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Current Economic Conditions in the

Eighth Federal Reserve District
Little Rock Zone
June 25, 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—June 25, 2009
Economic conditions in the Little Rock zone have continued to reflect weakness associated with the ongoing national recession,
but with some signs of improvement. Retail sales were slow, particularly among auto dealers. Manufacturing activity declined,
with layoffs and plant closings reported by many contacts. However, a few contacts in manufacturing and business services reported
business expansions and hiring plans. Banking conditions have been mixed, with reports of stronger demand for commercial and
industrial loans and an increase in mortgage originations.

Consumer Spending

Real Estate and Construction

Retail sales for April and early May were mixed among general
retailers but mostly negative among car dealers in the Little
Rock zone. Half of the general retailers and more than 80
percent of the car dealers surveyed indicated that sales were
down compared with the same months in 2008. Among car
dealers, one-third noted that new-car sales had increased relative to used-car sales, and one-third noted an increase in lowend vehicle sales relative to high-end vehicle sales. About 17
percent of the car dealers reported more rejections of finance
applications, whereas none reported more acceptances. The
sales outlook for the summer was mixed among general
retailers but pessimistic among car dealers. One-third of the
general retailers and all car dealers surveyed expect sales to
decrease over 2008 levels, while one-third of the general
retailers expect sales to increase.

Compared with the same period in 2008, Little Rock year-todate home sales were down by 23 percent through April 2009.
For the same period, year-to-date single-family housing permits
declined by 30 percent. Compared with the previous quarter, the
industrial vacancy rate in Little Rock increased in the first quarter
of 2009, while the suburban office vacancy rate decreased and
the downtown office vacancy rate remained fairly constant.

Manufacturing and Other Business Activity
Manufacturing in the Little Rock zone continued to decline in
the second quarter of 2009, with more firms reporting job layoffs and plant closures. Animal processing/slaughtering firms
and manufacturers of chemical products, HVAC equipment,
industrial equipment, auto parts, rubber products, transportation
products, and aluminum products all announced job layoffs.
Other firms in animal slaughtering/processing, wood product
manufacturing, and aluminum products manufacturing have
closed plants in the District, resulting in a large number of layoffs. In contrast, a firm in food product manufacturing and a
separate firm in wood product manufacturing announced that
they will expand production and hire new workers. A firm in
metal product manufacturing opened a new plant and distribution center, with plans to hire additional workers. Economic
activity in the service sector continued to decline, with several
firms in information services and medical services reporting layoffs as a cost-cutting measure. A firm in warehousing/distribution
services filed for bankruptcy, resulting in a closed facility and a
large number of job losses. In contrast, firms in business services
expanded operations and hired additional workers.

Banking and Finance
Reports on local banking conditions were mixed. Most noted
a slight decline in commercial and industrial lending activity.
Several contacts, however, noted that demand has been surprisingly strong for these loans. Reports on consumer lending
ranged from unchanged to a slight decrease in lending activity.
Residential mortgage lending activity increased, with several
contacts indicating that a slight decline in refinancing activity
has been offset by an increase in new mortgage loans. Contacts
noted both a spike in delinquencies and an increase in requests
for loan modifications. Reports indicate a steady increase in
deposits.

Agriculture and Natural Resources
Farmers in Arkansas intended to plant fewer acres of corn (7
percent), sorghum (52 percent), and cotton (16 percent) this
year than in 2008. In contrast, they intended to plant more
acres of soybeans (3 percent) and rice (13 percent). Frequent
wet and cool conditions since early April delayed fieldwork
throughout the zone. At the end of May, with corn planting
finished in Arkansas, the emergence of the crop was slightly
behind its 5-year average pace. Planting of soybeans, sorghum,
rice, and cotton was behind normal, and the emergence of
those crops was even further behind normal. About 80 percent
of the winter wheat and 98 percent of pastures were rated in
fair condition or better, which is roughly equivalent to the
ratings last year.

Recent estimates indicate that Little Rock
employment has contracted less sharply
than the national average. Over the threemonth period ending in May 2009, Little
Rock employment contracted at a 0.06
percent monthly rate, while U.S. employment contracted at a 0.40 percent monthly
rate.

