This week marked the second gathering of the Atlanta Fed's Local Economic Analysis and Research Network (LEARN). LEARN is a forum for academics and researchers with a detailed knowledge of economic developments in local economies in the Southeast. The aim is to create a network for discussing and exchanging ideas on research, methodologies, and current economic developments. LEARN members are university-based centers for business and economics research in the Sixth Federal Reserve District (Alabama, Florida, Georgia, eastern Tennessee, southern Louisiana, and southern Mississippi) and Atlanta Fed economists and analysts who focus on regional economic issues. We blogged about LEARN last year.
In addition to presentations from several FRB Atlanta economists, individual state outlooks were discussed. This week we highlight three of these outlooks—Alabama, Florida, and Tennessee.
Dr. Sam Addy, director of the University of Alabama's Center for Business and Economic Research, reported that Alabama's economy is recovering. Economic growth is expected be 1.9 percent in 2010, but employment growth should be flat. He also noted that The Alabama Business Confidence Index (ABCI), a forward-looking quarterly measure of business sentiment across the state, indicated a clear turnaround in confidence. With an index of 49.5, panelists feel economic conditions will be better in the second quarter. However, they do not yet think the state will see a broad-based recovery encompassing output, sales, profits, employment, and capital spending, Dr. Addy reported. See his latest forecast here.
Challenges facing the Alabama economy in 2010 include continuing, but slowing, job losses, declining consumer spending and income, declining revenue to fund public education, decreasing federal government spending, and continuing problems in commercial and residential real estate, he concluded.
Dr. Christopher McCarty from the University of Florida's Survey Research Center (a component of the school's Bureau of Economic and Business Research) highlighted four major indicators of economic activity—consumer confidence, employment, housing, and population. He reported that Florida's consumer confidence improved in 2009 but remains well below prerecession levels. Dr. McCarty reports on Florida's consumer confidence on a monthly basis.
Employment gains remain elusive in Florida, and unemployment is at its highest level on record, Dr. McCarty said. He also noted that long-term unemployment was higher in Florida than in the nation as a whole. The housing downturn in the Sunshine State has been significant, and house prices for the state are down nearly 50 percent from their peak.
Population decreased for the first time in postwar history in 2009, he said. Will population growth return? Dr. McCarty noted that population growth has always returned in the past following recessions, and he felt that baby boomers will still be inclined to move to warmer climates. Reasons why population growth may not rebound quickly include the possibility that retirees could change their behavior and stay put. Regardless, Dr. McCarty concluded, Florida has a large supply of single-family homes and condominiums that, along with declining home ownership, may stall construction growth even if population growth returns.
Professor Matthew Murray from the University of Tennessee's Center for Business and Economic Research told the participants that the state economy should begin seeing improvement in economic conditions as 2010 unfolds. However, he said that a strong and vigorous rebound is not expected. The latest forecast from Dr. Murray can be found here.
Even if rapid growth does emerge, it would be at least two years before Tennessee's economic activity returns to prerecession levels. Professor Murray also reported that the labor market is expected to see a slow recovery. The state unemployment rate will likely average 10.4 percent this year and remain above 10 percent through 2011, he reported.
Taxable sales and state sales tax revenue continue to contract, though now at somewhat lower rates of year-over-year decline. Taxable sales were down 2.2 percent in 2008 and will likely fall a further 7.6 percent in 2009. To illustrate the depth of the problem, Professor Murray added that taxable sales in 2009 were below the level of sales recorded in 2005.
Presentations from the conference will be available on our Web site shortly.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department