Employment in the Southeast region grew to 25.1 million jobs, a rate of less than 1 percent, or an increase of 192,600 jobs, during the 12 months ending in September 2001. This rate of gain was considerably below the annual rates of growth (2 percent or greater) of the late 1990s. Compared with September 2000, total nonfarm employment as of September 2001 rose in four States and declined in four. In those 12 months, Florida recorded the biggest increase—3 percent—while Alabama and Mississippi recorded declines of 1.2 and 1.6 percent, respectively. The 5.4-percent unemployment rate in Mississippi was the highest in the region in September, and Georgia, at 3.8 percent, recorded the lowest rate.

The manufacturing sector in the Southeast region continues to suffer, with employment down 4.8 percent regionwide during the past 12 months. Mississippi and North Carolina each recorded losses of more than 6 percent, or a total of 67,900 manufacturing jobs. The services sector continued to record the largest rate of gain in jobs, up 2.8 percent in the region as a whole. In Florida, more than 140,000 service jobs were added to the economy during the 12-month period, a 5.3-percent annual increase. However, the tourism industry in Florida, already adversely affected by the weak national economy, was dealt a severe setback by the aftermath of the September 11 terrorist attacks. The September employment figures do not reflect these impacts. All sectors of the State’s economy related to tourism have reported layoffs and reductions in hours worked. Some recovery has begun but tourism is still well below levels of a year ago. The upcoming winter season will be a real test of the effects of both the aftermath of the recent events and the overall national economy.

Because of the economic importance of Atlanta’s Hartsfield International Airport and the city’s large convention and hospitality business, the Atlanta area economy is vulnerable to the effect of the events of September 11. Employment growth in the Atlanta metropolitan area has stalled in recent months. Employment experienced a marginal decline of 6,500 jobs, or 0.3 percent, in the 12 months ending September 2001. Job losses have occurred in manufacturing and construction employment and in business services. Job reductions, which began in earnest in the first quarter of 2001, continued into the third quarter. Reductions in employment were announced by employers such as Cingular Wireless, Harris Teeter, Wolf Camera, Mitsubishi Wireless Communications, Northwest Airlines, Mead Corporation, and Lucent Technologies. Several of the largest employers recently announced job cuts not reflected in this quarter’s employment figures, including BellSouth Corporation, Delta Airlines, and Scientific-Atlanta. Delta plans to reduce employment by 4,500 jobs in the Atlanta area through retirement incentives and voluntary leave programs. Partially offsetting the declines are increases in the transportation, public utility, trade, and Government sectors.

Although most recent economic news in Mississippi has not been favorable, one sector reported substantial growth over the past 12 months. During the first half of 2001, Mississippi led the Nation in the growth of exports, with an increase of 65 percent over the same period in 2000. The largest increase came from ships and boats, which included the sale of a vessel by Friede-Goldman-Halter to Norway. Statewide gambling revenue figures indicate Mississippi gaming facilities have been less affected by the general decline in tourism and are rebounding faster than gaming facilities in other States. The 30 State-regulated gaming facilities employ more than 33,000 workers.

The total number of housing units issued building permits in the first 9 months of 2001 was up 3 percent compared with the same period in 2000. Half the States in the Southeast recorded increases in activity; the other half recorded decreases. The number of single-family homes permitted through September 2001 was up 6 percent compared with 2000 to slightly more than 265,000 units in the region. Activity was up in every State except Mississippi. Compared with the first 9 months of 2000, multifamily permit activity for the region totaled approximately 84,000 units, or just over 4 percent. Although multifamily activity in Florida increased 6 percent and activity in North Carolina equaled 2000’s pace, half the States in the region recorded substantial declines.

There are increasing concerns that the Atlanta area may not be able to sustain the recent high volume of residential construction (which has not diminished from the boom years of the late 1990s) given the falloff in job growth. Although slowing job growth has increased builders’ anxiety, Atlanta remains the Nation’s busiest new single-family market. Closings in the second quarter were level with the rapid pace in 2000. Although demand for higher-priced ($300,000 or more) homes is weakening, the markets for first-time homebuyers and move-up buyers remain strong. Houses priced below $200,000 continue to sell rapidly. Sales in the Atlanta metropolitan area’s south side remain ahead of the past year’s pace, reflecting the ready availability of lower priced finished lots compared with the north. Sales in the Atlanta area’s north side, with its higher land costs, greater infrastructure pressures, and limited development moratoria, showed a modest decline.

Single-family housing production shows few signs of slowing. Housing starts in the second quarter showed only a marginal decline from the comparable period of 2000, and single-family building permits through September are up 6 percent from year-earlier figures. After 3 years of increasing sales, Atlanta’s condominium market has softened, particularly in the upper price ranges (more than $250,000). The soft market conditions are most apparent in the $400,000-and-over price range.

In North Carolina, the rental market in the Raleigh-Durham-Chapel Hill area has weakened since the past winter. Data from Carolinas Real Data indicate that between January 2001 and July 2001 approximately 2,700 units were completed in the market area, but only 1,275 units were absorbed, resulting in an increase in the apartment vacancy rate from 8.1 to 9.6 percent. Rent concessions are reported at 47 percent of the developments in the survey, up from 33 percent in the survey conducted 1 year earlier. Given the size of the current pipeline compared with recent absorption, the overall apartment vacancy rate for the area is expected to increase during the next 12 months to between 11 and 14 percent.

