Of the four regions of the United States, economic activity appears to have slowed the most markedly in the Midwest. This is not surprising because the auto industry is concentrated in that region, and autos appear to have the largest inventory excesses to overcome. A weak farm economy also has not helped there.

However, the Southeast appears to have suffered almost as markedly as the Midwest and more than the nation as a whole. Despite the collapse of employment growth in the "new economy", (current layoffs for March appear to be 34,000 in that sector as compared to less than a hundred a year ago), the West continues to cling to economic gains. The Northeast from Pennsylvania north appears to have little inkling that an economic decline is occurring once they get their noses out of the stock tables.

Certainly, the Southeast has suffered from severe drought and the agricultural sector is not strong. Hopefully, some of those beneficial March rains may raise prospects for Southeast agriculture this year.

Auto and truck production also is increasingly important in the Southeast. Certainly, Nashville has suffered along with Atlanta in auto assembly. Truck production has slowed the North Carolina economy. However, the newer plants in South Carolina and Alabama still are not mature enough to be suffering inventory hangover. The newest plants are still under construction in Lincoln, Alabama and in Mississippi.

Thus, only a small portion of the auto and truck weakness can be cited as a cause of slowing in the Southeast. Instead, the normal villains appear to be at work: slower population growth during slowdowns, and the heavy concentration of manufacturing in the South.

The Southeast is blessed with higher population migration into the region than in much of the U.S. When economic activity slows nationwide, people are more reluctant to migrate. If you are facing unemployment, the local social networks are more welcome. Furthermore, quitting existing jobs to seek opportunities elsewhere slows dramatically as economic uncertainty rises.

Migration also is an important contributor to growth in the Mountain and Western states. Yet, they are not suffering the same degree of economic slowing as in the South. To some extent, the slowing is offset by energy gains in places like Denver. In others, such as Salt Lake, the slower population growth that comes with economic uncertainty is just beginning to be noticed.

We can expect that the slower population growth in the Southeast will undermine economic vitality in construction, although lower mortgage rates have partially offset slower job growth in that sector.

Automobiles may have the largest inventory problems, but furniture and apparel also need to liquidate some inventories. With higher concentrations in warehousing than in the nation, the southeast also suffers more when manufacturing suffers. Certainly, trucking is struggling in this environment.

Even here, we can wonder why Las Vegas, with the fastest growth in manufacturing jobs in the past decade of any city, has not suffered the same slowing. Of course, Las Vegas has gaming, but that clearly responds to consumer confidence, which has been falling until last month. An alternative explanation is that the same economic forces that attracted manufacturing to Las Vegas at the expense of California are still apparent. Costs are higher in California and sometimes you do not get electricity when you want it.

The good news for the Southeast is that manufacturing is nearing an end to its inventory correction. Activity should improve in that sector in the second half of this year. The one major exception may be tobacco, which is facing slowing markets in Asia and Europe.

However, the construction sector remains vulnerable to slowing employment growth. Also, Southeastern financial institutions are becoming more cautious than in most other regions. (The New York banks continue to provide funding, while many of the regional banks have sharply curtailed new loan business and raised thresholds for existing customers.)

The regional venture community also has become hesitant to invest in start ups. While new capital provided to local firms was the fourth highest quarter in history during the fall, this investment was almost halved from the heady days of the winter of 2000. Furthermore, only 15 percent of the new financing for local ventures came from the local venture community. This is one of the lowest ratios of local support for local new businesses in the country.

Because the construction correction has not yet run its course in the Southeast, total employment gains should remain anemic through the summer. Job growth should be more apparent in the fall, but the rate of growth will be only half what occurred only 18 months ago.