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Current Economic Conditions in the

Eighth Federal Reserve District
Louisville Zone
September 24, 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

ARKANSAS
ARKAN AS
RKAN AS
A

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—September 24, 2009
The overall picture for the Louisville zone was mixed. Car dealers and general retailers reported mixed news. Manufacturing declined,
while the service sector was stable. Activity in the real estate and construction sector declined, while the news from banking and
agriculture was mixed.

Consumer Spending

Real Estate and Construction

Retail sales reports for July and the first part of August were
mixed among general retailers and car dealers in the Louisville
zone. Half of the general retailers and one-third of the car dealers
surveyed indicated that sales were up compared with the same
months in 2008. One-third of each group reported decreased
sales. Among the general retailers, 33 percent noted that sales
levels met their expectations and 50 percent reported sales
below expectations. Among car dealers, one-third noted that
new car sales had increased relative to used car sales, while
another one-third reported the opposite. Also, half noted an
increase in low-end vehicle sales relative to high-end vehicle
sales, while 17 percent reported the opposite. One-third of the
general retailers and 17 percent of the car dealers reported that
their inventories were too high, while half of the car dealers
reported that their inventories were too low. The remaining
contacts reported that their inventories were at desired levels.
For September and October, about 83 percent of the general
retailers and half of the car dealers expect sales to increase over
2008 levels, while 17 percent of each group expect sales to
decrease.

In Louisville, compared with the same periods in 2008, June
and July 2009 year-to-date home sales were down by 20 percent
and 13 percent, respectively. Compared with the same periods
in 2008, June and July 2009 year-to-date single-family housing
permits declined by 34 percent and 30 percent, respectively.
Compared with the first quarter of 2009, the second-quarter
2009 industrial vacancy rate and the suburban and downtown
office vacancy rates all rose.

Manufacturing and Other Business Activity
Overall, manufacturing activity in the Louisville zone has
continued to decline since our previous report, although the
experience was far from uniform across firms and industries.
Firms in the petroleum/coal manufacturing, chemical product
manufacturing, fabricated metal product manufacturing, rail
technology manufacturing, and plastics products manufacturing
all announced plans to expand. In contrast, a few firms in auto
parts manufacturing announced plans to close their facilities.
Firms in transportation manufacturing, tobacco manufacturing,
auto manufacturing, and frozen foods manufacturing announced
plans to lay off workers. A firm in aluminum product manufacturing reduced production. The service sector was stable. Government services reported strong growth due to new jobs related
to the upcoming 2010 census. Firms in business support, health,
education, and information all reported job losses.

Banking and Finance
Reports indicated a decrease in lending activity for commercial
and industrial loans. Lending activity for consumer loans and
residential mortgage loans was mixed. Several contacts noted
an increase in demand for loan modifications due to economic
stress. Other contacts indicated that delinquency rates are
stabilizing. Most contacts reported that deposits were rising,
but at a slower pace than in previous reports.

Agriculture and Natural Resources
In late August, 11 percent of the corn and soybeans in Indiana
were rated in poor condition, but less than 10 percent of the
crops in Kentucky had that rating. As of August 1, yields for corn,
soybeans, and winter wheat in Indiana and corn and tobacco
in Kentucky were expected to range from 10 percent lower to
1 percent higher than last year’s yields. In Kentucky, soybean
yields were expected to be nearly 20 percent lower and winter
wheat yields were expected to be 20 percent higher than last
year. Total production of corn and soybeans in Indiana as well
as corn and tobacco in Kentucky was expected to range from
1 percent lower to 11 percent higher than last year. Total
production of soybeans in Kentucky was expected to be 22
percent higher than last year, and winter wheat production in
both states was expected to be at least 20 percent lower than
last year.

Employment losses in the Louisville MSA
show an uneven pattern in comparison
with the nation as a whole in the recent
months. Over the three-month period ending in May 2009, Louisville employment
growth averaged –0.54 percent per month,
while U.S. employment growth averaged
–0.40 percent per month. By August,
however, average employment growth in
Louisville rose to –0.08 percent, while it
was –0.21 percent for the United States.

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

Employment growth in the Louisville MSA
between August 2008 and August 2009 was
negative in most of the sectors. According
to the most recent estimates, the strongest
sectors were education and health and
government, which saw increases of 1.1
and 0.6 percent, respectively. All other
sectors experienced job losses. Natural
resources, mining, and construction experienced the steepest decline, losing 17.9
percent of its jobs during the period.
Manufacturing and trade, transportation,
and utilities were also among the weakest
performing sectors, losing 7.6 and 7.2
percent of their jobs, respectively.

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

Total
Nonfarm

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

Other
Services

Government

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

–4.25
–6.00
–2.56
–4.10

SOURCE: Bureau of Labor Statistics.

Goods producing
–10.97
–20.93
–7.24
–12.41

Service providing

Unemployment rate
July 2009

–2.84
–2.05
–0.99
–2.54

10.2
11.1
8.6
9.7

Louisville Zone—MSA Housing Activity
Total building permits,
units year-to-date
Percent change
–43.4
–34.8
–40.7
–35.2
–43.8
–45.2

July 2009

House price index,
percent change,
2009:Q2/2008:Q2
–0.90
–0.38
–1.30
–1.81
0.27
–3.99

Louisville
1,356
Bowling Green, Ky.
176
Elizabethtown, Ky.
159
Evansville, Ind.
261
Owensboro, Ky.
126
United States
331,308

Total residential building permits in July
were substantially lower than a year earlier
in every zone MSA. Louisville, Bowling
Green, Elizabethtown, Evansville, and
Owensboro all saw decreases of 34 percent
or more. Bowling Green performed the best,
with a decrease of 34.8 percent. House
price indices declined in all metro areas,
except for Owensboro, between the second
quarters of 2008 and 2009. The same
house price index fell by 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

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, Kentucky and Indiana have
underperformed relative to the country as
a whole since 2001. This trend has become
more pronounced throughout 2009. For
the year through July, the index for the
United States fell by 1.8 percent, while it
fell by 5.02 and 3.01 percent for Kentucky
and Indiana, respectively.

United States
130
2000

2001

2002

2003

2004

2005

2006

2007

2009

2008

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 since 2004 has tended to be
weaker than in the country as a whole.
Also, income growth over the period in
Indiana has been consistently weaker than
in Kentucky. Recent estimates show that
Kentucky’s personal income growth is
higher than that of the country and is rising.
Indiana’s personal income growth rate is
negative in the most recent estimates
and continues to lag the country’s and
Kentucky’s over the period.

Residential Mortgage Delinquency Rates for Eighth District States
Percent 90+ Days Delinquent or in Foreclosure, 2009:Q2
Prime

Subprime

All mortgages
Missouri
Illinois
Indiana
Kentucky
Tennessee
Mississippi
Arkansas
U.S. Total

Total

FRM

ARM

Total

FRM

ARM

5.0
8.6
8.4
5.7
5.9
7.4
4.5
8.0

3.0
5.5
5.0
3.3
3.3
4.2
2.8
5.4

2.5
4.0
4.2
2.7
2.7
3.6
2.3
3.5

7.3
13.6
12.5
9.1
8.8
14.0
8.6
15.1

18.6
29.9
23.8
20.4
19.7
22.6
17.0
26.5

13.7
19.7
18.3
15.3
14.6
17.9
13.0
17.1

27.2
40.3
34.3
31.6
30.1
34.1
25.8
38.7

NOTE: FRM, fixed-rate mortgages; ARM, adjustable-rate mortgages.
SOURCE: Mortgage Bankers Association, National Delinquency Survey/Haver Analytics.