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Business AN EIGHTH DISTRICT PERSPECTIVE F A L L 1984 Eighth District Marches to National Beat After hitting bottom in the fourth quarter of 1982, eco nomic activity at the national level has bounced back at a faster rate than during any other post-recession recovery since the late 1940s. Real GNP has grown at an average annual rate of 7.2 percent since the recession trough, and the unemployment rate has declined from about 10.5 per cent to about 7.5 percent. Despite the rapid pace of the ex pansion, the average annual rate of inflation (as measured by the implicit price deflator) has been 3.8 percent, well below the 5.1 percent average rate of the 1981-82 recession. As the accompanying data and charts indicate, economic activity in the Eighth District has been in step with the national recovery. For example, the indexes of general busi ness have advanced in each District state and are currently well above their pre-recession levels. These indexes, which are intended to be barometers of general economic activity, began recording upticks slightly ahead of the national ex pansion. The index for Arkansas and Tennessee began to advance in September 1982, while the indexes for Ken tucky and Missouri showed initial increases two months later. The National Bureau of Economic Research puts the trough in the national business cycle in November. While these indexes suggest that economic recovery began at roughly the same time in each of the District states, some states have grown faster than others. In Ar kansas and Missouri, the indexes have risen by 15.2 per cent and 13.4 percent, respectively, since the trough. Ken tucky and Tennessee show smaller increases of 8.9 to 10.5 percent. Personal Income Since the fourth quarter of 1982, both the District and national quarterly growth rates have trended upward and currently are well above their historical averages. This upward trend reflects an acceleration in personal income growth as the expansion has matured. The fact that the current growth rates are above their historical averages suggests that they eventually will decline. Employment Chart 2 plots the growth rates in total employment for the District and nation. Again, the long-run average growth rates are nearly the same for the District and nation. The quarterly growth rates, however, show con siderable variation around the averages. Beginning in the fourth quarter of 1982, the quarterly rates began to ad vance rapidly from the values recorded during the 1981-82 recession. During the second quarter of this year (the most recent for which data are available), the national growth rate in total employment was well above its historical aver age. At the District level, growth in total employment declined from a first quarter 1984 high that had not been matched in more than 10 years to a rate comparable to its historical average. Unemployment During the first year of the expansion, from fourth quar ter 1982 through fourth quarter 1983, personal income in both the D istrict and nation grew at nearly equal rates, 7.6 percent nationally and 7.3 percent in the District. Chart 1 (next page) plots the average an nual rates of growth in personal income for both the District and nation. In addition, it shows annualized quarterly growth rates in personal income at the District and na levels. The quarterly rates travel by Digitizedtional for FRASER fits and starts, and, at times, the differences between Dis trict and national growth rates appear to be considerable. Notice, however, that the average growth rates over the entire period (each about 9.5 percent) are very close; so close, in fact, that they are statistically indistinguishable. Generally, unemployment rates, both nationally and in the District states, began to decline following the trough of the recession. January 1983 marks the first month of decline in the national un employment rate; Arkansas, Kentucky and Tennessee also record reductions be ginning in this month. The unem ploy THE FEDERAL ment rate in Missouri, however, did not RESERVE begin to fall until May 1983, four months RANK of later. Since that time, Missouri’s unem ST. IXH IS ployment rate has declined sharply, and in June of this year it stood at 7 percent. FALL 1984 FEDERAL RESERVE BANK OF ST. LOUIS This was about equal to the national rate and considerably below the unemployment rates in other District