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By Michael Pakko, January 22, 2010 4:08 PM

The December 2009 report on Arkansas employment and unemployment was released this morning by the Bureau of Labor Statistics.  

The household survey showed a record number of unemployed in Arkansas — 105,408.  That represents about 3500 more unemployed Arkansans in December than there were in November.  The survey also showed that the number of employed declined by 10,550 from November to December (although this decline follows an increase of 10,175 in November).   The unemployment rate rose from 7.4 percent to 7.7 percent.  This is the highest unemployment rate for Arkansas since June 1988.

Source: Bureau of Labor Statistics

The payroll survey provided similarly disapointing news.  The number of workers on nonfarm payrolls declined by 3400 in December (seasonally adjusted).  Losses were largest in Trade, Transportation and Utilities (-2200) and Profesional and Business Services (-1900).  Some sectors experienced increases in employment:  for example, Manufacturing employment increased by 1000, jobs in Financial Services were up by 900, and the number of Education and Health workers rose by 800.  The table below summarizes employment changes by sector over the past six months. 

Source: Bureau of Labor Statistics

As described in a previous post, the next release of payroll data will include annual benchmark revisions, reflecting more complete information collected in the BLS’s Quarterly Census of Employment and Wages (QCEW).  Based on the most recent information available, the benchmark revisions will show much larger job losses in Arkansas than were previously reported (particularly in 2009Q2).  The table below reports projected revisions to the payroll data, extended through the end of 2009:

Source: Bureau of Labor Statistics. Projected revisions estimated by the Institute for Economic Advancement

Repeating a cationary note from the previous post :  The actual benchmark revisions to be released by the BLS on March 10 will be calculated using far more detailed methods and more up-to-date information.   Nevertheless, the revisions are likely to be of the general magnitude presented here.

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By Michael Pakko, January 15, 2010 10:05 AM

  “The bottom line:  Arkansas has lost 18,000 more jobs since the start of the recession than were previously recorded.”

In the business of monitoring and forecasting economic conditions, data revisions sometimes require tedious attention to detail and usually lead to only subtle changes in perspective.  At other times, revised data can dramatically alter our view of the world.  New data released by the Bureau of Labor Statistics (BLS) earlier this week fall into the latter category.  They  indicate that upcoming revisions to Arkansas employment statistics will reveal significant changes:  The employment situation in our state  is far worse than recent data have been leading us to believe. 

Month-to-month changes in payroll employment—as regularly reported in the media and here on the pages of the Arkansas Economist—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.”  This sample is used to produce employment estimates for the nation, the states, and metropolitan statistical areas.  It is one of the most timely and accurate measure of economic activity that is available—especially on the regional and local levels.  Nevertheless, it is a survey—subject to sampling error and unmeasured changes in the structure of of the labor market.  Specifically, the CES must use estimates of the number of establishments in a given state or metro area.  During times when there are many business entrances or exits from the market, these estimates can be off the mark.

To improve the accuracy of the statistics compiled by the CES program, the BLS also calculates a Quarterly Census of Employment and Wages (QCEW).  This is the report that came out earlier this week. 

The QCEW is a comrehensive and 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. 

However, data for the QCEW take longer to compile.   This week’s “new” data cover the period April-June 2009.  Old news.  But this more comprehensive measure will soon be used to “benchmark” the data from the CES.  On March 10, the BLS will release revisions to the CES payroll employment figures, based on the new data from the QCEW.  

For Arkansas, the QCEW showed that employment declined sharply during the first six months of 2009–down by approximately 33 thousand jobs.  In contrast, the monthly payroll employment reports from the CES have been suggesting that Arkansas employment began to stabilize in March (as reported in the Arkansas Economist here and here, for example).  We can be confident that the revisions will show sharply larger job-losses in early 2009 than are presently shown in the CES payroll data.

Rather than wait until March 10th, I have calculated  estimates for benchmarked CES payroll employment data—an exercise in forecasting an upcoming revision of history.  The results of this exercise are summarized in the figure below:

Sources: Bureau of Labor Statistics and Institute for Economic Advancement

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. 2007) and to forecast that relationship in the more recent past (Jan. 2008-June 2009).  For July 2009 through November 2009 (the most recent month availabile for the CES payroll data), month-to-month percent changes are used to extrapolate these estimates [see technical notes].

The projected revised data far sharply below current CES estimates during the first half of 2009, lowering the estimated level of employment in Arkansas for the second half of the year.  The bottom line:  Arkansas has lost 18,000 more jobs since the start of the recession than were previously recorded.