Carolinas Real Data also indicates the rental market is softening in the immediate Charlotte area, specifically Mecklenburg County. Completions during the 12 months ending August 2001 totaled 4,900 units, far outpacing the absorption of 2,260 units during the previous period. As a result, the apartment vacancy rate increased from 6.6 to 9.7 percent during the period. Further indication of the softening rental market is a decline in the rate of increase of rents. According to the survey, the average rent was $729, an increase of only 1.3 percent from the figure reported 6 months earlier. Rent concessions are being offered by 52 percent of the apartment communities surveyed, up from 34 percent a year earlier. Given the current pipeline of 3,300 units under construction and 4,450 units planned, the apartment vacancy rate is expected to increase to as much as 11 percent within the next 12 to 18 months.

Although most locally available surveys indicate apartment occupancy rates in the Atlanta metropolitan area of 93 to 95 percent, signs of softer, more competitive conditions have appeared with the large number of new units entering the market. Recent surveys show occupancy slipping by as much as 2 percentage points. Concessions are becoming more commonplace, particularly for older rental units and previously hot in-town markets. Slipping occupancy has reduced the rate of rental increases after several years of 4- to 5-percent annual increases. Rental increases are now below the general rate of inflation.

In Charleston, South Carolina, the rental market remains active, with more than 1,900 multifamily units under construction and approximately 1,400 in the planning pipeline. In the past 12 months the apartment vacancy rate has increased from approximately 6 percent to almost 9 percent. When the current construction level is taken into consideration, Carolinas Real Data concludes that the vacancy rate may reach double digits over the next 12 months.

Spotlight on Mayaguez, Puerto Rico

The Mayaguez metropolitan area, approximately 100 miles west of San Juan, includes the municipalities of Añasco, Cabo Rojo, Hormigueros, Mayaguez, Sabana Grande, and San Germán. In 2000 the area had a population of 253,347, a 0.6-percent annual rate of growth since 1990. Continued modest population growth is anticipated.

Mayaguez has one of Puerto Rico’s most important commercial ports with terminal facilities, transit and warehouse storage, and an industrial free zone. The area’s economy is based mainly on the manufacturing (21 percent of total employment), services (20 percent), and trade (18 percent) industries. As of August 2001, nonagricultural employment averaged 67,900, a decline of 1.2 percent compared with August 2000. Job losses resulted from the shutdowns of a major tuna cannery and apparel manufacturing plants in the area, and the Commonwealth Government is taking measures to cope with these employment losses. The Puerto Rico Legislature is considering a bill that would reduce corporate tax rates to below 2 percent in an effort to attract high-technology and other innovative industries. Promotional efforts in the manufacturing sector have yielded approximately 1,500 new job commitments, and approximately 300 additional jobs are expected from the construction and operation of new hotel rooms in the area.

The Municipality of Mayaguez and the Western Chamber of Commerce started a $500,000 microenterprise loan, loan guarantee, and technical assistance program to help at least 30 small businesses affected by recent plant closings in the area. Loans will be available for working capital, physical improvements, and equipment. Tax incentives are available to manufacturers who retain or create new jobs in the area.

Major long-range initiatives expected to spur the area’s economy are the Port of the Americas, a transshipment port to be built at the neighboring municipalities of Guayanilla, Peñuelas, and Ponce and the Techno-Economic Corridor of Puerto Rico and the Caribbean. The port will start construction in early 2002 and is expected to bring approximately 6,000 jobs to the area. The Techno-Economic Corridor is a private, nonprofit corporation that will promote new high-technology manufacturing plants in western Puerto Rico.

Mayaguez is also home to the University of Puerto Rico–Mayaguez, which has a significant economic impact in the area. Its annual budget is approximately $136 million. Approximately $115 million is spent on faculty and staff salaries, and $21 million is spent for goods and services. Annual student spending is estimated at $55 million; food, $34 million; lodging, $13 million; and miscellaneous, $8 million.

Residential building activity in the Mayaguez metropolitan area totaled 7,479 units from July 1996 through June 2001. Single-family homes accounted for 5,857 units of this total and multifamily condominium units for most of the remainder. Cabo Rojo accounted for approximately 40 percent of all construction activity in the metropolitan area, followed by Mayaguez with 22 percent. In the Cabo Rojo area, building of second homes has been substantial in recent years.

New home sales generally have been strong, especially in single-family units. Homes priced between $56,000 and $90,000 sell rapidly and account for more than 40 percent of sales. Sales in the $90,000–$125,000 bracket are moderate, whereas the market for units in the $125,000-and-above category is sluggish. Subsidized units built under Puerto Rico’s Affordable Housing program sell in the $56,000–$70,000 range and account for 16 percent of total market sales. The program offers tax exemptions to affordable housing developers while providing downpayment and mortgage interest subsidies to moderate-income families. During the next 12 months, the government will start construction of 6 new projects in the area that will total 1,300 units. The sales market is expected to remain strong due to prevailing low mortgage interest rates.

REALTORS^® and local government housing sources report balanced rental housing market conditions. Demand for rental housing has remained constant since 1990. Vacancy rates are estimated to be approximately 7 percent, approximately the same as in 1990. In the city of Mayaguez, college students comprise approximately 30 percent of the rental market. In recent years, a few small apartment projects consisting of individually owned units purchased as investment rental properties have been built close to the University of Puerto Rico. This market may be showing signs of overbuilding, as absorption of new projects has slowed.

Several privately owned rental-assisted projects have been built in recent years. In the municipalities of Añasco, Cabo Rojo, Sabana Grande, and San Germán, 310 family and 135 elderly units have been developed. All of these units received either U.S. Department of Housing and Urban Development (HUD) funding, low-income housing tax credits, or U.S. Department of Agriculture Rural Development rental assistance, alone or in combination.