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Current Economic Conditions in the

Eighth Federal Reserve District
Little Rock Zone
September 21, 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 Little Rock zone of the
Eighth Federal Reserve District (see map above), headquartered in St. Louis. Separate reports have also been prepared for the
Louisville, Memphis, and St. Louis zones and can be downloaded from research.stlouisfed.org/regecon/.
The report includes government-provided data for Arkansas and the metro areas of the Little Rock 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 Little Rock office:
Robert A. Hopkins, 501-324-8200, robert.hopkins@stls.frb.org
Economist:
Kevin L. Kliesen, 314-444-8583, kevin.l.kliesen@stls.frb.org

Little Rock Zone Report—September 21, 2012
In general, labor market conditions over the past three months in the Little Rock zone have been stronger than in the
nation, though growth in personal income has closely paralleled the nation’s. Housing activity thus far in 2012 has been
more mixed, though some areas of the zone are seeing robust growth rates experienced at the national level. House
price changes in the zone are varied, but on average consistent with the nation. The following five points illustrate this
assessment:
Annual Changes in Employment: In July 2012, Little Rock’s nonfarm payroll employment was 0.6 percent higher
than a year earlier, which was about three-quarters of a percentage point slower growth than the nation’s growth rate
of 1.4 percent.
Short-Term Changes in Employment: Between April 2012 and July 2012, the Little Rock MSA’s payroll employment
increased by an average rate of 0.3 percent per month. However, the rampant volatility in Little Rock area employment
growth since mid-2009 has made it difficult to discern the underlying trend.
Unemployment Rate: In Little Rock, the unemployment rate decreased from 6.6 percent in April 2012 to 6.5 percent
in July 2012. Over the same period, the U.S. unemployment rate inched up from 8.1 percent to 8.3 percent. Unemployment rates in the Little Rock zone, by and large, remain well below the U.S. rate.
Building Permits: Housing activity thus far in 2012 has been decidedly weaker in Little Rock than in the United States.
The number of building permits issued in the Little Rock MSA over the first seven months of 2012 are running a little less
than 40 percent below the same period a year earlier. That said, some areas of the Little Rock zone have seen permits
expanding at rates similar to the nation’s.
House Prices: Over the four quarters ending in the second quarter of 2012, prices of houses purchased with conventional mortgages were up by about 0.2 percent in the Little Rock MSA. For the nation, by contrast, house prices have
declined by 0.6 percent. Overall, house prices have increased in two of the key areas in the Little Rock zone, while remaining unchanged or decreasing in the other four key areas.

Anecdotal Information from the Beige Book
Agriculture and Natural Resources

Car Dealers

• Year-to-date coal production through August was
43.7 percent lower in Arkansas than in the first eight
months of 2011.

• July and early August sales stayed the same compared
with the same time last year for two of three contacts;
one of six contacts reported a slight increase while
one of six reported a moderate decrease.

• With the exception of pastureland, crop conditions
have held steady since June; at least 80 percent of
cotton, rice, sorghum, and soybean crops are rated as
fair or better. The share of pastureland rated as fair or
better has declined from 44 percent to 28 percent
since mid-June.
• Crop yields in Arkansas are expected to be 2.5 to 12.5
percent higher compared with last year. Annual corn
and sorghum production is forecasted to be 38.7 percent and 35.8 percent higher, respectively, than in
2011. Only cotton production is expected to decline
from last year.

• Sales are expected to increase in September and
October when compared with the same time last year
for one of two contacts; one of three contacts expect
lower sales; the remaining contacts expect no change
in sales.

Construction
• A contact reported several new office building construction projects in the Fayetteville metropolitan area.
• A contact noted some commercial redevelopment
construction plans in Pulaski County.

General Retail

Real Estate

• July and early August sales decreased compared with
the same time last year for one of two contacts; sales
remained the same for one of three contacts; sales
increased for the remaining contacts.

• A contact reported that apartment occupancy rates
in northwest Arkansas remained high in Rogers,
Bentonville, Fayetteville, and Springdale and strong
multi-family real estate activity is expected in the
second half of 2012.

• Sales met expectations for one of six contacts; sales
were below expectations for the remaining contacts.

Services

• Sales are expected to increase in September and
October when compared with the same time last year
for one of two contacts; one of three contacts expect
sales to decrease; the remaining contacts expect sales
to remain the same.

