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By Michael Pakko, March 18, 2013 1:29 PM

New and revised data for state employment and unemployment were released today by the Bureau of Labor Statistics and Department of Workforce Services.

For January, the household survey (a.k.a. Local Area Unemployment Statistics) featured an uptick in the unemployment rate to 7.2% (up from December’s 7.1% rate).  The number of people employed was down by 4,055 while the number employed increased by 760.  Consequently, the labor force declined by nearly 3,300.  The unemployment statistics were recently revised, reducing the magnitude of some recent fluctuations in Arkansas’ unemployment rate.  The revised data show that the rate peaked at 8.0% (instead of 8.2%), and the decline from July 2011 through April 2012 amounted to only 0.7% (instead of 1.0%).  The rate for December 2012 was unrevised at 7.1%.  The uptick in January’s unemployment rate mirrors the 0.1% increase that was previously reported for the U.S. average.

Source: Bureau of Labor Statistics

Payroll Survey:
The not-seasonally adjusted data for nonfarm payroll employment showed a decline of 20,800 jobs from December to January.  However, payroll employment is subject to particularly large seasonal effects in January:  the holiday break in public schools lowers employment in state and local government sectors, the end of the holiday shopping season reduces retail employment, and construction activity tends to scale back during the winter months.  After seasonal adjustment*, nonfarm payroll employment declined by only 1,700 for the month.

The employment contraction was smaller after seasonal adjustment, but it was still a decline.  Even considering seasonal patterns, construction employment was down 2,300.  Notable declines were also reported for Wholesale Trade, Transportation & Utilities, Professional & Business Services, and Government.

Source: Bureau of Labor Statistics

Benchmark Revisions:
The release of the January report was delayed by the annual “Benchmark Revision” process for payroll employment data.  The benchmarking involves a re-calibration of the monthly payroll employment series to be consistent with the more detailed Quarterly Census of Employment and Wages (QCEW).  We had expected the benchmarking process to result in a significant upward revision in the Arkansas payroll data, and it did.  The revisions to data for 2011 were particularly large.  For the period July through December 2011, the average monthly revision was +17,300.  This year, the BLS extended the period subject to benchmark revision to include the second and third quarters of 2012.  This resulted in lower job growth during 2012 than previously reported, but the increases in 2011 left the level of employment substantially higher than the earlier data had suggested.  In addition to the benchmark revision itself, the data were also subject to revised seasonal factors.

In total, the revisions amounted to an increase in payroll employment of 11,900 more than previously estimated for December 2012.     The newly revised data now show that Arkansas payroll employment expanded by 28,700 from February 2010 through January 2013 — a recovery of approximately one-half of the total job losses experienced during the employment contraction of December 2007 through February 2010 (see table above).

Sources: Bureau of Labor Statistics, Institute for Economic Advancement

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By Michael Pakko, March 14, 2013 1:51 PM

The U.S. Census Bureau released new population estimates today.  The statistics for Arkansas contain no real surprises:  Population growth patterns continued along well-established trends.  Among Arkansas’ 75 counties, only 25 experienced positive population growth between the April 2000 Census and July 2012.  The fastest growing counties over the past two years were the suburban areas of the state’s largest metropolitan areas.  Benton County in Northwest Arkansas had the highest growth (4.9%), followed by Faulkner County in Central Arkansas (4.8%).  The top four also included Saline County and Washington County.  Other areas of relatively rapid growth included parts of Northeast Arkansas (Craighead and Green Counties), as well as some counties in the North-Central part of the state. Overall, the state’s population increased by 1.1%.

[For a full-page PDF file of the map, click HERE.]

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By Michael Pakko, March 8, 2013 4:19 PM

The Arkansas Realtors® Association (ARA) announced yesterday that January home sales were up 11.6% from the previous year.  After several months of some slow sales growth, the January figures would seem to indicate some improvement in Arkansas residential real estate markets.  However, there are good reasons to avoid being overly enthusiastic about the report.

