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Current Economic Conditions in the

Eighth Federal Reserve District
Memphis 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

Elizabethtown

Owensboro

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 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
Economist:
Rubén Hernández-Murillo, 314-444-8588, ruben.hernandez@stls.frb.org

Memphis Zone Report—September 24, 2009
Economic activity in the Memphis zone continued to weaken during the third quarter of 2009. The majority of general retailers
reported a decrease in sales over the same period last year, while one-third of the car dealers reported an increase in sales. Overall
activity in manufacturing and services declined. Home sales and construction continued to fall, while banking conditions weakened
slightly.

Consumer Spending
Retail sales reports for July and early August were negative
among general retailers and mixed among car dealers in the
Memphis zone. All of the general retailers and one-third of the
car dealers surveyed indicated that sales were down compared
with the same months in 2008, while one-third of the car dealers
reported increased sales. Among general retailers, half noted
that sales were below their expectations and half reported that
sales were above what they had anticipated. Among car dealers,
one-third noted that new car sales had increased relative to
used car sales and 17 percent noted an increase in low-end
vehicle sales relative to high-end vehicle sales. One-third of
the car dealers reported more rejections of finance applications.
The sales outlook for September and October was mostly
pessimistic among the general retailers but mixed among the
car dealers. About 83 percent of the general retailers and onethird of the car dealers expect sales to decrease from their 2008
levels. Half of the car dealers expect sales to increase.

Manufacturing and Other Business Activity
Manufacturing activity in the Memphis zone continued to decline
during the third quarter of 2009, with a larger number of firms
reporting job losses and declines in output. Firms in auto parts
and auto manufacturing announced large job layoffs and cuts
in production, while manufacturers of household appliances and
machinery reduced their work force. A firm in paint and adhesive
manufacturing closed a plant in the zone, and a firm in rubber
tire manufacturing offered buyout packages to 500 employees.
In contrast, another manufacturer of rubber tires and a manufacturer of furniture hired new workers and increased production.
The service sector continued to decline, with firms in business
support and social services reporting job losses.

Real Estate and Construction
The residential real estate market has continued to be weak.
Compared with the same months in 2008, June and July 2009
year-to-date home sales in Memphis were down by 17 percent

and 15 percent, respectively. Compared with the same months
in 2008, June and July 2009 year-to-date single-family housing
permits declined by 51 percent and 49 percent, respectively.
Commercial real estate, although weak, performed somewhat
better than the residential side. The industrial vacancy rate rose
between the first and second quarters of 2009. Over the same
period, the downtown office vacancy rate also rose, although
the suburban office vacancy rate fell. A contact in the Memphis
area reported that new commercial construction is minimal.
However, some optimism going forward was expressed by
another contact who cited projects planned for 2010.

Banking and Finance
Banking conditions in the Memphis zone deteriorated slightly
during the past three months. Most contacts indicated a slight
decrease in demand for both consumer and business loans. A
few contacts noted, however, that they have seen an increase
in business loan applications, but restrictive lending standards
continue to make it difficult to issue new loans. Reports on
residential mortgage activity were mixed, and reports on deposit
growth ranged from unchanged to a slight increase. Several
contacts noted that delinquency rates continue to rise, but at a
slower pace.

Agriculture and Natural Resources
The development of soybeans and cotton is behind the normal
pace in Mississippi and Tennessee, as is the development of corn
in Tennessee and sorghum and rice in Mississippi. Crop conditions
have improved or stayed the same since mid-July for all of the
crops except tobacco in Tennessee. As of August, yields for corn,
soybeans, rice, and cotton in Mississippi as well as cotton and
tobacco in Tennessee were expected to be in the same range
as last year. Yields for corn and soybeans in Tennessee were
expected to be lower than last year, while winter wheat yields
in both states were expected to be higher than last year.

Recent estimates indicate that Memphis
payroll employment has contracted less
sharply than the national average. Over
the three-month period ending in August
2009, Memphis employment contracted
at a 0.13 percent monthly rate, while U.S.
employment contracted at a 0.25 monthly
rate.

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
Memphis MSA

–0.6
2001

2002

2003

2004

2005

2006

2007

2008

2009

Between August 2008 and August 2009,
employment growth in the Memphis MSA
was negative in all goods-producing sectors
and in most service-providing sectors.
Employment expanded in three service
sectors: education and health, for which
employment increased by 2.3 percent;
“other services” (1.6 percent); and government (1.4 percent). The biggest percentage
job losses were in manufacturing (6.1
percent); natural resources, mining, and
construction (8.2 percent); and information
(6.9 percent).

Memphis MSA Employment Growth by Sector
Year/Year Percent Change, August 2008–August 2009
Percent
4.0
2.0
0.0
–2.0
–4.0
–6.0
–8.0
–10.0

Total
Nonfarm

Natural Manufacturing Trade, Information Financial
Resources,
Transportation,
Activities
and Utilities
Mining, and
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,
August 2008–August 2009
Total
Memphis
Jackson, Tenn.
United States

Goods producing

Service providing

Unemployment rate
July 2009

–2.13
–3.25
–4.10

–6.81
–11.03
–12.41

–1.49
–1.04
–2.54

10.3
10.8
9.7

SOURCE: Bureau of Labor Statistics.

Memphis Zone—MSA Housing Activity
Total building permits,
units year-to-date
Percent change
–44.2
–47.1
–37.5
–45.2

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

1,248
111
230
331,308

House price index,
percent change,
2009:Q2/2008:Q2
–1.15
1.22
–0.15
–3.99

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. The index
decreased in all the zone states from 2008
through May 2009 and increased in June
and July 2009 in Tennessee and Mississippi.
For the 12 months through July 2009, the
index declined by 4.1, 1.5, and 2.7 percent
in Tennessee, Mississippi, and Arkansas,
respectively. Over the same period, the index
for the United States fell by 2.7 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 July
2009 were lower than a year earlier in all
of the three MSAs in the Memphis zone.
Permits declined by 44 percent in Memphis,
by 47 percent in Jackson, Tennessee, and
by 38 percent in Jonesboro, Arkansas.
According to the FHFA index, house prices
declined by 1.2 percent in Memphis in the
second quarter of 2009 compared with a
year earlier, increased by 1.2 percent in
Jonesboro, and remained flat in Jackson.
Nationwide, the FHFA index fell by 4.0
percent over the same period.

2009

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.