Fed report on economy doesn’t always match local perceptions

By MICHAEL E. KANELL

The Atlanta Journal-Constitution

Thursday, September 04, 2008

The economy has been shuffling along this summer, and Atlanta’s story was not much different from that of the nation, according to a report issued Wednesday by the Federal Reserve Bank.

Known as the Beige Book, the latest periodic report includes snapshots from a dozen Fed branches and discussion of key economic sectors.

"The pace of economic activity has been slow in most districts,": the Fed reported. "Many described business conditions as ’weak,’ ’soft,’ or ’subdued.’ "

That assessment echoes downbeat news from tourism and hospitality, said Mark Vaughan, executive vice president of the Atlanta Convention and Visitors Bureau.

"We are a direct reflection on the economy,": he said. "We have seen a drop in occupancy in the market.":

Only long-term bookings are solid, he said.

"When the economy is great, business people travel. When it is not so great, they tend not to travel.":

Economic growth has lurched between solid and anemic and negative the past two years. Last quarter, exports provided a surprising punch, pushing expansion to a 3.28 percent pace.

Growth has not kept unemployment from rising - both nationally and in Georgia. That will likely continue: The Atlanta Fed said that most of its contacts were cutting hours and workers.

Thousands of those laid-off workers have been arriving at state offices to file for jobless benefits, said Michael Thurmond, state Labor Commissioner.

"We have definitely seen an increase in the number of unemployed Georgians coming into our career centers,": he said. "It is not just blue-collar. It is broad-based.":

Nationally, the economy has shed jobs for seven consecutive months - nearly 500,000 in all.

"It is true in both public and private sectors,": said Thurmond. "It is just tough all the way around.":

One factor raising the odds against a quick recovery is the credit crisis: Loans are the lubricant of business growth and consumer purchases - as well as a cushion when there’s a fall.

Now, tight credit has crimped both companies and consumers.

"Multifamily developers are finding it extremely difficult to finance new developments,": said William Donges, chief executive of Lane Co., which builds and manages apartments. "Multifamily developments are at an all-time low.":

The mortgage crisis produced such huge losses and tainted so many loans that lenders were spooked.

"A year ago, there was a tremendous amount of capital available,": Donges said. "Now, you have the same institutions looking for ways to kill the deal.":

In the auto sector, skittishness about lending money adds to damage caused by high gas prices.

"Business is slow,": said William Morie, president of the Georgia Auto Dealers Association.

"I think that, almost as much of a factor as gas prices, has been the availability of credit. Some people are taking themselves out of the equation because of the credit crunch.":

The market for single-family homes, where the credit problem started, has seen dramatic drops in sales in many areas - as well as home values.