn't occurred in almost two years.
While it's important to look at the aggregate picture when thinking about labor market performance for the entire District, it's also meaningful to hone in on the drivers of that performance. Although the drivers are largely related to the sheer size of the labor force, in the case of February's job growth in Sixth District states, just two states contributed to the bulk of February's job gains (see the chart).
Georgia and Florida carry the weight of job growth
February was a standout month for the Peach State. With 25,400 net payrolls added, Georgia supplied more than half of the jobs of all Sixth District states combined, and was the second largest contributor to job growth in the United States. This over-the-month jobs figure was the most the state added in four years, also crushing its 2014 monthly average of 12,200 net payrolls. Job gains were widespread, but the industries that contributed the most net payrolls in Georgia were retail (up 5,300) and accommodation and food services (up 5,500). In fact, both industries have almost steadily added jobs on net each month in Georgia over the past two years (see the chart).
Not too far behind the Peach State in February was the Orange State, with 19,700 net jobs added. The largest gains came from the government (up 4,800; local government payrolls were up 3,200), retail (up 4,200), and health care and social assistance (up 3,700) sectors. Over the past two years, the retail and health care and social assistance industries, in particular, have contributed solid gains in the state. In reality, Florida has been a consistent contributor to Sixth District jobs growth for several years (see the chart).
Where did the other states stand? In addition to Georgia's 25,400 and Florida's 19,700 payrolls in February, Mississippi contributed 3,500 net jobs. The remaining states subtracted from job growth: Louisiana (down 700), Tennessee (down 800), and Alabama (down 1,200).
Unemployment rate declines in all states
All six states in the District experienced a decline in the unemployment rate in February, which hasn't occurred in almost two years (see the chart). The aggregate figure was 6.1 percent, slowly approaching the national rate of 5.5 percent. February rates by state were as follows: Alabama 5.8 percent, Florida 5.6 percent, Georgia 6.3 percent, Louisiana 6.7 percent, Mississippi 7.0 percent, and Tennessee 6.6 percent.
Keeping an eye on developing trends
I'll be paying attention to future data to spot this year's trends in regional labor market indicators and report back here.
By Rebekah Durham, economic policy analysis specialis t in the Regional Economic Information Network at the New Orleans Branch of the Atlanta Fed
March 12, 2015
Southeast PMI Surges in February
The Southeast purchasing managers index (PMI) report was released on March 5, and it indicates that any lingering effects from the late 2014 manufacturing slowdown have abated. If you recall, the December Southeast PMI dipped into contraction territory, but it has rebounded nicely since. The PMI index has risen 14.9 points since December and now sits at its highest reading since April 2014.
The Atlanta Fed's research department uses the Southeast PMI to track southeastern manufacturing activity. The Econometric Center at Kennesaw State University produces the survey, which provides an analysis of current conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates contracting activity.
The Southeast PMI's overall index rose 4.9 points to 60.5 in February (see the chart). The subindexes also suggest some positive future developments:
- The new orders subindex rose to 63.4, a 6.0 point increase over January and a 29.4 point increase over the last two months.
- The production subindex increased 3.5 points over the previous month and now reads 64.6.
- The employment subindex rose 7.8 points over January to 67.1, indicating that manufacturing payrolls grew for the 17th consecutive month.
- The supply deliveries subindex increased 1.8 points from the previous month to 53.7.
- The finished inventory subindex increased 5.5 points compared with January.
- The commodity prices subindex fell 1.7 points and now reads 35.4.
Optimism for future production fell in February. When asked for their production expectations during the next three to six months, 46 percent of survey participants expected production to be higher going forward, compared with 61 percent in January. The good news is that no survey respondents expect production to be lower than their current levels during the same time period.
The change in energy prices and severe winter weather are just a couple of challenges manufacturing faces. Some isolated reports of reduced orders from manufacturers closely tied to the energy sector have emerged, but on the other hand, the drop in oil prices has other contacts saving money on fuel costs. However, most contacts in the Southeast have expressed little direct energy-related effect on their business activity. Judging by the February PMI report, southeastern manufacturing is holding strong. We'll see if the positive momentum sustains into spring.
May 12, 2015
Trials and Tribulations in Transportation
Members of the Atlanta Fed's Trade and Transportation Advisory Council convened on April 7 at the Atlanta Fed's Jacksonville Branch to discuss the Southeast latest developments in this sector.
Just over half of council members reported an expansion of overall activity compared with the same period last year. A few members reported reduced freight activity, citing the primary causes as both a decrease in movement of materials related to oil exploration and the appreciation of the U.S. dollar against the euro. Members noted that severe winter weather affected shipments for railroads and truckers primarily throughout the north and northeast United States, and the West Coast ports situation disrupted supply chains across the country. East Coast port volumes are now over capacity as shippers began diverting cargo away from the West Coast. Council members anticipate that it will be August before the backlog of port cargo will be cleared, a situation that may adversely affect the peak fall shipping season. However, members believed that many of the structural problems of the West Coast ports will remain in place long after the labor situation is resolved.
