A new report issued by the Federal Reserve of St. Louis discloses that the recession hit Missouri harder than the rest of the country and that it will take a while before the state regains its economic footing.
An index created by the Philadelphia Fed indicates Missouri took a hard hit in January of 2008. Though the recession is officially over, recovery has been painfully slow. St. Louis Federal Reserve Bank economist Howard Wall says that while uncertainty about the future has held business back, certainty about rising costs has played a role as well.
“One of the things people are very certain about is that taxes are going to be higher, health care costs are going to be higher, financial regulations are going to be more costly for them,” Wall tells the Missourinet. “So, they’re certain about the sign that everything’s going. They’re not really sure exactly how all of that is going to be implemented precisely and what they’re going to end up having to do.”
Flipping through the Burgundy Book, it’s hard to find any reason for optimism.
Nearly 40% of the general retailers and half the car dealers tell the St. Louis Fed that sales for July and early August dropped below levels during the same time period last year. Car dealers seem to be at least a bit optimistic about September and October sales, but retailers remain cautious.
Manufacturing activity in the St. Louis zone, which includes eastern and much of southern Missouri, remains fairly stable. The service sector has shown some improvement.
The housing market continues to languish. Improvement can be seen in the industrial real estate market. The commercial real estate market has weakened.
Very little movement can be seen in the credit market. Wall says the availability of credit is hard to gauge. He says bankers claim they are willing to extend credit to worthy projects, but they are having trouble finding them. Business owners report difficulty in obtaining credit for their projects. One contact told the Fed that consumer lending will remain sluggish until uncertainty over the economy gives way to a more confident consumer.
An interesting tidbit in the report is the Philadelphia Fed’s coincident index that combines payroll employment, wages and salaries, the unemployment rate, and hours worked into a single index. That index claims that Missouri took a harder hit than the rest of the country when the recession shook the economy in early 2008.
Whether that index is valid or not, the report simply states the economy in the St. Louis zone, which spread over portions of seven states, has been showing few signs of expansion. Wall doesn’t expect an economic rebound any time soon.
“You know, I don’t know, it could be slightly faster, slightly slower, but it’s going to be a long haul for everyone, including us,” Wall says.