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By Michael Pakko, January 26, 2012 3:13 PM

The final sales report of the year from the Arkansas Realtors® Association (ARA) showed that home sales in December were down 6.2% from December 2010.  Total sales for the year were reported to be down slightly from the previous year (-0.6%), marking 2011 as the slowest sales year in recent history.  Nevertheless, there is reason to be optimistic about residential real estate markets in Arkansas.  Although 2011 sales were lower than the previous two years, they had been boosted in 2009 and 2010 by the Federal home-buyer’s tax-credit programs.  As shown in the figure below, home sales exhibited unusual spikes in the final months of the first-time home buyer’s program (November 2009) and at the conclusion of the second round of home-buyer tax credits (April 2010).  Sales in 2011 followed a more typical seasonal pattern, without any temporary boosts from government incentive programs.

Source: Arkansas Realtors® Association

After using standard statistical techniques to seasonally adjust the data, the extraordinary nature of the policy-induced sales spikes becomes even more apparent.  More important, the seasonally-adjusted data show a trend of increasing sales over the course of 2011.  Extrapolating this trend forward into 2012 suggests the emergence of a long-awaited, sustainable recovery in Arkansas residential real estate markets.

Source: Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancement

At the UALR Economic Forecast Conference in November, we anticipated that annual home sales for 2011 would be down slightly from the previous year (-0.8%), but that we would see a significant improvement in 2012 (+12.6%).  Although this would represent a significant improvement, the forecast is not based on expectations of a dramatic recovery in housing market conditions; rather, it reflects the expected outcome of slow steady growth starting from a very low base.  Given the typical seasonal pattern in home sales, however, it won’t be until the summer surge that we will have a clear indication of how the totals will end up in 2012.

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By Michael Pakko, January 24, 2012 2:43 PM

The Arkansas unemployment rate declined to 7.7% in December, down from a revised 7.9% rate in November.   Over the last two months of the year, the number of unemployed declined by 6,469 and the number employed rose by 16,190.  Accordingly, the sharp drop in the unemployment rate has taken place in the context of an expanding labor force.  Since Spring of 2011, we had seen the labor force participation rate decline sharply as the unemployment rate rose.  In the final months of year we’ve seen that trend almost completely reversed and we’re now right about where we were before the summer doldrums hit the Arkansas employment market.

Source: Bureau of Labor Statistics

The improvement in unemployment indicated by the household survey suggests that the temporary weakness we saw during 2011 has abated.  But there is still reason to be cautious about the outlook for 2012.  In the independent payroll survey released as part of today’s report, total employment for the month declined slightly from the previous month (-500, seasonally adjusted).  Moreover, the employment total for November was revised down by 1,600.  For the two months together, payroll employment was up by 5,000.  However, total employment remains below a peak reached in April 2011.

Source: Bureau of Labor Statistics

The December decline in payroll employment was spread across service-providing sectors.  One notable exception was Trade, Transportation and Utilities, which showed an increase of 1,900 jobs for the month.  Nevertheless, TT&U employment remains 4,800 jobs below the April 2011 peak.  Other sectors that continue to lag well below their levels of last spring include Manufacturing and Professional & Business Services.

Source: Bureau of Labor Statistics

Compared to a year ago (December 2010), total payroll employment is up by 8,000.   However, the next monthly report (Scheduled for March 13), will include annual benchark revisions to the payroll data.  As discussed in a previous post, the data revisions are likely to result in a sharp downward revision to the payroll figures for early 2011.  As a result, we are likely to see the year-over-year employment gains revised away in light of updated, more accurate data.

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By Michael Pakko, January 4, 2012 1:35 PM

Unemployment rates in Arkansas metro areas fell sharply in November, adding to declines registered in October.  The newest data, released this morning by the Bureau of Labor Statistics, show unemployment rates down in each of the Metropolitan Statistical Areas (MSAs) that include parts of Arkansas. The raw data (which are not seasonally adjusted) generally understate the magnitude of the declines. After seasonal adjustment, the declines in November ranged from -0.2% in Fort Smith to  -0.9% in Memphis.  For the two months of October and November, unemployment rates were down by at least one-half of a percentage point in all eight MSAs.

Sources: Bureau of Labor Statistics, Institute for Economic Advancement

After experiencing rising unemployment rates over the first half of 2011, the recent declines leave unemployment lower than the previous year in every MSA except Pine Bluff, where the unemployment rate was unchanged from November 2010.