First, as illustrated in the chart below, January tends to be the slowest sales month of the year.  Although the January 2013 sales total of 1,448 is the highest January total since 2008, total sales in 2013 will depend far more crucially on the sales figures in the peak summer months.  Weak sales in the summer would completely swamp the sales gains from January.

Source: Arkansas Realtors® Association

A second reason to be cautious in interpreting the January sales figures is the volatile nature of month-to-month fluctuations in home sales.  The ARA had previously reported that sales in November 2012 were up 6.6% from the previous year but that December sales were down 6.2%.  The January increase should be interpreted in light of this pattern of zig-zags.  Moreover, severe weather in the final week of 2012 might have distorted the statistics for both December and January.  The ARA sales statistics refer to home-sale closings.  With much of the state paralyzed by ice and snow snow, and with many homes and businesses lacking electricity, it is quite possible that some final inspections and closings were delayed until after the start of the new year.  This would help to explain both the downturn in the December sales figures and the sharp increase in January.  If we consider the two-month period of December 2012/January 2013, total sales were up only 1.3% from the same time a year earlier.

Nevertheless, there is reason to be cautiously optimistic about the outlook for home sales in 2013. Financing rates remain at all-time lows, home prices have appear to have bottomed-out, and general economic conditions continue to improve.  Although the sales trend has been flat for the past two years, seasonally-adjusted data shown in the figure below gives some indication of a slight upturn in recent months.  The pace of sales growth in the upcoming spring months should give a better indication of whether this apparent upturn represents a lasting improvement.

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

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By Michael Pakko, February 27, 2013 8:05 AM

The Commerce Department announced yesterday that 35 states saw merchandise export growth in 2012, and that Arkansas had the second-highest growth rate in the nation.  Total Arkansas exports were $7.6 billion, representing an increase of 36% from 2011 (second only to New Mexico’s 42% growth rate).  During the recession, exports from Arkansas did not decline as sharply as the national total, but had been slower to recover in 2010 and 2011.  The sharp increase in 2012 vaulted Arkansas exports well above the U.S. gain since the export peak of 2008.

Source: Foreign Trade Division, U.S. Census Bureau.

Arkansas’ largest export category in 2012 was Transportation Equipment, comprising 28% of the state’s total.  (Within this category, the state’s leading export is “Civilian Airplanes, Engines and Parts,” but “Graders and Levelers” has also been a recent large contributor.)  After Transportation Equipment, Arkansas’ next-highest export categories are Chemicals and Food Manufactures.  These top three categories accounted for about half of the state’s total value of exports.

Source: Foreign Trade Division, U.S. Census Bureau.

One factor that contributes to a relatively high variability in Arkansas exports is the fact that transportation equipment is such a large component.  This tends to be a “lumpy” category of export goods:  for example, aircraft shipments occur infrequently but in large dollar volumes.  In fact, aircraft exports have even been known to temporarily distort national trade statistics at times (see, here, for example).

As shown in the figure below, the Transportation Equipment component has indeed been a volatile component of Arkansas exports.  In 2012, shipments of Transportation Equipment accounted for approximately two-thirds of Arkansas’ total export growth.  Consequently, the sharp rate of increase in total Arkansas exports in 2012 can be ascribed, at least in part, to the relatively low level of Transportation Equipment exports in 2011.  This observation is not intended to diminish the good news that exports expanded in 2012, but to caution that the particularly high rate of export growth that Arkansas experienced in 2012 is likely to be a transitory phenomenon.

Source: Foreign Trade Division, U.S. Census Bureau.

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By Michael Pakko, February 26, 2013 3:52 PM

More evidence came out today suggesting that home prices have bottomed-out and are moving tentatively higher.  The new data from the Federal Housing Finance Agency (FHFA) — covering the fourth quarter of 2012 – show upward momentum in prices both nationwide and here in Arkansas.  As shown in the chart below, the FHFA “Purchase-Only Index” for Arkansas held relatively steady over the second half of the year, but ended the year about 2.3% higher than the fourth quarter of 2011.  The corresponding measure for the U.S. continues to increase steadily, rising 5.5% over the course of 2012.