Employment, wage picture largely mixed
A majority of council members reported that employment levels were flat or slightly higher compared with this time last year, and two-thirds of council members expect higher workforce levels this time next year.
Truck driver shortages remained an almost universal concern for the industry. Technicians (formerly referred to as mechanics) are also in demand and harder to find as new federal emission requirements demand workers with more specialized skills.
Responses regarding wage pressures were mixed. Trucking companies continued to raise driver pay, as finding willing and qualified truck drivers remained difficult. Outside of specific areas of expertise, such as railroad engineers and technicians, employers were easily filling nondriver positions without increasing starting salaries. Logistics firms, however, perceived the labor market as tightening and reported more frequent voluntary turnover with "higher pay" being cited as a reason for leaving. Additionally, candidates were receiving multiple offers and enhanced benefits packages.
Nonlabor input costs and prices
A number of council members reported seeing some upward cost pressures in nonlabor inputs such as commercial insurance, equipment, locomotives and leases, ocean freight rates, and domestic trucking rates. The sharp decline in fuel costs, however, has helped keep overall costs down.
Almost all council members reported better pricing power since the last meeting in October 2014. Members indicated that some customers understand market forces and work to negotiate the best deal possible with their current carrier, but others shop around for the lowest cost. All council members anticipate greater ability to raise prices one year out and beyond, citing constrained capacity and expected higher commodity prices as the principal reasons, along with seeking to recover increased regulatory compliance costs.
International trade rises modestly
Council members with insight into international trade indicated modest growth in imports, related to the strong U.S. dollar against the euro and other foreign currencies and an improved domestic economy. Regions expected to drive demand for U.S. exports are South America and Asia as those economies continue to expand consumer buying power. Near-shoring is expected to become a bigger trend, and the automotive sector's investments in Mexico will drive greater cross-border growth between the United States and Mexico.
Outlook
Two-thirds of council members expect higher growth in the short term. Over the next two to three years, three-quarters of members expect higher growth. When asked about the most challenging issues facing the transportation sector, responses varied by sub-industry. Driver shortages continued to be the headliner, along with regulatory issues, which continued to drive capacity out of the market and significantly push up operations costs. Broadly, the supply chain has been adversely affected by infrastructure constraints, and this impact could persist: the United States has a great need for well-planned and properly funded hard infrastructure investment in ports and road networks to get goods to market.
The council meets again in October, and SouthPoint will report whether the summer months reflect improving conditions for the movement of goods.
By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch
April 16, 2015
Southeast Manufacturing: Solid as an Oak
When I was a kid, I spent a few fall afternoons cutting and splitting firewood with my older brother. I must say that I didn't care for the process at all. It was hard work, and I have much respect for people that carry on the time-honored tradition. I learned quickly that there were certain types of wood you wanted to stay away from. Oak was one of them. Now, I am ashamed to say that I didn't pay close attention when collecting tree leaves for science class, but I always knew when I was trying to split a piece of oak. As a matter of fact, when I would come across a piece of oak, I preferred to skip over it. Oaks are strong and stately trees and no fun at all to split. The March Southeastern purchasing managers index (PMI) report, released on April 6, reminded me of my ill-fated attempts to split oak. It is one tough piece of wood.
The Atlanta Fed's research department uses the Southeast PMI to track regional manufacturing activity. The Econometric Center at Kennesaw State University produces the survey, which analyzes current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.
The March Southeast PMI's overall index declined slightly from February, falling 2.5 points to 58.0 (see the chart). However, the index has remained above the 50 threshold for expansion 14 out of the last 15 months. It also averaged a solid 58.0 during the first quarter.
- The new orders subindex fell 6.6 points to 56.9.
- The production subindex decreased 2.9 points compared with the previous month and now reads 61.8.
- The employment subindex declined 9.2 to 57.8. The March report indicated that manufacturing payrolls have now grown for 18 consecutive months.
- The supplier deliveries subindex increased 1.2 points to 54.9.
- The finished inventory subindex increased 5.2 points to 58.8.
- The commodity prices subindex rose 4.8 points and now reads 40.2.
Optimism for future production also increased in March. When asked for their production expectations during the next three to six months, 53 percent of survey participants expected production to be higher going forward, compared with 46 percent in February.
Much of the recent national manufacturing data have been weak. In March, the industrial production report indicated that manufacturing output increased 0.1 percent during February, but output had declined in the previous two months. New orders for core capital goods also declined for the sixth consecutive month in February and the March ISM index, although still indicating expansion, fell to its lowest reading since May 2013. Some analysts believe cold weather and the strong dollar are affecting overall manufacturing activity.
