The Southeastern Economy in 2009
Region Hopes for Turnaround
As 2008 dawned, the U.S. economy was already in the throes of a now-declared recession, and as the year wore on the nation was plagued by financial market turmoil, housing market and credit crises, rising food and energy costs, and job losses.
The Southeastern economy struggled with many of the same problems. Economic factors that had buoyed the region's economy in previous years began to crumble. Employment levels in 2008 in the region fell for the first time in five years, and by the third quarter the unemployment rate was at its highest level since the 1991 recession. Likewise, consumer spending slumped as consumers felt the pinch of soaring energy and food prices, the credit crunch, and uncertainty about the economy.
New construction and sales of residential and commercial real estate in the Southeast weakened in 2008. Existing home sales did stabilize in parts of the region, but in some markets foreclosed homes became a larger share of the inventory, driving down home prices. Many manufacturers were hit hard by the declines in construction, home sales, auto sales, and tighter credit conditions. Agricultural industries also struggled with continuing drought, risings costs for fuel and related inputs, and reduced product demand as the domestic and global economies weakened.
Not all the region's economic news in 2008 was bad, though. Tourism industries, especially cruise lines, had a relatively sunny year as a weaker dollar kept domestic travelers vacationing closer to home and brought international travelers flocking to the region. The weak dollar also helped some manufacturing industries that produced goods for export. Manufacturers tied to the energy sector and commodities also fared comparatively well.
The economic outlook for the Southeast in 2009 is in many ways for more of the same. Employment levels in the region may in fact get worse before they get better. Consumer spending and personal income will likely continue to be restrained until employment picks up. Energy markets remain uncertain; prices, which fell as sharply in the latter half of 2008 as they rose in the first half, could go up again if global economic conditions improve and spur business and consumer demand.
Housing activity has shown some recent signs of stabilizing, but recovery is unlikely to occur quickly. Tourism and exports, two relatively bright spots in the past year, may fare less well if the strengthening of the dollar and the global economic slowdown that began late in 2008 continue. On the upside, plans for expansion in auto and aerospace manufacturing should help bolster the region's economy in 2009.
In the following articles, EconSouth examines how the Southeastern economy coped with 2008's problems and what challenges and signs of encouragement might be in store in 2009.
The Southeast in 2009 at a Glance
Despite declining auto sales nationwide, Alabama should hold its own in auto-mobile manufacturing when Honda shifts assembly of two existing models to its Lincoln plant in 2009. The aerospace industry also propped up manufacturing in the state in 2008 and should remain strong in 2009. Home prices have not declined as much in Alabama as elsewhere in the region, suggesting that the state's relatively lower rates of mortgage delinquencies will continue to be a plus in 2009. But Alabama's poultry industry will feel the pinch in 2009 as a global economic slowdown reduces demand from China and Russia, major importers of the state's chickens.
Plummeting home prices, soaring foreclosures, tight credit, and rising unemployment added up to a fairly miserable economic experience in Florida in 2008. The state's agriculture sector also suffered from continued drought, declines in demand for landscaping materials, and diseases attacking the citrus crops. The only relatively bright spot for Florida's economy in 2008 was tourism, especially the cruise industry. In 2009, expansion in the aerospace industry should provide a boost. One tentatively encouraging sign for the state's economy is that the decline in home sales has moderated.
The rate of home foreclosures was high in Georgia during 2008, particularly in the Atlanta area. Real estate loan problems also led to the failure of five of the state's banks during the year. The slow housing market nationally also brought further job losses to the state's textile manufacturers. Another manufacturing setback was the closing of GM's 61-year-old plant in Doraville in September. But a positive sign is the new Kia plant in West Point, which began training workers in March 2008 and will begin production in late 2009.
Louisiana was once again hit by costly hurricanes—two in 2008. On the bright side, however, the state boasted the lowest unemployment rate among the Southeastern states through September. Louisiana has reaped the benefits from high oil prices over the past several years, reflected in continued, although slowing, employment growth through 2008. The current economic uncertainty and decline in energy prices could spell trouble for the state in 2009.
At the beginning of 2008, Mississippi was the only state in the region with a declining unemployment rate. But between May and September the state saw the most dramatic rise in the unemployment rate among the Southeastern states and now has the region's highest unemployment rate. Further bad news came in December when Toyota indefinitely delayed the opening, scheduled for 2010, of its assembly plant in Blue Springs. The state also faces uncertainty in 2009 as the potential for declining energy prices throws the future of many oil exploration projects into question.
A dismal housing market in 2008 continued to be bad news for Tennessee's furniture and fabricated metals manufacturing sectors. Rising commodity prices through most of the year, however, provided a relative boost to the state's primary metals industry. Construction of the Volkswagen assembly plant in Chattanooga will continue through 2009 for an anticipated 2010 opening. If gasoline prices remain at the relatively modest levels they hit toward the end of 2008, drive-to tourist destinations in Tennessee should benefit in 2009.