Source: Federal Housing Finance Agency

The FHFA home price indexes are constructed using sales price information from all mortgages processed by FannieMae and FreddieMac.  In order to expand the coverage to include other mortgages, the FHFA has recently introduced an “Expanded Index” that also includes information from county recorder offices.  The latest information from this data series presents an even clearer picture of recent house price appreciation.  In the fourth quarter, the expanded index data shows prices up 1.4% in Arkansas and up 1.6% for the U.S.  Compared to the fourth quarter of 2011, prices were up 5.7% in Arkansas and 5.5% nationwide.

Source: Federal Housing Finance Agency

In order to accumulate enough sales-price data to provide reliable indicators for metro-area home prices, the FHFA also constructs a set of “All Transactions” indexes that include information from actual home sales as well as refinancing appraisals.   As detailed in the table below, home prices have recently been on the increase in almost all of the state’s metro areas.

Source: Federal Housing Finance Agency

There is one exception to the recent trend:  Home prices in Hot Springs have continued to decline over the second half of 2012.  It is notable, however, that the housing market in Hot Springs remained strong well after home prices began to decline nearly everywhere else in the nation. That is, patterns in house prices in Hot Springs appear to be lagging behind the state and national trends.  As shown in the chart below, home prices in Hot Springs have fallen by about 4.4% since the beginning of 2007 — the same rate of decline as the statewide average.

Source: Federal Housing Finance Agency

The metro-area chart also shows a wide divergence over longer-term house-price changes.  Prices in Fayetteville and Memphis remain well-below their previous peaks, while many of the metro areas have seen relatively little net change in prices over the past 5 to 6 years.  At the other extreme, house prices in Texarkana were barely affected by the general decline in prices over the past several years.

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By Michael Pakko, February 26, 2013 8:30 AM

The Arkansas Realtors® Association (ARA) released new home sales data yesterday, covering the final two months of 2012.  November sales were up 6.6% from the previous year, while December sales were down 6.2%.  For the two-month average, home sales were essentially flat (+0.1%) compared to the same period in 2011.  The chart below shows that Arkansas home sales in 2012 were a repeat of the 2011 experience:  a typical seasonal pattern with no apparent change in trend.  In fact, the annual figures from the ARA show that sales in 2012 were down 1.1% for the year as a whole.

Source: Arkansas Realtors® Association

After seasonally adjusting the data to statistically remove recurring annual patterns, the flat-line for Arkansas home sales becomes even more evident.  In the figures below, seasonally-adjusted data are displayed for the monthly sales data and for quarterly totals.  Both charts illustrate the absence of any discernible trend over the past two years.

Sources: Arkansas Realtors® Association, Institute for Economic Advancement

Sources: Arkansas Realtors® Association, Institute for Economic Advancement

The release of sales data for November and December was, in some sense, anticlimactic — the final two months are typically among the slowest sales months of the year, so there was little chance of a substantial year-end surprise.  Sales during the peak summer months of 2012 had already shown that annual totals would be little-changed from the previous year.

Looking ahead to 2013, there are reasons to be cautiously optimistic:  Financing rates remain at all-time lows, home prices have appear to have bottomed-out, and general economic conditions continue to improve (albeit slowly).  Foreclosures and distressed sales will continue to be a negative factor, since foreclosures add to available inventory and tend to put downward pressure on prices.  Nevertheless, this is likely to be less of a drag on home sales over time as the pace of foreclosure activity continues to slow.  Overall, our forecast for home sales in 2013 remains a modest increase of about 6%.

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By Michael Pakko, February 25, 2013 11:49 AM

After a 5-month administrative delay, the U.S. Bureau of Economic Analysis has released new 2011 GDP data for the nation’s metropolitan areas.  The statistics are considered “advance statistics,” subject to considerable future revision.