Investigating in more detail, I also estimated revisions to major sectoral categories of the data.  The results of this exercise, summarized in the table below, reveal that some sectors fared better according to the revised statistics (especially in the earlier stages of the recession, during 2008), but most fared worse (especially during 2009).   Overall, Arkansas lost slightly fewer jobs in 2008 than previously recorded, but lost far more in 2009. 

Sources: Bureau of Labor Statistics, Institute for Economic Advancement

The estimates presented here may not line up precisely with the benchmarked data to be released on March 10.  The BLS will use more detailed methods and up-to-date information to perform the actual benchmarking procedure.  Nevertheless, given the size of the discrepancy between current CES survey data and the available QCEW population data, the revisions are likely to be of this general magnitude.

Although the revisions will reveal a sharply larger employment decline in Arkansas, it remains true that the state has fared better than the nation as a whole.  The benchmarking process is expected to lower employment estimates for the total U.S. , leaving Arkansas in roughly the same relative position. 

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By Michael Pakko, January 11, 2010 4:51 PM

Governor Beebe announced another round of state budget cuts this morning.  The cutbacks total $106 million of spending, amounting to about 2.4% of the state’s budget.  Today’s announcment followed last week’s report from the Department of Finance and Administration (DF&A) that showed state revenues continuing to fall short of expectations.

For the first six months of the 2010 fiscal year (July-December 2009),  gross general revenues were down $80 million– about 3 percent–from the previous year.  More important, gross revenues were 1.9 percent below DF&A’s forecast.  As shown in the chart below, gross revenue has shown some signs of a comeback in recent months.  However, the rebound is not as large as was anticipated in the state’s revenue forcast (as revised in October 2009).

Source: Arkansas Deparment of Finance and Administration. Seasonal adjustment by the Institute for Economic Advancement

Gross General Revenues measure the total income for the state.  A more important measure for the budget is known as Net Available Revenues, which is equal to gross revenues minus some specific budgetary obligations (including tax refunds, bond payments, earmarked education funds, etc.).   Net available revenues measure the resources that are available for funding ongoing state government operations.  According to the DF&A report last week, net revenues for the first half of FY2010 were $37.7 million (1.7 percent) lower than in the previous year, and were 2.4 percent lower than the DF&A revised forecast. 

This second round of budget cuts for FY2010 should be sufficient to keep the state’s finances in balance.  As is clear in the chart above, however, a large share of the state’s revenues arrive in the second calendar quarter of the year (the last quarter of the fiscal year).   Consequently, we should have a much clearer picture of the state’s budget situation for FY2010 after income tax returns are filed in April.

Selected news coverage about the budget cuts:

• Arkansas News:  UPDATE: Beebe says no layoffs from new budget cuts
• Arkansas Online:  Beebe announces $106 million budget cut
• Arkansas Times:  Beebe cuts $106 million from budget

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By Michael Pakko, December 18, 2009 6:53 PM

Data on employment and unemployment in Arkansas were released this morning by the Bureau of Labor Statistics.  Overall, the report indicates a continuation of the trends we’ve seen in recent months.   There is no clear inidication of an upturn in employment, but neither is there evidence that the employment situation is deteriorating.  However, buried among the details of the report are some encouraging tidbits.

The household survey showed a decline in the unemployment rate, from 7.6 percent in October to 7.4 percent in November.  More important, the raw numbers that underlie the unemployment rate showed an increase of more than 10,000 in the number of people employed and a decrease of almost 2500 in the number of people unemployed.

The payroll survey showed an increase in jobs for November as well, although the data for October were revised downward to more than offset those gains.  Nevertheless, since March of 2009 nonfarm payrolls have shed only 2,500 jobs —  a decline of about 0.2%.

The sectoral composition of job gains and losses in November showed some interesting features:   Increases were registered in Construction (+1000), Manufacturing (+300), and Transportation (+1100)–three sectors that have been hard-hit during the recession.   In contrast, employment in Education and Health services declined by 1800 jobs in November.  Health services has added 13,000 jobs to the Arkansas economy since the beginning of the recession, but recent budgetary constraints at major hospitals has evidently stalled further expansion in this sector — for now.

Recovery in employment is likely to be a long, slow process.  At this point, the data suggest that we’re still in a period of stabilization.

