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Current Economic Conditions in the

Eighth Federal Reserve District
Louisville 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
Owensboro

Elizabethtown

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 Louisville zone
of the Eighth Federal Reserve District (see map above), headquartered in St. Louis. Separate reports have also been
prepared for the Little Rock, 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 the metro areas and states of the Louisville zone.
These data are the most recent available at the time this report was assembled.
For more information, please contact the Louisville office:
Maria G. Hampton, 502-568-9205, maria.g.hampton@stls.frb.org
Economists:
Tom Garrett, 314-444-8601, tom.a.garrett@stls.frb.org
Subhayu Bandyopadhyay, 314-444-7425, subhayu.bandyopadhyay@stls.frb.org

Louisville Zone Report—June 25, 2009
The overall picture for the economy of the Louisville zone continues to be mostly negative. While general retail activity was mixed,
car dealers continued to report mostly negative news. Manufacturing continued to decline, but portions of the service sector showed
signs of improvement. Real estate, construction, and banking all continued to be weak. Agriculture and natural resources, on the
other hand, continued to be strong.

Consumer Spending
Although not strong, reports from general retailers were notably
more positive than were reports from car dealers. Nearly 20
percent of the general retailers and over 80 percent of the car
dealers indicated that sales were down compared with April
and May 2008. Among general retailers, two-thirds noted that
sales met their expectations. One-third of the car dealers noted
that new car sales had increased relative to used car sales, but
none reported the opposite. Also, one-third of the car dealers
noted an increase in high-end vehicle sales relative to low-end
vehicle sales. The sales outlook for the summer was mostly
optimistic among general retailers but mixed among car dealers.
Two-thirds of the general retailers and one-third of the car
dealers expect sales to increase over 2008 levels, while nearly
20 percent of the general retailers and half of the car dealers
expect sales to decrease.

Manufacturing and Other Business Activity
Manufacturing employment and output continued to decline
in the second quarter of 2009, with a large number of firms
reporting reduced output and job layoffs. These firms include
manufacturers of primary metal, food and beverages, paper,
auto parts, and furniture. Closed plants were reported by firms
in the electrical machinery, aluminum product, and auto parts
industries. In contrast, a firm in plastic product manufacturing
expanded its operations and hired new employees, and a producer of optical equipment was awarded a contract that will
allow it to continue production at a high level. Unlike the manufacturing sector, parts of the service sector began to expand.
Job growth was reported in financial services and business
support services.

Real Estate and Construction
The residential real estate market continued to be weak in the
Louisville metro area. Compared with the same months in 2008,
February 2009 year-to-date home sales were down by 30 percent and April 2009 year-to-date home sales were down by 26
percent. Compared with the same months in 2008, February
2009 year-to-date single-family housing permits were 48

percent lower and April 2009 year-to-date single-family housing permits were 49 percent lower. The commercial real estate
market in Louisville showed fewer signs of weakness. The firstquarter 2009 industrial vacancy rate was unchanged from the
fourth quarter of 2008. The suburban and downtown office
vacancy rates remained fairly steady as well. Reports on construction activity were mixed. A large construction company in
Evansville reported that business has slowed considerably.
However, a contact in south-central Kentucky reported that
several projects are in progress in downtown Bowling Green
and at Western Kentucky University.

Banking and Finance
Bank contacts reported generally weak local banking conditions.
One contact noted that demand for commercial and industrial
loans will be weak as long as businesses continue to cut back
on capital expenses. Consumer lending activity ranged from
unchanged to slightly decreased. Most contacts reported little
change in residential mortgage lending. Some contacts reported
that refinancing activity has slowed from the levels experienced
earlier this year. Lending standards were reported to be tighter
in the commercial and industrial, commercial real estate, and
consumer lending categories. Reports indicate no change to a
slight increase in bank deposits.

Agriculture and Natural Resources
Farmers in Kentucky intended to plant more acres of corn and
soybeans, but fewer acres of tobacco. Farmers in Indiana intended
to plant the same number of acres of corn and 1 percent fewer
acres of soybeans this year than in 2008. Farmers in both states
planted less winter wheat in the fall than the previous year.
Frequent wet and cool conditions since early April have delayed
fieldwork throughout the zone. As a result, farmers reported
that they were behind their normal planting pace for corn and
soybeans. About 96 percent of the pastures in Indiana and 95
percent in Kentucky were in fair condition or better, which was
slightly better than the same time last year for Indiana and
roughly the same for Kentucky.