Nationwide, real (inflation-adjusted) GDP increased in 242 of the nation’s 366 metro areas in 2011, with an overall metro-area growth rate of 1.6%.   Here in Arkansas, growth rates were positive for Hot Springs, Little Rock, Memphis and Texarkana.  The economies of Fort Smith, Jonesboro and Pine Bluff contracted from the previous year, while Northwest Arkansas saw real GDP unchanged from the previous year.  Even among the Arkansas metro areas that expanded, growth rates were generally below the national average (with only Little Rock matching the U.S. average).

The preliminary nature of the “advance” estimates leaves a great deal of uncertainty about the magnitude of the reported growth rates.  Along with current growth rates, the table below also shows revisions to the data from previous years.

Source: Bureau of Economic Analysis

In general, negative growth rates in 2009 were revised downward — indicating that the effects of the recession were more severe than previously reported.  The only Arkansas metro area with a positive growth rate in 2009 was Little Rock; but even this estimate was subject to a substantial downward revision.

In 2010, the newly-revised data generally show higher growth rates than the advance estimates published in September 2011.  Growth in the Fayetteville metro area, in particular, was marked up substantially.  At the other extreme, the new estimates show negative growth for Little Rock in 2010, compared to the small increase that was originally reported.

As demonstrated by the magnitude of the revisions for 2009 and 2010, it is quite likely that the 2011 growth rates will be revised considerably by the time the next metro area GDP report comes out this September.

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By Michael Pakko, February 7, 2013 2:57 PM

The most recent General Revenue Report  from the Department of Finance and Administration (DF&A) indicated a slight decline in sales and use tax revenue compared to the previous year, but both of the previous months’ reports had shown year-over-year increases.  As a result, preliminary figures for Arkansas Taxable Sales (ATS) for the fourth quarter of 2012 show a rebound after two consecutive quarters of decline.  Fourth quarter taxable sales were up 3% from the previous quarter (seasonally adjusted) and were 0.9% higher than the fourth quarter of 2011.

According to data from the Oil Price Information Service, monthly average gasoline prices in Arkansas declined over the quarter, falling from $3.65 per gallon in September to $3.11 in December.  On a quarterly average basis, , gasoline prices declined from an average of $3.46 in the third quarter to $3.27 in the fourth quarter.  Preliminary information on gasoline sales from DF&A’s Motor Fuels Tax section indicate that fourth quarter sales declined slightly from the third quarter — but less than is typical for that time of year.  So after seasonal adjustment, total gasoline sales were up 2.4%.  Consequently, Arkansas Taxable Sales Including Gasoline (ATSIG) were up 2.9% — nearly the same rate of increase as ATS.

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

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

The weakness of taxable sales growth during the second and third quarters of 2012 remains somewhat mysterious.  Available data on income and employment in Arkansas did not show notable weakness over that period, but those measures are subject to future revision.  National retail sales statistics showed a decline in the second quarter, but  rebounded in the third quarter.  Regardless of the cause of the mid-year slump, the fourth quarter recovery suggests positive momentum for consumer and business spending going into 2013.

At this point, the fourth quarter data are incomplete.  Final figures on sales and use tax collections are not yet available, nor are the data for gasoline sales in December (the gasoline component of ATSIG in this preliminary report is includes December figures that are derived from model-based estimates).  The data will be updated here on the pages of the Arkansas Economist when final information becomes available.

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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 2012:Q4 (Excel file)

* Data are preliminary until the release of the DFA report, Arkansas Fiscal Notes for January 2013, and will be updated when information becomes available.

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By Michael Pakko, January 30, 2013 11:40 AM

Unemployment rates in Arkansas metro areas ratcheted up in December — a typical seasonal pattern.  After seasonal adjustment, however, rates were essentially unchanged across the state.  As shown in the table below, unemployment rates were lower than the previous year in all of Arkansas’ metro areas, with declines ranging from -0.3% in Memphis to -1.2% in Texarkana (not seasonally adjusted).  Across the nation, the Bureau of Labor Statistics reported that unemployment rates were down from the previous year in 290 of the 370 metropolitan areas, higher in 68 metro areas, and unchanged in 14 areas.

