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Current Economic Conditions in the

Eighth Federal Reserve District
Memphis 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 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:
Howard Wall, 314-444-8533, wall@stls.frb.org

Memphis Zone Report—December 17, 2009
Economic activity in the Memphis zone has shown signs of improvement since the September report. Retail and auto sales in
October and early November were mixed. Manufacturing and services activity increased. Residential sales and construction continued
to decline, and commercial and industrial real estate market conditions worsened. Banking conditions remained largely unchanged.

Consumer Spending
Retail sales for October and early November were mixed among
general retailers and car dealers surveyed in the Memphis zone.
Half of the contacts in each group indicated that sales were
down compared with the same months in 2008. The other half
of the general retailers and one-third of the car dealers reported
increased sales. Among the general retailers, 40 percent reported
sales below expectations and 40 percent reported sales above
expectations. Among car dealers, one-third noted that new car
sales had increased relative to used car sales. Half of the general
retailers reported too-high inventories, and 17 percent reported
too-low inventories. The sales outlook for the rest of 2009
was mixed among the general retailers but mostly optimistic
among the car dealers.

Manufacturing and Other Business Activity
Manufacturing in the Memphis zone has improved since our
previous report, with an expansion in new jobs. Firms in beverage
manufacturing, furniture manufacturing, and plastic product
manufacturing announced they will expand operations and hire
additional workers. Firms in glass/aluminum product manufacturing and chemical manufacturing also announced they will
locate new facilities in the zone and hire additional workers.
In contrast, firms in copper tube manufacturing and appliance
manufacturing announced job cuts, citing weak product demand.
The service sector has continued to improve since our previous
report, with firms in business support services and health
services announcing new hiring activity.

Real Estate and Construction
In Memphis, compared with the same period in 2008, September
2009 year-to-date home sales were down by 14 percent, while
September 2009 year-to-date single-family housing permits
declined by 44 percent. Compared with the second quarter of
2009, the third-quarter 2009 industrial vacancy rate increased.
During the same period, the suburban and downtown office
vacancy rates remained the same. A contact noted that a number

of high-profile commercial properties in the Memphis area have
recently been foreclosed upon. Another contact does not expect
the industrial real estate market to improve until late 2010.

Banking and Finance
Overall lending activity was relatively unchanged from previous
reporting periods in the Memphis zone. Contacts indicated a
slight decrease in demand for both consumer and business
loans. Reports on residential mortgage lending activity were
mixed. Reports indicated little to no change in refinancing
activity, but a number of contacts reported a spike in new loan
requests. One of these contacts indicated that demand for new
residential mortgage loans was much higher than expected for
late fall and early winter. Several contacts noted that delinquency
rates continue to rise, but at a slower pace than previous reports.
Lending standards remain tight, and several contacts indicated
that, until lending standards become less restrictive, loan volume
will not increase to the levels needed for a healthy banking
sector. Reports on deposit growth ranged from stable to slightly
increasing.

Agriculture and Natural Resources
Wet conditions throughout the Memphis zone caused some
delays in harvesting and winter wheat planting. As of midNovember, farmers had harvested nearly all of their corn, rice,
and sorghum in Mississippi and corn in Tennessee. Mississippi
farmers had harvested about 95 percent of their soybeans
and 85 percent of their cotton, while Tennessee farmers had
harvested about 75 percent of their soybeans and 60 percent
of their cotton. November estimates showed that yields for corn,
soybeans, rice, and cotton in Mississippi were between 3 percent
and 11 percent lower than last year’s yields, but yields for
sorghum were 1 percent higher than last year’s yields. In
Tennessee, yields for corn, soybeans, and cotton were between
2 and 21 percent higher than last year. As of mid-November,
winter wheat planting in Mississippi and Tennessee was behind
normal and crop growth was even farther behind normal.

Recent estimates indicate that Memphis
employment has contracted less sharply
than the national average, although the
decline in the national average has slowed
to match that of Memphis in recent months.
Over the three-month period ending in
October 2009, employment for Memphis
contracted at a 0.16 percent monthly rate,
while U.S. employment contracted at a
monthly rate of 0.17 percent.

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
Memphis MSA

–0.6
2001

2002

2003

2004

2005

2006

2007

2008

2009

Between October 2008 and October 2009,
total nonfarm employment in the Memphis
MSA fell by 2 percent. Employment losses
were experienced by all goods-producing
sectors and by half of the service-providing
sectors. The service sectors for which
employment expanded the most were the
education and health services sector, where
it increased by 1.2 percent, and the “other
services” category, where it increased by
3.7 percent.The largest percentage declines
were in natural resources, mining, and construction (7.2 percent); information (6.9
percent); and manufacturing (6.2 percent).

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

Goods producing

Service providing

Unemployment rate
October 2009

–2.00
–3.74
–3.87

–6.50
–13.33
–12.03

–1.38
–1.04
–2.37

10.4
11.6
10.2

SOURCE: Bureau of Labor Statistics.

Memphis Zone—MSA Housing Activity
Total building permits,
units year-to-date
Percent change
–40.2
–32.6
–33.4
–40.5

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

1,790
188
339
483,013

House price index,
percent change,
2009:Q3/2008:Q3
–2.24
2.64
4.53
–4.08

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

Memphis Area Coincident Economic Activity Index
Index (1992 = 100)
170
Arkansas
165
Mississippi
Tennessee
United States

160
155
150
145
140
135
130
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

SOURCE: Federal Reserve Bank of Philadelphia.

Memphis Area Real Personal Income Growth
Percent Change, Year/Year
Percent
7
6
5
4
3
1
1
0
–1
–2
–3
–4
2000

Arkansas
Mississippi
Tennessee
United States
2001

2002

2003

SOURCE: Bureau of Economic Analysis.

2004

2005

2006

2007

2008

2009

Total residential building permits in
September 2009 were lower than a year
earlier in all three of the MSAs in the
Memphis zone. Permits declined by 40 percent in Memphis, 33 percent in Jackson,
Tennessee, and 33 percent in Jonesboro,
Arkansas. House prices declined by 2.2
percent in Memphis in the third quarter of
2009 compared with a year earlier, while
house prices increased by 4.5 percent in
Jonesboro and by 2.6 in Jackson. Nationwide, house prices were down by 4.1
percent over the same period.
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,
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 October 2009, the index declined
by 3.8, 2.8, and 3.2 percent in Tennessee,
Mississippi, and Arkansas, respectively.
Over the same period, the index for the
United States fell by 3.3 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 national growth rate. As of the second
quarter of 2009, Tennessee, Mississippi,
and Arkansas experienced year-over-year
growth rates of –0.7, –2.8, and –2.0
percent, respectively. For the nation as a
whole, personal income declined by 2.4
percent over the same period.

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.