Employment losses in the Louisville metro
area have been lower than for the country
as a whole during the first five months of
2009, reversing the trend of the prior half
year. For the period January 2009 to May
2009, average monthly employment growth
was –0.36 percent in the Louisville metro
area, compared with -0.45 percent for the
United States. For the last six months of
2008, average monthly employment growth
in the Louisville area was –0.30 percent
compared with –0.22 percent for the
United States

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

United States
Louisville MSA

–0.6
2001

2002

2003

2004

2005

2006

2007

2008

2009

Sector-specific employment growth in the
Louisville metro area between May 2008
and May 2009 was mixed, although the
majority of sectors experienced negative
growth. The information sector, the government sector, and the education and health
sector experienced annual job growth of
0.9 percent, 0.2 percent, and 1.9 percent,
respectively. The remaining sectors experienced job losses, with the natural resources,
manufacturing, and leisure and hospitality
sectors having the greatest percentage job
loss. Employment in these sectors declined
by –17.1 percent, –13 percent, and –6.5
percent, respectively.

Louisville MSA Employment Growth by Sector
Year/Year Percent Change, May 2008–May 2009
Percent
5.0
0.0
–5.0
–10.0
–15.0
–20.0

Total
Nonfarm

Natural Manufacturing Trade, Information Financial Professional Education Leisure
Resources,
Transportation,
Activities
and
and
and
Mining, and
and Utilities
Business
Health Hospitality
Construction
Services

Other
Services

Government

Louisville Zone—MSA Employment and Unemployment
Nonfarm payroll employment percent change,
May 2008–May 2009
Total
Louisville
Bowling Green, Ky.
Evansville, Ind.
United States

–4.66
–5.28
–3.35
–3.95

SOURCE: Bureau of Labor Statistics.

Goods producing
–14.26
–18.46
–7.35
–12.11

Service providing

Unemployment rate
April 2009

–2.61
–1.82
–2.01
–2.44

9.3
9.3
8.5
8.6

Louisville Zone—MSA Housing Activity
Total building permits,
units year-to-date
Percent change
–51.1
–33.6
–52.2
–46.0
–34.0
–48.2

April 2009

House price index,
percent change,
2009:Q1/2008:Q1
0.14
0.83
–0.93
–0.80
1.54
–3.35

Louisville
599
Bowling Green, Ky.
99
Elizabethtown, Ky.
55
Evansville, Ind.
107
Owensboro, Ky.
62
United States
166,319

Total residential building permits in April
were significantly lower than a year earlier
in every zone metro area, with all metro
areas seeing a decrease in excess of 30
percent. Building permits declined by 51
percent in Louisville compared with a
decline of 48 percent for the United States.
House price indices increased in all but two
of the metro areas (Elizabethtown and
Evansville) between the first quarters of
2008 and 2009. In contrast, this index fell
by nearly 3.4 percent during the period
for the country as a whole.

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

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

Indiana
Kentucky

135

United States
130
2000

2001

2002

2003

2004

2005

2006

2007

2009

2008

The Philadelphia Fed’s coincident index
combines payroll employment, wages and
salaries, the unemployment rate, and hours
worked into a single index of economic
performance. According to this index,
Kentucky and Indiana have underperformed
relative to the country as a whole since
2001. This is partly due to losses in the
relatively larger manufacturing sector
present in Kentucky and Indiana. For the
first four months of 2009, the index for the
United States fell by 1.4 percent, while it
fell by 2.7 percent and 2.0 percent for
Kentucky and Indiana, respectively.

SOURCE: Federal Reserve Bank of Philadelphia.

Louisville Area Real Personal Income Growth
Percent Change, Year/Year
Percent
7
Indiana

6

Kentucky

5

United States

4
3
2
1
0
–1
–2
–3
2000

2001

2002

2003

SOURCE: Bureau of Economic Analysis.

2004

2005

2006

2007

2008

Personal income growth in Kentucky and
Indiana has tended to be weaker than
that of the country as a whole since 2004.
However, income growth in Kentucky
approached national growth in 2007 and
was greater than national growth in the
first quarter of 2009. Personal income
growth has been consistently weaker in
Indiana than in Kentucky since 2004. For
the first quarter of 2009, personal income
growth was about 0.05 percent in the
United States, compared with 1.5 percent
in Kentucky and –0.34 percent in Indiana.

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.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102