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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.
December 30, 2014
New Orleans Area Optimistic Heading into 2015
During the last couple of months, the Regional Economic Information Network team from the New Orleans Branch of the Atlanta Fed was in contact with more than 30 business leaders to gauge sentiment about current and anticipated economic conditions in the region (which covers central and south Louisiana and Mississippi, south Alabama, and the Florida Panhandle to Apalachicola). The optimism and confidence that our contacts expressed over the last few quarters continued and was in fact more prevalent this time. Although contacts' expectations in previous months were for "slow and steady" growth, many business leaders now feel assured about their outlook for a pickup in growth in 2015.
In particular, we continue to receive upbeat reports about the tourism sector. This time, the message came from the Florida Panhandle again, where it was mentioned that tourism was growing into a year-round business, supported largely by an emergence of international travelers rather than the typical wintertime snowbirds. Retail contacts were also very positive, especially about holiday sales in November but also about a notable general sense of improving consumer sentiment. Another sign of strength in the region was commercial real estate, which was reported as robust across Louisiana, particularly for retail, multifamily, and office space leasing and development.
Employment and labor markets
Generally, contacts continued to report positive net hiring in response to increases in demand, though they didn't report acceleration from previous months. We continue to receive reports about firms' efforts to use automated solutions to reduce staffing or conduct optimization studies to enhance efficiency while reducing costs. Once again, contacts noted major challenges filling certain skilled positions, such as trades workers, engineers, truck drivers, and information technology professionals—a predicament business contacts have expressed for more than a year.
Costs, wages, and prices
For several months now, contacts have reported some cost pressures with little pricing power. In most cases, firms have been able to increase prices only after a competitor successfully does so or when contracts are up for renegotiation. Regarding the declining price of oil, energy industry representatives shared their view of the impact on their industry, which they indicated would initially affect smaller players (described in a recent SouthPoint post). In addition, a few contacts noted that declining energy prices posed a risk to their 2015 outlook. For the first time in many months, a number of contacts reported across-the-board wage pressures, which were previously isolated to certain positions. Others indicated they expect to encounter pressure in 2015. Several firms we spoke with indicated they expanded merit program budgets in 2015, with most increases being in the range of 2.5 to 3 percent, though a few in the range of 3 to 5 percent. Though a number of firms reported they were investigating strategies to control compensation costs with tools such as performance-based incentives, health care contributions, and targeted salary increases—a trend we've noted over the last couple of quarters.
Availability of credit and investment
Access to capital and availability of credit remained a nonissue for the majority of our contacts, though some small firms indicated obtaining credit from traditional banks remained difficult because of qualification requirements. Banking contacts indicated that loan demand strengthened in the third quarter. Capital investment reports were consistent with the last few cycles, reflecting some expansion activity but mostly focused on efficiency or maintenance.
Business outlook
Although some contacts noted a bit of uncertainty about the outlook—including the declining price of oil, increased government regulations, and the strengthening U.S. dollar—contacts were overall positive and confident about 2015 expectations. What's your outlook for 2015?
By Rebekah Durham, economic policy analysis specialist in the Regional Economic Information Network at the New Orleans Branch of the Atlanta Fed
December 17, 2014
A Timely Talk with Energy Professionals
If you read or watch the news, you've undoubtedly noticed what's happening with the price of oil. But for those of you who may have missed these reports, here it is in a nutshell: the price of Brent crude oil, the international benchmark, has declined more than 40 percent since its peak of over $115 in mid-June (see the chart).
Many reports have discussed what the decline means to the energy industry and economy as a whole. In fact, the Atlanta Fed's very own macroblog published a post that examined the impact on energy investment and overall economic growth. We were also fortunate to be able to discuss this important and timely situation, along with other industry trends, with energy sector representatives last month during our Energy Advisory Council meeting held at the New Orleans Branch. So what did council members think about the declining price of oil? I gleaned a few key takeaways.
Industry effects
Council members reported that the recent drop in the price of oil had led exploration and production firms to reevaluate operational flexibility, cost-management strategies, and extraction technologies. These firms also initiated renegotiations with oilfield service companies for reductions to pricing structures, which a recent report suggested may drop as much as 20 percent.
In addition, council members conveyed their expectation that marginal oil producers may be negatively affected by falling oil prices, as their breakeven point is typically much higher than the larger producers. They shared that foreign oil-producing countries that acquire a majority of their revenues from the world's most traded commodity may also be adversely affected, which is a known concern among many key people inside the industry. The council also pointed out that if oil prices continued to decline or even hold at current levels, capital spending may be affected since firms would have fewer profits to reinvest into production and growth. Some reports indicate that this effect on spending is already beginning to occur. However, some members told us that they anticipate continued steady production in both deepwater and onshore drilling since many of these projects are large scale and long term and have high front-end costs (which in many cases have already been funded). Decisions about future projects may need to be reconsidered, however.