Despite the recent weak national numbers, southeastern manufacturing appears to be holding strong...just like the oak trees I tried to split as a kid. If you've never split wood—and especially a piece of oak—try it sometime. I doubt it will make your top-five list of things to do. Oak is one tough piece of wood.
April 10, 2015
The Fruits of Our Labor
February 2015 state-level labor market data from the U.S. Bureau of Labor Statistics (BLS) for Sixth District states was solid—on aggregate. Overall, the region contributed 45,900 net payrolls in February, which was 17 percent of the nation's 264,000 payrolls. The combined unemployment rate of District states declined 0.1 percentage point to 6.1 percent. In fact, the unemployment rate fell in all six states, which hasn't occurred in almost two years.
While it's important to look at the aggregate picture when thinking about labor market performance for the entire District, it's also meaningful to hone in on the drivers of that performance. Although the drivers are largely related to the sheer size of the labor force, in the case of February's job growth in Sixth District states, just two states contributed to the bulk of February's job gains (see the chart).
Georgia and Florida carry the weight of job growth
February was a standout month for the Peach State. With 25,400 net payrolls added, Georgia supplied more than half of the jobs of all Sixth District states combined, and was the second largest contributor to job growth in the United States. This over-the-month jobs figure was the most the state added in four years, also crushing its 2014 monthly average of 12,200 net payrolls. Job gains were widespread, but the industries that contributed the most net payrolls in Georgia were retail (up 5,300) and accommodation and food services (up 5,500). In fact, both industries have almost steadily added jobs on net each month in Georgia over the past two years (see the chart).
Not too far behind the Peach State in February was the Orange State, with 19,700 net jobs added. The largest gains came from the government (up 4,800; local government payrolls were up 3,200), retail (up 4,200), and health care and social assistance (up 3,700) sectors. Over the past two years, the retail and health care and social assistance industries, in particular, have contributed solid gains in the state. In reality, Florida has been a consistent contributor to Sixth District jobs growth for several years (see the chart).
Where did the other states stand? In addition to Georgia's 25,400 and Florida's 19,700 payrolls in February, Mississippi contributed 3,500 net jobs. The remaining states subtracted from job growth: Louisiana (down 700), Tennessee (down 800), and Alabama (down 1,200).
Unemployment rate declines in all states
All six states in the District experienced a decline in the unemployment rate in February, which hasn't occurred in almost two years (see the chart). The aggregate figure was 6.1 percent, slowly approaching the national rate of 5.5 percent. February rates by state were as follows: Alabama 5.8 percent, Florida 5.6 percent, Georgia 6.3 percent, Louisiana 6.7 percent, Mississippi 7.0 percent, and Tennessee 6.6 percent.
Keeping an eye on developing trends
I'll be paying attention to future data to spot this year's trends in regional labor market indicators and report back here.
By Rebekah Durham, economic policy analysis specialis t in the Regional Economic Information Network at the New Orleans Branch of the Atlanta Fed
March 12, 2015
Southeast PMI Surges in February
The Southeast purchasing managers index (PMI) report was released on March 5, and it indicates that any lingering effects from the late 2014 manufacturing slowdown have abated. If you recall, the December Southeast PMI dipped into contraction territory, but it has rebounded nicely since. The PMI index has risen 14.9 points since December and now sits at its highest reading since April 2014.
The Atlanta Fed's research department uses the Southeast PMI to track southeastern manufacturing activity. The Econometric Center at Kennesaw State University produces the survey, which provides an analysis of current conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates contracting activity.
The Southeast PMI's overall index rose 4.9 points to 60.5 in February (see the chart). The subindexes also suggest some positive future developments:
- The new orders subindex rose to 63.4, a 6.0 point increase over January and a 29.4 point increase over the last two months.
- The production subindex increased 3.5 points over the previous month and now reads 64.6.
- The employment subindex rose 7.8 points over January to 67.1, indicating that manufacturing payrolls grew for the 17th consecutive month.
- The supply deliveries subindex increased 1.8 points from the previous month to 53.7.
- The finished inventory subindex increased 5.5 points compared with January.
- The commodity prices subindex fell 1.7 points and now reads 35.4.
Optimism for future production fell in February. When asked for their production expectations during the next three to six months, 46 percent of survey participants expected production to be higher going forward, compared with 61 percent in January. The good news is that no survey respondents expect production to be lower than their current levels during the same time period.
The change in energy prices and severe winter weather are just a couple of challenges manufacturing faces. Some isolated reports of reduced orders from manufacturers closely tied to the energy sector have emerged, but on the other hand, the drop in oil prices has other contacts saving money on fuel costs. However, most contacts in the Southeast have expressed little direct energy-related effect on their business activity. Judging by the February PMI report, southeastern manufacturing is holding strong. We'll see if the positive momentum sustains into spring.
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