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Business
AN EIGHTH DISTRICT PERSPECTIVE
SPRING 1988

District Employment Gains Continue in 1987
which account for more than four-fifths of the total
employment, largely determined the growth of total payroll
employment. Of these four sectors, the largest changes were
in the services and manufacturing sectors.
Employment growth in the 1980s has been fastest in the
services sector, which is dominated by business and health
services. Consumers have spent an increasing proportion
of their rising incomes on services. Slower labor productivity
growth in services than in goods-production has also
contributed to services’ relatively rapid job growth. Although
the expansion of District services employment slowed from
Employment
6.1 percent in 1986 to 4 percent in 1987, the sector provided
The table on page 4 shows that the average unemployment
more new jobs than any other single sector last year.
rate in 1987 fell from the previous year in both the District
A turnaround of manufacturing provided the most dramatic
and the nation. The District average jobless rate during 1987,
employment development of 1987 in both the District and
7.2 percent, was the lowest of the decade. The jobless rate
the nation. Manufacturers were aided by strong export
fell in Arkansas, Kentucky and Tennessee, but edged upward
demand for their products, as the declining exchange value
in Missouri, which has enjoyed relatively low unemployment
of the dollar made U.S. products relatively less expensive
rates for several years. Despite last year’s decreases, the rates
in many foreign markets. The real value of the nation’s
in Arkansas and Kentucky remained stubbornly high,
exceeding 8 percent in 1987.
exports, dominated by manufactured goods, jumped 12.8
percent in 1987.
The decline in unemployment rates is reflected in payroll
District manufacturing employment grew 1.8 percent in
employment growth of 2.6 percent in the District and 2.9
1987 following a 0.2 percent decrease in 1986. Similarly,
percent nationally. District employment grew rapidly in the
factory employment grew 1.9 percent in 1987 nationally and
fourth quarter, expanding at a 4.1 percent rate. As the table
fell 0.9 percent in 1986. The growth in 1987, though modest,
on page 3 indicates, 1987 represents the third successive year
of moderate employment growth in both the District and
represents manufacturing’s first annual job gains since 1984.
the nation. The table also shows that Tennessee has been
The table on the bottom of page 3 shows that the gains in
the star performer of the District states in recent years, with
District manufacturing employment were concentrated in
employment growth of 3.8 percent in 1987 and more than
the food and kindred products and the textile and apparel
3 percent growth in the previous two years. Arkansas’ job
industries.
growth was also relatively rapid, rising 3.5 percent in 1987,
Among District states, growth was particularly strong in
and at a 6.3 percent annual rate in the final quarter of the year.
Arkansas, in which manufacturing employment rose 4.7
Although the growth of District’s payroll
percent during the year and at an 8.8 percent
employment in 1987 was similar to that of
annual rate in the fourth quarter. Arkansas’
1986, the sources of growth varied. This can
manufacturing gains were concentrated in the
be seen in the figure on the next page. The
transportation equipment industry, printing
eight divisions of payroll employment are
and publishing industry and food and kindred
THE
arranged in descending size, ranging from the
products industry—in which poultry
FEDERAL
K1SIKM
wholesale and retail trade sector, which
producers grew rapidly. As the table on page
RANK of
employed almost a quarter of the District’s
3 shows, manufacturing employment also
ST. LOLLS
1987 workforce, to mining, which employed
increased substantially in Kentucky and
less than 1 percent. The largest four sectors,
Tennessee but fell slightly in Missouri.

1987 was the fifth successive year of national and regional
economic growth, making the current recovery the longest
peacetime expansion of the century. The stock market crash
in October shocked the nation, but growth continued through
the end of the year. Though the growth of income and
construction weakened slightly from 1986, employment
continued to expand moderately. This article focuses on
economic developments in 1987 in the Eighth Federal
Reserve District.




SPRING 1988

FEDERAL RESERVE BANK OF ST. LOUIS

DISTRICT EMPLOYMENT GROWTH BY SECTOR
Percent Change

PERCENT

A closure of a light truck assembly plant in St. Louis and
intermittent layoffs of auto workers contributed to the decline
in Missouri.

