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Current Economic Conditions in the

Eighth Federal Reserve District
Louisville Zone
December 17, 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
Economist:
Howard Wall, 314-444-8533, wall@stls.frb.org

Louisville Zone Report—December 17, 2009
Although the overall picture for the economy of the Louisville zone continues to be mostly negative, conditions have improved in
some sectors. Retail activity for general retailers and car dealers was mixed. Manufacturing continued to decline, but portions of the
service sector showed signs of improvement. Real estate, construction, and banking all continued to be weak. Economic conditions
in the agriculture and natural resource sector, on the other hand, were generally favorable.

Consumer Spending
Reports on retail sales for October and early November were
mixed among general retailers and car dealers. About 60 percent
of the general retailers and half of the car dealers indicated that
sales were down compared with the same months in 2008,
and roughly 40 percent of the general retailers and one-third
of the car dealers reported increased sales. One-third of general
retailers noted that sales levels met their expectations. Among
car dealers, one-third reported that used car sales had increased
relative to new car sales, but none reported the opposite. Twothirds of car dealers noted an increase in low-end vehicle sales
relative to high-end vehicle sales, but none reported the opposite.
The sales outlook for the rest of 2009 was mixed among the
general retailers and the car dealers. Half of each group expect
sales to increase over 2008 levels.

Manufacturing and Other Business Activity
Manufacturing in the Louisville zone continues to be weak, with
manufacturers of pharmaceuticals, auto parts, and appliances
reporting layoffs and plant closures. A few firms announced
plans to expand and hire new workers, however. These include
firms in food and beverage manufacturing and glass manufacturing. In addition, a firm in petroleum and coal manufacturing
announced plans to open a new mine and hire additional
workers. The service sector has continued to improve slightly
since our previous report, with contacts reporting an increase
in hiring. One firm in business support services announced that
a new facility will be located within the zone and that the firm
will hire additional workers.

Real Estate and Construction
The residential real estate market continued to be weak in the
Louisville zone. Compared with the same periods in 2008,
August 2009 and September 2009 year-to-date home sales
were down by 10 percent and 7 percent, respectively. Compared
with the same periods in 2008, August 2009 and September
2009 year-to-date single-family housing permits declined by
25 percent and 23 percent, respectively. Compared with the

second quarter of 2009, the third-quarter 2009 industrial
vacancy rate remained the same but the suburban and downtown office vacancy rates increased. A contact in south-central
Kentucky noted that overall commercial construction continues
to lag behind the number of projects in recent years.

Banking and Finance
Bank contacts in the Louisville zone provided mixed reports
on local banking conditions. On net, these reports indicated a
decrease in lending activity for commercial and industrial loans
despite a few isolated reports of an uptick in demand and originations. Most contacts reported little to no change in lending
activity for consumer loans. There were several reports that
lower interest rates and the first-time homeowner tax credit
increased residential mortgage lending over the past few months,
but demand for these loans appears to be waning. Contacts
noted concern over decreasing loan quality, and one contact
indicated that loan renegotiations are occurring at an unprecedented rate. Most contacts reported an increase in deposits.

Agriculture and Natural Resources
Wet conditions throughout the Louisville zone caused some
delays in harvesting and winter wheat planting. As of midNovember, farmers had harvested at least 90 percent of the
soybeans in Indiana, 90 percent of the corn in Kentucky, 80
percent of the soybeans in Kentucky, and two-thirds of the corn
in Indiana. Yields for corn and soybeans in Indiana were 4
percent and 2 percent higher, respectively, than last year’s
yields, and yields for those crops in Kentucky were 18 percent
and 33 percent higher, respectively, than last year’s yields. From
October to November, yield estimates changed by less than 5
percent except for soybeans in Indiana, which increased by 7
percent. As of mid-November, farmers in Indiana and Kentucky
were behind normal with their winter wheat planting, and crop
growth was even farther behind normal. About 95 percent of
the emerged winter wheat in both states was rated in fair
condition or better, which was comparable to the same time
last year.

For the three-month period ending in
October 2009, average monthly employment losses in the Louisville metro area
have been smaller than for the country as
a whole. Over the period, average monthly
employment growth was –0.08 percent in
the Louisville metro area compared with
–0.18 percent for the United States. This
is a reversal over the three-month period
immediately prior, when average monthly
employment growth in the Louisville area
was –0.54 percent compared with –0.37
percent for the United States.

