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Current Economic Conditions in the

Eighth Federal Reserve District
Little Rock Zone
March 19, 2008

Prepared by the

Center for Regional Economics—8th District (CRE8)
Federal Reserve Bank of St. Louis

Eighth
Federal Reserve
District
I
ILLINOIS
ILL NO
ILLINO S
ILLINOIS

IN IANA
IN IAN
INDIANA
ND
NDIAN

Columbia
Jefferson City

St. Louis

MISSOURI
ISS UR
SSOUR
S
SO

Louisville-Jefferson County

Evansville

Elizabethtown

Owensboro

KENTUCKY
KENTUCKY
KEN UCKY
EN UC
N
NTU

Springfield
Bowling Green

Fayetteville-Springdale-Rogers
Jonesboro
Jackson

ARKA AS
ARKAN AS
RKANSAS
AN

TEN SSEE
TEN ESSEE
TENNESSEE
NNE
N

Fort Smith

Memphis

Little Rock-North Little Rock
Hot Springs
Pine Bluff

Texarkana

MISS SIPPI
MISS SSIPPI
SSISS PP

This report summarizes information on economic conditions in the Little Rock zone of the Eighth Federal Reserve
District (see map above), headquartered in St. Louis. Separate reports have also been prepared for the Louisville,
Memphis, and St. Louis zones and can be downloaded from the CRE8 web site (research.stlouisfed.org/regecon/).
The first section of this report summarizes information provided by various contacts within the District and is
similar to the type of information found in the Fed’s Beige Book (federalreserve.gov/fomc/beigebook/2008/).
The period covered by this section coincides roughly with the two Beige Book periods immediately preceding this
report. The second section includes government-provided data for Arkansas and the metro areas of the Little Rock
zone. These data are the most recent available at the time this report was assembled.
For more information, please contact the Little Rock office:
Robert A. Hopkins, 501-324-8200, robert.hopkins@stls.frb.org
Economists:
Michael Pakko, 314-444-8564, pakko@stls.frb.org
Rubén Hernández-Murillo, 314-444-8588, ruben.hernandez@stls.frb.org

Little Rock Zone Report—March 19, 2008
Economic conditions in the Little Rock zone were mixed. The residential housing markets remained sluggish, but commercial and
industrial real estate markets have remained relatively robust. Problems in the housing sector have shown signs of spilling over
into banking, with a softening of loan demand reported. The consumer spending outlook was mixed. Manufacturing employment
has been expanding somewhat, while service sector employment has weakened. Agriculture and natural resource extraction have
generally been bright spots in the Arkansas economy.

Consumer Spending
Retail sales for January and early February were mixed among
general retailers and car dealers in the Little Rock zone. Onethird of the general retailers and half of the car dealers surveyed
indicated that sales were down compared with last year, while
one-third of each group reported that sales were up. Among
general retailers, half noted their sales levels met their expectations, while half noted their sales levels did not. Among car
dealers, 83 percent noted that used car sales had increased
relative to new car sales. Two-thirds of the respondents reported
recent increases in rebates and incentives.
About 33 percent reported more rejections of finance applications, but none of the contacts reported more acceptances.
About 17 percent of the general retailers and half of the car
dealers reported that inventories were at desired levels, while 50
percent of the general retailers and the other half of the car
dealers reported that inventories were too high. One-third of
the general retailers reported that inventories were lower than
planned. The sales outlook for March and April was generally
positive among general retailers and mixed among car dealers.

January 2007. Commercial and industrial development continued to expand. The industrial vacancy rate in Little Rock declined
in the third quarter of 2007. In addition, both downtown and
suburban office vacancy rates declined. Through November, yearto-date commercial construction permits in Little Rock were up
more than twofold from the same time last year. Tighter credit
conditions were expected to exacerbate the commercial inventory situation in northwest Arkansas.

Banking and Finance
Banking conditions in the Little Rock zone deteriorated during
the first quarter of 2008. Nearly all contacts reported continued
softening in demand for consumer loans. Reports on business
loan demand ranged from unchanged to slightly weaker. Contacts indicated that demand for mortgage loans continues to be
weak. Over half of the contacts reported tightening credit standards on all loans, citing an uncertain economic outlook and a
reduced tolerance for risk as reasons for the change. All contacts
reported little to no change in deposits.