Consumer Spending and Income
The table on page 3 suggests that personal income
expanded rapidly in the thrid quarter, growing at a 6.3
percent annual rate in the District and only slightly slower
nationally. After adjusting for inflation, however, the third
quarter growth rate was only 1.5 percent regionally and 1.1
percent nationally.
In current dollars, income in the District grew at a slightly
faster rate in the first three quarters of 1987 than the 5.4
percent growth for 1986. After adjusting for inflation,
however, District income only grew at a 1.3 percent rate
in 1987 compared with a 4.1 percent real gain in 1986. All
three components of District real income—earnings, transfer
payments and dividends/interest/rent—grew slower in 1987
than in 1986. Real income in Kentucky outpaced the other
District states, but still only expanded at a modest 2.5 percent
pace in the first three-fourths of 1987. During the same
period, real income in Arkansas was virtually unchanged.
The sluggish expansion of retail sales continued in 1987.
After adjusting for inflation, retail sales grew 0.8 percent
in 1987 compared with 0.5 percent in 1986. Sales were
particularly weak in Missouri, where sales fell 2.3 percent.

Construction
After modest growth in 1986, construction activity leveled
off in 1987. The real value of construction contracts issued
in the District increased 0.3 percent last year while falling
0.4 percent nationally. District nonresidential building
contracts grew moderately during the year due to strong
expansions in Kentucky and Tennessee. These gains were
offset by declines of the residential sectors in each of the
four District states, mainly due to less construction of
multifamily structures. In addition, District contracts for non­
building projects (such as roads, bridges and utilities)
declined in 1987.

Summary
Indicators of District economic activity provide a mixed
picture of economic performance in 1987. The expansion
of real income continued in 1987, but at a slower pace than
in the previous year. The real value of construction contracts
was virtually flat in 1987. More positively, payroll
employment grew at a moderate pace, allowing the
unemployment rate to fall through the year. Aided by rising
exports, the number of District manufacturing jobs increased
in 1987 after falling for two years. The District’s vigorous
employment growth in the year’s final quarter was
particularly encouraging, given the shock of the October
stock market crash.
—Thomas B. Mandelbaum

Business—An Eighth District Perspective is a quarterly summary of business conditions in the area served by the Federal Reserve
Bank of St. Louis. Single subscriptions are available free of charge by writing: Research and Public Information Department,
Federal Reserve Bank of St. Louis, P.O. Box 442, St. Louis, Missouri 63166. Views expressed are not necessarily official
positions of the Federal Reserve System.
2



SPRING 1988

FEDERAL RESERVE BANK OF ST. LOUIS

EIGHTH DISTRICT BUSINESS DATA
Rates of Change1
Current Quarter
G en e ra l B usiness In d e x e s 2
A rka n sa s
K e n tu cky
M isso u ri
T e n n e sse e

P ayro ll E m p lo y m e n t
U n ite d S tates
D istrict
A rka n sa s
L ittle R ock
K e n tu c k y
L o u isville
M isso u ri
St. Louis
T e n n e sse e
M e m p h is
M a n u fa c tu rin g E m p lo ym en t
U nited S tates
D istrict
A rka n sa s
K e n tu cky
M isso u ri
T e n n e sse e
R etail S a le s 3

1987

1985

1986

IV /1 9 8 7
5 .8 %
2.5
5.3
4.7

3 .2 %
2.5
2.3
2.5

0 .2 %
2.3
1.8
4.9

1.0%
0.8
3.0
3.6

2 .9 %
2.6
3.5
2.4
1.9
3.0
1.6
1.3
3.8
2.3

2 .0 %
2.5
2.5
0.7
2.3
2.8
1.5
1.2
3.6
4.2

2 .7 %
2.5
1.7
2.9
2.3
2.4
2.1
2.3
3.2
3.1

1 .90/0
1.8
4.7
2.6
-0 .2
1.8

-0 .9 %
-0 .2
2.4
-0 .4
-3 .0
1.1

- 1.8 %
-1 .6
-1 .6
-2 .0
- 1.4
-1 .6

IV /1 9 8 7
3 .9 %
4.1
6.3
4.1
2.7
6.7
3.6
4.3
4.7
4.2
IV /1 9 8 7
3 .9 %
3.8
8.8
2.0
-0 .8
6.4
IV /1 9 8 7

U nited S tates
A rka n sa s
K e n tu c k y
M isso u ri
T e n n e sse e

- 3 .8 %
49.1
-2 0 .4
4.6
-9 .3

2 .0 %
14.0
3.5
2.1
6.5

6 .3 %
2.2
-2 .2
2.6
6.6

6 .4 %
2.2
12.9
3.2
9.5

P erso n al In co m e

111/1987

1986

1985

1 984

U n ite d S tates
D istrict
A rka n sa s
K e n tu c k y
M isso u ri
T e n n e sse e

