Employment in the Southeast continued to slow during the first quarter of 2003. With manufacturing losses weighing heavily on the region’s economy, employment declined by 55,100 jobs, or 0.2 percent, to 24,246,400 for the 12 months ending February 2003. Florida’s gain of more than 55,600 jobs was offset by losses in all of the other states except Mississippi, which recorded a small gain of 700 jobs over the period. In Florida the loss of 28,800 manufacturing jobs was more than offset by a gain of 71,900 jobs in service-producing industries and 22,600 in local government. The leisure and hospitality industries in the Orlando metropolitan area continue to suffer because of the significant decline in tourists flying to the area and in convention business as a result of the weaker general business climate. The conflict in Iraq caused a decline after some gains since 2001. Theme park attendance is reportedly still below prerecession levels.

North Carolina’s economy saw the worst decline in the region during 2002 with 39,300 lost jobs, or slightly more than 1 percent of total employment. The average annual rate of decline in manufacturing during 2002 increased to 8.8 percent from 7.1 percent in 2001. In addition the Employment Security Commission of North Carolina reported that more than 6,700 individuals were affected by permanent manufacturing layoffs and business closures during the first quarter of 2003. As part of an effort to boost the state’s economy, the Governor has announced the development of a major job program, N.C. Moving Ahead!, which is intended to improve the state’s transportation network and includes projects for maintenance, modernization, and public transportation. The program hopes to create 30,000 jobs across the state over a 2-year period and provide a $4 billion stimulus for the state’s economy.

Employment in South Carolina declined by 5,400 jobs for the 12 months ending February 2003 compared with the previous 12-month period. Losses would have been higher if it were not for the state’s aggressive capital and job recruitment efforts. Announced economic activity during 2002 totaled $4.2 billion in capital investment, with 20,045 new jobs created. The year 2002 marked the ninth consecutive year that capital investment in South Carolina from internationally based companies exceeded $1 billion. The rural areas of the state received 26.8 percent of the new capital investment and 38.6 percent of the new jobs.

Sources report that the economy of the U.S. Virgin Islands is reasonably healthy and has handled the decline in construction employment as a result of the completion of the Hovensa refinery’s massive coker unit remarkably well. Construction accounts for nearly 93 percent of the jobs lost in the past year, as approximately 1,400 jobs were lost once the coker unit was finished. The construction industry has some strong prospects for future growth however, because Hovensa plans to spend $650 million to build facilities that will extract sulfur from gasoline and diesel fuels. Although Hovensa anticipates it will need fewer workers than the 2,000 it hired when the coker project was at its peak, construction employment could still bounce back dramatically once work begins on the new facilities later this year. Plans to construct a $540 million casino on St. Croix are also moving forward. The Virgin Islands has granted a casino license for the proposed facility and officials are now arranging for more funding before breaking ground. Approval was also secured in January for a bond issue that will generate $35.4 million to expand the Crown Bay dock and build a nearby shopping center, projects that should also boost construction employment.

Despite the weaker economy low mortgage interest rates sustain strong housing sales and demand for new homes in the region. Single-family permits for the first 3 months of 2003 were at approximately the same level as for the first 3 months of 2002. Three states recorded a decline, including North Carolina where the number of permits fell by almost 9 percent compared with the first 3 months of 2002. Median sales prices for 2002 were up over 2001 for almost all metropolitan areas, according to the NATIONAL ASSOCIATION OF REALTORS^® (NAR). Housing markets in the Southeast are expected to perform well overall during 2003, but some weakness is expected in the sale of high-end homes.

NAR reports increases in existing home sales for 2002 compared with 2001 for all states in the region, from 2.4 percent for Kentucky to 15.5 percent for Alabama. Data available from the Alabama Real Estate Research and Education Center indicate that single-family home sales totaled 5,558 statewide through February compared with 4,957 in 2002, an increase of 12 percent. The average sales price is $118,711, an increase of 1 percent from last year, and average time on the market is 27 days less, at 146 days, for homes sold during 2003.

