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Current Economic Conditions in the

Eighth Federal Reserve District
St. Louis Zone
December 17, 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 St. Louis 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 Memphis zones and can be downloaded from the CRE8 website
(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 St. Louis zone.
These data are the most recent available at the time this report was assembled.
For more information, please contact the St. Louis office:
Randy Sumner, 314-444-8644, randall.c.sumner@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

St. Louis Zone Report—December 17, 2008
Economic activity in the St. Louis zone remains weak. Retail activity has been down across the board, and retailers are mostly
pessimistic about the near future. Declines in manufacturing and services have continued, as firms in many sectors report plans to
reduce employment and/or output. Residential real estate remains weak, although commercial real estate markets have been more
stable. Bank lending has fallen as lenders report tighter standards. The agricultural sector remains a bright spot, with generally
higher yields and good crop conditions.

Consumer Spending
Retail sales reports from general retailers and car dealers for
October and the first half of November were mostly negative.
Eighty-six percent of general retailers and 100 percent of car
dealers indicated that sales were down compared with the same
period in 2007. Nearly all general retailers noted that sales were
below expectations. Among car dealers, one-third reported
increased sales of used cars relative to new cars and one-third
reported increased sales of low-end cars relative to high-end
cars. Half reported recent increases in rebates, and two-thirds
reported more rejections of finance applications. The sales
outlook for the remainder of 2008 was mostly pessimistic:
57 percent of the general retailers and 100 percent of the
car dealers expected sales to decrease over 2007 levels.

Manufacturing and Other Business Activity
Manufacturing in the St. Louis zone continued to decline in
October and the first half of November. Firms in machinery,
automobile parts, glass/glass product, primary metal, and
apparel manufacturing all announced plans to decrease
production and lay off employees. In addition, firms in cement/
concrete product manufacturing and animal slaughtering/
processing announced plans to close plants in the zone. The
service sector in St. Louis also continued to decline during the
period, with firms in the medical services, information services,
business services, and government services sectors all announcing plans to lay off workers and decrease operations.

Real Estate and Construction
In St. Louis, compared with the same periods in 2007, October
year-to-date home sales were down by 14 percent, while
October year-to-date single-family housing permits were down
by 42 percent. Between the second and third quarters in
St. Louis, the vacancy rates fell for industrial space and suburban
and downtown office space. A contact in St. Louis reported that
the industrial real estate market is stable and that developers
are not overbuilding. A commercial construction contact in

St. Louis reported concerns over his clients’ ability to finance
committed future work because of current credit market conditions. A Districtwide commercial construction contact reported
that backlogs are shortening and interest in new projects has
slowed sharply.

Banking and Finance
Contacts in the St. Louis zone reported continued declines in
commercial and industrial lending activity. Lending standards
remained tight for these loans, with more than half of all
contacts reporting tighter standards. Contacts reporting on
commercial real estate loans indicated large declines in lending
activity. One contact noted that deteriorating loan quality and
tightening lending standards have made many banks reluctant
to lend in this category. Reports indicate little to no change in
lending activity in the residential mortgage loan category.
Reports on consumer lending were mixed, with most contacts
reporting little to no change.

Agriculture and Natural Resources
Weather conditions and moisture content prevented some
farmers in the St. Louis zone from harvesting their crops on
schedule. As of mid-November, Illinois farmers had harvested
all of their soybeans and 88 percent of their corn and sorghum
(the latter two behind schedule). Missouri farmers had harvested
all of their cotton and rice but around 80 percent of their corn,
soybeans, and sorghum (the latter three behind schedule).
November estimates showed higher yields for corn, soybeans,
and sorghum in Illinois and for soybeans, rice, and cotton in
Missouri, where estimated yields for corn and sorghum are off
by 1 percent. As of mid-November, farmers had planted nearly
their entire intended winter wheat crop, with Illinois farmers
ahead of their normal pace but Missouri farmers slightly behind
schedule. Crop development was behind schedule in both states,
more so in Missouri. Nearly all of the emerged winter wheat in
both states—at least 97 percent—was rated in fair condition
or better.

Payroll employment growth in the St. Louis
MSA continues to underperform the country
as a whole. Three-month average employment growth has tended to be negative
since mid-2007, and recent job decreases
have been the largest since 2003. Recent
job growth in the St. Louis MSA has lagged
the national rate: Over the three-month
period ending in October 2008, St. Louis
monthly employment growth averaged
–0.13 percent, while U.S. employment
growth averaged –0.11 percent.

Nonfarm Payroll Employment Growth
3-Month Average, SA, January 2001–October 2008
Percent
0.4
0.3
0.2
0.1
0
–0.1
United States
St. Louis MSA

–0.2
–0.3
2001

2002

2003

2004

2005

2006

2007

2008

On a year-over-year basis St. Louis MSA
sectoral employment growth rates between
October 2007 and October 2008 were
negative for all sectors except for education
and health, while overall job growth was
–0.9 percent. The most-recent estimates
show that job growth in the education and
health sector was 1.4 percent. The largest
declines were in manufacturing, which
lost 4.2 percent of its jobs. Information,
professional and business services, and
government all showed declines greater
than 1 percent.

