November 30, 1988
Summary
Weakness in many sectors of the District economy has continued in
recent months. Payroll employment rose slightly, largely the result
of gains in manufacturing. Construction activity continues to weaken
as homebuilding declines. A drop in consumer lending has caused
overall loan activity to fall. Agricultural conditions, on the other
hand, are improving because of warm, wet fall weather.
Employment
Unemployment rates in most District states increased slightly in the
third quarter. Payroll employment continues to grow slower in the
District than in the nation: in the third quarter, it rose at a 0.2
percent seasonally adjusted annual rate in the District compared
with a 3.3 percent rate for the nation. In contrast to other states
in the region, Kentucky's recent employment growth has been
moderate: payroll employment in the state rose at a 2.7 percent rate
in the third quarter.
Employment in all nonmanufacturing sectors grew slower in the District than in the nation in the third quarter. Employment in the region's services and wholesale/retail trade sectors declined slightly in both the second and third quarters after rising in every previous quarter of the recovery.
District manufacturing employment grew at a 2.7 percent rate in the third quarter, after declining at a 2.8 percent rate in the second quarter. In comparison, national manufacturing employment increased at a 1.4 percent rate during the third quarter, after growing at 2.3 percent rate during the previous three months. The District's recent growth was concentrated in factories producing electrical equipment, nonelectrical machinery, chemicals and transportation equipment. Approximately 2,100 workers—many of whom had been laid off since November 1987—were recalled to a St. Louis area auto assembly plant in September. Increasing orders for motor vehicle parts led to 1,100 additional jobs over the last 12 months in Arkansas.
Consumer Spending
District retail sales have been similar to those of a year earlier,
after adjusting for inflation. St. Louis retailers report slightly
slower sales volumes than a year earlier with particularly sluggish
sales in general merchandise stores. Sales in Memphis recently have
softened after moderate gains during the summer months. In contrast,
retail jobs in Louisville, as well as elsewhere in Kentucky have
grown substantially in response to moderate sales growth.
Department stores throughout the District generally expect real sales during the upcoming holiday season to be only a few percent above last year's level and have accordingly kept inventories slim, Numerous pre-holiday sales already have appeared, and widespread price discounting is expected throughout December.
Construction
The real value of District building contracts declined 1.5 percent
in the third quarter and was 7 percent less than in the third
quarter of 1987. Contracts for District nonresidential construction
projects rose 3.8 percent in the third quarter while residential
contracts fell 6.1 percent after adjusting for inflation. Contracts
for both sectors were below year-earlier levels. During the third
quarter and throughout the current recovery, regional residential
construction growth has been weaker than the national rate. The
expansion of District nonresidential construction, however, has
exceeded the national average.
Banking
Total loans at large weekly reporting District banks declined at a
1.3 percent annual rate in the three months through October, down
from a 2.5 percent rate of increase in the same period last year.
The overall decline was due primarily to a 17.4 percent drop in
consumer loan volume. For the same three-month period in 1987,
consumer loans expanded at a 6.3 percent rate. Commercial loans also
declined during the recent three-month period. Real estate lending
grew more slowly than a year earlier.
Agriculture
Agricultural conditions continue to improve. Late-planted soybeans
in southern portions of the District have benefited from warm, wet
fall weather and are producing above-average yields. Crop production
in these states accordingly is being revised upward. The rain also
is benefiting the recently planted winter wheat crop. The District's
cotton crop, however, is being damaged by the rain, and below-
average yields are now anticipated.
The rain also has helped to recharge dry soils and has improved pastures, a development that will allow livestock producers to carry larger herds through the winter. This should alleviate some of the pressure on red meat prices that had been feared for next year had livestock producers been forced to reduce herds further. Because of the availability of storage space and the long harvest period, no grain transportation difficulties have been encountered.