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By Michael Pakko, December 17, 2009 11:06 AM

Figures for personal income growth in the 50 States and District of Columbia were released this morning.  In Arkansas, personal income was essentially unchanged from the previous quarter.  The press release from the Bureau of Economic Analysis was generally upbeat, noting that the report showed “19 states seeing net earnings growth for the first time in at least a year.”  With income growth improving in many States, the zero-growth measured for Arkansas placed our state in the lowest quintile with a rank of #42.

Today’s report is a very good example of why it is important to look beyond a single data observation.  For many states in the nation, even modest income growth represents a vast improvement over recent quarters.  However, Arkansas suffered a more modest slowing of income during the recession.  Personal income during the first two quarters of the year declined by less than one-tenth of one percent in Arkansas.  Income declines in other parts of the country were far greater, with a national average of -1.5%. 

The report released today shows that Arkansas personal income in the third quarter was only 0.09% lower than in the fourth quarter of 2008.  From this longer term perspective (cumulative growth during 2009), Arkansas is in the highest quintile among the states, with a rank of #8. 

Arkansas may not be showing the gains that are being recorded in other states, but we didn’t suffer as severe a downturn either.   It’s good news that other parts of the country are showing signs of recovery – this can only help businesses in Arkansas as demand for our goods and services picks up in other parts of the nation .

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By Michael Pakko, December 2, 2009 4:02 PM

The October unemployment rates for Metropolitan Statistical Areas (MSAs) were released by the BLS this morning.  The report on state unemployment rates released two weeks ago showed that Arkansas’ unemployment rate rose by one-half of one percent to 7.6 percent.  The new data for Arkansas’ MSAs show similar sharp increases.

As noted in earlier posts, the MSA data are not seasonally adjusted by BLS.  The unadjusted data show that unemployment rates rose slightly or remained steady in October.  However, October is a month in which seasonal movements typically result in a falling unemployment rate.  After accounting for this recurring pattern, seasonally-adjusted measures show increases in the range of 0.4 to 0.6 percent.

The table below summarizes the MSA unemployment rate data for October.

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By Michael Pakko, November 20, 2009 1:45 PM

The Bureau of Labor Statistics released its latest report on state employment and unemployment this morning. The obvious headline for Arkansas is that the unemployment rate rose by one-half of a percentage point to 7.6 percent. This is the highest rate for Arkansas in over two decades–clearly not good news. Nevertheless, the state’s unemployment rate remains well below that national average rate of 10.2 percent.

As alarming as the unemployment rate increase appears, one should never become too concerned about a single observation. Indeed, the Arkansas employment data have recently been subject to considerable month-to-month volatility. Recall that the unemployment rate jumped to 7.4 percent in July before falling back to 7.1 percent in August and September. The chart below illustrates a three-month moving average of the unemployment rate, smoothing out some of the monthly variability. By this measure, the rate has been fairly steady at around 7.25 percent since mid-summer.

Source: Bureau of Labor Statistics

The data on employment in Arkansas has been similarly volatile. In a post last month, I noted that the household survey and payroll survey were providing mixed signals about employment in September. The household survey showed a gain of 8400 jobs, while the payroll survey showed a decline of 7700 jobs. In the latest report, the September employment figure was revised upward, reducing the August-September job loss to 5300. For October, payroll employment was up by 4200 jobs, resulting in a net loss of only 1100 jobs over the two month period. Meanwhile, the household survey for September was revised upward (now showing an increase of nearly 8600 jobs), while the newly-released number for October showed a decline of 4100 jobs.

The chart below puts some of these monthly changes into context. Both measures of employment showed sharp declines from about October 2008 until March 2009. While falling slightly since then, Arkansas employment has evidently stabilized. We continue to see month-to-month movement in both series (some of which is smoothed out by considering a simple average of the two), but no significant upward or downward trend is discernable.

Source: Bureau of Labor Statistics

October’s increase in the unemployment rate will surely generate alarmist headlines, but overall the October employment report shows a continuation of the labor market performance we’ve been observing since spring: sluggish but not deteriorating.

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By Michael Pakko, November 19, 2009 7:58 PM

Even before the onset of the recent recession, residential real estate markets have been at the heart of our national economic tribulations. And having just purchased a home in the Little Rock area, I’ve recently taken a personal interest in the Arkansas housing market. So how did the Arkansas housing market fare during the recession, and is it now recovering?

Data on existing home sales in Arkansas are available from both the National Association of Realtors® (NAR) and the Arkansas Realtors® Association (ARA).

