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Current Economic Conditions in the Eighth Federal Reserve District St. Louis Zone March 23, 2012 Prepared by the Research Division of the 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 St. Louis 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 Memphis zones and can be downloaded from research.stlouisfed.org/regecon/. The report includes government-provided data for Missouri and the metro areas of the St. Louis zone. These data are the most recent available at the time this report was assembled. NOTE: Metropolitan statistical areas (MSAs) are larger geographic areas than cities, as defined by the Census Bureau. For more information, please contact the St. Louis office: Joel James, 314-444-8963, firstname.lastname@example.org Economist: Alejandro Badel, 314-444-8712, email@example.com St. Louis Zone Report—March 23, 2012 The most recent data at the time of publication show that St. Louis is performing below the nation in terms of the unemployment rate, annual employment growth, short-run employment growth, and the issuance of building permits, while house price growth is somewhat less negative than the nation’s. The following five points illustrate this assessment: Annual Changes in Employment Building Permits By the end of January, St. Louis’s nonfarm payroll employment was 0.1 percent lower than last year, while national employment was 1.6 percent higher than last year. The number of building permits issued in the St. Louis zone in January 2012 was 18.7 percent higher than the number issued during January 2010. This increase was somewhat weaker than the 28.6 percent increase of building permits issued in the nation as a whole during the same periods. Short-Term Changes in Employment Between November 2011 and January 2012, St. Louis’s local employment decreased by an average rate of 0.1 percent per month, while the nation’s employment increased by 0.2 percent per month. Unemployment Rate In St. Louis, the unemployment rate decreased from its level in October 2011. However, the 8.6 percent unemployment rate registered in St. Louis at the close of December 2011 is still slightly above the 8.5 percent rate registered for the nation as a whole. House Prices At the close of the third quarter, housing prices were 2.1 percent lower in the St. Louis zone compared with the same time last year. In spite of this decline, St. Louis outperformed the nation: National house prices have fallen 3.0 percent over the past year. Anecdotal Information from the Beige Book Agriculture and Natural Resources Car Dealers • Year-to-date coal production (by early March) in Illinois was 1 percent lower relative to the same period in 2011; production in Missouri was 1 percent higher. • January and early February sales increased compared with the same time last year for 1 in 7 contacts; sales decreased for roughly 2 in 3 contacts. • The overall value of field crops in Illinois and Missouri rose by 11 percent and 5 percent, respectively, between 2010 and 2011. • Prices for agricultural products generally increased from 2010 to 2011: Corn prices posted some of the strongest gains in Illinois (20 percent), while winter wheat prices did the same in Missouri (34 percent). • Changes in crop values from 2010 to 2011 were mixed: Soybeans decreased by 8 to 10 percent in both states, but winter wheat and corn values increased in that period. • Sales were expected to increase in March and April when compared with the same time last year for roughly 1 in 2 contacts; 1 in 7 contacts expected sales to decrease. Construction • Contacts in the St. Louis metropolitan area reported a lack of commercial and industrial construction activity, although one contact noted a fair amount of industrial construction activity in the manufacturing sector as of the end of 2011. • Contacts in St. Louis noted that industrial construction activity has been mainly build-to-suit but that speculative commercial development is expected to increase. General Retailers Real Estate • January and early February sales increased compared with the same time last year for roughly 1 in 2 contacts; sales decreased for 1 in 3 contacts. • Contacts in St. Louis noted an increase in office and industrial vacancy rates in the fourth quarter of 2011 compared with the third quarter. • Sales met or exceeded expectations for all contacts. Services • Sales were expected to increase in March and April when compared with the same time last year for roughly 3 in 5 contacts; the remaining contacts expected sales to be flat. • Information technology and health care contacts plan to hire new workers and/or open new facilities. Education and government services contacts plan to decrease operations and employment. Manufacturing • A contact in can manufacturing plans to expand operations and hire new workers. Dye and paper product contacts plan to close plants and lay off workers. Detailed Indicators: Employment, Unemployment, Personal Income, and General Economic Activity Nonfarm Payroll Employment Growth—St. Louis MSA Percent 0.3 0.2 0.1 0 –0.1 –0.2 –0.3 –0.4 –0.5 United States St. Louis MSA –0.6 –0.7 2006 2007 2008 2009 2010 2011 2012 NOTE: 3-Month moving average, seasonally adjusted, January 2006–January 2012. SOURCE: Bureau of Labor Statistics. St. Louis’s recession-related decline in employment, which was centered near the first quarter of 2009, was similar to the nation’s decline. The recovery in St. Louis was also similar to the nation’s until the first quarter of 2011. Since then, employment growth in St. Louis has been systematically below the nation’s. Between November 2011 and January 2012, employment in St. Louis declined at an average rate of 0.1 percent per month while national employment grew at a 0.2 percent rate. Employment Growth by Sector—St. Louis MSA Percent 6.0 4.0 2.0 0.0 –2.0 –4.0 –6.0 –8.0 Total Nonfarm Trade, 100% Transportation, and Utilities 19% Education Professional and and Health Business Services 18% 15% Government Manufacturing 13% 9% Financial Activities 