Sources: Bureau of Labor Statistics, Institute for Economic Advancement

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By Michael Pakko, December 20, 2011 11:10 AM

The unemployment rate in Arkansas fell by two-tenths of a percent to 8.0% November.  According to data from the Bureau of Labor Statistics (BLS) and the Department of Workforce Services (DWS), the number of unemployed Arkansans declined by 3,219.  The household survey also showed an increase of nearly 10,000 employed, so the unemployment rate declined in the context of a sharp increase in the labor force.

Source: Bureau of Labor Statistics

The independent payroll survey also showed a significant increase in employment.  Total nonfarm payrolls increased by 7,100 for the month, a gain of 0.6% (seasonally adjusted*).  According to the press release from the BLS, this was the second-largest over-the-month percentage increase in the nation (employment in South Carolina increased by 0.9%).  As shown in the table below, gains were prominent in service-providing sectors — particularly Professional & Business Services (+2,500) and Education & Health Services (+2,000).  Gains in Retail Trade employment also boosted the Trade, Transportation & Utilities category, which increased by 1,100 jobs.  The November data also showed a sharp increase in Manufacturing employment (+1,400). 

Source: Bureau of Labor Statistics

Since peaking in April 2011, employment in Arkansas had been on the decline for much of the year.  The November increase (on top of a revised 1,200 job gain in October) represents a welcome reversal of that trend.  On net, however, employment remains 1,200 below the April peak.  Compared to the trough registered in February 2010, employment in Arkansas has increased by 29,400.  Nevertheless, the total number of jobs remains 29,100 below the level recorded at the start of the recession in December 2007. 

Source: Bureau of Labor Statistics

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By Michael Pakko, December 19, 2011 11:17 AM

New figures from the U.S. Bureau of Economic Analysis show that total personal income in Arkansas declined slightly in the third quarter, down $57 million or 0. 06%.  In addition, data for the first two quarters of 2011 were revised downward.  Previously-released data showed growth rates of 1.4% and 1.3% in the first two quarters of the year, while the new data show growth of only 0.9% and 0.7%.

Nationwide, personal income growth slowed considerably in the third quarter, growing at only 0.1%.  This represents a sharp deceleration from the 1.3% pace of the previous four quarters.  The chart below shows the growth slowdown for the U.S., and illustrates that income growth in Arkansas has been slowing relative to the national average over the past year.  As of the third quarter, total personal income for both Arkansas and the U.S. are 3.1% higher than the previous peak (in the second quarter of 2008). 

Source: Bureau of Economic Analysis

Many of the important components of Arkansas personal income were positive, although the magnitude of the changes were very small.  Nonfarm income was up slightly (+$ 25 million or 0.02%), while the overall downturn was concentrated in farm income, which was down $81 million — a 12.5% drop from the previous quarter.  The decline in farm income was, in turn, concentrated in proprietors’ income, which was down $84 million or 24.3%.

The only other components of Arkansas income that contracted in the third quarter was personal current transfer receipts.  This component, which includes all sources of transfer payments to individuals from government entities, was down by $141 million, or 0.6%.  As discussed in previous posts, transfer payments tend to provide temporary support for incomes during economic downturns, so a measure of total income that excludes transfers provides a better indication of the underlying growth of the private-sector economy.  The chart below compares Personal Income Less Transfer Payments for the U.S. and Arkansas.  By this measure, the relative slowdown in growth for Arkansas is even more pronounced. 

Source: Bureau of Economic Analysis

 Given the weak performance of Arkansas’ labor markets this year, it is not surprising that personal income growth has lagged behind the rest of the nation.  When it comes to potential drivers of this slowdown, the extraordinary weather events of 2011 are a likely culprit.  The tornados and floods in the spring, followed by the summer drought, had measurable impacts on Arkansas agricultural sector.  The good news is that weather is a temporary factor:  This year’s weakness in agricultural incomes (along with their ripple-effects on the rest of the Arkansas economy) are unlikely to have lasting effects on income growth.

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By Michael Pakko, November 29, 2011 12:12 PM

New data from the Federal Housing Finance Agency (FHFA) show that house prices in Arkansas increased slightly in the third quarter,  and data for the second quarter were revised to show a modest increase as well.   The FHFA All-Transaction Index for Arkansas increased by 0.4% from the second quarter to the third, leaving home prices down 1.8% from a year earlier.  The index for the U.S. was up 0.9% for the quarter, but remains 4.3% lower than the previous year.

Source: Federal Housing Finance Agency

Among Metropolitan Statistical Areas (MSAs) that include parts of Arkansas, prices were up in Fayetteville-Springdale-Rogers, Fort Smith, Jonesboro, Little Rock-N. Little Rock-Conway, and Memphis.  Prices were down in Hot Springs, Pine Bluff and Texarkana.  Compared to the third quarter of 2010, prices were higher in two of the state’s MSAs:  Hot Springs and Texarkana. 