Last week (on November 10), the NAR released its quarterly report on state-level existing home sales. The report showed that the markets are improving in most areas of the country, with 45 states and the District of Columbia showing sales increases in the third quarter relative to the second quarter (seasonally adjusted). Arkansas was one of the states showing an increase, up 2.7%. This was the third consecutive increase for Arkansas home sales, following a 4.2% rise in the second quarter and a 3.6% increase in the first quarter. The magnitudes of the quarterly gains are relatively modest compared to some other states, but Arkansas was one of only 6 states to experience sales increases over all three quarters.

Although these data are indicative of the performance of the Arkansas market relative to other parts of the country, they do not necessarily represent the most accurate assessment of market conditions for the state. According to the the NAR’s own description of its methodology, the monthly survey covers only about 30-40% of all existing home sale transactions. The sample data are used to construct aggregates for the four census regions of the U.S., then the State data are derived from those totals.

Indeed, according to Ethan Nobles of the ARA, it is his understanding that the NAR survey excludes some of the important local markets in Arkansas. The ARA releases its own monthly summary of home sales, consisting of the total number of homes sold by Realtors® across the state. The data are subject to some revision as late reports come in, but they represent (as best as possible) a full accounting of the number of homes sold in the state.

The most recent report from the ARA came out earlier this week (November 16). It shows that home sales were up in September over the previous year. This was the second month in the past three that showed a year-over-year increase. The data, shown in the chart below, suggest that home sales in Arkansas have been on a recovery path throughout 2009.

Source: Arkansas Realtors® Association

However, it is also evident from the chart that there is a pronounced seasonal pattern in the data. Home sales tend to be lower during the winter months, and higher during the spring and summer. This makes it difficult to discern trends over periods less than a year in length. And in particular, it is hard to tell how much of the increase since January 2009 represents actual growth as opposed to regular seasonal movement.

With a longer data series, it would be possible to apply standard statistical techniques directly to the data. In the absense of a long time-series, however, more rudimentary techniques can suffice: The NAR’s monthly report on existing home sales provides estimates of both seasonally-adjusted and not-seasonally-adjusted estimates for the U.S. and the four census regions, over the past 12 months. The ratio of these two sets of estimates provide implicit seasonal factors, as calculated by the NAR (using a census X-11 procedure).

Applying the implicit seasonal factors for the Census South Region to the data for Arkansas from the ARA, we obtain a rough estimate of seasonally-adjusted Arkansas sales. The chart below illustrates the result of this procedure, with the data multiplied by 12 (so they present annualized measures), and averaged over quarters (to smooth out month-to-month variability).

Source: Arkansas Realtors® Association (ARA), National Association of Realtors® (NAR), and the Institute for Economic Advancement (IEA).

It is clear from this chart that home sales in Arkansas were sliding downward before and during the first part of the recession, then dropped sharply in the fourth quarter of 2008. Since then, sales have steadily increased. This confirms the pattern observed in the NAR data suggesting that residential real estate markets in Arkansas have been consistently improving since the beginning of the year.

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By Michael Pakko, October 29, 2009 6:04 PM

The UALR Arkansas Economic Forecast Conference took place today.  I thank all of those who attended, and extend special thanks to the participants:  Richard Bell, Roby Brock, Lane Kidd, Chris Masingill, David Sanders and Julie Stackhouse. 

Proceedings of the conference are available on the

Arkansas Economic Forecast Conference page. 

News coverage:

    State rebound to take time, says economist

    UALR Economist Foresees Modest Growth Ahead

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By Michael Pakko, October 21, 2009 12:22 PM

September data on Arkansas employment and unemployment were released by the Bureau of Labor Statistics (BLS)  this morning.  The report provides mixed signals.

The household survey shows that the unemployment rate remained stable in September at 7.1%.  Arkansas is now 2.7 percentage points below the national unemployment rate.  The household survey also showed that the number of employed rose by more than 8400 from August to September.  The number unemployed also rose, but only by 539 jobs.

On the other hand, the payroll survey showed a large decline in the number of Arkansas jobs.   The new data show a seasonally-adjusted decline of 7700 jobs in September.  Moreover the number for August was revised down by 1600 jobs.  By this measure, the trend of stabilizing employment would seem to have collapsed.

Generally speaking, the payroll numbers are more accurate and provide more detail on labor market conditions.   However, they are also subject to significant revisions from month to month, and undergo a major benchmark revision in the spring of each year.  We may find that the September payroll employment report is a statistical fluke.  Nevertheless, we should not dismiss the numbers just yet.  The discrepency between the two surveys is an indication of the degree of uncertainty that we have regarding the employment outlook for Arkansas.

Two Measures of Employment in Arkansas