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Current Economic Conditions in the

Eighth Federal Reserve District
Memphis 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 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—June 25, 2009
Economic activity in the Memphis zone weakened further since the March report. Retail and auto sales declined in April and early
May. Manufacturing and services continued to decline. Home sales and construction continued to fall, while banking conditions
were relatively unchanged.

Consumer Spending

Real Estate and Construction

Retail sales reports for April and early May were mostly negative
among general retailers and car dealers in the Memphis zone.
About 71 percent of the general retailers and 83 percent of the
car dealers surveyed indicated that sales were down compared
with the same months in 2008, while only 14 percent of the
general retailers and 17 percent of the car dealers reported
increased sales. Among general retailers, 17 percent noted that
sales levels met their expectations and half reported that sales
were below what they had anticipated. Among car dealers, half
noted that used-car sales had increased relative to new-car sales
and half noted an increase in low-end vehicle sales relative to
high-end vehicle sales. All reported more rejections of finance
applications. The sales outlook for the summer was pessimistic
among general retailers but mixed among car dealers. All of
the general retailers and one-third of the car dealers expect
sales to decrease from their 2008 levels. Half of the car dealers
expect sales to increase. The remaining car dealers expect sales
to be similar to last year.

Compared with the same period in 2008, April 2009 year-todate home sales in Memphis were down by 27 percent, while
April 2009 year-to-date single-family housing permits declined
by 60 percent. In Memphis, the first-quarter 2009 industrial
vacancy rate was unchanged compared with the fourth quarter
of 2008—as was the suburban office vacancy rate. During
the same period, the downtown office vacancy rate increased
slightly. A contact in Memphis noted a decline in demand for
industrial distribution space in particular and did not expect to
see any new building in the industrial market until mid-2010.

Manufacturing and Other Business Activity
Manufacturing activity in the Memphis zone declined during
the second quarter of 2009, with a number of plants closing
operations and fewer reporting plans to open or expand operations. Firms in auto parts, furniture, wood product, rubber tire,
medical device, aluminum product, appliance, grain milling,
and electrical equipment manufacturing announced job layoffs,
often citing weak demand. Furthermore, firms in metal product,
machinery, and auto parts manufacturing closed plants in the
zone. In contrast, firms in biofuel, furniture, and steel product
manufacturing announced plans to open new plants in the zone
and hire additional workers. Economic activity in the service
sector continued to decline, with a large number of firms
announcing job layoffs in medical, information, and warehousing/
transportation services. Other firms in warehousing/transportation
services, however, reported new opportunities for expansion.

Banking and Finance
Banking conditions in the Memphis zone remained relatively
unchanged during the past three months. Most contacts indicated little to no change in consumer loan demand. About half
of all contacts also reported little to no change in demand for
business loans. Several contacts who reported a decline in
business lending cited tightening lending standards and an
unwillingness of businesses to take on new loans. All contacts
reporting on commercial real estate lending indicated a decline
in demand. Reports indicate a slight increase in deposits.

Agriculture and Natural Resources
Farmers in Mississippi and Tennessee planted less winter wheat
in the fall of 2008 than they did during the fall of 2007.
Frequent wet and cool conditions since early April delayed
fieldwork throughout the zone. At the end of May, corn planting
was finished in Mississippi but was slightly behind its 5-year
average pace in Tennessee. Soybean planting and cotton planting were behind their normal pace in both states. Additionally,
sorghum planting and rice planting were behind normal in
Mississippi. Emergence for all of the crops in Mississippi (except
corn) and in Tennessee was also behind their normal pace. About
87 percent of the winter wheat in Mississippi and 91 percent
of the winter wheat in Tennessee was rated in fair condition or
better—a slight decline over the same time last year for both
states.

Recent estimates indicate that Memphis
payroll employment has contracted less
sharply than the national average. Over
the three-month period ending in May
2009, Memphis employment contracted
at a 0.31 percent monthly rate, while U.S.
employment contracted at a 0.40 monthly
rate.

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
Memphis MSA

–0.6
2001

2002

2003

2004

2005

2006

2007

2008

2009

Between May 2008 and May 2009,
employment growth in the Memphis MSA
was negative in all goods-producing sectors
and in most service-providing sectors. The
service sectors to show expansion were the
education and health services sector, for
which employment increased by 1.6
percent, the “other services” sector (3.7
percent), and the government sector (0.2
percent). The biggest percentage job losses
were in manufacturing (6.9 percent);
natural resources, mining, and construction
(5.2 percent); and information (5.6
percent).

Memphis MSA Employment Growth by Sector
Year/Year Percent Change, May 2008–May 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,
May 2008–May 2009
Total
Memphis
Jackson, Tenn.
United States

Goods producing

Service providing

Unemployment rate
April 2009

–2.47
–4.47
–3.95

–6.30
–12.23
–12.11

–1.95
–2.25
–2.44

9.0
9.9
8.6

SOURCE: Bureau of Labor Statistics.

Memphis Zone—MSA Housing Activity
Total building permits,
units year-to-date
Percent change
–47.9
–61.3
–12.0
–48.2

April 2009
Memphis
Jackson, Tenn.
Jonesboro, Ark.
United States

597
46
117
166,319

House price index,
percent change,
2009:Q1/2008:Q1
–0.82
0.09
1.53
–3.35

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

2009

SOURCE: Federal Reserve Bank of Philadelphia.

Percent Change, Year/Year
Percent
Arkansas

12

Mississippi

10

Tennessee
United States

8
6
4
2
0
–2
–4
–6
–8
2000

2001

2002

2003

SOURCE: Bureau of Economic Analysis.

2004

2005

2006

2007

2008

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 and into 2009, 12-month
growth rates slowed in all the zone states.
For the 12 months through April 2009, the
index declined by 4.4, 3.0, and 3.1 percent
in Tennessee, Mississippi, and Arkansas,
respectively. Over the same period, the
index for the United States fell by 3.2
percent.
Since Hurricane Katrina in the third quarter
of 2005, Mississippi has experienced more
volatile personal income growth than the
nation as a whole, while Tennessee and
Arkansas have tended to keep pace with
the nation. As of the first quarter of 2009,
Tennessee, Mississippi, and Arkansas
experienced year-over-year growth rates
of 0.3, 1.2, and 1.6 percent, respectively.
For the nation as a whole, personal income
grew by 0.05 percent over the same period.

Memphis Area Real Personal Income Growth

14

Total residential building permits in April
2009 were lower than a year earlier in all
of the three MSAs in the Memphis zone.
Permits declined by 48 percent in Memphis,
by 60 percent in Jackson, Tennessee, and
by 12 percent in Jonesboro, Arkansas.
House prices declined by less than 1 percent
in Memphis in the first quarter of 2009
compared with a year earlier, increased by
1.5 percent in Jonesboro, and remained
flat in Jackson. Nationwide, house prices
were down by 3.4 percent over the same
period.

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.