Economic Forecast OUTPUT AND EMPLOYMENT WHAT THE TABLE SHOWS:

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2 June, Economic Forecast OUTPUT AND EMPLOYMENT United States Real GDP $ billions (fourth quarter) $,996 $,575 $,5 $,9 $5, $5,5 $5,9 $6,5 $7, % change over the four quarters.9% -.8% -.%.8%.%.%.6%.5%.8% Nonfarm employment Job count (fourth quarter) 8,6, 5,9,667 9,877,667,65,,6,667,85,667 7,7,667 9,69,88,679,6 % change over the four quarters.9% -.% -.%.6%.5%.7%.8%.8%.% Average monthly change,667-9,6-68, 6,58 65,889 8,5 8,5 8,5 8,5 WHAT THE TABLE SHOWS: s GDP forecast is derived from the national forecast by allocating output to each of the 5 states based on employment shares. So, forecast misses reflect surprises in the aggregate forecast as well as unexpected shifts in a state s GDP share. s economy is tracking the performance of the national economy. So are its job markets. Real GDP $ billions (fourth quarter) $76 $66 $56 $6 $69 $78 $9 $ $8 % change over the four quarters.% -.6% -.9%.7%.%.%.%.%.7% Nonfarm employment Job count (fourth quarter),7,,5,9,85,6,87,,9,9,98,67,6,867,7,67,8,99 % change over the four quarters.7% -.8% -5.%.6%.%.7%.%.5%.% Average monthly change,58-9,79-6,858,958,7 5,6 6,95 5,9,7 The economy is expected to speed up in and 5, but the job market is likely to continue to recover at only a moderate pace. Note: GDP figures are based on quarterly values that are interpolated from annual GDP estimates using quarterly employment changes. Unbolded figures are reported actual values and bold figures represent forecasts. Sources: US Department of Commerce; US Department of Labor. Regional Perspectives: Economic Outlook Commercial Banking

3 Agriculture Mining Utilities Construction Durable manufacturing Nondudrable manufacturing Wholesale trade Retail trade Transportation Information Finance and insurance Real estate Professional and technical services Management of companies Administrative and waste management services Educational services Health care and social assistance Arts, entertainment, and recreation Hotel and food service Other services Government June, The Economy s Structure PERCENT OF TOTAL GDP DERIVED FROM SELECTED INDUSTRIES The figure compares the relative importance 6 of selected industries to the state s economy US industry mix 's industry mix with the national footprint of each industry (state and national figures reflect the value added of each industry as a percent of 8 6 aggregate state or US nominal GDP, respectively). s economy comprises a higher concentration of nondurable manufacturing, retail trade, transportation, and information sectors. The real estate industry still has a significant footprint in the state and that is a modest headwind for the state. Source: US Department of Commerce. Updated through. Regional Perspectives: Economic Outlook Commercial Banking

4 June, Bankruptcies RATIO OF BANKRUPTCY FILINGS TO THE 7 Q NUMBER The figure illustrates trends in bankruptcy 5 5 filings by businesses and persons relative to the number of filings in 7 Q, prior to the Business bankruptcy filings Nonbusiness bankruptcy filings recession. Bankruptcy filings rose to high levels amid the housing debacle, but are back to pre- All US bankruptcy filings (shaded area) recession levels. Indicators of financial stress are a useful coincident indicator of economic distress. The legacy of real estate excesses is beginning to pass. Source: Administrative Office of the U.S. Courts; Updated through March Regional Perspectives: Economic Outlook Commercial Banking

5 June, Oil & Gas Activity NUMBER OF DRILLING RIGS ON LAND, INLAND WATERS, AND OFFSHORE, 5 The figure illustrates recent trends in the rig count for petroleum drilling operations. Oil and gas drilling activity in is,5, United States (left scale) (right scale) 9 relatively robust. s small energy sector is bringing welcome help to an otherwise slow,5 economy., 6 Source: Baker Hughes rig count. Updated through Q Regional Perspectives: Alabama Economic Outlook Commercial Banking 5

