Labor costs growing at a much slower rate than inflation in the Atlanta area

Slower rising labor costs good news for employers, but not for workers facing higher consumer prices 

Compensation costs for private industry workers in the Atlanta-Athens Combined Statistical Area increased 2.5 percent in 2021, according to newly released information from the U.S. Bureau of Labor Statistics. Wages and salaries for private industry workers rose 3.1 percent.

Earlier in the month, BLS released inflation data for 2021, and a comparison of the two reports shows that labor costs are rising at a much slower rate than consumer prices in the Atlanta area. BLS reported that consumer prices in the Atlanta metro area rose 9.7 percent in 2021.

For employers the slow rise in labor costs helps them offset some of the pressure coming from increasing producer prices, which rose 9.7 percent nationally.

The slower rise in wages and salaries, when compared to consumer prices, adds pressure on Atlanta area household budgets and incentivizes workers to search for ways to either lower their consumer costs or increase their compensation.

Both compensation costs and wages and salary costs in the Atlanta-Athens area were among the lowest increases recorded for 15 metro areas published by BLS.

The Seattle-Takoma, Wa, CSA showed the fastest increase in total compensation costs, up 6.3 percent over the year, while the Miami-Fort Lauderdale-Port St Lucie, Fl, CSA recorded the fastest rise in wage and salary costs, moving up 6.0 percent over the year.

Nationally, compensation costs for private industry workers rose 4.4 percent in 2021, while wages and salary costs increased 5.0 percent.

Georgia December employment by the numbers

 State Employment and Unemployment - December 2021 - Seasonally Adjusted

Number employed 5,177,893

Number unemployed 5,041,987

Unemployment rate 2.6

Labor force participation rate 61.5

Employment-population rate 59.8

Net number of nonfarm jobs created over the month 24,200

Net number of nonfarm jobs created over the year 198,200

Percent change in nonfarm jobs over the year 4.5

For more detailed information and commentary, see 

Georgia’s lack of Covid restrictions hurting the state’s businesses and labor force

Georgia workers showing more optimism than employers about the future

 Number of Georgia workers quitting their jobs reached a new high in November, 2021

The number of Georgians quitting their jobs in November rose significantly, while the number of job openings fell, indicating that workers are feeling more confident about their financial futures than employers are feeling about future business conditions.

The U.S. Bureau of Labor Statistics released information for November 2021 indicating that the number of job openings in the state fell by 33,000 positions or 0.6 percentage points, while job openings nationwide fell 0.4 points.

Employers posting job openings can be interpreted as companies’ optimism about future economic conditions, as employers will add workers when they expect sustained business activity.

Georgia workers leaving their jobs in large numbers

Total separations, which includes retirements, firings, layoffs, and voluntary quits, rose by 57,000 in Georgia or 1.2 points. Nationally, separations rose 0.2 points.

More than 90 percent of those separations occurred as the result of voluntary quits by workers. In Georgia, 53,000 quits were recorded in November an increase of 1.2 percentage points from October. For the nation, the number of quits rose by 0.2 percent.

The rate of workers quitting in Georgia remained far higher than for the nation as a whole, with 4.5 percent of the workforce quitting in the state compared to 3.0 percent nationwide in November.

Interpreting the data

Economists interpret the choice of workers to voluntarily leave their jobs as an indicator of people’s confidence in their economic future.

Worker turnover can mean large headaches for employers, as it adds to training costs and higher wages to retain staff.

Increased economic confidence by workers can also be an indicator of increased consumer spending, as workers more confident about their future also tend to increased their expenditures.

For employers, lower number of job openings can mean that employers are responding to workers quitting by filling fewer vacancies or by using other means, such as more automation, to meet business needs in lieu of hiring more staff.

Atlanta Fed lowers GDP forecast for 4th Quarter 2021; says economy in Southeast expanded “moderately”

 

The Federal Reserve Bank of Atlanta has lowered their forecast for the United States Gross Domestic Product (GDP) in the last three months of 2021 to 5.0 percent.