states. Though declining, unemployment rates in Arkansas, Ken tucky and Tennessee have been high relative to the nation al average. As a result, the District’s unemployment rate has been higher than the nation’s throughout the recovery and currently exceeds the national average by about one percentage point. Digitized for 2 FRASER Summing Up The national economy has been experiencing a boom in economic activity that, in terms of the rate of advance, has not been matched since the post-recession recovery of 1948-49. The advance in economic activity in the Eighth District has kept pace with the national recovery. Though some slowing will no doubt occur, the outlook for the near future remains encouraging. —G. J. Santoni Chart 1 PERSONAL INCOME GROWTH RATES Chart 2 TOTAL EMPLOYMENT GROWTH RATES PERCENT FEDERAL RESERVE BANK OF ST. LOUIS FALL 1984 EIG HTH DISTRICT BUSINESS DATA G r o w th R a t e s 1 Y ear-to-D ate 1984 C urrent Period G en eral B usiness In d exes2 M ay-July 2 .3 % 5.8 6.4 7.4 A rka n sa s K entucky M isso u ri T ennessee 11.3% 9.5 19.4 25.4 -4 .4 U n ite d S tates A rk a n s a s 3 K e n tu cky3 M isso u ri Tennessee 1 1 .8 % 4.7 8.7 4.8 1 3 .0 % 6.3 4.2 18.3 8.5 1 1 .0 % 11.2 8.9 9.5 14.0 1 2 .7 % 13.2 15.8 13.9 12.5 12.1 7 .6 % 7.3 11.4 4.5 8.1 6.6 4 .6 % 3.3 3.1 0.1 3.5 1.1 3.8 0.9 2.5 5.9 1.9 3 .3 % 2.6 5.4 4.3 1.3 0.7 0.7 1.3 1.9 3.7 2.2 3 .5 % 4.8 4.6 4.3 5.6 3.8 4.5 2.3 6.2 4 .2 % 5.3 4.0 7.6 4.7 5.1 5.0 4.4 0.9 1st q u arter ’84 Personal In co m e 12.7% 13.2 15.8 13.9 12.5 12.1 U nited S tates D istrict A rka n sa s K e ntucky M isso u ri Tennessee M ay-July Payroll E m p lo ym en t 4 .4 % 1.4 0.1 -2 .7 1.1 -3 .6 2.2 -1 .4 0.9 5.3 U n ite d States D istrict A rka n sa s L ittle R ock K e ntucky E vansville, IN Lo u isville M isso u ri St. Louis T ennessee M e m p h is 0.0 Average H ou rly E a rn in g s-M fg . M ay-July U nited S tates A rka n sa s L ittle R ock K e ntucky Lo u isville M isso u ri St. Louis T ennessee M e m p h is 2 .5 % 2.3 5.2 5.9 2.6 4.7 4.9 4.0 2.3 Employment1_________ Y ear-to-D ate 1984 5 .2 % 6.2 7.2 8.0 A pr-June R etail S ales ey In d u s trie s F abricated M etal P rod u cts E le ctrica l a nd E le ctro n ic E q u ip m e n t N o n e le c tric a l M a ch in e ry T ransportation E q u ip m e n t Food and K in d re d P roducts Textile and A p p a re l P rin tin g and P u b lis h in g C h e m ic a ls a nd A llie d P roducts C o n stru ctio n 1983 2 .4 % 8.4 10.6 7.4 2.0 0.0 2.7 3.7 13.7 S am e Period 1983 -3 .6 % 8.9 4.7 10.8 -3 .5 3.7 4.1 -1 .4 -2 .7 ____________ Prices1 Y ear-to-D ate 1984 3 .4 % 3.6 3.0 1.4 5.3 2.5 6.5 3,5 3.2 S a m e P eriod 1983 -1 .8 % 4.6 2.9 -0 .4 3.1 1.0 7.3 1.1 5.9 3 EIGHTH DISTRICT BU SIN ESS DATA Current Period*12 3 U n e m p lo y m e n t R ate U n ite d S tates D istrct A rka n sa s L ittle R ock K e n tu cky E vansville, IN L o u isville M isso u ri St. Louis Tennessee M e m p h is 7 .4 % 8.4 9.2 7.0 9.4 8.8 8.9 7.2 7.9 8.6 7.5 M ay-July D istrict A rkansas K entucky Eastern M isso u ri W estern T ennessee $633.1 128.6 202.2 212.1 90.2 L ittle R ock Lo u isville St. Louis M e m p h is Average Yearto-Date 1984 Average 1983 M ay-July C o n stru ctio n C o n tra c ts 4 (m illio n s o f d o lla rs) H o u sin g P erm its Previous 3 Months 7 .8 % 8.7 8.6 6.9 9.3 9.1 8.9 8.3 9.2 8.8 8.0 7 .6 % 8.7 9.0 7.1 9.4 9.0 9.0 7.9 8.7 8.8 7.9 $505.2 114.7 154.1 156.5 79.8 $ 537.8 118.1 168.9 170.8 80.0 $ 4 8 3 .4 106.4 172.9 136.8 67.3 397 428 1,002 1,256 427 357 829 1,272 274 295 440 986 9 .6 % 10.8 10.1 8.1 11.6 10.7 10.9 9.9 10.5 11.4 9.5 A pr-Ju ne 457 286 657 1,287 NOTE: With the exception of construction contracts and employment and prices in key industries, all data are seasonally adjusted. 1Data are presented as three-month averages to minimize distortions due to the large variability of monthly data. The current period growth rate is a comparison of the average of the current three months to the average of the previous three months. The year-to-date growth rate is from the average of the three months ended in December 1983. All growth rates are compounded annual rates of change. 2Sources: Arkansas and Missouri from Southwestern Bell, Kentucky and Tennessee from South Central Bell. 3Sources: Arkansas from Southwestern Bell and Kentucky from Kentucky Revenue Department. 4Source: F.W. Dodge, Construction Potentials, McGraw-Hill Information Systems Company, proprietary data provided by special permission.