Agriculture and Natural Resources
Manufacturing and Other Business Activity
Manufacturing in the Little Rock zone expanded slightly during
the first quarter of 2008. Firms in food manufacturing, oil and
gas field machinery manufacturing, and sanitary paper product
manufacturing reported plans to open new facilities and hire
workers. Firms in transportation equipment manufacturing and
fabricated metal product manufacturing reported plans to lay off
workers. One firm in machinery manufacturing announced it
will close a facility in the zone. The service sector showed signs
of weakness, with job losses reported in educational services.

Real Estate and Construction
Little Rock home sales in 2007 were down 15 percent from
2006. Sales in January 2008 were down 13.5 percent from

The total value of all field crops in Arkansas rose by 32 percent
from 2006 to 2007. The increased values mostly reflect higher
prices of major crops in 2007 than in 2006, especially corn (37
percent), soybeans (53 percent), winter wheat (41 percent), and
sorghum (49 percent). Total production volume increased for
corn, sorghum, and winter wheat. Strength in row crop prices has
boosted land prices and farm equipment sales. In contrast, bales
of cotton ginned in Arkansas were down almost one-quarter in
2007 relative to 2006. The timber industry in south central
Arkansas is suffering from a serious downturn, with the cost
of harvesting timber exceeding the sales price. The Fayetteville
Shale play continues to have a very positive impact on the
central Arkansas economy, with ripple effects boosting sales for
both industrial suppliers and retail service providers.

Nonfarm Payroll Employment Growth
3-Month Average, SA, January 2001–January 2008
Percent
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
United States
Little Rock MSA

–0.1
–0.2
–0.3
2001

2002

2003

2004

2005

2006

2007

2008

Little Rock Employment Growth by Sector
Year/Year Percent Change, January 2007–January 2008
Percent
6.0
5.0
4.0
3.0
2.0
1.0
0
–1.0
–2.0
–3.0
–4.0

Total
Nonfarm

Natural Manufacturing Trade, Information Financial
Resources,
Transportation,
Activities
Mining, and
and Utilities
Construction

Professional Education
and
and
Business
Health
Services

Leisure
and
Hospitality

Other
Services

Government

In 2007, payroll employment growth in the
Little Rock MSA was stronger than for the
nation as a whole. The most recent estimates indicate that the number of jobs in
Little Rock increased by 5,200, or 1.5 percent, during the year. (See the table at the
top of the final page, which provides recent
benchmark revisions of employment data.)
In recent months, however, Little Rock
employment growth has been weaker than
for the country as a whole. Over the threemonth period ending in January 2008,
Little Rock monthly employment growth
averaged 0.07 percent, while U.S. employment growth averaged 0.10 percent.
Between January 2007 and January 2008
employment growth in the Little Rock MSA
was very strong in several sectors. According to the most recent estimates, employment growth exceeded 3 percent in
education and health, leisure and hospitality,
government, and information. The natural
resources, mining, and construction sector
also grew at an above-average rate over
the 12-month period. Countering these
gains was the nearly 3 percent decline in
the number of manufacturing jobs, primarily in durable goods industries.

Little Rock Zone—MSA Employment and Unemployment
Nonfarm payroll employment percent change,
January 2007–January 2008
Total
Little Rock
Fayetteville-Springdale-Rogers, Ark.
Fort Smith, Ark.
Texarkana, Ark.-Tex.
United States
SOURCE: Bureau of Labor Statistics.

