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Current Economic Conditions in the

Eighth Federal Reserve District
Little Rock 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

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 (known as the Burgundy Book ) 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 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 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, michael.r.pakko@stls.frb.org
Rubén Hernández-Murillo, 314-444-8588, ruben.hernandez@stls.frb.org

Little Rock Zone Report—December 17, 2008
Economic conditions in the Little Rock zone softened since the previous report in late September. Retail and auto sales declined in
October and the first half of November. Activity continued to decline in manufacturing and residential real estate markets, and
banking contacts reported declines in lending activity. In contrast, the service sector expanded slightly.

Consumer Spending

Real Estate and Construction

Car dealers and general retailers in the Little Rock zone reported
weak sales for October and the first half of November. About
83 percent of retailers and all car dealers surveyed indicated
that sales were down compared with the same months in 2007.
The other 17 percent of retailers reported increased sales.
Among retailers, 20 percent noted that sales levels were below
expectations, while 20 percent said that sales were above
expectations. One-third of car dealers reported increased sales
of used cars relative to new cars, half reported increased sales
of low-end cars relative to high-end cars, and two-thirds reported increased rejections of finance applications. One-third of
the general retailers and two-thirds of the car dealers reported
that their inventories were too high, while the remaining contacts
reported that inventories were at desired levels. The sales outlook for the rest of 2008 was mixed among retailers but generally
pessimistic among car dealers.

In Little Rock, October 2008 year-to-date home sales and singlefamily housing permits were down by 20 percent and 33 percent,
respectively. The industrial vacancy rate for the third quarter of
2008 in Little Rock rose above the rate for the second quarter
of 2008. During the same period, the suburban office vacancy
rate decreased, while the downtown office vacancy rate increased.
A contact in central Arkansas whose firm specializes in general
commercial construction reported that the firm’s backlog had
decreased from 12 to 6 months as projects have begun to dry
up. An industrial construction contact in Little Rock reported
that activity has held steady and that the outlook is positive
because of the upcoming construction of several facilities related
to wind energy.

Manufacturing and Other Business Activity
Manufacturing activity in the Little Rock zone continued to
decline in October and the first half of November. Contacts in
wood product, paper product, and machinery manufacturing
announced plans to idle plants and temporarily lay off workers
and decrease operations. Firms in printing, primary metal, and
appliance manufacturing each announced plans to close a
plant in the zone and lay off workers. Finally, manufacturing
firms in the fabricated metal, machinery, wood and furniture
products, boats, and animal slaughtering/processing industries
announced plans to lay off workers. In contrast, firms in electrical
equipment and machinery manufacturing related to wind power
reported plans to open new facilities in the zone and hire additional workers. A firm in soap/cleaning-compound manufacturing
also announced plans to open a new facility and hire additional
workers. The service sector expanded slightly: Firms announcing
new jobs outnumbered those announcing layoffs. Contacts in
business support services reported plans to hire additional
workers, while a firm in medical services announced plans to
cut jobs and cut costs.

Banking and Finance
Contacts provided mixed reports on local banking conditions
that included continued declines in commercial and industrial
loans and modest declines in residential mortgage lending
activity. A number of contacts reported that, as credit standards
continue to tighten, they have been much more cautious in
extending new loans across all categories. Reports indicated
modest growth in deposits, with a number of contacts noting
strong competition for deposit funds.

Agriculture and Natural Resources
Good weather conditions helped many farmers throughout the
Little Rock zone make significant progress with crop harvesting.
As of mid-November, Arkansas farmers had harvested all of
their corn, sorghum, and rice and at least 94 percent of their
soybeans and cotton. November estimates showed that yields
for corn, sorghum, rice, and cotton were between 4 percent and
10 percent lower than last year’s yields, but soybean yields
were 11 percent higher than last year’s. As of mid-November,
farmers in Arkansas had planted nearly the entire intended
winter wheat crop. Nearly all of the emerged winter wheat in
Arkansas was rated in fair condition or better.