• An information technology services firm and a nonprofit organization plan to hire new workers and
expand operations. A telecommunications firm,
meanwhile, plans to lay off a significant number of
workers.

Manufacturing

Banking and Finance

• Firms in furniture, air purification equipment, electrical
equipment, metal can, industrial gas, and nanotechnology manufacturing plan to hire new workers while
expanding operations or opening new plants. In contrast, firms in food, air transportation, and wind turbine
manufacturing plan to lay off workers.

• Little Rock has not completed any Q3 visits. Visits
have been scheduled for mid-September.

Detailed Indicators: Employment, Unemployment,
Personal Income, and General Economic Activity

Nonfarm Payroll Employment Growth—Little Rock MSA
Percent
0.6
0.4
0.2
0
–0.2
–0.4
–0.6
–0.8
2006

United States
Little Rock MSA
2007

2008

2009

2010

2011

2012

NOTE: 3-Month moving average, seasonally adjusted, January 2006–July 2012. See the narrative with the St. Louis charts for descriptions and definitions of the series
that are also used in the Little Rock, Louisville, and Memphis charts and tables.
SOURCE: Bureau of Labor Statistics.

Compared with the nation, payroll employment growth in the Little Rock MSA has been exceptionally volatile since the
end of the recession in June 2009. At this point, it is difficult to pinpoint the cause of this volatility. Nevertheless, over the
three months ending in July 2012, payroll employment in Little Rock increased by 0.3 percent, versus 0.1 percent for the
nation. During the three-month period shown in our prior report (January 2012 to April 2012), employment in Little Rock
had decreased by 0.5 percent, versus a 0.1 percent increase for the nation. Because of this volatility, a longer-run view
might provide more clarity: Since June 2009, Little Rock payroll employment has increased by 0.5 percent, while U.S.
employment has increased by 2.1 percent.

Employment Growth by Sector—Little Rock MSA
Percent
6.0

5.3
3.4

4.0
2.0

2.0
0.7

0.6

0.0
–0.3

–2.0

–0.5

–1.1

–4.0

–2.6

–3.0

–6.0

–5.7

–8.0
Total Nonfarm
100%

Government
20%

Trade,
Transportation,
and Utilities
20%

Education Professional and
and Health Business Services
15%
13%

Leisure and
Hospitality
9%

Manufacturing
6%

Financial
Activities
6%

Natural
Resources,
Mining, and
Construction
5%

Other Services
5%

Information
2%

NOTE: Percent change with respect to one year ago, July 2011–July 2012.
SOURCE: Bureau of Labor Statistics.

In contrast with the St. Louis MSA, payroll employment has increased slightly over the past 12 months in the Little Rock
MSA. However, this increase of 0.6 percent still trails the nation (1.4 percent). The three largest sectors in the Little Rock
MSA are Government; Trade, Transportation, and Utilities (TTU); and Education and Health. These three sectors account
for 55 percent of total payroll employment. In the largest sector (Government), employment has decreased by 0.3 percent
over the past year, but growth has been considerably stronger in TTU (2 percent) and in Education and Health (3.4 percent). Employment increases have also been particularly strong in the Leisure and Hospitality sector. Notable sectors that
have experienced declining employment over the 12 months ending in July 2012 have been in Professional and Business
Services, Manufacturing, and Natural Resources and Construction. Overall, these three sectors accounted for about 25
percent of the jobs in the Little Rock MSA.

Employment and Unemployment by MSA
Nonfarm payroll employment percent change,
July 2011–July 2012
Total
Little Rock, Ark.
0.63
Fayetteville-Springdale-Rogers, Ark.-Mo. 3.47
Fort Smith, Ark.-Okla.
–2.42
Texarkana, Ark.-Tex.
7.04
United States
1.40

Goods producing

Service providing

Unemployment rate
July 2012

–4.31
1.13
3.04
3.12
1.52

1.24
3.98
–4.11
7.55
1.38

6.5
5.5
7.9
6.6
8.3

NOTE: Sector-level employment data are not available for Hot Springs, Ark., or Pine Bluff, Ark.; as a result, these MSAs are not included in this table.
SOURCE: Bureau of Labor Statistics.