St. Louis MSA Employment Growth by Sector
Year/Year Percent Change, October 2007–October 2008
Percent
2.0
1.0
0.0
–1.0
–2.0
–3.0
–4.0
–5.0

Total
Nonfarm

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

Financial Professional Education
Activities
and
and
Business
Health
Services

Leisure
and
Hospitality

Other
Services

Government

St. Louis Zone—MSA Employment and Unemployment
Nonfarm payroll employment percent change,
October 2007–October 2008
Total
St. Louis
Columbia, Mo.
Jefferson City, Mo.
Springfield, Mo.
United States

Goods producing

Service providing

Unemployment rate
October 2008

–0.86
0.11
–0.25
0.25
–0.31

–2.83
–5.49
–3.92
–3.83
–3.35

–0.48
0.70
0.29
0.91
0.28

6.9
4.1
4.9
5.4
6.1

SOURCE: Bureau of Labor Statistics.

St. Louis Zone—MSA Housing Activity
Total building permits,
units year-to-date
Percent change
–44.2
–51.1
–38.1
–31.7
–33.2

October 2008

House price index,
percent change,
2008:Q3/2007:Q3
–0.96
1.88
0.91
–0.25
–4.00

St. Louis
5,215
Columbia, Mo.
581
Jefferson City, Mo.
99
Springfield, Mo.
1,683
United States
812,088

SOURCE: Bureau of the Census, Federal Housing Financing Authority.

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

Illinois
Missouri

135

United States
130
2000

2001

2002

2003

2004

2005

2006

2007

2008

SOURCE: Federal Reserve Bank of Philadelphia.

St. Louis Area Real Personal Income Growth
Percent Change, Year/Year
Percent
7

Illinois
Missouri

6

United States

5
4
3
2
1
0
–1
–2
2000

2001

2002

SOURCE: Bureau of Economic Analysis.

2003

2004

2005

2006

2007

2008

Total residential building permits in October
were lower than a year earlier in every MSA
in the zone. The decline for every MSA was
comparable to or greater than what was
experienced by the country as a whole.
The house price index rose slightly for
Columbia and Jefferson City between the
third quarters of 2007 and 2008, but fell
off in the other two metro areas in the zone.
Jefferson City, in particular, saw a relatively
strong increase. The decline in this index
for the country as a whole was much larger
than for any MSA in the St. Louis zone.
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, labor market conditions began
to soften in early 2007, several months
before similar softening occurred nationwide. Throughout 2008 this index has
performed better at the national level than
for Illinois and Missouri: For the United
States the index was unchanged through
October, while it decreased by 1.5 percent
and 1.7 percent for Illinois and Missouri,
respectively.

Personal income growth in Missouri and
Illinois has tended to be weaker than in
the country as a whole since 2003, and
income growth in Missouri had been weaker
than in Illinois through most of 2006 and
2007. For the first half of 2008, however,
Missouri’s income growth has outpaced
that of Illinois and the country as a whole,
although growth has been roughly halved
across the board relative to the first half
of 2006.

Year-Over-Year Percent Change in State Tax Revenue
2007:Q3
Personal
income
Arkansas
Illinois
Indiana
Kentucky
Mississippi
Missouri
Tennessee
United States

7.3
5.5
7.2
11.5
9.5
7.3
—
6.3

Corporate
income
9.3
–4.3
6.2
–41.4
14.4
–2.3
13.3
–2.4

2008:Q3

Sales

Total

Personal
income

Corporate
income

Sales

Total

–2.5
–2.9
3.7
3.2
–3.1
4.8
3.0
3.1

3.2
1.3
5.6
2.4
2.7
5.8
5.9
4.4

5.7
3.7
–1.9
6.6
–1.9
2.4
—
1.5

–10.7
1.5
–10.5
–49.8
–14.6
–14.5
–25.2
–8.3

3.7
2.5
2.7
1.6
2.9
–2.5
–2.0
–0.7

4.8
2.7
–0.6
0.4
1.2
0.4
–4.8
0.1

NOTE: July-September 08/07 data are preliminary data from early-reporting states collected by the Rockefeller Institute of Government.
SOURCE: The Nelson A. Rockefeller Institute of Government/U.S. Bureau of the Census.

In all District states but Arkansas, third-quarter tax revenue growth was lower than it was a year earlier, which mirrors the national
experience. For Indiana and Tennessee, total third-quarter 2008 tax revenues were actually lower than they were a year earlier. For
the other District states, however, total revenue growth was stronger than the national average.
The largest declines in tax revenue growth tended to be from corporate income taxes. Every state in the District except for Illinois
saw double-digit decreases in corporate income tax revenue in the third quarter of 2008 relative to a year earlier. Compared with
2007, year-over-year growth in revenue from personal income taxes was lower for all District states in the third quarter of 2008,
although sales tax results were mixed.