During 2007, payroll employment growth
in the Little Rock MSA was stronger than
for the nation as a whole. Employment
growth slowed during the first part of 2008,
but rebounded toward the third quarter of
2008. Over the three-month period ending
in October 2008, Little Rock’s monthly
employment growth averaged –0.12
percent, while U.S. employment growth
averaged –0.11 percent. Over the past 12
months, employment in the Little Rock MSA
has increased by 100 jobs, approximately
0.03 percent.

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

–0.2
–0.3
2001

2002

2003

2004

2005

2006

2007

2008

Little Rock Employment Growth by Sector
Year/Year Percent Change, October 2007–October 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
Resources,
Transportation,
Mining, and
and Utilities
Construction

Financial Professional Education
Activities
and
and
Business
Health
Services

Leisure
and
Hospitality

Other
Services

Government

Between October 2007 and October 2008,
employment growth remained strong in
some service-related sectors, but declined
in other service industries and in manufacturing. Employment growth in leisure
and hospitality reached 3.5 percent, while
growth in education and health services was
1.7 percent. Financial activities declined
by 2.9 percent, while trade, transportation,
and utilities contracted by 2.4 percent.
Manufacturing employment declined
3.6 percent. Total nonfarm employment
increased by only 0.03 percent.

Little Rock Zone—MSA Employment and Unemployment
Nonfarm payroll employment percent change,
October 2007–October 2008
Total
Little Rock
0.03
Fayetteville-Springdale-Rogers, Ark. 1.81
Fort Smith, Ark.
–0.08
Texarkana, Ark.-Tex.
2.12
United States
–0.31
SOURCE: Bureau of Labor Statistics.

Goods producing

Service providing

Unemployment rate
October 2008

–0.68
–2.30
–4.30
–1.33
–3.35

0.13
1.63
1.53
2.64
0.28

4.1
3.5
4.7
4.7
6.1

Little Rock Zone—MSA Housing Activity
Total building permits,
units year-to-date
October
2008
Little Rock
2,273
Fayetteville-Springdale-Rogers, Ark. 2,422
Fort Smith, Ark.
590
Hot Springs, Ark.
50
Pine Bluff, Ark.
114
Texarkana, Ark.-Tex.
136
United States
812,088

Percent
change

House price index,
percent change,
2008:Q3/2007:Q3

–12.2
–15.3
–28.7
–39.8
103.6
–62.4
–33.2

0.97
–4.09
2.67
4.25
0.55
–1.60
–4.00

Total residential building permits through
October 2008 were lower than a year earlier
in five of the six MSAs in the Little Rock
zone. In Little Rock, permits fell by 12.2
percent. In Pine Bluff, however, permits
were up by over 100 percent from the
previous year. In the third quarter of 2008,
house prices were up in four of the six
MSAs. In the Fayetteville-Springdale-Rogers
MSA, prices fell by 4.1 percent and in
Texarkana prices fell by 1.6 percent. In
contrast, house price increases in the other
four MSAs ranged from 0.6 percent (Pine
Bluff) to 4.3 percent (Hot Springs).

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

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

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 in a single index. According to this
index, Arkansas has underperformed the
country as a whole since 2000. Recent data
show an increase in economic activity
comparable to the rest of the nation. In
the 12 months ending in October 2008,
the Arkansas index rose 0.16 percent
compared with an increase of 0.21 percent
for the nationwide index.

2008

SOURCE: Federal Reserve Bank of Philadelphia.

Personal income growth in Arkansas has
kept slightly ahead of national income
since 2006. In 2007 and the first half of
2008, however, the difference in growth
rates increased. The most recently available
data indicate that in the first and second
quarters of 2008, year-over-year income
growth in Arkansas was 1.3 and 2.6
percent, respectively, while the U.S. growth
in those quarters was 0.8 and 1.5 percent,
respectively.

Arkansas Real Personal Income Growth
Percent Change, Year/Year
Percent
7

Arkansas
United States

6
5
4
3
2
1
0
–1
2000

2001

2002

SOURCE: Bureau of Economic Analysis.

2003

2004

2005

2006

2007

2008

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.