Regional Economic Digest
Second Quarter 1999

Regional Economic Update: The Consequences of a Tight Labor Market
By Ricardo C. Gazel and Chad Wilkerson

The Tenth District economy remained relatively healthy in the first quarter of 1999 but slowed substantially from the strong pace registered in recent years. Employment levels were virtually flat, as extremely tight labor markets in much of the district may have made it difficult for businesses to hire additional workers.

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The State of Tenth District Manufacturing
By Ricardo C. Gazel

Manufacturing activity in the Tenth Federal Reserve District slowed further in the first months of 1999. The overall weakness of manufacturing nationally and the depressed conditions of international markets continued to hamper district plants and factories. Manufacturing employment declined in April for the third consecutive month, pushing job levels at district plants to 1.1 percent below year-ago levels. Despite manufacturing’s poor performance, the sector remained in better shape in the district than in the nation, where employment losses have continued to mount heavily over the last 12 months.

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Survey of Agricultural Credit Conditions
By Russell L. Lamb

Agricultural credit conditions in the Tenth District remained weak at the beginning of 1999, according to a survey of 316 district agricultural bankers. Commodity prices were mixed, with crop prices falling and livestock prices rising. District farmland values edged down again and were lower than year-earlier levels. The survey suggested that farmers were exercising caution in borrowing decisions: Farm loan demand fell, the availability of funds increased, and the loan-deposit ratio fell. Loan repayment rates continued to slide.

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A Strong Performance by District Community Banks in 1998
By William R. Keeton and Michelle Holloway

Community banks in Tenth District states had another good year in 1998. They continued to benefit from solid growth in the district economy. And in contrast to some large banks in other parts of the country, they were largely unaffected by the turmoil in financial markets in the latter part of the year. To be sure, average profitability would have edged down in 1998 were it not for the decision by a substantial number of banks to change their tax status. Even accounting for this effect, however, district community banks remained highly profitable.

Furthermore, overall loan quality showed no sign of deterioration, and loan growth and deposit growth were both healthy. Community banks in the district also compared favorably with their peers in the rest of the nation in all performance measures.

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Economic Indicators
The actual Economic Indicators tables from this issue of the Regional Economic Digest are not available because data have been revised. Regional Economic Indicators are available and updated monthly by research staff.

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