6% Natural Resources, Mining, and Construction 4% Other Services 4% Information 2% Leisure and Hospitality 1% NOTE: Percent change with respect to one year ago, January 2011–January 2012. SOURCE: Bureau of Labor Statistics. Employment growth by sector during the past 12 months distinguishes general trends from sector-specific trends in St. Louis’s economic performance. Employment decreased by 0.1 percent in this MSA with respect to one year ago, while employment increased by 1.6 percent in the nation. The three largest sectors in St. Louis are Trade, Transportation, and Utilities; Education and Health; and Professional and Business Services. These sectors account for 19 percent, 18 percent, and 15 percent of St. Louis’s employment, respectively, and expanded by –0.9 percent, –0.2 percent, and 1.1 percent, respectively, during the past year. Employment growth varied across sectors, with 6 of 10 sectors decreasing employment and the rest having positive or zero employment growth. The Other Services sector, accounting for 4 percent of total employment in St. Louis, had the best performance (5.3 percent expansion), while the Information sector, which accounts for 2 percent of total employment, had the worst performance (6.6 percent contraction). Coincident Economic Activity Index—St. Louis Zone Index (Jan. 2008 = 100) 102 100 98 96 94 92 Illinois 90 Missouri 88 United States 86 2008 2009 2010 2011 SOURCE: Federal Reserve Bank of Philadelphia. The Philadelphia Fed’s coincident index combines information on payroll employment, wages, unemployment, and hours of work to give a single measure of economic performance. The coincident indexes for both Illinois and Missouri reveal a stronger impact of the recession and a slower recovery in these states compared with the nation. In fact, the index values during the recession show that, at the lowest point, the level of economic activity in Illinois and Missouri was at 89.5 percent and 87.6 percent of pre-recession levels, respectively. Meanwhile, the nation’s lowest point of economic activity was at 92.1 percent of its pre-recession level. Current values of the index suggest that, compared with pre-recession levels, economic activity is at 93.9 percent in Illinois, while it is at 89.7 percent in Missouri and 97.0 percent in the nation. Despite the large difference in the recovery of economic activity between Missouri and the nation, the graph indicates that, during the last half of 2011, economic activity in Missouri has resumed its expansion path. Employment and Unemployment by MSA Nonfarm payroll employment percent change, January 2011–January 2012 Total St. Louis, Mo.–Ill. Columbia, Mo. Jefferson City, Mo. Springfield, Mo. United States Goods producing Service providing Unemployment rate December 2011 –0.15 6.54 1.33 0.84 1.55 0.24 7.81 3.45 1.55 2.53 –0.21 6.44 1.06 0.76 1.40 8.6 5.5 6.3 7.2 8.5 SOURCE: Bureau of Labor Statistics. Total employment expansion in the St. Louis zone has been positive for all MSAs except for St. Louis, where employment fell by 0.15 percent with respect to last year. Columbia experienced a substantial increase in employment driven by goodsproviding sectors, while Springfield experienced the smallest increase in employment. Columbia experienced the highest employment growth in goods-producing activities (7.8 percent) and also the highest employment growth in serviceproviding activities (6.4 percent). The highest unemployment rate in the St. Louis zone was registered in St. Louis, at 8.6 percent. All MSAs in the zone, except for St. Louis, registered lower unemployment rates than the 8.5 percent registered for the nation at the close of December. The lowest unemployment rate across the zone’s MSAs was 5.5 percent, as registered in Columbia. Real Personal Income Growth—St. Louis Zone Percent 6 4 2 0 –2 –4 Illinois Missouri –6 United States –8 2006 2007 2008 2009 2010 2011 NOTE: Percent change with respect to previous year. SOURCE: Bureau of Economic Analysis. For several quarters before the national recession, which started in the last quarter of 2007, Illinois’s personal income growth was roughly similar to the nation’s, while Missouri’s was slightly lower. The recession’s impact on personal income in Missouri and Illinois was similar to that for the nation. The recovery (since 2010) has been similar in both states and similar to the nation’s until the third quarter of 2010. Between the third quarter of 2010 and the third quarter of 2011, personal income growth fell in the two states as well as in the nation. In fact, personal income grew by 0.2 percent and 1.5 percent in Missouri and Illinois, respectively, and grew 1.2 percent for the nation as a whole. Residential Real Estate Activity by MSA Total building permits, units year-to-date January 2012 St. Louis, Mo.–Ill. Columbia, Mo. Jefferson City, Mo. Springfield, Mo. United States 260 45 8 56 46,278 Percent change 18.7 125.0 –33.3 9.8 28.6 House price index, percent change, 2011:Q4/2010:Q4 –2.1 0.0 –0.4 –2.6 –3.0 SOURCE: Bureau of the Census, Federal Housing Financing Authority. The latest available data at the time of this report’s publications reveal that housing activity in the St. Louis zone was weaker in terms of home prices but stronger in terms of building permits compared with the same time last year. The number of building permits issued in January was 18.7 percent, 125 percent, and 9.8 percent higher than last year in St. Louis, Columbia, and Springfield, respectively. Meanwhile the number of building permits issued in January in Jefferson City was 33.3 percent lower than in January 2011. In contrast, home prices declined with respect to one year ago in all of the St. Louis zone’s MSAs except for Columbia, where housing prices remained unchanged. Specifically, housing prices decreased 2.1 percent, 0.4 percent, and 2.6 percent in St. Louis, Jefferson City, and Springfield, respectively. These declines were, however, less pronounced than they were at the national level, where home prices experienced a 3.0 percent decline over the past year.