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Current Economic Conditions in the

Eighth Federal Reserve District
Memphis 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 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/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 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—March 18, 2009
Economic activity in the Memphis zone weakened further since the December report. Retail and auto sales declined in January and
early February. Manufacturing reports were mixed, and the service sector continued to decline. Home sales and construction continued
to fall, and banking conditions worsened.

Consumer Spending

Real Estate and Construction

Retail sales reports for January and early February were negative
among both general retailers and car dealers in the Memphis
zone. Nearly all of the contacts surveyed indicated that sales
were down compared with the same months in 2008. Among
general retailers, 60 percent reported that sales were below
what they had anticipated, while 40 percent reported that sales
met their expectations. Car dealers tended to note that used
car sales had increased relative to new car sales. Half reported
an increase in sales of low-end relative to high-end vehicles.
Car dealers also reported more rejections of finance applications. About 57 percent of the general retailers and half of the
car dealers reported that their inventories were too high, while
14 percent of the general retailers and 17 percent of the car
dealers reported that inventories were too low. Nearly all of
the general retailers and 83 percent of the car dealers expect
sales to decrease in March and April over 2008 levels, while
the remaining car dealers expect sales to increase.

Memphis 2008 home sales were down by 19 percent compared with 2007, while January 2009 sales were down by 39
percent compared with January 2008. Single-family housing
permits declined 59 percent in 2008 from the previous year,
while January 2009 single-family housing permits declined 57
percent compared with January 2008. The fourth-quarter 2008
industrial vacancy rate increased in Memphis relative to the
third quarter. During the same period, the suburban and downtown office vacancy rates decreased. A contact in Memphis
reported that Shelby County, Tennessee, has had no new industrial construction since late 2007 and that no new industrial
construction is slated for DeSoto County, Mississippi, for the
whole of 2009.

Manufacturing and Other Business Activity
Manufacturing activity in the Memphis zone was mixed from
December 2008 through February 2009. Firms in the auto parts
and wood-product manufacturing industries announced plans
to lay off workers and cut production. Firms in paper-product
manufacturing and furniture manufacturing announced plans
to close facilities in the zone, and a firm in auto manufacturing
abandoned plans for a new facility. In contrast, firms in the
transportation, household appliance, and airplane manufacturing
industries announced plans to expand their existing facilities,
hire new workers, and increase production. Some contacts in
furniture manufacturing expressed optimism that a new foreign
trade zone designation would lower costs and improve business.
The service sector continued to decline, with a large number of
firms announcing job layoffs. Contacts in the leisure/hospitality,
transportation, medical, educational, business support, and
information services industries announced plans to cut jobs.
Additionally, a large firm in transportation services announced
pay cuts for a significant part of its workforce.

Banking and Finance
Banking conditions in the Memphis zone deteriorated during
the past three months. Most contacts reported little change in
demand for consumer loans. All contacts reported a decline in
the demand for business loans. Contacts indicated that lower
rates have helped increase residential mortgage lending activity,
but also noted that most of the activity has been refinances.
Most contacts indicated little to no change in the demand for
new residential mortgage loans. Reports indicate a slight increase
in deposits.

Agriculture and Natural Resources
Total coal production in Mississippi and Tennessee for December
was 20 percent lower than year-earlier levels, and total coal
production for 2008 decreased by 16 percent from 2007 levels.
The total value of field crops in the Memphis zone states
increased 24 percent from 2007 to 2008. The price and production of winter wheat in Mississippi and Tennessee increased
from 2007 to 2008, and the prices of corn and cotton increased
but production decreased. The price of soybeans increased in
Mississippi and decreased in Tennessee, while production
increased in both states. The price of sorghum decreased in both
states, while production decreased in Mississippi but increased
in Tennessee. Also, the prices and production of rice in Mississippi
and tobacco in Tennessee increased.

Recent estimates indicate that Memphis
employment has contracted less sharply
than the national average. Over the threemonth period ending in January 2009,
Memphis monthly employment contracted
at a 0.23 percent monthly rate, while U.S.
employment fell at a monthly rate of 0.53
percent.

Nonfarm Payroll Employment Growth
3-Month Average, SA, January 2001–January 2009
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

2009

Between January 2008 and January 2009,
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 expansion was
the education and health services sector,
which increased by 1.7 percent, and the
“other services” category, which increased
by 4.6 percent. Employment in the trade,
transportation, and utilities sector declined
by 3.5 percent, while employment in both
professional and business services and in
leisure and hospitality services fell by more
than 4 percent.

Memphis MSA 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

Memphis Zone—MSA Employment and Unemployment
Nonfarm payroll employment percent change,
January 2008–January 2009
Total
Memphis
Jackson, Tenn.
United States

Goods producing

Service providing

Unemployment rate
December 2008

–2.44
–2.14
–2.48

–4.89
–8.70
–8.28

–2.10
–0.21
–1.39

7.6
7.6
7.1

SOURCE: Bureau of Labor Statistics.

Memphis Zone—MSA Housing Activity
Total building permits,
units year-to-date
January 2009

Percent change

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

283
8
14
36,250

36.1
–38.5
–65.9
–52.3

–2.89
0.99
1.59
–4.47

Memphis
Jackson, Tenn.
Jonesboro, Ark.
United States

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

2003

SOURCE: Bureau of Economic Analysis.

2004

2005

2006

2007

2008

Total residential building permits in January
2009 were lower than a year earlier in two
of the three MSAs in the Memphis zone.
Permits declined by 39 percent in Jackson,
Tennessee, and declined 66 percent in
Jonesboro, Arkansas. In contrast, permits
increased by 36 percent in Memphis. House
prices declined by 2.9 in Memphis in the
fourth quarter of 2008 compared with a
year earlier, while house prices increased
by 1 percent in Jackson and 1.6 percent in
Jonesboro. Nationwide, house prices were
down by 4.5 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 has tended to
keep pace with the nation. Through most
of 2008, 12-month growth rates slowed
in all the zone states. For the 12 months
through December 2008, the index
declined by 1.9, 1.6, and 2.8 percent in
Tennessee, Mississippi, and Arkansas,
respectively. Over the same period, the index
for the United States fell by 0.9 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 more volatile income
growth. As of the third quarter of 2008,
only Arkansas showed positive year-overyear growth of 0.2 percent. Mississippi fell
the lowest with a decline of 1.4 percent,
while Tennessee was down by 0.7 percent.
For the U.S. as a whole, personal income
declined 0.6 percent over the same period.

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.