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Business AN EIGHTH DISTRICT PERSPECTIVE Spring 1984 District Followed Nation’s Economic Recovery in 1983 Last year, the nation’s economy rebounded from the 1981-82 recession. After declining in 1982, real GNP rose 6.2 percent for the year ending in the fourth quarter of 1983, while industrial production and retail sales rose 14.9 and 10.8 percent, respectively. The latest fourth quarter data indicate that personal income is rising at a rate of 11.0 percent compared with 4.7 percent for all of 1982. Following a decline in 1982, payroll employment ex panded at a pace of 2.9 percent in 1983. Economic activity in the Eighth Federal Reserve ^strict followed the national trend and showed sub stantial improvement during 1983. The strength of the recovery across District states was somewhat disparate, however, with some areas showing substantially more im provement than others. The indexes of general business, which declined in all the states in 1982, rose at rates rang ing from 11.0 percent for Arkansas to 4.4 percent for Ten nessee. According to the latest third quarter data for the District, personal income is rising at a rate of 7.2 percent, slightly higher than the rate at the national level for the same period, and substantially above the District’s per sonal income growth rate in 1982. Employment The general expansion in economic activity during 1983 had important consequences for District employ ment. Growth in payroll employment ranged from a high of 4.4 percent in Arkansas to a low of 1.1 percent in Missouri. Payroll employment had declined in all the states during 1982 at rates ranging from —4.1 percent in Tennessee to —2.3 percent in Missouri. Despite the expansion in employment, the District’s average unemployment rate for 1983 remained at its 1982 level. Tennessee had a substantial reduction in its rate during ^83, while slight increases occurred in Kencky and Missouri. Arkansas’ unemploy ment rate was unchanged. These two factors — growth in employment and a stable unemployment rate—suggest that the labor force in the District has expanded at a rate commensurate with employment growth. Retail Sales Pushed along by a banner Christmas season, which some merchants described as “ tremendous” and “ fan tastic,” retail sales grew substantially in most District states during 1983. Most merchandise sold well during the Christmas buying season and the willingness of shop pers to purchase “ big ticket” and high-quality items was particularly impressive. The one state that did not follow this general pattern was Missouri in which 1983 retail sales growth fell well below the previous year’s growth rate. Construction Construction activity throughout the District was relatively brisk last year. The average monthly value of construction contracts during 1983 exceeded the levels reached in 1982 by considerable margins. The 1983 values ran ahead of previous year levels by as much as 55 percent in western Tennessee and 29 percent in eastern Missouri, with the District as a whole having a 37 percent gain. The Employment Picture in St. Louis While the distribution of St. Louis employment does not change markedly from year to year, some fairly substantial changes have oc curred over the longer run. Chart 1 presents the 1982 percentage distribution of employment by industrial sector in the S t. L o u is S ta n d a rd M e tr o p o lita n THE FEDERAL Statistical Area (SMSA). For comparison, RESERM a similar distribution is given for the RANK of United States. The chart suggests that the ST. IXHTS distributions of employment in St. Louis and in the United States were quite SPRING 1984 FEDERAL RESERVE BANK OF ST. LOUIS similar. In both cases, nonmanufacturing employment amounted to about 80 percent of total nonagricultural employment, and manufacturing employment accounted for about 20 percent. Almost 50 percent of the St. Louis and U.S. work forces were employed in wholesale/retail trade and services. To give a longer-run view, chart 2 presents the 1954 percentage distribution of employment by sector for St. Louis and the nation. One of the most significant changes since 1954 has been the reduction in the size of the manu facturing sector relative to nonmanufacturing for both St. Louis and the nation. In the case of St. Louis, the reduction in manufacturing employment was more substantial, as it declined from 38 percent of total nonagricultural employment in 1954 > about 22 percent in 1982. A t the national level, manui( ) turing employment declined from 33 percent of the tot^r in 1954 to 21 percent in 1982. This reduced concentration of employment in manufacturing has been almost exactly offset by increases in service and government employ ment. An exception to the general decline in St. Louis