Southeastern forecast: return to growth in New Year: the Southeastern economy suffered the effects of competition, declining demand for manufactured goods, shrinking business investment and a sharp reduction in travel-related activities during 2001. For 2002, a gradual recovery is on tap for the region, but growth is likely to be slower than what was the norm for the latter part of the 1990s - Regional Focus

EconSouth, Winter, 2001 by John Robertson, David Avery, Whitney Mancuso, Navnita Sarma, Gustavo Uceda

Nissan Motor Co. is proceeding with its new plant near Canton that will produce 250,000 sport utility vehicles, trucks and minivans a year, with the first vehicles rolling off the assembly lines in 2003. Nissan is spending $900 million on the plant, and Mississippi is investing $295 million on roads and job training. The company expects the plant to eventually employ 4,000 workers, and the pay for production line workers is likely to average well over $20 per hour.

Construction has subdued prospects

The issuance of building permits for new residential construction in Mississippi declined during 2001. Construction activity was weakest along the Gulf Coast whereas activity around Jackson was strong. The sales of existing homes improved during 2001 across the state. During the third quarter of 2001, permit issuance was almost 3 percent below year-earlier levels compared with an almost 7 percent increase in the Southeast as a whole. Given the extent of the weakness in Mississippi's labor markets during 2001, single-family construction activity will likely remain subdued during much of 2002.

Economic weakness has also had a significant impact on nonresidential construction activity. In the third quarter of 2001 the overall pace of construction slowed considerably. In 2002 the slowdown in casino-related projects may be offset somewhat by the increased construction activity associated with the new Nissan plant in Canton.

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TENNESSEE

EXPECTS A BALANCED RECOVERY

The economic downturn in Tennessee has largely mirrored the slowdown in the nation as a whole. Service employment has slowed considerably, and the manufacturing sector has contracted, particularly in industries producing capital equipment and in those facing strong foreign competition. The state's important tourism sector remains well grounded, but commercial real estate markets are weak, and less construction activity is anticipated next year.

Services and tourism are slower but steady

Growth in service employment in Tennessee slowed to around 2 percent between the third quarter of 2000 and the third quarter of 2001 from a 3 percent pace in 2000 and 1999. This rate reflects the general slackening in demand for business services. Business services employment grew at a modest rate around 2 percent compared with more than 5 percent growth in 2000 and an 8 percent increase in 1999. Health service payrolls remained relatively stable, fluctuating around the levels prevailing over much of the previous four years.

During 2001 employment in amusement and recreation services and staffing levels at hotels increased, thanks in part to the opening of the massive Opryland Hotel and Convention Center and the continuing popularity of country music-based theme parks such as Dollywood. Hotel employment in Tennessee reached its highest level since 1996. Although the slowing economy has led to the cancellation of plans to build a new luxury hotel along Nashville's music row, several hotels have recently opened or will open in early 2002.