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
Little Rock Zone
March 18, 2009

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/2009/).
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—March 18, 2009
Weak economic conditions have continued to prevail in the Little Rock zone, but some positive developments were evident as well.
Home sales and building permits continued to decline, along with further weakening of commercial construction. Manufacturing firms
and service sector businesses announced high-profile plant closures and layoffs. Nevertheless, some businesses in the zone announced
plans for expansion and the hiring of new workers. A survey of general retailers found that a majority experienced increased sales
in January and February compared with a year earlier.

Consumer Spending
Retail sales reports for January and early February were mixed
among general retailers and mostly negative among car dealers
in the Little Rock zone. About 80 percent of the car dealers
surveyed indicated that sales were down compared with the
same months in 2008. In contrast, 60 percent of the general
retailers reported increased sales, with only 20 percent reporting
decreased sales.
Among car dealers, 40 percent noted that new car sales had
increased relative to used car sales, while none reported the
opposite. Also, 40 percent reported an increase in sales of highend relative to low-end vehicles. About 60 percent reported
recent increases in rebates and incentives, while none reported
fewer rebates. About 20 percent reported more rejections of
finance applications, but another 20 percent reported fewer
rejections.
The sales outlook for March and April was mostly pessimistic
among the general retailers and mixed among the car dealers.
Two-thirds of the general retailers and 40 percent of the car
dealers expect sales to decrease over 2008 levels, while the
remaining contacts expect sales to increase.

Manufacturing and Other Business Activity
Manufacturing activity in the Little Rock zone has continued to
decline. Firms in machinery manufacturing, electrical equipment
manufacturing, and animal processing/slaughtering all announced
large layoffs, citing weak product demand and a need to control
costs. In addition, firms in steel-product, metal working, and auto
parts manufacturing announced job layoffs. Firms in plastics
manufacturing, food manufacturing, and footwear manufacturing all closed a plant in the zone. In contrast, a large firm in
heavy machinery manufacturing announced plans to build a
new facility and hire additional workers; firms in natural gas
manufacturing and sugar manufacturing also announced plans
to open new facilities in the zone and hire new workers.
Economic activity in the service sector declined, with large job
losses from major employers. Some contacts in the financial
services and transportation/warehousing industries reported

plans to expand operations and hire additional workers. However, firms in the transportation services and business support
services reported plans to lay off workers amidst declining
revenue.

Real Estate and Construction
Home sales in Little Rock were down by 22 percent in 2008
compared with 2007. For the same period, single-family housing permits were down by 35 percent. Data for January 2009
show home sales down by 23 percent and single-family housing
permits down by 46 percent from the previous year. In the
fourth quarter of 2008, the industrial vacancy rate in Little Rock
declined from the previous quarter, while suburban and downtown office vacancy rates increased. A contact in northeast
Arkansas reported that overall commercial construction is at a
standstill.

Banking and Finance
Contacts provided mixed reports on local banking conditions.
Consumer lending activity declined, residential mortgage lending increased, and there was little or no change in commercial
and industrial lending activity. Contacts indicated that both
tighter lending standards and a decrease in demand due to
economic uncertainty have slowed consumer lender activity.
All contacts reporting on residential mortgage lending noted a
substantial increase in refinancing activity, but little to no change
in lending activity for new mortgage loans. Reports indicate
little to no change in deposits.

Agriculture and Natural Resources
The total value of field crops in Arkansas increased by 10
percent from 2007 to 2008. Across crops, however, changes
in prices and production were mixed: Both the price and output of winter wheat increased from 2007 to 2008, while the
price and production of cotton decreased. The price of soybeans decreased but production was higher, while the opposite
occurred for corn, rice, and sorghum (the price increased but
production decreased). Total coal production in Arkansas for
2008 decreased by 29 percent from 2007 levels.

During much of 2007 and 2008, payroll
employment growth in the Little Rock MSA
was stronger than for the nation as a whole.
Beginning in late 2008, both local and
national employment turned sharply downward. The latest figures show that for the
three months ending January 2009,
employment contracted at a rate of 0.5
percent for both the Little Rock MSA and
for the nation as a whole.

Nonfarm Payroll Employment Growth
3-Month Average, SA, January 2001–January 2009
Percent
0.8
0.6
0.4
0.2
0
–0.2
–0.4

United States
Little Rock MSA

–0.6
2001

2002

2003

2004

2005

2006

2007

2008

2009

Little Rock Employment Growth by Sector
Year/Year Percent Change, January 2008–January 2009
Percent
6.0
4.0
2.0
0.0
–2.0
–4.0
–6.0
–8.0

Total
Nonfarm

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

Professional Education Leisure
and
and
and
Business
Health Hospitality
Services

Other
Services

Government

Between January 2008 and January 2009,
employment in the Little Rock metro area
declined in all goods-producing sectors and
in most service-providing sectors as well.
Employment in education and health
continued to grow, expanding by 4 percent.
In the leisure and hospitality sector, as well
as in government, employment registered
small increases over the 12-month period.
Professional and business services recorded
the largest decline, exceeding 6 percent.
Substantial declines were also recorded for
information services; financial services;
trade, transportation, and utilities; and
manufacturing.