6 June, FRB Atlanta Business Survey REAL GDP (% CHANGE MONTHS EARLIER) DIFFUSION INDEXES ( = NO CHANGE) FRB Atlanta D6 Factor, columns (right) real GDP, line (left) Forecast The figure compares an index of business activity produced by the Federal Reserve Bank of Atlanta (referred to as the D6 Factor) with s real GDP growth. The index is an estimate of the trend common to 5 distinct monthly series of economic data for the six states in the Bank s region. The D6 Factor filters out idiosyncratic shocks that disproportionately affect individual states. A value for the index appears to match trend-like growth for the national economy. The FRB Atlanta s business activity index points to slow growth. The southeastern region of the country is recovering but at a slow pace. Sources: Federal Reserve Bank of Atlanta; US Department of Commerce. Updated through December (surveys) and Q (GDP). Note: diffusion indexes represent the percentage of respondents seeing an increase in activity plus one half of the percentage reporting no change in activity. Regional Perspectives: Economic Outlook Commercial Banking 6

7 June, Initial Jobless Claims RATIO OF INITIAL CLAIMS FOR UNEMPLOYMENT INSURANCE TO THE 7 Q LEVEL The figure compares the trend in layoffs in US (solid area) with that for the national economy. Weekly layoffs, both the state and national tallies, are illustrated in the figure as a ratio to the level of layoffs in the fourth quarter of 7, prior to the recession... Layoffs have fallen back to pre-recession levels in, a clear indication that the state s economy is well on the road to a full recovery Weekly jobless claims figures are reported on a timely basis and so signal real-time shifts in economic activity. The low level of jobless claims bodes well for the state s economic outlook. Source: US Department of Labor. Updated through May 7, (state) and May, (US). Regional Perspectives: Economic Outlook Commercial Banking 7

8 June, Economic Growth REAL GDP GROWTH (PERCENT CHANGE FROM FOUR QUARTERS EARLIER) US Forecast Real GDP growth in (the line in the figure) is superimposed on top of US real GDP growth (bars in the figure). Real GDP growth in the state is tracking the trends in the national economy. From a GDP perspective, s economy is faring reasonably well. Source: US Department of Commerce. Updated through (state) and Q (US). Quarterly estimates for states after are interpolated from employment figures (through April ), based on the historical correlation of state and national employment changes. Regional Perspectives: Economic Outlook Commercial Banking 8

9 June, Economic Output REAL GDP LEVEL (RATIO TO Q) The figure illustrates the evolution of real.5. Forecast.5. GDP of the state and the overall US economy since the fourth quarter of, the peak of the previous business cycle that is, at any point in time the lines trace the.5. US.5. ratio of real GDP to its level in Q. s economy contracted by more in the recession than the national economy,.5.5 but now is tracking the national recovery s economy is forecast to continue to improve in. Source: US Department of Commerce. Updated through (state) and Q (US). Quarterly estimates for states after are interpolated from employment figures (through April ), based on the historical correlation of state and national employment changes. Regional Perspectives: Economic Outlook Commercial Banking 9

10 June, Employment Growth NONFARM PAYROLL EMPLOYMENT (PERCENT CHANGE FROM MONTHS EARLIER) US Forecast Job growth in versus the rest of the nation. Job growth in is surpassing the national average. suffered its most significant economic crisis in a long time, judging by trends in employment, but that now is largely history. Job growth is forecast to continue to expand at a respectable pace for the next couple of years. Source: US Department of Labor. Updated through April (state) and April (US). Regional Perspectives: Economic Outlook Commercial Banking

11 June, Employment NONFARM PAYROLL EMPLOYMENT (RATIO TO THE Q LEVEL) The figure illustrates the evolution of.6.5 Forecast.6.5 employment in the state compared with the nation since Q, the peak of the previous business cycle. The lines trace out... US... the ratio of employment at the time to employment in Q. Employment expanded about five percent over the course of the past expansion, like.. the national performance, then contracted sharply, giving up all of the job gains from the s. Businesses have recovered or replaced three-quarters of the recession s losses and is forecast to eclipse the 7 peak job count within a couple years s job market is on the mend. Source: US Department of Labor. Updated through April (state) and April (US). Regional Perspectives: Economic Outlook Commercial Banking