Nonfarm Payroll Employment Growth
3-Month Average, SA, January 2001–May 2009
Percent
0.8
0.6
0.4
0.2
0
–0.2
United States
Little Rock MSA

–0.4
–0.6
2001

2002

2003

2004

2005

2006

2007

2008

2009

Little Rock Employment Growth by Sector
Year/Year Percent Change, May 2008–May 2009
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 Financial
Transportation,
Activities
Resources,
Mining, and
and Utilities
Construction

Professional Education Leisure
and
and
and
Business
Health Hospitality
Services

Other
Services

Government

Between May 2008 and May 2009, nonfarm employment growth in the Little Rock
MSA was negative in all goods-producing
sectors and in all but two service-providing
sectors. The only service sectors to show
expansion were the education and health
services sector (3.1 percent) and leisure
and hospitality (3.3 percent). Employment
in the manufacturing; trade, transportation,
and utilities; and professional business
sectors fell by more than 5 percent. Total
nonfarm employment fell by nearly 2
percent over the period.

Little Rock Zone—MSA Employment and Unemployment
Nonfarm payroll employment percent change,
May 2008–May 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
April 2009

–1.94
–0.77
–1.51
–1.03
–3.95

–3.18
–4.51
–7.92
–10.81
–12.11

–1.76
0.18
0.87
0.39
–2.44

5.4
5.0
7.0
5.2
8.6

Little Rock Zone—MSA Housing Activity
Total building permits,
units year-to-date
Percent
change

House price index,
percent change,
2009:Q1/2008:Q1

29.4
–71.7
–13.4
–52.2
–85.7
201.9
–48.2

April
2009

1.91
–2.85
3.00
1.70
–2.63
2.30
–3.35

Little Rock
1,007
Fayetteville-Springdale-Rogers, Ark. 362
Fort Smith, Ark.
213
Hot Springs, Ark.
11
Pine Bluff, Ark.
7
Texarkana, Ark.-Tex.
160
United States
166,319

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

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, Arkansas has underperformed the
country as a whole since 2001. Recently,
however, the state’s experience has mirrored
the nation’s. For the 12 months through
April 2009, the index declined by 3.1
percent for Arkansas and by 3.2 percent
for the United States.

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

135
130
2000

Total residential building permits in April 2009
were lower than a year earlier in all but two
MSAs in the Little Rock zone. Permits declined
by 86 percent in Pine Bluff and 72 percent
in Fayetteville-Springdale-Rogers, for example. On the other hand, Little Rock and
Texarkana saw increases in permits of 29
and 202 percent, respectively. Changes in
house price indices were mixed across the
MSAs of the zone. Whereas the indices for
Little Rock, Fort Smith, Hot Springs, and
Texarkana saw small increases of around 2 to
3 percent, those for Fayetteville-SpringdaleRogers and Pine Bluff decreased by almost
as much as the national index, which fell by
3.4 percent over the same period.

United States
2001

2002

2003

2004

2005

2006

2007

2008

2009

SOURCE: Federal Reserve Bank of Philadelphia.

Personal income growth in Arkansas has
tended to keep ahead of national income
growth since 2007: Arkansas year-overyear growth in the third and fourth quarters of 2008 was 0.8 and –0.5 percent,
respectively, while U.S. personal income
growth in those quarters was –0.4 and
0.3 percent. In the first quarter of 2009—
the most recent quarter for which there
are data—year-over-year income growth
in Arkansas was 1.6 percent, compared
with a 0.05 percent growth rate for the
nation as a whole.

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

2009

Bank Conditions in Eighth District Metro Areas
2008:Q1 (%)
Return on Average Assets
St. Louis
Little Rock
Louisville
Memphis
Net Interest Margin
St. Louis
Little Rock
Louisville
Memphis
Loan Loss Provision
St. Louis
Little Rock
Louisville
Memphis
Nonperforming Loans
St. Louis
Little Rock
Louisville
Memphis

2008:Q4 (%)

2009:Q1 (%)

0.66
1.04
1.45
0.21

–0.42
0.72
0.90
–0.55

–0.97
0.56
1.15
–0.65

3.54
3.85
4.34
3.02

3.40
3.98
3.89
3.10

3.06
4.21
5.01
3.05

0.63
0.38
0.54
2.37

1.48
0.87
0.43
2.89

1.56
1.23
1.06
3.54

1.62
1.14
1.28
3.02

2.44
1.53
1.34
4.99

2.96
2.33
1.70
6.12

NOTE: Variable definitions:
Return on Average Assets = (Net Income/Average Assets) × 100
Net Interest Margin = (Tax Equivalent Net Interest Income/Average Earning Assets) × 100
Loan Loss Provision = (Provision for Loan Losses/Average Assets) × 100
Nonperforming Loans = (Nonperforming Loans/Total Loans) × 100
SOURCE: Reports of Condition and Income for Commercial Banks.
For additional statistics and information on bank conditions in the Eighth District, see
“Slump Persists for District and U.S. Banks.” Central Banker, Summer 2009, p. 3.
Available at http://www.stlouisfed.org/publications/cb/2009/b/pages/quarterly_report.cfm.