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

The outlook for the state's factory sector is mixed. Job losses are likely to continue in some industries, such as apparel, but the fortunes of many others will be determined by the direction of the oil and gas extraction industry. Stronger energy prices would put further downward pressure on the state's large chemical industry but would boost demand for fabricated metal producers, machinists and shipbuilders. An increase in military shipbuilding contracts would also help Louisiana's shipyards. For example, a recent defense bill has a $10 million provision to expand the Maritime Technology Center built by the state of Louisiana at the Avondale Shipyard, Louisiana's largest manufacturing employer. The expansion of the General Motors Shreveport plant should attract a number of parts suppliers into that area.

Construction outlook is mixed

The housing market in Louisiana improved during the early part of 2001. Single-family construction permit issuance grew by almost 5 percent when comparing the third quarter of 2000 to the third quarter of 2001. Existing home sales also grew at a rate greater than in the previous year. If the decline of the extraction industry continues into 2002, however, new home construction and sales may weaken, at least until the effects of a general recovery in the economy lead to greater housing demand.

Office and industrial construction levels remained fairly low in 2001. In New Orleans, the office market experienced rising vacancy rates as sublease space re-entered the market. In Baton Rouge, in contrast, most segments of the commercial real estate market boasted high occupancy rates. The hotel sector, which has been booming for the past five years, is facing the risk of being overbuilt unless occupancies rebound. Nonetheless, several major industrial construction projects, including refinery upgrades and power plant construction, will boost commercial construction activity in 2002.

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MISSISSIPPI

MANUFACTURING WANES AS SERVICES GAIN GROUND

Mississippi has been at the leading edge of the national economic slowdown. By the middle of 2001, the state was posting one of the largest rates of employment decline in the nation, but what has been taking place in Mississippi is part of a larger trend. The state's manufacturing jobs declined through much of 2000 largely because of the shrinking of the state's beleaguered apparel industry. In 2002, even after the temporary cyclical factors subside, the trend away from certain types of manufacturing in the state is likely to continue. As a result, the service sector will become increasingly important.

Services and tourism stabilize the economy

About one-fourth of Mississippi's workers are employed in service jobs outside the retail, government and financial sectors. Between the third quarter of 2000 and the third quarter of 2001, service payrolls declined by about 0.6 percent in the state following little gain over the preceding 12 months and a 3 percent increase in 1999. The significant falloff in employment in the sector can be attributed largely to the end of the expansion of Mississippi's gaming sector. In particular, employment in the state's hotels and motels grew by 28 percent in 1999 as new casinos opened their doors whereas it rose by only 0.5 percent in 2000 and fell by about 2 percent in 2001.