All in all, the Energy Advisory Council meeting was very timely, considering our attempts to understand what was happening globally with the price of oil and its impact on the economy. It will be interesting to learn how the energy industry will have adapted to current events when the council convenes again in March 2015.
By Rebekah Durham, economic policy analysis specialist in the Atlanta Fed's New Orleans Branch
May 20, 2014
Jazz Fest: Another Capital Boost in New Orleans
In March, I wrote about the impact of Mardi Gras on the New Orleans economy. Well, in case you didn’t know this already, we love our festivals here in NOLA. The fact that they support our economy is just lagniappe (that’s “a little something extra” in New Orleans–speak). Second only to Mardi Gras in terms of economic impact is the New Orleans Jazz and Heritage Festival, or “Jazz Fest,” which this year spanned two spring weekends: April 27–29 and May 3–6. The festival attracts about 400,000 people each year, who come to hear eclectic musical performances (from blues, jazz and rock to gospel, zydeco, pop, and more) and eat some of the best local food around (crawfish monica, alligator pie, shrimp bread, and cochon de lait, to name a few).
According to the New Orleans Jazz and Heritage Festival and Foundation Inc., the nonprofit organization that owns and manages the event, Jazz Fest generates more than $300 million for the city. This figure includes spending at the festival, Jazz Fest staff wages, hotel rooms, and estimated spending at restaurants and other shops and activities. The foundation uses the profits from the festival to preserve the city’s musical culture by putting on other festivals and concerts (smaller and free), lectures and literary events, gallery exhibits, educational programs, and grants for students and community cultural organizations. So you could say that Jazz Fest not only has a positive economic impact on New Orleans but also a significant human capital contribution as well.
If you haven’t been to Jazz Fest yet, make plans to come next year. And remember, your contribution produces economic value in the form of financial and human capital.
By Rebekah Durham, economic policy analysis specialist in the Atlanta Fed's New Orleans Branch
March 4, 2014
Does Fat Tuesday Give New Orleans a Fat Wallet?
"Happy Mardi Gras!" is what's been enthusiastically shouted across the streets of New Orleans the past couple of weeks. Well, there's that and "Throw me something, Mister!" It's Mardi Gras season—a time of king cakes, wild and crazy Bourbon Street, and extravagant parades that include musicians, dancers, and colorful floats filled with masked locals who throw shiny plastic beads and trinkets to excited crowds. Though it may seem like a haze of decadence and chaos spanning two weeks in New Orleans, a lot of planning and money from locals and tourists alike goes into this lively time of year. More than a million people pack the city's streets during the two weeks leading up to Mardi Gras day, also known as Fat Tuesday (which falls on March 4 this year). So, what does Mardi Gras mean to the local economy?
In 2009, the Carnival Krewe Civic Foundation Inc. commissioned a biennial study of the economic impact of Mardi Gras. Tulane University economics professor Toni Weiss prepared the 2009 and 2011 reports. However, in 2013, New Orleans hosted the Super Bowl during Mardi Gras season, making it difficult to separate the economic effects of the two events. Therefore, the next study will reflect 2014 data.
According to the 2011 report, the economic impact on the city was $300 million, accounting for 1.5 percent of New Orleans's gross domestic product. It's worth noting that this figure is likely understated as it does not include incremental restaurant business, airport usage, or any businesses' fixed investment. It may also underestimate local citizens' Mardi Gras–related spending. Weiss evaluated seven main categories in the study: lodging and nonlodging, food and alcohol, merchandise, Mardi Gras–themed tours, Krewes (organizations of revelers who put on the parades, host Mardi Gras balls, and participate in social events throughout the year), Krewe members (the aforementioned revelers who spend their own money on the events), and the city government. Direct expenditures from these categories during the 2011 Mardi Gras season were an estimated $144 million.
So where did the other $156 million come from? According to Weiss, the Mardi Gras "franchise" the city created accounts for the difference. It includes an extensive infrastructure of lodging, food and drinking establishments, retail shops selling themed merchandise, and other factors from which other events and businesses (for example, conventions unrelated to Mardi Gras specifically) could benefit. The net fiscal benefit to the city was more than $13 million, or a return of $8.45 for every city dollar spent.
If you ask me, that's a pretty sizable return on investment—enough to fatten the city's wallet quite a bit.
Weiss's team will begin collecting data on the 2014 Mardi Gras season in a couple of weeks, and I look forward to seeing what the new results show.