Little Rock Zone—MSA Employment and Unemployment
Nonfarm payroll employment percent change,
January 2008–January 2009
Total
Little Rock
Fayetteville-Springdale-Rogers, Ark.
Fort Smith, Ark.
Texarkana, Ark.-Tex.
United States
SOURCE: Bureau of Labor Statistics.

Goods producing

Service providing

Unemployment rate
December 2008

–1.59
–0.73
–1.21
1.40
–2.48

–3.42
–4.72
–6.41
–5.41
–8.28

–1.33
0.31
0.78
2.40
–1.39

4.9
4.6
4.7
4.7
7.1

Little Rock Zone—MSA Housing Activity
Total building permits,
units year-to-date
January
2009
Little Rock
420
Fayetteville-Springdale-Rogers, Ark.
64
Fort Smith, Ark.
56
Hot Springs, Ark.
2
Pine Bluff, Ark.
0
Texarkana, Ark.-Tex.
4
United States
36,250

Percent
change

House price index,
percent change,
2008:Q4/2007:Q4

101.0
–61.4
–37.1
–66.7
–100.0
–78.9
–52.3

1.21
–3.04
0.61
–2.08
–0.76
1.06
–4.47

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
130
2000

United States
2001

2002

2003

2004

2005

2006

2007

Total residential building permits in January
were above the previous-year’s levels in
Little Rock, but were down in all other metro
areas in the zone. In Little Rock, permits
doubled from the previous year. At the opposite extreme, no permits were issued in Pine
Bluff during the month of January. As of the
end of 2008, housing prices were down by
2 percent in Hot Springs and 3 percent in the
Fayetteville-Springdale-Rogers metro area,
compared with the previous year. Prices were
also lower in Pine Bluff, but were up from
the previous year in Little Rock, Fort Smith,
and Texarkana. None of the metro areas in
the zone experienced price declines as large
as the national average.

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 a sharp downward turn for
both Arkansas and the nation as a whole.
In December 2008, compared with the
previous year, the index was down by 0.9
percent for the nation and by 2.9 percent
for Arkansas.

2008

SOURCE: Federal Reserve Bank of Philadelphia.

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

2003

SOURCE: Bureau of Economic Analysis.

2004

2005

2006

2007

2008

Personal income growth in Arkansas has
kept slightly ahead of national income
since 2006. During 2007 and 2008, however, personal income growth has slowed
sharply. The most recent available data
indicate that in the third quarter of 2008,
personal income had contracted by 0.6
percent for the nation as a whole (relative
to the third quarter of 2007). In Arkansas,
the year-over-year growth rate remained
slightly positive, registering a 0.2 percent
gain.

Annual Revisions of the Metro-Area Employment Data
December 2007–December 2008
Original estimate
as of January 2009
Thousands
Large Metro Areas
Little Rock–N. Little Rock, Ark. –5.8
Louisville, Ky.–Ind.
–16.1
Memphis, Tenn.–Ark.–Miss.
–15.7
St. Louis, Mo.-Ill.
–23.0
Small and Medium Metro Areas
Fayetteville-Springdale–2.5
Rogers, Ark.
Fort Smith, Ark.-Okla.
–1.6
Texarkana, Texas-Ark.
1.2
Bowling Green, Ky.
–0.8
Evansville, Ind.-Ky.
–2.5
Jackson, Tenn.
–0.9
Columbia, Mo.
0.0
Jefferson City, Mo.
–1.0
Springfield, Mo.
0.1

Percent
change

Revised estimate
as of March 2009
Thousands

December 2006–December 2007
Original estimate
as of January 2009

Revised estimate
as of March 2009

Percent
change

Thousands

Percent
change

Thousands

Percent
change

–1.7
–2.5
–2.4
–1.7

–4.7
–16.9
–15.7
–19.8

–1.3
–2.7
–2.4
–1.4

5.2
6.9
5.4
2.0

1.5
1.1
0.8
0.1

5.0
4.3
–0.1
6.7

1.5
0.7
0.0
0.5

–1.2

–2.6

–1.2

0.9

0.4

1.2

0.6

–1.3
2.1
–1.3
–1.4
–1.4
0.0
–1.2
0.1

–1.4
0.9
–1.5
–4.6
–1.7
1.1
–0.7
–4.6

–1.1
1.6
–2.4
–2.6
–2.7
1.2
–0.9
–2.3

1.7
0.7
1.8
1.4
0.3
1.0
1.5
5.2

1.4
1.2
2.9
0.8
0.5
1.1
1.9
2.6

2.1
0.9
1.6
–0.2
0.0
–0.1
1.5
4.4

1.7
1.6
2.6
–0.1
0.0
–0.1
1.9
2.2

In early March of each year, the Bureau of Labor Statistics carries out a benchmark revision of state and local payroll employment
data using information from the more-comprehensive Quarterly Census of Employment and Wages (QCEW). The payroll employment
data are revised going back 21 months and the new numbers sometimes show a dramatically different view of local employment
experiences. This year, however, data revisions for Eighth District metro areas are relatively small. The revisions for the 2007 and
2008 calendar years are presented in the table. Note that the data for 2008 are subject to revision again in March 2010.