 

"The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2021 is 5.0 percent on January 14, down from 6.8 percent on January 10. After the January 10 GDPNow update and subsequent releases from the US Census Bureau, the US Bureau of Labor Statistics, the US Department of the Treasury’s Bureau of the Fiscal Service, and the Federal Reserve Board of Governors, a decrease in the nowcast of fourth-quarter real personal consumption expenditures growth from 4.5 percent to 2.0 percent was slightly offset by an increase in the nowcast of fourth-quarter real gross private domestic investment growth from 17.8 percent to 18.1 percent. Also, the nowcast of the contribution of the change in real net exports to fourth-quarter real GDP growth decreased from 0.21 percentage points to 0.19 percentage points." 

The U.S. Bureau of Economic Analysis (BEA) announced that the nation’s GDP for the 3rd quarter of 2021 came in at 2.3 percent. 

Southeast economy expanding at a “moderate” pace 

The bank’s latest summary of economic activity found: 

"Economic activity in the Sixth District expanded moderately from mid-November through December, even amidst widespread outbreaks of the Omicron variant late in the reporting period. Demand for workers remained strong and labor market tightness persisted. Upward pressure on wages was widespread. Nonlabor costs grew, albeit at a slower pace. Retail sales were solid; auto sales, however, remained challenged due to supply chain constraints. Domestic leisure travel was strong. Business travel and convention bookings picked up somewhat, though increases in Omicron cases precipitated some postponements and cancellations in the near term. Robust housing demand continued. Conditions in commercial real estate improved. Manufacturing activity was healthy. Conditions at financial institutions were steady, though deposit levels declined, and loan demand slowed somewhat." 

·         Consumer spending was healthy, particularly for off-price retailers. Cruise ship business was strong, though passenger counts were lower than before the pandemic as cruise lines have continued to limit capacity.

·         Demand from investors and second-home buyers continued to make up a significant component of housing market demand.

·         Manufacturing contacts reported increased revenues and believe business will continue to improve this year, even as some expressed concerns about supply chain interruptions, labor shortages, and rising input costs.

·         Transportation stayed strong. Container volume grew at district seaports, and air cargo contacts noted increased demand because of surging ecommerce shipments.

·         Chemical manufacturing and petroleum refining improved. However, contacts continued to report that supply chain bottlenecks constrained some chemical production. 

The report for all the Federal Reserve banks on economic conditions for their districts can be found at https://www.federalreserve.gov/monetarypolicy/beigebook202201.htm. 

The next meeting of the Federal Open Market Committee is scheduled for January 25-26, 2022.

 

Inflation in the Atlanta area continues to outpace the nation, rising 9.8% in 2021

 Calendar year increase largest since beginning of local series in 1998

Consumer prices in the Atlanta area rose 1.9 percent for the two months ending in December 2021, according to new information released by the U.S. Bureau of Labor Statistics. The two-month increase rose at twice the pace of the nation, which posted a 0.8 percent increase.

For the 12 months ending in December 2021, consumer prices in the Atlanta area increased 9.8 percent, the largest calendar year increase since BLS began posting calendar year data for the Atlanta area in 1998. Nationally, consumer prices rose 7.0 percent over the year.

Index components

Food prices in the Atlanta area increased 0.9 percent over the past two months, moving up 2.6 percent over the year.

Consumer prices for energy rose 2.2 percent over the two-month period, increasing 28.6 percent since last December.

All items excluding food and energy increased 2.0 percent over the two months and rose 9.3 percent over the 12 months ending in December, the largest increase for that index since 1998.

Housing costs rose 1.8 percent over two months, as rental costs increased 1.6 percent and owners’ equivalent of residential rent moved up 1.7 percent. For 2021, housing costs in the Atlanta are rose 7.4 percent as rental costs increased 8.1 percent and owners’ equivalent of residential rent moved up 7.5 percent.

Consumer costs for gasoline increased 1.5 percent over two months. For 2021, costs for gasoline in the Atlanta area increased 55.7 percent.

Impact on consumers

For Atlanta area consumers, increases in prices without a corresponding increase in the value of the items being bought causes a drain on consumer finances. Various items in the Consumer Price Index for All Urban Consumers in the Atlanta metropolitan area (CPI-U, Atlanta) have different impacts depending on what percentage of their budget is devoted to each item.

For example, food represents approximately 15 percent of the average Atlanta area consumers’ purchases with 8.7 percent going to food at home and 6.3 percent to food away from home.

Housing costs including rent or mortgage, as well as utilities, represent 35.7 percent of the average household’s budget.

Transportation costs amount to 13.9 percent of the budget for the average household.