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Current Economic Conditions in the

Eighth Federal Reserve District
Memphis 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 Memphis zone of the Eighth Federal Reserve
District (see map above), headquartered in St. Louis. Separate reports have also been prepared for the Little Rock,
Louisville, 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 the metro areas and states of the Memphis
zone. These data are the most recent available at the time this report was assembled.
For more information, please contact the Memphis office:
Martha L. Perine Beard, 901-579-2400, martha.l.perine-beard@stls.frb.org
Economists:
Michael Pakko, 314-444-8564, pakko@stls.frb.org
Rubén Hernández-Murillo, 314-444-8588, ruben.hernandez@stls.frb.org

Memphis Zone Report—March 19, 2008
The pace of economic activity in the Memphis zone slowed during the first quarter of 2008. Except for the manufacturing sector,
in which contacts reported increased activity, reports in most other sectors were not so favorable. Retail and car sales reports for
January and February 2008 were mostly negative. In contrast with the recent trend, there were signs of weakening in the services
sector. Residential home sales continued to weaken, while reports in commercial real estate market were more upbeat. Banking
conditions during the third quarter of 2007 were mixed.

Consumer Spending
Sales reports for January and early February were mostly negative among general retailers and car dealers in the Memphis
zone. Two-thirds of each group surveyed indicated that sales
were down compared with the same two months in 2007, while
the remaining contacts indicated that sales were up. Among
general retailers, 20 percent noted that sales levels met their
expectations. Outerwear was a strong seller, while gift items
were moving more slowly. Among car dealers, 67 percent noted
that used car sales had increased relative to new car sales. Also,
17 percent reported an increase in high-end vehicle sales relative to low-end vehicle sales, and 17 percent reported recent
increases in the use of rebates and incentives.
Half of the car dealers surveyed reported more rejections of
finance applications. About 60 percent of the general retailers
and 67 percent of the car dealers reported that inventories
were at desired levels. The sales outlook for March and April
was mixed among general retailers but generally optimistic
among car dealers.

Manufacturing and Other Business Activity
Manufacturing activity in the Memphis zone during the first
quarter of 2008 grew significantly. Several firms in motor vehicle
parts manufacturing reported plans to open new facilities in
the zone. Also opening new facilities were firms in chemical
manufacturing and household appliance manufacturing. Firms
in fabricated metal product manufacturing reported plans to hire
additional workers and expand production. In contrast, firms
in plastic product manufacturing reported plans to decrease
operations and a firm in machinery manufacturing announced
that it will close a plant in the zone. During the same period, the
service sector showed signs of weakness. In Tunica, Mississippi,
February 2008 year-to-date gaming revenues declined with
respect to 2007.

Real Estate and Construction
The Memphis residential real estate market continues to be
hard-hit. Contacts report rising inventories of homes and a

growing number of foreclosures. Compared with the same
period in 2006, December 2007 year-to-date home sales
declined 15 percent. Compared with January 2007, January
2008 home sales declined 22 percent. In contrast, conditions
in the commercial real estate market continue to be healthy. In
Memphis, fourth quarter 2007 industrial vacancy rates declined
over the third quarter of 2007; also, fourth quarter 2007 downtown office vacancy rates increased over the third quarter of
2007, while suburban office vacancy rates declined. Contacts in
the office and industrial real estate markets in Memphis expect
that 2008 will be a good year in terms of occupancy rates and
leasing activity.

Banking and Finance
Banking conditions in the Memphis zone were mixed during
the third quarter of 2007. Contacts reported softened demand
for consumer loans. Reports on the demand for business loans
ranged from little change to slight increases. Nearly all contacts
reported tightened credit standards for all types of loans, citing
an uncertain economic outlook. One contact noted that tightened
credit standards have led to a decrease in lending activity, as
many loan applications have been turned down. Most contacts
reported a continued decline in demand for new residential
mortgage loans, but there were also reports of a noticeable
increase in refinancing activity. Reports from the region on
average deposits ranged from no change to modest growth.

