REGIONAL ECONOMIC BRIEFING
Economic Conditions in the Eighth Federal Reserve District GIC Central Banking Series: Location Matters in a Global Economy Fayetteville, AR
Kevin L. Kliesen Business Economist and Research Officer Federal Reserve Bank of St. Louis November 6, 2017
The views I will express are my own and do not necessarily reflect the positions of the Federal Reserve Bank of St. Louis or the Federal Reserve System.
Disclaimer The views I will express today are my own and do not necessarily reflect the positions of the Federal Reserve Bank of St. Louis or the Federal Reserve System.
District GDP growth varies by state, but it is slower than the nation on average. Real Gross Domestic Product: 2017:Q1 Percent change from one year ago
0.23%
1.9%
1.3% 4.2% 2.2%
0%
U.S. year-over-year growth rate for 2017-Q1: 2%
Seven-state growth rate for 2017-Q1: 1.4%
3
Growth in Large District MSAs generally out-performed the Nation in 2017:Q1. Growth of Real Goods and Services (Output) in 2017:Q1 Percent change from one year ago 4.5 4.0 3.5
2.0
3.9
Little Rock
Fayetteville
3.2
3.0 2.5
4.1
2.2
2.0
1.5
1.7
1.5
District States
St. Louis
1.0 0.5 0.0 US
Memphis
Louisville
Note: Growth defined by economic conditions indexes for St. Louis, Memphis, Louisville, and Little Rock MSAs (2017-Q1). Growth defined by real GDP for Fayetteville MSA (2016) and U.S. (2017-Q1). Source: St. Louis Fed, BEA 4
Very low unemployment rates in some Eighth District MSAs. Unemployment Rates in the Eighth District MSAs: September 2017 Percent of labor force 6.0 5.0 4.0
3.1 3.0
2.4
3.2
3.2
3.2
3.3
3.7
3.7
3.7
3.8
4.1
4.1
4.2
4.2
4.2
4.5
4.6
4.7
4.7
4.8
4.8
2.6
2.0 1.0 0.0
Note: Black bars indicate lowest level since 2000. Source: Bureau of Labor Statistics/Haver 5
Beige Book contacts remain optimistic about the 2017 outlook. How do you expect local economic conditions to change in 2017 relative to 2016?
How do you expect each of the following measures to change at your firm relative to the same time last year?
Percent of Respondents
Previous Survey
Current Survey
Prices Charged to Customers
35%
23%
Louisville Zone
Sales (Dollars)
29%
35%
Memphis Zone
Inventory
-3%
13%
St. Louis Zone
Non-Labor Costs
51%
37%
40
Capital Expenditures
18%
24%
30
Labor Costs
61%
54%
20
Wages
61%
61%
Hours per Employee
23%
20%
Employment
32%
31%
80 Little Rock Zone 70 60 50
10 0 Worse
About the same
Better
Note: Results are according to 2017 Q3 Beige Book survey.
6
The Cost of Living is Relatively Low in the Eighth District MSAs • Coughlin, Gascon, and Kliesen (FRB St. Louis Review, 2017) use BEA Regional Price Parity indexes (RPPs) to deflate nominal measures of income rather than traditional price indexes (e.g., CPI).
• We show that living standards are higher in District MSAs when adjusted this way.
• A key factor is housing costs, which are generally lower in smaller MSAs.
7
RPP Indexes in the Eighth District are Lower than the U.S. Average
8
RPP-Adjusted Incomes for Some Eighth District MSAs are Higher than U.S. Avg. 2015 Real RPP-Adjusted Per Capita Personal Income Relative to U.S. Average
Ratio 2.5
2.0
1.5
1.0
Midland, TX Fayetteville, AR St. Louis, MO New York, NY Chicago, IL Louisville, KY
Los Angeles, CA Memphis, TN Little Rock, AR
0.5
0.0
MSAs
SOURCE: Bureau of Economic Analysis and the Federal Reserve Bank of St. Louis. 9
End
10