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Current Economic Conditions in the

Eighth Federal Reserve District
Louisville Zone
June 25, 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
Owensboro

Elizabethtown

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 (known as the Burgundy Book ) summarizes information on economic conditions in the Louisville zone
of the Eighth Federal Reserve District (see map above), headquartered in St. Louis. Separate reports have also been
prepared for the Little Rock, 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 the metro areas and states of the Louisville zone.
These data are the most recent available at the time this report was assembled.
For more information, please contact the Louisville office:
Maria G. Hampton, 502-568-9205, maria.g.hampton@stls.frb.org
Economists:
Howard Wall, 314-444-8533, howard.j.wall@stls.frb.org
Subhayu Bandyopadhyay, 314-444-7425, subhayu.bandyopadhyay@stls.frb.org

Louisville Zone Report—June 25, 2008
Overall economic activity in the Louisville zone continues to be weak, but the situation differs across sectors. Retail sales have
been flat, but have improved since our previous report. Car dealers continue to see weaker sales than last year. Reports from the
manufacturing sector are mostly negative, although the service sector continues to expand. Declines in residential real estate and
construction have deepened while commercial real estate remains relatively strong. Although loan and deposit activity remain soft,
the banking sector remains stable. Reports from the agriculture sector were generally very positive.

Consumer Spending
One-third of the general retailers and about 60 percent of the
car dealers surveyed indicated that sales were down in April
and May compared with the same months in 2007. Still, onethird of the general retailers and 40 percent of the car dealers
reported increased sales. All car dealers surveyed noted that
sales of used cars had increased relative to new ones, while
about half reported recent increases in rebates and incentives.
Also, two-thirds reported more rejections of finance applications.
Two-thirds of the general retailers reported that their inventories
were too high, and three-fourths of these retailers plan to use
more discounting than usual. Two-thirds of the general retailers
and one-third of the car dealers expect sales to be higher this
summer than they were a year earlier.

Manufacturing and Other Business Activity
Manufacturing activity in the Louisville zone decreased during
the second quarter of 2008. A firm in the apparel manufacturing industries reported plans to consolidate existing facilities
and operations, which will allow the firm to hire additional
workers. In contrast, contacts in the fabricated metal, furniture,
and chemical manufacturing industries all reported plans to
lay off workers and decrease operations. Firms in the plastic
and motor vehicle parts manufacturing industries announced
that they will each close a plant in the zone. The service sector
continued to expand and experience job growth. Contacts in
business support services, retail services, and financial services
all announced plans to expand operations and hire additional
workers.

Real Estate and Construction
The downturn in the Louisville housing market has gained
momentum. Compared with the same period last year, yearto-date home sales were down by 14 percent in February and
18 percent in April. Permits for single-family homes were 39
percent lower in February and 40 percent lower in April. Com-

mercial real estate activity has been relatively strong, with
lower commercial and industrial vacancy rates in Louisville in
the first quarter of 2008 than in the fourth quarter of 2007.
A contact in Louisville reported that commercial and industrial
construction continues at a strong pace, although there have
been delays on several large projects. Other contacts in
Louisville reported a stable volume of work among nonresidential
construction contractors. Contacts in south-central Kentucky
reported that commercial construction is relatively strong and
that there are considerable projects in the pipeline. A contact
in Danville, Kentucky, reported that while healthcare and
school construction are in the works, speculative commercial
projects are soft.

Banking and Finance
Bank contacts reported continued softening in consumer loan
demand. A number of contacts noted the absence of the spike
in loan activity that usually occurs at this time of year. Most
contacts indicated that residential mortgage lending and commercial and industrial lending have been mostly flat. Almost all
contacts noted little or no growth in deposits, but that higher
market rates might attract more deposits in coming months.

Agriculture and Natural Resources
Farmers in Indiana and Kentucky intended to plant fewer acres
of corn and more acres of soybeans this year than last. Farmers
in both states planted more winter wheat in the fall. On the
other hand, Kentucky farmers intended to plant fewer acres
of sorghum and tobacco than in 2007. Frequent wet and cool
weather conditions have caused delays in planting and crop
growth. At the end of May, farmers were behind their normal
planting pace for corn, sorghum, and soybeans. Also at the
end of May, nearly all of the winter wheat and pasture land in
Indiana and Kentucky was rated in fair condition or better—
a significant improvement over the same period last year.

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

–0.4
–0.6
2001

2002

2003

2004

2005

2006

2007

2008

Louisville MSA Employment Growth by Sector
Year/Year Percent Change, May 2007–May 2008
Percent
4.0
3.0
2.0
1.0
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

Although there were relatively dramatic
swings in employment growth in the
Louisville MSA during 2007, the most
recent estimates indicate that Louisville
outperformed the rest of the country over
the course of the year. Estimates for
recent months, however, suggest that
Louisville has experienced relatively larger
job losses than did the country as a whole:
Over the three-month period ending in
May 2008, Louisville employment growth
averaged –0.11 percent per month, while
U.S. employment growth averaged –0.06
percent per month.