Goods producing

Service providing

Unemployment rate
December 2007

1.47
0.93
1.22
1.44
0.89

–0.69
–4.04
–4.48
–3.95
–1.48

1.79
2.32
3.56
2.30
1.35

4.6
3.9
5.6
4.7
4.8

Little Rock Zone—MSA Housing Activity
Total building permits,
units year to date
Percent
change

Little Rock
209
Fayetteville-Springdale-Rogers, Ark. 166
Fort Smith, Ark.
89
Hot Springs, Ark.
6
Pine Bluff, Ark.
28
Texarkana, Ark.-Tex.
19
United States
75,933

House price index,
percent change,
2007:Q4/2006:Q4

–14.7
–38.7
23.6
–33.3
833.3
90.0
–32.4

January
2008

3.85
0.41
3.53
9.57
4.44
6.96
0.84

Total residential building permits in January
were lower than a year earlier in two of
the three largest MSAs in the Little Rock
zone. In Little Rock and FayettevilleSpringdale-Rogers, Arkansas, permits fell
by 15 and 39 percent, respectively, while
permits fell by 32 percent nationally. House
price indices increased in all zone metro
areas between the fourth quarters of 2006
and 2007, and all but FayettevilleSpringdale-Rogers saw much higher
increases than did the nation as a whole.

SOURCE: Bureau of the Census, Office of Federal Housing Enterprise Oversight.

Arkansas Coincident Economic Activity Index
Index (1992 = 100)
165
160
155
150
145
140
Arkansas
135
130
2000

The Philadelphia Fed’s coincident index
combines payroll employment, wages and
salaries, the unemployment rate, and hours
worked into a single index. According to
this index, Arkansas underperformed the
country as a whole during the recessionary
period of 2000-03, but then tended to
keep pace during the recovery and expansion period of 2004-06. In 2007, however,
this index rose by 2.4 percent nationally,
but only 0.4 percent for Arkansas.

United States

2001

2002

2003

2004

2005

2006

2007

SOURCE: Federal Reserve Bank of Philadelphia.

Arkansas Real Personal Income Growth
Percent Change, Year-Over-Year
Percent
7
6
5
4
3
2
1

Arkansas

0

United States

–1
2000

2001

2002

SOURCE: Bureau of Economic Analysis.

2003

2004

2005

2006

2007

Personal income growth in Arkansas has
tended to keep pace with national income
growth since 2004. This was true even in
2007, when other measures saw Arkansas
begin to lag behind the performance of the
rest of the country. In fact, for the most
recent quarters for which there are data,
year-over-year income growth in Arkansas
was 3.8 and 4.6 percent in the second
and third quarters of 2007, respectively.
U.S. personal income growth in those
quarters was 3.6 and 4.3 percent.

Metro Area Employment Growth
December 2006 to December 2007
Revised estimate as of March 2008
Change (in thousands)
Large metro areas
Little Rock–North Little Rock, Arkansas
Louisville, Kentucky-Indiana
Memphis, Tennessee-Arkansas-Mississippi
St. Louis, Missouri-Illinois
Small and medium metro areas
Fayetteville-Springdale-Rogers, Arkansas
Fort Smith, Arkansas-Oklahoma
Texarkana, Texas-Arkansas
Bowling Green, Kentucky
Evansville, Indiana-Kentucky
Jackson, Tennessee
Columbia, Missouri
Jefferson City, Missouri
Springfield, Missouri

Percent change

5.2
6.9
5.4
2.0

1.5
1.1
0.8
0.1

0.9
1.7
0.7
1.8
1.4
0.3
1.0
1.5
5.2

0.4
1.4
1.2
2.9
0.8
0.5
1.1
1.9
2.6

NOTE: These are the most recent benchmark revisions from March 11, 2008. See CRE8 Occasional Paper #2008-01 for a discussion
of these revisions (http://research.stlouisfed.org/regecon/occasionalpapers.html).
SOURCE: Bureau of Labor Statistics.

Foreclosures, 2007
Percentage of
households, 2007

Percent change
from 2006

Little Rock–North Little Rock, Arkansas
Louisville, Kentucky-Indiana
Memphis, Tennessee-Arkansas-Mississippi
St. Louis, Missouri-Illinois

0.95
0.60
2.14
1.28

15.52
–12.05
30.35
58.11

Arkansas
Ilinois
Indiana
Kentucky
Mississippi
Missouri
Tennessee

0.51
1.25
1.03
0.27
0.11
0.91
0.98

26.44
25.29
11.31
23.45
91.65
80.93
24.56

United States

1.03

74.99

SOURCE: Realty Trac.