12 June, Intrastate Employment NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO Q LEVEL) Forecast US forecast US Hinesville Warner Robins Savanah Gainesville Valdosta Athens Atlanta Augusta Brunswick Macon Columbus The figure illustrates job trends in selected communities. Employment has stabilized in most communities around the state. Trends are improving quickly in Savanah, Gainesville, and Valdosta. Atlanta mirrors the recovery pace in the national economy. The economies of Hinesville and Warner Robins have ground to a slow uptrend, but these communities were relatively untouched by the recession. Many others are beginning to rebound Rome Albany Dalton forecast Amid the wide diversity of economic performance, most communities are on the mend. Source: US Department of Labor. Updated through April (state) and April (US). Regional Perspectives: Economic Outlook Commercial Banking

13 June, Unemployment UNEMPLOYMENT (PERCENT OF THE LABOR FORCE) The figure traces unemployment in Forecast against the national trend. s unemployment rate crested near percent, but now has fallen back to about 7 percent. 8 US (shaded) 8 The unemployment rate is the single best 6 6 indicator of the relative economic performance of a region. s falling unemployment rate implies that the economy is growing slightly faster than its underlying potential. Source: US Department of Labor. Updated through April (state) and April (US) Regional Perspectives: Economic Outlook Commercial Banking

14 June, Relative House Prices RATIO OF THE STATE S HOUSE PRICES TO THE NATIONAL AVERAGE (995 Q =.) The figure tracks the relative price of houses in the state versus the nation that is, it reflects the ratio of the state price index to the national house price index, with that ratio set to unity in the summer of 995. A drop in the line means that house prices in the state lag the national trend. States that did not suffer from speculative conditions saw a decline in the relative price of houses in the last decade. House prices lagged the national run-up in the last decade. Nonetheless, real estate values have weakened further even as house prices nationally have corrected earlier inflated conditions s real estate markets are now more attractively priced relative to the national average than at any time in recent memory. Source: FHFA. Updated through Q. Regional Perspectives: Economic Outlook Commercial Banking

15 June, Real Estate Markets HOUSE PRICES IN SELECTED COMMUNITIES (RATIO TO THE 995 Q LEVEL) The figure tracks the cumulative percentage US Dalton Albany Columbus Atlanta-Sandy Springs-Marietta Brunswick Chattanooga, Tn Athens-Clarke County Gainesville Hinesville Macon Rome Savannah Warner Robins Atlanta (Case-Shiller) deviation in house prices since 995 in selected local markets and compares those with the national average. House prices in are beginning to stabilize. KEY MESSAGE: Like the national trend, s real estate markets are beginning to follow more normal trends higher. Source: FHFA. Updated through Q Regional Perspectives: Economic Outlook Commercial Banking 5

16 June, New Home Building HOUSING STARTS (RATIO TO THE JULY 99 LEVEL) Housing starts in, which are US beginning to firm up. Home building activity has been slow for some time, but recently appears to be strengthening. Forecast Home building has much ground to recover to return to more normal levels. Source: Census Department. Updated through March (state) and April (US) Regional Perspectives: Economic Outlook Commercial Banking 6

17 June, Office Markets PERCENT OF OFFICE SPACE THAT IS VACANT Office vacancy rates in, compared with the national office vacancy rate. With the economy weak, office vacancy 5 Atlanta 5 rates have climbed to high levels, but now are stabilizing. Commercial real estate markets are 5 5 sensitive to local economic conditions and the odds are that vacancy rates will continue 5 All metropolitan areas (shaded area) 5 to rise. Source: CB Richard Ellis (formerly CB Commercial Property Information Systems), Office Vacancy Index of the United States. Updated through Q Regional Perspectives: Economic Outlook Commercial Banking 7

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