Other
Services

Government

Employment growth in the Louisville MSA
between May 2007 and May 2008 varied
a great deal across sectors. According to
the most recent estimates, the strongest
sectors were government and education
and health, which saw increases of 3.1 and
2.2 percent, respectively. Other strong
sectors were trade, transportation, and
utilities and other services. On the other
hand, four sectors—manufacturing,
information, professional and business
services, and leisure and hospitality—
were each estimated to have lost more
than 2 percent of their jobs over the
period.

Louisville Zone—MSA Employment and Unemployment
Nonfarm payroll employment percent change,
May 2007–May 2008
Total
Louisville
Bowling Green, Ky.
Clarksville, Ky.
Evansville, Ind.
United States

Goods producing

Service providing

Unemployment rate
April 2008

0.30
1.44
0.35
2.18
0.30

–1.34
0.00
–2.98
–1.08
–2.49

0.65
1.82
1.16
3.32
0.84

5.3
4.5
5.6
4.3
4.8

SOURCE: Bureau of Labor Statistics.

Louisville Zone—MSA Housing Activity
Total building permits,
units year to date
Percent change
–45.9
–56.3
–28.6
–30.7
–48.4
6.8
–34.6

April 2008

House price index,
percent change,
2008:Q1/2007:Q1
2.73
1.93
3.22
3.01
1.65
5.24
–0.03

Louisville
1,226
Bowling Green, Ky.
149
Clarksville, Ky.
548
Elizabethtown, Ky.
115
Evansville, Ind.
198
Owensboro, Ky.
94
United States
321,015

Total residential building permits in April
were substantially lower than a year earlier
in every zone MSA except Owensboro.
Louisville, Bowling Green, and Evansville
all saw decreases of 45 percent or higher.
House price indices, however, increased in
all metro areas between the first quarters
of 2007 and 2008, with especially strong
increases in Owensboro. In contrast, the
same house price index fell slightly over
the period for the country as a whole.

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

Louisville Area Coincident Economic Activity Index
Index (1992 = 100)
165
160
155
150
145
140

Indiana
Kentucky

135

United States
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, Kentucky and Indiana have
underperformed relative to the country as
a whole since 2001. Between January
and April 2008, this trend became more
pronounced. While the index for the United
States rose by 0.26 percent, it fell by 0.19
and 0.23 for Kentucky and Indiana,
respectively.

2008

SOURCE: Federal Reserve Bank of Philadelphia.

Louisville Area Real Personal Income Growth
Percent Change, Year-Over-Year
Percent
7
6
5
4
3
2
1
0
Indiana
–1

Kentucky

–2
–3
2000

United States
2001

2002

SOURCE: Bureau of Economic Analysis.

2003

2004

2005

2006

2007

2008

Personal income growth in Kentucky and
Indiana since 2004 has tended to be
weaker than in the country as a whole.
Also, income growth over the period in
Indiana has been consistently weaker than
in Kentucky. Although Kentucky’s personal
income growth has approached that of the
country by the second quarter of 2007, it
slowed substantially in the second half of
the year and through the first quarter of
2008. Indiana’s personal income growth
continued to lag the country’s and
Kentucky’s over the period, but all three
growth rates converged as they fell.

2007 Population Estimates for Eighth District Metro Areas
2007
Population
Large metro areas
St. Louis, Missouri-Illinois
Little Rock–North Little Rock–Conway, Arkansas
Louisville/Jefferson County, Kentucky-Indiana
Memphis, Tennessee-Arkansas-Mississippi
Small and medium metro areas
Bowling Green, Kentucky
Columbia, Missouri
Elizabethtown, Kentucky
Evansville, Indiana-Kentucky
Fayetteville-Springdale-Rogers, Arkansas-Missouri
Fort Smith, Arkansas-Oklahoma
Hot Springs, Arkansas
Jackson, Tennessee
Jefferson City, Missouri
Jonesboro, Arkansas
Owensboro, Kentucky
Pine Bluff, Arkansas
Springfield, Missouri
Texarkana, Texas-Arkansas
SOURCE: U.S. Census Bureau.

Change
since 2000

Percent
change

International
migration

Internal
(domestic)
migration

2,803,707
666,401
1,233,735
1,280,533

105,020
55,883
71,760
75,329

3.9
9.2
6.2
6.3

27,436
3,644
12,115
13,399

–35,697
25,220
24,698
3,086

116,001
162,314
111,610
349,717
435,714
289,693
96,371
112,660
145,686
116,402
112,104
101,484
420,020
134,215

11,835
16,648
4,063
6,902
88,669
16,523
8,303
5,283
5,634
8,640
2,229
–5,857
51,646
4,466

11.4
11.4
3.8
2.0
25.5
6.0
9.4
4.9
4.0
8.0
2.0
–5.5
14.0
3.4

2,549
3,000
–53
1,493
10,435
3,937
451
1,030
854
913
310
448
1,485
531

5,784
6,769
–1,207
–393
52,725
3,497
9,355
1,180
493
4,747
–1,022
–8,297
39,241
1,970