By Rebekah Durham, economic policy analysis specialist in the Atlanta Fed's New Orleans Branch
December 30, 2014
New Orleans Area Optimistic Heading into 2015
During the last couple of months, the Regional Economic Information Network team from the New Orleans Branch of the Atlanta Fed was in contact with more than 30 business leaders to gauge sentiment about current and anticipated economic conditions in the region (which covers central and south Louisiana and Mississippi, south Alabama, and the Florida Panhandle to Apalachicola). The optimism and confidence that our contacts expressed over the last few quarters continued and was in fact more prevalent this time. Although contacts' expectations in previous months were for "slow and steady" growth, many business leaders now feel assured about their outlook for a pickup in growth in 2015.
In particular, we continue to receive upbeat reports about the tourism sector. This time, the message came from the Florida Panhandle again, where it was mentioned that tourism was growing into a year-round business, supported largely by an emergence of international travelers rather than the typical wintertime snowbirds. Retail contacts were also very positive, especially about holiday sales in November but also about a notable general sense of improving consumer sentiment. Another sign of strength in the region was commercial real estate, which was reported as robust across Louisiana, particularly for retail, multifamily, and office space leasing and development.
Employment and labor markets
Generally, contacts continued to report positive net hiring in response to increases in demand, though they didn't report acceleration from previous months. We continue to receive reports about firms' efforts to use automated solutions to reduce staffing or conduct optimization studies to enhance efficiency while reducing costs. Once again, contacts noted major challenges filling certain skilled positions, such as trades workers, engineers, truck drivers, and information technology professionals—a predicament business contacts have expressed for more than a year.
Costs, wages, and prices
For several months now, contacts have reported some cost pressures with little pricing power. In most cases, firms have been able to increase prices only after a competitor successfully does so or when contracts are up for renegotiation. Regarding the declining price of oil, energy industry representatives shared their view of the impact on their industry, which they indicated would initially affect smaller players (described in a recent SouthPoint post). In addition, a few contacts noted that declining energy prices posed a risk to their 2015 outlook. For the first time in many months, a number of contacts reported across-the-board wage pressures, which were previously isolated to certain positions. Others indicated they expect to encounter pressure in 2015. Several firms we spoke with indicated they expanded merit program budgets in 2015, with most increases being in the range of 2.5 to 3 percent, though a few in the range of 3 to 5 percent. Though a number of firms reported they were investigating strategies to control compensation costs with tools such as performance-based incentives, health care contributions, and targeted salary increases—a trend we've noted over the last couple of quarters.
Availability of credit and investment
Access to capital and availability of credit remained a nonissue for the majority of our contacts, though some small firms indicated obtaining credit from traditional banks remained difficult because of qualification requirements. Banking contacts indicated that loan demand strengthened in the third quarter. Capital investment reports were consistent with the last few cycles, reflecting some expansion activity but mostly focused on efficiency or maintenance.
Business outlook
Although some contacts noted a bit of uncertainty about the outlook—including the declining price of oil, increased government regulations, and the strengthening U.S. dollar—contacts were overall positive and confident about 2015 expectations. What's your outlook for 2015?
By Rebekah Durham, economic policy analysis specialist in the Regional Economic Information Network at the New Orleans Branch of the Atlanta Fed
December 17, 2014
A Timely Talk with Energy Professionals
If you read or watch the news, you've undoubtedly noticed what's happening with the price of oil. But for those of you who may have missed these reports, here it is in a nutshell: the price of Brent crude oil, the international benchmark, has declined more than 40 percent since its peak of over $115 in mid-June (see the chart).
Many reports have discussed what the decline means to the energy industry and economy as a whole. In fact, the Atlanta Fed's very own macroblog published a post that examined the impact on energy investment and overall economic growth. We were also fortunate to be able to discuss this important and timely situation, along with other industry trends, with energy sector representatives last month during our Energy Advisory Council meeting held at the New Orleans Branch. So what did council members think about the declining price of oil? I gleaned a few key takeaways.
Industry effects
Council members reported that the recent drop in the price of oil had led exploration and production firms to reevaluate operational flexibility, cost-management strategies, and extraction technologies. These firms also initiated renegotiations with oilfield service companies for reductions to pricing structures, which a recent report suggested may drop as much as 20 percent.
In addition, council members conveyed their expectation that marginal oil producers may be negatively affected by falling oil prices, as their breakeven point is typically much higher than the larger producers. They shared that foreign oil-producing countries that acquire a majority of their revenues from the world's most traded commodity may also be adversely affected, which is a known concern among many key people inside the industry. The council also pointed out that if oil prices continued to decline or even hold at current levels, capital spending may be affected since firms would have fewer profits to reinvest into production and growth. Some reports indicate that this effect on spending is already beginning to occur. However, some members told us that they anticipate continued steady production in both deepwater and onshore drilling since many of these projects are large scale and long term and have high front-end costs (which in many cases have already been funded). Decisions about future projects may need to be reconsidered, however.