House prices in Arkansas have generally been trending downward from the beginning of 2009, and the increase in prices in the third quarter only partly reversed the accumulated declines.  Compared to two years ago, house prices are down in all of Arkansas’ MSAs.  But in the longer run, house prices outside of Northwest Arkansas have retained much of their value.  Over the past 5 years, the net change in house prices has been positive in 5 of the state’s MSAs, and are essentially unchanged in Pine Bluff.  Only the Fayetteville and Memphis metro areas have shown net declines since the third quarter of 2006.

Source: Federal Housing Finance Agency

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By Michael Pakko, November 22, 2011 10:50 AM

The unemployment rate in Arkansas dropped one tenth of a percentage point to 8.2 percent in October.  According to data from the Bureau of Labor Statistics (BLS) and the Department of Workforce Services (DWS), the number of unemployed Arkansans fell by 663 (seasonally adjusted), the first monthly decline since May.  The data from the household survey also showed that the number of employed rose by 7,424.  Arkansas was one of  36 states to see a drop in the unemployment rate in October, but one of only 8 states with an unemployment rate higher than one year earlier.

Source: Bureau of Labor Statistics

The separate payroll employment report showed an increase of 1,000 jobs for the month (seasonally adjusted).  However, total employment in October was down 1,300 from a year earlier, and 8,500 below the recent peak employment recorded in April 2011.  Month-to-month changes showed declines in good-producing sectors, with Construction down by 500 and Manufacturing down by 1,500.  Employment in Trade, Transportation and Utilities was also down sharply.  With the exception of Information Services, all service-sector categories showed increases in October.  As noted in the news release from DWS, not-seasonally-adjusted data for Education and Health Services and Local Government showed increases associated with back-to-school effects.  Nevertheless, these categories also experienced employment increases after accounting for this recurring seasonal pattern.

Source: Bureau of Labor Statistics

As previously reported on the Arkansas Economist, the payroll data are subject to annual benchmark revisions that will be completed in March 2012.  Based on available data from the Quarterly Census of Employment and Wages (QCEW), the benchmark revisions are likely to show sharply lower job growth for the fourth quarter of 2010 and the first quarter of 2011.  Consequently, the total level of employment for all subsequent months (including October) are likely to be revised downward by about 10,000 jobs (+/- 2,000).

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By Michael Pakko, November 9, 2011 9:00 AM

The latest monthly revenue report from the Department of Finance and Administration indicated another slow month for sales tax collections in October (corresponding to transactions in September).  Nevertheless, strength in the previous month propelled the non-gasoline component of Arkansas Taxable Sales to a healthy increase of 1.8% in third quarter (seasonally adjusted).*  And despite a decline in gasoline prices relative to the second quarter, gasoline expenditures rose by 3%.  Overall, Arkansas Taxable Sales Including Gasoline (ATSIG) rose by 1.9%.

Sources: Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement

The third-quarter increase in ATSIG represents a wecome recovery from the decline recorded in the second quarter.  And in fact, growth in the previous two quarters would have been slower had it not been for higher gasoline expenditures associated with a price spike.  The third quarter growth rate appears to indicate a resurgence of growth after a year-long slowdown.

Relative to U.S. Retail Sales, the third quarter increase in ATSIG also represents an improvement (see chart, below).  Arkansas had fallen behind in the pace of overall sales growth during late 2010 and early 2011, but the 1.9% increase in the third quarter exceeded the U.S. growth rate of 1.1%.

Sources: U.S. Census Bureau, Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement

One important caveat to the third quarter figures should be mentioned:  The totals for ATSIG do not include tax-exempt expenditures associated with the new back-to-school sales tax holiday in August.  Information is sketchy on the magnitude of this sales surge.  But if DF&A estimates are correct,  August sales were actually about 1% higher than implied by the sales tax data.  This corresponds to a 0.3% increase in quarterly growth, raising ATS growth in the third quarter to over 2%.

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Arkansas Taxable Sales (ATS) is calculated by the Institute for Economic Advancement to serve as a timely proxy for Arkansas retail sales.  The series is derived from sales and use tax data, adjusting for the relative timing of tax collections and underlying sales, changes in tax laws, and seasonal patterns in the data.  Arkansas Taxable Sales Including Gasoline (ATSIG) incorporates data on the state motor fuel tax and gasoline prices from the Oil Price Information Service.

A spreadsheet of the data is available here:  Arkansas Taxable Sales Data 2011:Q3 (Excel file)

* Data are preliminary until the release of the DFA report, Arkansas Fiscal Notes for October 2011, and will be updated when information becomes available.