Agriculture and Natural Resources
As of mid-December, year-to-date bales of cotton ginned
(separated from the seed) in Memphis zone states were down
42 percent from the same period a year earlier; Mississippi had
37 percent fewer and Tennessee had 50 percent fewer bales
ginned. The total value of all field crops in the Memphis zone
states rose by 21 percent from 2006 to 2007. Mississippi had an
increase of 59 percent, while the total crop value in Tennessee
declined by 14 percent.

Nonfarm Payroll Employment Growth
3-Month Average, SA, January 2001–January 2008
Percent
0.6
0.4
0.2
0
–0.2
United States
Memphis MSA

–0.4
–0.6
2001

2002

2003

2004

2005

2006

2007

2008

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

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

Month to month, payroll employment
growth in the Memphis MSA tended to
move opposite national employment growth
in 2007. Nonetheless, the most recent
estimates indicate that Memphis employment grew by about the same rate as the
country as a whole. (See the table at the
top of the final page, which provides recent
benchmark revisions of employment data.)
But this has not been true for recent
months. Over the three-month period ending in January 2008, Memphis monthly
employment growth averaged 0.05 percent,
while U.S. employment growth averaged
0.10 percent.

Between January 2007 and January 2008,
employment growth in the Memphis MSA
was positive in most sectors. According to
the most recent estimates, the strongest
sectors were education and health and
other services, which saw employment
increases of 2.3 and 3.4 percent, respectively. Also, although the number of jobs
in the manufacturing sector fell by 1 percent, this drop was mild compared with
other large metro areas in the District.
The information sector fared worst over
the period, losing 5.3 percent of its jobs.

Memphis Zone—MSA Employment and Unemployment
Nonfarm payroll employment percent change,
January 2007–January 2008
Total
Memphis
Jackson, Tenn.
United States

Goods producing

Service providing

Unemployment rate
December 2007

0.82
1.48
0.89

–0.39
–4.11
–1.48

0.99
3.25
1.35

5.5
5.4
4.8

SOURCE: Bureau of Labor Statistics.

Memphis Zone—MSA Housing Activity
Total building permits,
units year to date
January 2008

Percent change

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

208
13
41
75,933

–78.2
–89.3
115.8
–32.4

1.35
–2.68
0.45
0.84

Memphis
Jackson, Tenn.
Jonesboro, Ark.
United States

Total residential building permits in January
were lower than a year earlier in two of
the three MSAs in the Memphis zone. In
Memphis and Jackson, Tennessee, permits
fell by 78 and 89 percent, respectively,
while permits fell by 32 percent nationally.
House price indices increased in Memphis
and Jonesboro, Arkansas, between the
fourth quarters of 2006 and 2007, but fell
by 2.7 percent in Jackson.

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

Memphis Area Coincident Economic Activity Index
Index (1992 = 100)
165
Arkansas
160

Mississippi

155

Tennessee
United States

150
145
140
135
130
2000

2001

2002

2003

2004

2005

2006

2007

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, Mississippi and Arkansas have
underperformed the country as a whole
since 2001, while Tennessee has tended to
keep pace with the nation until recently.
In 2007 this index rose by 2.4 percent
nationally, but only 1.8 and 0.4 percent
for Tennessee and Arkansas, respectively.
For Mississippi, on the other hand, the
index rose by 2.6 percent.

SOURCE: Federal Reserve Bank of Philadelphia.

Memphis Area Real Personal Income Growth
Percent Change, Year-Over-Year
Percent
12

Arkansas

10

Mississippi
Tennessee
United States

8
6
4
2
0
–2
–4
–6
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, while Tennessee has
tended to be just below the national pace.
Since Hurricane Katrina in the third quarter
of 2005, Mississippi has experienced relatively erratic income growth. By the third
quarter of 2007, income growth in
Mississippi and Arkansas was slightly above
the national growth rate, while it fell short
of the national rate in Tennessee.

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.