manu facturing employment was employment in transportation equipment manufacturing. This grew from 3.9 percent of nonagricultural employment in 1954 to 4.6 percent in 1982. A t the national level, however, it fell from 3.7 per cent in 1954 to 2.0 percent in 1982. C h a rt 1 Percentage Distribution of E m p l o y m e n t in 1982: St. Louis a n d U.S.LL —G.J. Santoni Manufacturing Nonmanufacturing U.S.: 79.07, Mining S o u r c e : U .S U.S.: 21.0% St. Louis: 77.87, Construction Transportation, Wholesale, Utilities Retail Trade Finance, Insurance, Real Estate Services Government St. Louis: 22.27, Percent 24 Transportation Equipment Other D e p a r t m e n t of L a b o r _ A s a p e r c e n t of Total N o n a g r i c u l t u r a l E mp lo y me n t. Chart 2 P e r c e n t a g e Di st r i but i on of E m p l o y m e n t in 1954: St. Louis a n d U .S .ll 2 Nonm anufacturing U.S.: 66.77, Mining Construction Transportation. Wholesale, Utilities Retail trade ce: U.S. D e p a r t m e n t of L a b o r p e r c e n t of Tot al N o n a g r i c u l t u r a I E m p l o y m e n t . Manufacturing St. Louis: 62.07, Finance, Insurance, Real Estate U.S.: 33.37, Services Government St. Louis: 38.07, Percent 36 Transportation Equipment Other FEDERAL RESERVE BANK OF ST. LOUIS SPRING 1984 EIGHTH DISTRICT BUSINESS DATA C u rre n t P e rio d Growth Rates 1983 Nov-Jan G eneral B u sin e ss In d e x e s 1 A rkansas K e n tu cky M is s o u ri T ennessee 13.6% 12.2 6.6 7.7 R etail Sales 11.0% 4.9 8.0 4.4 -2 .2 % - 1.8 -1 .6 -0 .9 10.5% 11.2 9.0 9.9 12.8 5.3% 9.3 2.0 12.7 4.0 6.6% 7.2 8.4 6.0 7.5 7.4 4.7% 3.9 3.2 3.0 3.7 5.1 2.9% 2.0 4.4 2.2 1.6 2.5 1.1 1.1 1.2 2.5 0.3 -2 .4 % -3 .0 -2 .5 - 1.4 -3 .1 -4 .2 -4 .6 -2 .3 -2 .9 -4 .1 -3 .5 4.3% 5.1 4.9 7.7 6.4 5.0 4.6 4.1 1.9 5.3% 6.4 6.6 5.2 3.1 6.6 6.5 6.3 3.9 O ct-D ec U nited S tates A rk a n s a s 2 K e n tu c k y 2 M is s o u ri T ennessee 11.8% 35.4 23.1 10.5 -2 .3 3rd q u a rte r ’83 P ersonal Incom e 7.0% 7.3 7.4 4.7 7.5 9.0 U nited S tates D is tric t A rkansas K e n tu cky M is s o u ri T ennessee P ayroll E m p lo ym e n t O ct-D ec U nited S tates D is tric t A rkansas L ittle Rock K e n tu cky E vansville, IN L o u is v ille M is s o u ri St. Louis T ennessee M e m p h is 4.9% 4.7 10.1 4.9 3.4 5.2 -1 .9 2.7 3.0 5.6 3.6 A verage H o u rly E arn in gs-M fg. O ct-D ec U nited S tates A rka n sa s L ittle R ock K e n tu c k y L o u is v ille M is s o u ri St. L ouis T ennessee M em p h is 6.1% 2.1 -2 .6 13.8 9.8 5.5 5.4 2.9 3.2 Employment 1983 Key In d u s trie s F a b rica te d M etal P ro d u c ts E le c tric a l and E le c tro n ic E q u ip m e n t N o n e le c tric a l M a ch in e ry T ra n s p o rta tio n E q u ip m e n t Food and K indred P ro d u c ts T e x tile and A pparel P rin tin g and P u b lis h in g C h e m ic a ls and A llie d P ro d u c ts C o n s tru c tio n 1982 2.7% 10.5 10.0 14.9 - 1.1 3.4 1.6 -0 .3 2.5 Prices 1982 -8 .0 % - 1 1 .2 - 1 8 .2 -4 .5 ' 0.1 -6 .8 -2 .0 -6 .6 -6 .5 1983 1982 -0 .6 % 2.8 1.6 0.1 2.2 0.7 4.1 1.0 3.3 0.8% 3.2 4.1 4.4 2.3 -0 .1 8.4 0.7 1.2 3 EIGHTH DISTRICT BUSINESS DATA Current Period Unemployment Rate Oct-Dec U n ite d S ta te s D is tric t A rka n sa s L ittle R ock K e n tu c k y E vansville, IN L o u is v ille M is s o u ri St. L o u is T ennessee M e m p h is 8.5% 10.1 9.9 7.8 11.1 9.9 10.2 9.5 10.2 10.7 8.5 Previous 3 Months Average 1983 Average 1982 9.6% 10.4 9.6 7.6 11.0 10.2 10.4 9.6 10.4 11.1 9.2 9.7% 10.4 9.7 7.6 10.7 9.8 11.7 9.3 9.9 11.8 9.6 9.4% 10.2 9.8 7.9 11.3 9.6 9.9 9.2 10.0 10.3 8.8 Construction Contracts*1 3 2 (m illio n s o f d o lla rs ) D is tric t A rka n sa s K e n tu c k y E astern M is s o u ri W e ste rn T enn e sse e Housing Permits L ittle R ock L o u is v ille M e m p h is S t. L ouis Nov-Jan $384.0 91.6 145.1 99.8 47.5 $578.5 132.1 189.8 176.2 80.4 $479.5 104.5 170.1 137.4 67.4 $351.0 79.6 121.8 106.3 43.4 305 427 420 1000 276 310 446 955 144 158 221 531 Oct-Dec 246 246 531 1044 NOTE: With the exception of construction contracts and employment and prices in key industries, all data are seasonally adjusted. Data are presented as three-month averages to minimize distortions due to the large variability of monthly data. The current period growth rate is a comparison of the average of the current three months to the average of the previous three months. The year-to-date growth rate is from the average of the three months ended in December of 1982. All growth rates are com pounded annual rates of change. 1 Sources: Arkansas and Missouri from Southwestern Bell, Kentucky and Tennessee from South Central Bell. 2 Sources: Arkansas from Southwestern Bell and Kentucky from Kentucky Revenue Department. 5 Source: F.W. Dodge, Construction Potentials, McGraw-Hill Information Systems Company, proprietary data provided by special permission.