Existing home sales in Georgia increased 7.5 percent from 2001 to 2002. In Atlanta sales have been strong for homes priced below $250,000, as demand from first-time buyers continues. However, in the higher price ranges, inventory of homes for sale continues to increase, and price reductions or withdrawals from the market are becoming more common. Despite strong sales the weak economy is affecting the market. Single-family foreclosures in 2002 were almost double the rate of 2 years ago, and the number of homes advertised for foreclosure hit a new record in February. The current high volume of residential construction in the Atlanta area may be difficult to sustain given the declines in employment; however, there are few signs that housing production is slowing. Single-family permits for the 12 months ending March 2003 were marginally above year-earlier figures.

Single-family housing production in Florida for the 12 months ending March 2003 increased by 4,253 units, or 3.4 percent. According to the Florida Association of REALTORS^®, 153,587 existing homes were sold in the 12 months ending February 2003, an increase of 8.5 percent compared with sales of 141,545 for the same period a year earlier. They also report for Orlando that 27,921 homes were sold during the 12 months ending February 2003, an 11.6-percent increase. Single-family production in Orlando increased by 1,226 units, or 7.2 percent, to 18,146 units for the 12 months ending March 2003. Thus the single-family sector is being aided by low interest rates more than it is being hurt by the weak local economy.

Other areas of the region registering substantial increases in sales include the Mississippi Gulf Coast, where the Multiple Listing Service (MLS) indicates that home sales were up 13.6 percent for the 12-month period ending February 2003 compared with the preceding 12-month period. The average sales price for February 2003 was $118,057. The Memphis Area Association of REALTORS^®, reports its highest ever sales volume in 2002; sales totaled 13,818, an increase of 5.2 percent over 2001. Single-family building permits increased 17 percent in the 12 months ending March 2003.

Despite a continued decline in multifamily construction activity since 1999, employment losses and competition from strong sales have led to softer market conditions and an increase in the rental vacancy rate in many of the region’s major metropolitan markets. The rental market in the Atlanta metropolitan area has continued to soften as many new apartments are added to an already weak market. It is estimated that the overall rental vacancy now exceeds 12 percent, and approximately 13,000 apartment units are currently under construction. Local sources report that absorption in recently completed developments has slowed in the past 12 months. Although the number of units under construction has declined by approximately 25 percent from a year ago, the number of never-rented apartments in recently completed developments has increased. As a result Atlanta’s total forward supply of apartments, the largest in the nation, has declined by only 10 percent during the past 12 months. Given the large number of units already in the pipeline, occupancy rates should continue to decline for the rest of 2003.

In Florida multifamily permits in Palm Beach County totaled 3,158 for the year ending March 2003, a decrease of 18 percent over the previous 12-month period. After several years of stability the rental market in the county was very active in the first 9 months of 2002. The impact of these additions on the market is predictable. Despite an economy buoyed by more than 100 companies in the area working for the Department of Defense, occupancy fell more than a point to 94 percent, and average rent increased only 1.9 percent during the past year. Although production has decreased somewhat during the past two quarters, supply is expected to continue to outpace demand, particularly in the North Palm Beach County submarket where, according to M/PF Research, Inc., occupancy fell to 92.3 percent in the first quarter.

In Memphis rental market conditions remained weak but stable during 2002 because of a cutback in apartment construction. Multifamily permit activity, which peaked at 4,207 units in 2000, declined to 1,377 units for the 12 months ending March 2003. CB Richard Ellis of Memphis reports an overall apartment vacancy rate of 9.8 percent as of the fourth quarter of 2002, down from 11.3 percent in the fourth quarter of 2001. Even with the decline in production, the Memphis rental market continues to be affected by the substantial number of renter households moving to homeownership because of low interest rates and affordable prices for entry-level, single-family homes.