View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Current Economic Conditions in the

Eighth Federal Reserve District
Memphis 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 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 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 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@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

Memphis Zone Report—December 17, 2008
Economic activity in the Memphis zone weakened considerably since the previous report in late September. Retailers reported downturns in sales across the board. Employment in both the manufacturing and service sectors declined. Home sales and construction
continued to fall, while the outlook for commercial real estate was mixed.

Consumer Spending
Reports on retail sales were uniformly negative among general
retailers and car dealers in the Memphis zone. All of the general
retailers and car dealers surveyed indicated that sales were down
compared with the previous year. Among the general retailers,
80 percent noted that sales levels were below expectations.
Two-thirds of car dealers reported increased sales of used cars
relative to new cars. Also, one-third reported increased sales
of low-end cars relative to high-end cars. About 17 percent
reported recent increases in rebates, and two-thirds reported
lower sales prices. All of the car dealers reported that they are
rejecting more financing applications.
About 71 percent of the general retailers and all of the car
dealers reported that their inventories were too high. The sales
outlook for the rest of 2008 was mostly pessimistic. About 86
percent of the general retailers and 83 percent of the car dealers
expect sales for the period to be lower than 2007 levels.

Manufacturing and Other Business Activity
Manufacturing in the Memphis zone continued to decline.
Several firms reported plans to consolidate production and lay
off workers, including those who manufacture electrical products,
appliances, apparel, and plastic products. Some firms in auto
parts/automobile manufacturing, building products manufacturing, apparel manufacturing, and fabricated metal manufacturing
announced plans for extended layoffs and/or plant shutdowns.
In contrast, firms in the aerospace product/parts manufacturing
and primary metal manufacturing industries announced plans
to expand production and hire additional workers. Also, one firm
in the auto parts manufacturing sector announced plans to open
two new facilities in the District and to hire additional employees.
The service sector also continued to decline, with firms in the
tourism sector reporting lower earnings and firms in education
services and financial services announcing plans to lay off
workers.

Real Estate and Construction
The residential real estate sector in the Memphis zone continued
to decline: Compared with the same period in 2007, October

2008 year-to-date home sales were down by 19 percent, while
year-to-date single-family housing permits were down by 57
percent. Reports on the commercial real estate side were mixed.
According to a contact in Memphis, total committed projects for
2009 for one of the area’s largest commercial contractors are
at a record level. However, a Districtwide commercial construction contact reported that backlogs are shortening and interest
in new projects has slowed sharply. Although industrial and
office vacancy rates in Memphis were down in the third quarter,
contacts suggested that this was due to a lack of new industrial
construction rather than increasing demand. A contact in
Memphis noted that increased interest in rail transportation is
likely to benefit their industrial market.

Banking and Finance
Banking conditions in the Memphis zone deteriorated slightly
during the past three months. Contacts reported varying levels
of demand for consumer loans, ranging from unchanged to a
modest decrease. Demand for business loans was generally
reported to be down. One exception was agricultural loans, for
which increased demand was reported. Half of all contacts
reported a continued decline in demand for new residential
mortgage loans, but there were also reports of a noticeable increase in refinancing activity. Most contacts reported tightened
credit standards across all types of loans. All contacts reported
a steady increase in deposits.

Agriculture and Natural Resources
Good weather conditions helped many farmers throughout the
Memphis zone make significant progress harvesting their crops.
As of mid-November, farmers had harvested all of their corn
and rice and at least 95 percent of their soybeans and cotton.
November estimates showed that yields for corn, soybeans, rice,
and cotton are between 5 percent and 10 percent lower than
last year. In Tennessee, however, yields for soybeans and cotton
are each about 60 percent higher than last year. As of midNovember, farmers had planted at least 80 percent of their
intended winter wheat crop. Crop development was slightly
behind normal in Tennessee and Mississippi.

Recent estimates continue to indicate that
Memphis employment has contracted more
sharply than the national average throughout 2008. Over the three-month period
ending in October 2008, Memphis monthly
employment contracted at a 0.17 percent
monthly rate, while U.S. employment fell
at a monthly rate of 0.11 percent.

Nonfarm Payroll Employment Growth
3-Month Average, SA, January 2001–October 2008
Percent
0.6
0.4
0.2
0
–0.2
–0.4

United States
Memphis MSA

–0.6
2001

2002

2003

2004

2005

2006

2007

2008

Between October 2007 and October 2008,
employment growth in the Memphis MSA
was negative in all goods-producing sectors
and in most service-providing sectors. The
only service sector to show ongoing expansion was “other services,” which was up
2.9 percent. Information services and
Education and Health services were
unchanged from a year earlier. Employment
in natural resources, mining, and construction; financial activities; and professional
and business services were all down by
more than 3 percent.

Memphis MSA 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
–5.0
–6.0

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

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

Goods producing

Service providing

Unemployment rate
October 2008

–1.67
0.00
–0.31

–2.77
–1.40
–3.35

–1.51
0.42
0.28

7.0
6.7
6.1

SOURCE: Bureau of Labor Statistics.

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

Memphis
Jackson, Tenn.
Jonesboro, Ark.
United States

Percent change
–56.8
–39.9
13.1
–33.2

October 2008

House price index,
percent change,
2008:Q3/2007:Q3
–0.68
–2.63
4.55
–4.00

2,994
279
509
812,088

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

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

2008

SOURCE: Federal Reserve Bank of Philadelphia.

Memphis Area Real Personal Income Growth
Percent Change, Year/Year
Percent
14
12
10
8

Arkansas
Mississippi
Tennessee
United States

6
4
2
0
–2
–4
–6
–8
2000

2001

2002

SOURCE: Bureau of Economic Analysis.

2003

2004

2005

2006

2007

2008

Total residential building permits in October
2008 were lower than a year earlier in two
of the three MSAs in the Memphis zone.
In Memphis and Jackson, Tennessee, yearto-date permits were down 57 percent and
40 percent, respectively, while permits fell
by 33 percent nationally. Permits were up
by 13 percent in Jonesboro, Arkansas. As of
the third quarter, house price indices showed
declines of 0.7 percent in Memphis and 2.6
percent in Jackson. House prices were up
by 4.6 percent in Jonesboro. Nationwide,
house prices were down by 4 percent over
the same period.
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 had tended to
keep pace with the nation until recently.
Through most of 2008, growth rates have
slowed in Mississippi and Tennessee. For the
twelve months through October 2008, the
index grew by –0.06, –0.40, and 0.16 percent in Tennessee, Mississippi, and Arkansas,
respectively. Over the same period, the
index for the U.S. grew by 0.21 percent.
Personal income growth in Arkansas has
tended to keep pace with national income
growth since 2004, while Tennessee and
Mississippi have tended to be just below
the national pace. Since Hurricane Katrina
in the third quarter of 2005, Mississippi
has experienced relatively erratic income
growth. As of the second quarter of 2008,
all three states were showing year-overyear growth in excess of the national
average. Arkansas was up 2.6 percent,
Mississippi was up 1.7 percent, and
Tennessee was up 1.9 percent. For the
United States as a whole, personal income
growth was 1.5 percent over the same
period.

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.