All in all, the Energy Advisory Council meeting was very timely, considering our attempts to understand what was happening globally with the price of oil and its impact on the economy. It will be interesting to learn how the energy industry will have adapted to current events when the council convenes again in March 2015.
By Rebekah Durham, economic policy analysis specialist in the Atlanta Fed's New Orleans Branch
May 20, 2014
Jazz Fest: Another Capital Boost in New Orleans
In March, I wrote about the impact of Mardi Gras on the New Orleans economy. Well, in case you didn’t know this already, we love our festivals here in NOLA. The fact that they support our economy is just lagniappe (that’s “a little something extra” in New Orleans–speak). Second only to Mardi Gras in terms of economic impact is the New Orleans Jazz and Heritage Festival, or “Jazz Fest,” which this year spanned two spring weekends: April 27–29 and May 3–6. The festival attracts about 400,000 people each year, who come to hear eclectic musical performances (from blues, jazz and rock to gospel, zydeco, pop, and more) and eat some of the best local food around (crawfish monica, alligator pie, shrimp bread, and cochon de lait, to name a few).
According to the New Orleans Jazz and Heritage Festival and Foundation Inc., the nonprofit organization that owns and manages the event, Jazz Fest generates more than $300 million for the city. This figure includes spending at the festival, Jazz Fest staff wages, hotel rooms, and estimated spending at restaurants and other shops and activities. The foundation uses the profits from the festival to preserve the city’s musical culture by putting on other festivals and concerts (smaller and free), lectures and literary events, gallery exhibits, educational programs, and grants for students and community cultural organizations. So you could say that Jazz Fest not only has a positive economic impact on New Orleans but also a significant human capital contribution as well.
If you haven’t been to Jazz Fest yet, make plans to come next year. And remember, your contribution produces economic value in the form of financial and human capital.
By Rebekah Durham, economic policy analysis specialist in the Atlanta Fed's New Orleans Branch
March 4, 2014
Does Fat Tuesday Give New Orleans a Fat Wallet?
"Happy Mardi Gras!" is what's been enthusiastically shouted across the streets of New Orleans the past couple of weeks. Well, there's that and "Throw me something, Mister!" It's Mardi Gras season—a time of king cakes, wild and crazy Bourbon Street, and extravagant parades that include musicians, dancers, and colorful floats filled with masked locals who throw shiny plastic beads and trinkets to excited crowds. Though it may seem like a haze of decadence and chaos spanning two weeks in New Orleans, a lot of planning and money from locals and tourists alike goes into this lively time of year. More than a million people pack the city's streets during the two weeks leading up to Mardi Gras day, also known as Fat Tuesday (which falls on March 4 this year). So, what does Mardi Gras mean to the local economy?
In 2009, the Carnival Krewe Civic Foundation Inc. commissioned a biennial study of the economic impact of Mardi Gras. Tulane University economics professor Toni Weiss prepared the 2009 and 2011 reports. However, in 2013, New Orleans hosted the Super Bowl during Mardi Gras season, making it difficult to separate the economic effects of the two events. Therefore, the next study will reflect 2014 data.
According to the 2011 report, the economic impact on the city was $300 million, accounting for 1.5 percent of New Orleans's gross domestic product. It's worth noting that this figure is likely understated as it does not include incremental restaurant business, airport usage, or any businesses' fixed investment. It may also underestimate local citizens' Mardi Gras–related spending. Weiss evaluated seven main categories in the study: lodging and nonlodging, food and alcohol, merchandise, Mardi Gras–themed tours, Krewes (organizations of revelers who put on the parades, host Mardi Gras balls, and participate in social events throughout the year), Krewe members (the aforementioned revelers who spend their own money on the events), and the city government. Direct expenditures from these categories during the 2011 Mardi Gras season were an estimated $144 million.
So where did the other $156 million come from? According to Weiss, the Mardi Gras "franchise" the city created accounts for the difference. It includes an extensive infrastructure of lodging, food and drinking establishments, retail shops selling themed merchandise, and other factors from which other events and businesses (for example, conventions unrelated to Mardi Gras specifically) could benefit. The net fiscal benefit to the city was more than $13 million, or a return of $8.45 for every city dollar spent.
If you ask me, that's a pretty sizable return on investment—enough to fatten the city's wallet quite a bit.
Weiss's team will begin collecting data on the 2014 Mardi Gras season in a couple of weeks, and I look forward to seeing what the new results show.
By Rebekah Durham, economic policy analysis specialist in the Atlanta Fed's New Orleans Branch
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