Nonfarm Payroll Employment Growth
3-Month Average, SA, January 2001–October 2009
Percent
0.6
0.4
0.2
0
–0.2
–0.4
United States
Louisville MSA

–0.6
–0.8
2001

2002

2003

2004

2005

2006

2007

2008

2009

Sector-specific employment growth in the
Louisville metro area between October
2008 and October 2009 was mixed,
although the majority of sectors experienced
job losses. The education and health sector
experienced annual job growth of 2.1
percent, and job growth in the government
sector was 1.5 percent. Job losses were
experienced in all other sectors, although
the greatest percentage job losses were in
natural resources, mining, and construction
(12 percent); trade, transportation, and
utilities (6.5 percent); and manufacturing.
Total job losses in the metro area over this
period were 3.0 percent.

Louisville MSA Employment Growth by Sector
Year/Year Percent Change, October 2008–October 2009
Percent
4.0
2.0
0.0
–2.0
–4.0
–6.0
–8.0
–10.0
–12.0
–14.0
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,
October 2008–October 2009
Total
Louisville
Bowling Green, Ky.
Evansville, Ind.
United States

–2.98
–5.69
–3.21
–3.87

SOURCE: Bureau of Labor Statistics.

Goods producing
–8.02
–18.03
–8.87
–12.03

Service providing

Unemployment rate
October 2009

–1.96
–2.64
–1.28
–2.37

11.0
12.8
8.8
10.2

Louisville Zone—MSA Housing Activity
Total building permits,
units year-to-date
Percent change
–37.9
–21.4
–17.6
–28.8
–31.7
–40.5

September 2009
Louisville
2,063
Bowling Green, Ky.
305
Elizabethtown, Ky.
239
Evansville, Ind.
401
Owensboro, Ky.
200
United States
483,013

House price index,
percent change,
2009:Q3/2008:Q3
–0.37
0.83
1.82
–1.20
2.90
–4.08

Total year-to-date residential building
permits in September were significantly
lower than a year earlier in every zone
metro area, with decreases ranging from
–21.4 percent in Bowling Green to –37.9
percent in Louisville. In comparison, building
permits declined by 40.5 percent for the
United States. House price indices, however,
increased in all but two of the metro areas
(Louisville and Evansville) between the third
quarters of 2008 and 2009. In contrast,
house prices fell by 4.1 percent during the
period for the country has 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

SOURCE: Federal Reserve Bank of Philadelphia.

Louisville Area Real Personal Income Growth
Percent Change, Year/Year
Percent
8
Indiana

6

Kentucky

4

United States

2
0
–2
–4
2000

2001

2002

2003

SOURCE: Bureau of Economic Analysis.

2004

2005

2006

2007

2008

2009

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 January through October
2009, the index for the United States fell by
2.1 percent, while it fell by 5.6 percent and
2.8 percent for Kentucky and Indiana, respectively. In October 2009, the index for Kentucky
fell below that of Indiana for the first time
over the shown time period January 2000
to October 2009.

Personal income growth in Kentucky and
Indiana has tended to be weaker than the
country as a whole from 2004, although
income growth in Kentucky and Indiana
for the middle of 2008 was greater than
that of the United States. More recently,
second-quarter 2009 income growth in
Indiana was greater than that of the United
States while income growth in Kentucky
was below that of the country. For the
second quarter of 2009, personal income
growth over a year earlier was about –2.4
percent in the United States, compared with
–3.2 percent in Kentucky and –1.9 percent
in Indiana.

Year-Over-Year Percent Change in State Tax Revenue
2008:Q3
Personal
income
Arkansas
Illinois
Indiana
Kentucky
Mississippi
Missouri
Tennessee
United States

6.2
3.8
–1.9
6.6
–1.8
0.2
—
1.9

Corporate
income
–12.4
–3.4
–10.5
–48.4
–14.6
–3.0
–25.2
–14.9

2009:Q3

Sales

Total

Personal
income

3.6
1.9
19.7
3.2
2.5
–3.6
–2.0
4.8

3.4
1.4
9.1
0.9
1.4
–1.1
–4.2
3.0

–6.9
–11.7
–20.3
–7.1
–12.2
–8.1
—
–11.3

Corporate
income
–21.4
–28.4
–42.4
–40.5
–19.1
–8.5
8.2
–17.5

Sales

Total

–11.1
–13.1
–10.9
–7.5
–12.4
–6.0
–9.5
–8.8

–7.8
–12.6
–14.2
–5.5
–11.8
–6.9
–5.4
–11.1

NOTE: 2009:Q3 data are preliminary data from early-reporting states collected by the Rockefeller Institute of Government.
SOURCE: The Nelson A. Rockefeller Institute of Government/U.S. Bureau of the Census.