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By Michael Pakko, November 8, 2011 1:25 PM

News coverage of the Arkansas Economic Forecast Conference featured the forecast of an ”expected future revision of history.”  Just as in 2009, it appears likely that the annual benchmark revision of payroll employment data will include sharply lower estimates for Arkansas employment in 2011.  Compared to currently-published estimates, the revised data will show about 11,000 fewer jobs.

The monthly payroll employment data come from the BLS’s Current Employment Statistics (CES) program.  According the the BLS, the CES surveys “about 150,000 businesses and government agencies, representing approximately 390,000 individual worksites.”  Each year, however, the CES data are revised to match the more-comprehensive Quarterly Census of Employment and Wages (QCEW).  The QCEW is a detailed account of employment, disaggregated by sectors and by counties.  It is constructed from state unemployment insurance records, so it constitutes a full accounting of all covered jobs in the nation. 

Because of it’s comprehensive coverage, the QCEW provides a more accurate picture of employment than the CES.  But it also takes longer to compile –  data for the first quarter of 2011 were published just last month.  When the revised CES payroll employment data are released next March, it is this 2011:Q1 QCEW data that will be used as a benchmark.  The benchmark revision process is a detailed exercise that affects data for each individual sector and each state and metro area in the U.S. — that’s why we won’t find out the results until March 2012. 

But it is possible to estimate the approximate magnitude of the revisions for Arkansas using simple linear regression techniques.*  Based on this analysis, we forecast that the CES data for Arkansas will be revised sharply downward in the first quarter of 2011 — down approximately 11,000 jobs.  The lower employment in 2011:Q1 will carry through for the rest of the year, resulting in a permanently lower level of employment estimates for 2011.

Source: Bureau of Labor Statistics; calculations by the Institute for Economic Advancement.

The revision is not entirely negative.  Revised data for 2010 will show slightly higher employment than the currently-published numbers.  But this tends to exacerbate the negative impact of the revisions on job growth for 2011.  Currently-published data show job growth of 8,000 (0.7%) for the four quarters ending 2011:Q3.  The revised data are expected to show a net decline of 3,200 jobs (-0.3%).

The magnitude of the data revisions also vary by sector.  As shown in the table below, some sectors are likely to show positive net revisions:  Manufacturing and Government, in particular, are expected to be revised upward — each by more than 3,000 jobs.  Downward revisions are concentrated in private-sector service-providing sectors, with Business & Professional Services and Leisure & Hospitality Services registering the largest declines.  Note that the sum of the estimated component-revisions do not add to the total.  Taking the estimated revisions sector-by-sector, the total downard revision is 9,400.

Source: Bureau of Labor Statistics; caluclations by the Institute for Economic Advancement

Whether the total downward revision is 11,000 (as estimated for the total) or 9,400 (as estimated for the sum of super-sector components), the general magnitude of the downward revision is clear.  After all the data are in, it looks like employment growth during 2011 will be close to zero.  In terms of the slow jobs-recovery from the 2008-09 recession, 2011 is shaping up to be a “lost year” for Arkansas. 

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*The projected benchmark series is calculated using some simple statistical procedures to estimate the  correspondence between the two measures in the past (Jan. 2001-Dec. 2009) and to forecast that relationship in the more recent past (Jan. 2010-March 2011).  For April 2011 through September 2011 (the most recent month availabile for the CES payroll data), month-to-month percent changes are used to extrapolate these estimates forward.  Quarterly estimates are then calculated as the average of monthly figures.

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By Michael Pakko, November 3, 2011 3:55 PM

Yesterday, the September figures for employment and unemployment were released by the Bureau of Labor Statistics.  The not-seasonally-adjusted data for Arkansas metro areas show that unemployment was higher in September of 2011 than in September of 2010 everywhere except Hot Springs.  On a month-to-month basis, unemployment rates were down across the state; however, this drop represents part of the typical seasonal effect that is seen in August and September — when the students are back to school and teachers are back to work.  After seasonal adjustment, the change in unemployment rates from August to September was postive in each of Arkansas MSAs.

Source: Bureau of Labor Statistics

As shown in the chart below, there is a clear trend emerging for 2011.  After some improvement in 2010, unemployment rates have been rising for several months now.   Higher rates of unemployment are emerging in nearly every area of the state, and the magnitudes of increase rates have been substantial:  Since February, unemployment rates are up more than a percentage point in Fayetteville, Little Rock and Pine Bluff.

Source: Bureau of Labor Statistics; Seasonally adjusted by the Institute for Economic Advancement.