October 18, 1988
Summary
Economic conditions in the Eighth District remain sluggish.
Employment in most sectors has stagnated. Manufacturing employment
has grown slightly however, led by job gains in factories producing
electrical equipment, machinery and chemicals. Retail sales remain
flat, with little growth in vehicle sales or department store sales.
Nonresidential construction activity increased since the last
report.
Employment
District nonfarm employment has changed little over the first eight
months of the year compared with the nation's 3.6 percent rate of
increase. During the three months through August, all private
sectors expanded more slowly in the District than in the nation. The
greatest weaknesses were observed in construction, mining and
services. Manufacturing employment rose slightly, growing at a l.5
percent annual rate in the three months through August after
declining at a 1.6 percent rate in the previous three months. The
upturn was due largely to strong gains in three export-oriented
sectors: electrical equipment, nonelectrical machinery and
chemicals. Textile and apparel makers accounted for the sharpest
recent decline among major District manufacturing industries. The
slowdown in domestic apparel sales contributed to the closure of
several regional textile and apparel plants. In the past six months,
three Missouri shoe manufacturers, employing eight hundred workers,
have closed permanently or have announced their impending closure.
Employment in the region's food processing industry also has
declined since March.
Despite the flatness at the District level, employment in the largest metropolitan areas in the District—St. Louise Louisville and Memphis and Little Rock—continues to trend upward. Survey results indicate considerably weaker fourth quarter hiring plans in St. Louis than in the nation. Staff reductions are foreseen in St. Louis' retail and financial sectors.
Consumer Spending
District retail sales in the three months through July were 2.4
percent higher than a year earlier, compared with a 5.8 percent
national gain. Spending was particularly weak in Missouri and
Tennessee where retail sales rose less than 1 percent over the year.
Weak sales continued in District general merchandise stores in
August and early September according to contacts. Car and light
truck sales leveled off in August and September after strong gains
in the first seven months of the year. Rising interest rates were
blamed for the lack of sales growth. Because retailers anticipate
sluggish sales and have ordered fall merchandise conservatively,
inventories are generally at satisfactory levels.
Construction and Real Estate
The value of District construction contracts rose 11.7 percent in
the three months through August, compared with the 5.5 percent
national average. Most of the recent regional growth was due to a
21.7 percent rise in nonresidential construction contracts. Despite
the recent gains, construction contracts remained slightly below the
level of a year earlier in both the District and the nation.
The number of existing homes sold in August was well above the year- earlier level in St. Louis, but the median price fell almost 5 percent. Office vacancy rates in St. Louis and Louisville dropped in the second quarter from their year-earlier levels and remained below the national average. Despite vigorous economic growth, office vacancy rates in Memphis are well above the national average and have not declined for two years.
Agriculture
The harvest of District crops is underway with few weather-related
problems. Crop yields in southern portions of the District were
better than expected. Growers in Tennessee, Kentucky and Arkansas
report soybean yields above last year's yields. Crop losses in
northern Missouri are the largest in the District, but because
prices are significantly higher than last year, farm income should
be little changed. Although the average farm income level will be
maintained, there are wide disparities among farmers. For example,
farmers who had stored crops last year received windfall gains,
whereas others suffered total crop failures due to spotty rainfall
and were not protected by crop insurance. Drought-related farm
failures will be few because the large crops and high livestock
prices of 1986 and 1987 provided a cushion against this year's
setback. Recent rains have helped improve pastures and have allowed
the planting of winter wheat crops.