Local economy continues to improve slightly, report shows
Originally Published in The Daily Memphian
By Frank Lanigan
Economic conditions have improved slightly in the Eighth District that includes Memphis since the last Beige Book was issued Nov. 27, according to the Federal Reserve Bank of St. Louis.
The Beige Book, released eight times a year, is a summary of current anecdotal market evidence gathered by the Federal Reserve through various contacts such as bankers, economists and market experts.
Memphis, Little Rock, Arkansas, and Louisville, Kentucky, are among the larger cities in the St. Louis district.
Employment remained stagnant since the previous report, with most experts citing the tight labor market as an obstacle to growth. Further, firms are hesitant to invest in new employees and subsequently lose them to better-paying positions.
Brad Federman, chief executive officer at PerformancePoint LLC, a Memphis-based national consulting and training firm, said despite the sluggish employment rate, a firm hiring now could create a competitive advantage.
“We are now at a time when employers must invest more in employees, including training new employees. Those that invest will outperform those companies that don’t. … There are still many people sitting on the sidelines who are not participating in this strong economic period,” Federman said.
Wages have increased moderately since the last report as employers seek to retain and attract employees and limit turnover. On Jan. 1, the Arkansas minimum wage was increased statewide from $9.25 to $10 per hour.
“We are now at a time when employers must invest more in employees, including training new employees. Those that invest will outperform those companies that don’t.” Brad Federman, CEO at PerformancePoint LLC
While it is too soon to see the market impact of this legislation, some Arkansas retailers reported hiring fewer workers to counteract the higher labor cost.
Jim Vogel, executive vice president of interest rate strategies at Memphis-based First Horizon National Corp., said there were no real surprises in the report, but the district may lag slightly behind the national outlook.
“When you get into the St. Louis Reserve District, it’s much the same thing,” Vogel said. “I think it may be a little more downcast than the national level, because in our particular district, they talk a good bit about manufacturing being weaker.”
Manufacturing in the St. Louis district has continued to decline, though market experts are hopeful that it will stabilize in the next few months. Nationally, the sector remained mostly flat.
In West Tennessee, moderate increases in consumer spending were reported since November, and consumer sentiment was higher for both current and future economic conditions. Memphis was mentioned specifically in the report as having seen a slight decrease in home sales from October to November, though the rental market remains strong.
“With regards to our neck of the woods in West Tennessee, current economic conditions and end-over-end expectations have improved since September. You want to see that improvement,” Vogel said.
Agriculture remains unchanged but weak since the Nov. 27 report due in part to low crop prices and the trade dispute. The signing of the Phase One Trade Agreement between the U.S. and China on Jan. 15, however, was lauded by Agriculture Secretary Sonny Perdue as a potential boon for farmers and the U.S. economy as a whole.
“While it took China a long time to realize President Trump was serious, this China Phase I Deal is a huge success for the entire economy,” Perdue said in a statement. “This agreement finally levels the playing field for U.S. agriculture and will be a bonanza for America’s farmers, ranchers, and producers.
“China has not played by the rules for too long, and I thank President Trump for standing up to their unfair trading practices and for putting America first,” Perdue said. “We look forward to exporting to Chinese customers hungry for American products.”
The banking sector saw reserved growth with small and slow increases in commercial and residential real estate lending, the Beige Book noted.
Commercial and industrial loans remained at a 2% increase year-over-year, which Vogel said is a figure that matches the growth of the economy.