The Federal Reserve Bank issued its Beige Book this past week. While it shows a slight economic improvement for the Arkansas area, there are some slight discrepancies from the Arkansas Department of Finance and Administration’s revenue report.
If you ask the state of Arkansas, residents are earning more and spending more compared to last year. A report from the Eighth District of the Federal Reserve Bank, which covers most of Arkansas, mostly agrees, though the improvements are slighter.
Charles Gascon, a regional economist at the Federal Reserve Bank of St. Louis says most of the bank’s contacts in the St. Louis region believed the economy is not changing much.
“Conditions more or less kind of continued along the pace that they had been going the last couple of months,” Gascon said.
The report from the St. Louis branch, which includes most of Arkansas, shows a slight improvement in economic conditions in the Little Rock area. Gascon broke that down to percentages.
“Moderate would be about average for the US economy, so you’re talking 2.5 percent growth would be a regular pace of growth. So a slightly improving growth is somewhere between 0-1.5 percent growth. Nothing super-fast, but generally kind of moving in a positive direction and that’s basically the trend that we’ve seen in our federal reserve district and in the state of Arkansas over the last year or so,” Gascon said.
However, tourism tax revenue was flat, meaning there is not an increase of visitor dollars since last year. The Beige Book says a demand for new loans was flat, or slightly weaker across all types of loans in the Little Rock zone. According to Gascon, this trend was not unique to the Little Rock Zone.
Similar to the report from the Arkansas Department of Finance and Administration, the St. Louis Federal Reserve says employment increased modestly. However, one difference is that employers have said a lack of applicants is restraining hiring processes.
“We did a survey on kind of hiring plans and expectations on hiring into the next year and what we saw from most of our contacts was that there is a demand for workers and they have openings, but the number of applications that they’re seeing is relatively low. And that’s kind of the biggest factor restraining their hiring plans,” Gascon said.
Gascon says the Federal Reserve Bank uses different sources to gather its largely anecdotal information.
“As a reserve bank, we have formal advisory councils that cover different industries, we have branch boards of directors that provide us with insight when they meet as to what’s going on. We do formal surveys of contacts across out district and we also look at a variety of other sources.”
According to the Beige Book, the overall outlook for the Little Rock Zone has weakened from three months ago. The Eighth District report says “a slightly greater share of contacts expect local economic conditions to be worse in 2019, compared to 2018.”
Gascon says at this point in the year, they ask their contacts how they expect the regional economy to perform during the incoming year.
“In this survey, in the Little Rock area, or the Little Rock Zone, which is most of Arkansas…our contacts were telling us they expected, on net they expected, more contacts expected conditions to be slightly weaker,” Gascon said.
Previous KUAR reporting on the state’s revenue report found a gross revenue increase of 7.5% compared to last year. This report surpassed the department’s own expectations for the state and was regarded as mostly good news for Arkansas.
So why is there discrepancy between Arkansas’s Department of Finance and Administration and the Federal Reserve? Gascon says the timing of both reports played a part.
“That report came out I think pretty much the day after the day before the Beige Book was released. By that point we had already compiled our report. So we were primarily looking at the October numbers for that…I went back, related to your question and added the November numbers and the November numbers definitely look a little bit better,” Gascon said.
According to Gascon, the Federal Reserve Bank also adjusts for inflation, so their numbers are normally lower than other reports.