5 .8 %
6.3
4.3
8.0
6.8
5.2

5 .6 %
5.4
5.4
4.0
5.1
6.7

Prices1

District Employment1
Key In d u stries
F a b rica te d M etal P ro d u cts
E le c trica 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 in d re d P ro d u cts
T e x tile and A p p a re l
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 cts
C o n s tru c tio n




8 .3 %
8.6
8.1
7.9
8.7
9.1

6 .9 %
6.2
6.5
4.3
6.4
7.2

Current Quarter

Current Year

C urrent Q uarter

IV /1 9 8 7

IV /1 9 8 6 - IV /1 9 8 7

IV /1 9 8 7

1.5%
0.6
-0 .1
-4 .1
3.3
3.8
0.7
0.4
4.7

8 .2 %
1.8
2.2
6.6
-1 .5
3.8
3.5
6.5
8.3

1 9.7%
2.1
2.1
-2 .7
1.0
4.5
2.8
-3 .2
-6 .2

C urrent Year
IV /1 9 8 6 - IV /1 9 8 7
3 .8 %
1.3
1.6
0.4
1.6
3.2
3.9
6.7
4 .2

3

EIGHTH DISTRICT BUSINESS DATA

U n e m p lo y m e n t R ate
U n ite d S tates
D is tric t
A rk a n s a s
L ittle R ock
K e n tu c k y
L o u is v ille
M isso u ri
St. Louis
T e n n e sse e
M e m p h is

C o n s tru c tio n C o n tra c ts 4
(m illio n s o f d o lla rs)

Average
1987

Average
1986

7.2

6.2 %
7.2

7 .0 %
7.7

7.9

8.2

8.1

8.8

6.8

7.3
8.3

7.1

Current
Quarter

Previous
Quarter

IV /1 9 8 7

111/1987

5 .9 %

6 .0%

6.8

6.8

7.0

6.9
9.2
7.0

6.5
6.9
6.9

6.2

6.1

6.9

7.0

6.8

6.1

5.9

8.0
6.8

Current
Quarter

Previous
Quarter

Same Period
1986

Same Period
1985

IV /1 9 8 7

111/1987

IV /1 9 8 6

IV /1 9 8 5

$541.9
57.6
114.8
172.9
196.7

$ 500.5
53.3
102.9
155.7
188.6

$ 552.5
59.4
104.2
195.0
193.8

$479.9
68.3
104.9
123.9
182.7

$427.4
27.8
114.2
117.0
168.4

$ 426.2
32.2
96.9
148.9
148.2

$ 368.4
28.8

$ 336.9
43 .7
87.1
94.9

7.6

6.0
6.2
6.8
6.3
5.6

8.8

R e s id e n tia l C o n s tru c tio n
D is tric t
A rk a n s a s
K e n tu c k y
M isso u ri
Tennessee
N o n re s id e n tia l C o n s tru c tio n
D is tric t
A rka n sa s
K e n tu c k y
M isso u ri
T e n n e sse e

101.8
119.6
118.3

111.2

NOTE: With the exception of employment and prices in key industries, all data are seasonally adjusted. Data for Arkansas,
Kentucky, Missouri and Tennessee are used to represent the District.
1 All growth rates are compounded annual rates of change. The 1984 through 1986 growth rates compare the fourth quarter of
the year listed with the fourth quarter of the previous year.
2Although each index is a comprehensive measure of economic activity, the Arkansas and Missouri indexes, computed by Southwestern
Bell, are not strictly comparable to the Kentucky and Tennessee indexes, which are computed by South Central Bell.
3Sources: Arkansas from Southwestern Bell, Kentucky from the Kentucky Revenue Department, Missouri and Tennessee from the U.S.
Department of Commerce.
4Excludes nonbuilding construction. Source: F. W. Dodge Construction Potentials, proprietary data provided by special permission.




Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102