During the past 12 months, the Little Rock zone experienced net positive growth of employment across its MSAs. Over the past
year, employment gains have been especially robust in the Texarkana (7 percent) and Fayetteville (3.5 percent) areas. By contrast, payroll employment has declined moderately in the Fort Smith area (–2.4 percent). Perhaps unusually, Fort Smith’s decline
stems from a rather large decline in services-related employment over the past year (–4.1 percent). The other MSAs, by contrast,
have seen moderate to strong gains in services sector employment. Similar to our previous report published in June, the Little
Rock MSA continued to see significant declines in goods-producing employment from a year ago. Compared with three months
earlier, unemployment rates in the Little Rock zone are little changed but generally lower. Still, with the exception of Fort Smith,
unemployment rates in the Little Rock zone MSAs are more than 1.5 percentage points lower than the nation’s rate as of July
2012.

Coincident Economic Activity Index—Arkansas
Index (Dec. 2007 = 100)
102

100

98

96

94

92

Arkansas
United States

90
2007

2008

2009

2010

2011

SOURCE: Federal Reserve Bank of Philadelphia.

Economic activity in Arkansas, as measured by the Philadelphia Fed’s coincident index, has struggled to recoup the losses
experienced during the 2007-09 recession. The recession hit Arkansas comparatively harder than the nation as a whole
and its recovery has been much weaker. In the first year of the recovery (measured from the index’s low point), U.S. economic activity rose by 1.8 percent but Arkansas’s activity rose by only 1.1 percent. As much as anything, Arkansas’s weaker
performance stems from the fact that government entities are the largest employer in the state. This matters because
state and local governments have had to significantly reduce expenditures and employees to balance their budgets.
Thus far in 2012, the growth gap between Arkansas and the United States has narrowed some: Activity has increased by
1 percent in Arkansas and by 1.6 percent in the United States. Still, Arkansas’s current index (95.3) remains well below
its December 2007 value, whereas the U.S. index (101.2) has surpassed its December 2007 value.

Real Personal Income Growth—Arkansas
Percent
8
6
4
2
0
–2
–4
–6
2006

Arkansas
United States

2007

2008

2009

2010

2011

2012

NOTE: Percent change with respect to previous year.
SOURCE: Bureau of Economic Analysis.

Since the end of the recession in June 2009 (2009:Q2), growth of personal income (PI) in Arkansas has trended considerably closer to the U.S. growth rate. Prior to the recession, personal income growth in Arkansas was stronger than the
nation’s rate and, moreover, did not decline as severely during the recession. Since early 2011, though, PI growth in the
nation and in Arkansas has slowed to less than 1 percent, with Arkansas’s rate modestly lower. Indeed, Arkansas’s PI is
essentially unchanged (up 0.1 percent) over four quarters ending in the first quarter of 2012. Still, the nation’s rate is
only slightly stronger (0.6 percent).

Residential Real Estate Activity by MSA
Total building permits, units year-to-date
July 2012
Little Rock, Ark.
1,314
Fayetteville-Springdale-Rogers, Ark.-Mo.
975
Fort Smith, Ark.-Okla.
273
Hot Springs, Ark.
28
Pine Bluff, Ark.
57
Texarkana, Ark.-Tex.
120
United States
454,275

Percent change
–37.8
43.6
–11.1
64.7
18.8
–46.4
31.1

House price index, percent change,
2012:Q2/2011:Q2
0.2
0.6
0.0
–4.1
–3.6
–2.2
–0.6

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

Housing activity (as measured by building permit issuance) during the second quarter and early stages of the third quarter
in the Little Rock zone has been decidedly mixed. In the largest MSA, Little Rock, authorized building permits over the
first seven months of 2012 have declined nearly 38 percent from their levels a year earlier. Larger declines have been seen
in the Texarkana area, but with markedly smaller declines seen in the Fort Smith area. Housing activity in the other three
areas—Fayetteville, Hot Springs, and Pine Bluff—have seen robust growth of housing permits in 2012 compared with
the same period a year earlier. These growth rates, by and large, are similar to the nation’s strong growth in housing permits year-to-date. Perhaps unusually, house prices over the four quarters ending in the second quarter of 2012 are generally little changed or up slightly in those areas where permits have fallen, while prices have declined in those areas where
permits have exhibited the strongest growth. Texarkana was a notable exception. The largest increase in house prices
over the past year was registered in Fayetteville (0.6 percent), while the largest decline occurred in the Hot Springs area
(4.1 percent).


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102