Source: Bureau of Labor Statistics (Local Area Unemployment Statistics)

December unemployment rates were up from the previous month, but such increases are typical of December when schools and universities break for the year-end holidays.  The BLS smoothed seasonally adjusted estimates provide a more informative comparison of month-to-month changes.  The smoothed seasonally adjusted numbers show little change in unemployment rates across the state.  Rates ticked down by 0.1% in Fort Smith and Texarkana and ticked up by 0.1% all the other metro areas except Jonesboro (which was unchanged).

Source: Bureau of Labor Statistics (Smoothed Seasonally Adjusted Metropolitan Area Estimates)

Payroll Employment
Nonfarm payrolls expanded in December for Jonesboro (+1.0%) and Hot Springs (+0.3%), but were unchanged or lower the state’s other metro areas.  Compared to December of 2011, employment was up in Fayetteville, Jonesboro, Pine Bluff, and Texarkana.  However, it was unchanged or lower in Fort Smith, Hot Springs, Little Rock, and Memphis.

Source: Bureau of Labor Statistics (Current Employment Statistics)

As detailed last month, the next publication of metro area employment data will incorporate the annual benchmark revisions.  The revised data will show a somewhat different picture of employment conditions around the state, particularly in the figures for cumulative employment changes over time.  The table below details our best estimates of what the revised data will indicate.  The new figures will show that employment declined during 2012 in only two metro areas:  Little Rock and Memphis.  The revised data are expected to show a substantial upward revision to the data for Fort Smith, with the result that cumulative changes since the trough of February 2010 will be positive for all metro areas in the state.   On the other extreme, payroll data for Texarkana are expected to be revised downward — resulting in the reversal of cumulative gains since the pre-recession peak of December 2007.

Sources: Bureau of Labor Statistics, Institute for Economic Advancement

These expected revisions are only estimates.  Data for metro areas can also be subject to substantial changes in estimated seasonal factors, so the post-benchmark data may differ from the figures summarized in the table above.  Nevertheless, the magnitude of expected revisions for Fort Smith and Texarkana, in particular, are likely to be notable.

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By Michael Pakko, January 29, 2013 4:02 PM

“After adjusting for a relatively low cost of living, incomes in Arkansas allow for a higher standard of living than in some of the higher-cost regions of the country.”

It is widely recognized that changes in income and spending over time should be adjusted for changes in prices; i.e., inflation.  Comparisons of income across countries are also routinely adjusted for differences in prices using exchange rates or other relative price measures.  Less common is the adjustment of state and local data to account for differences in relative prices across regions within the United States.  This type of inter-regional relative price adjustment is familiar to regular readers of the Arkansas Economist — in the context of interpreting poverty rates published by the Census Bureau (see, here and here, for example).  In recent years, researchers at the U.S. Bureau of Economic Analysis (BEA) have been developing statistics on regional price differences that can be applied more generally to income and consumption data for the states and metropolitan areas of the U.S.  This year, the BEA is scheduled to publish the first set of annual updates for personal income adjusted by regional price parties (RPPs).

The baseline estimates for these regional price parties were published in the Survey of Current Business in August 2012 – Regional Price Parities for States and Metropolitan Areas, 2006–2010.   Using data on rents from the American Community Survey (Census Bureau), price data from the Consumer Price Index (Bureau of Labor Statistics), and expenditure shares from the Personal Consumption Expenditure survey (BEA), the newly-developed RPP statistics allow for the comparison of the cost of living among states and metro areas in the U.S.

Normalizing the U.S. average to have an index value of 100, the estimate of Arkansas’ relative price level is calculated to be 89.3.  That is, the overall level of prices in Arkansas is more than 10% lower than the national average.  For the calculation period 2006-2010, the highest and lowers price parities in the nation were calculated for Hawaii (116.1) and South Dakota (87.2), respectively.  The Arkansas level of 89.3 ranked our state as having the 6th lowest prices in the nation.

This as in interesting finding in its own right, but is even more important in what it tells us about relative incomes and purchasing power.  For example it is widely known that Arkansas has one of the lowest levels of average income in the nation.  But to the extent that prices are also lower than in other regions, the differences in price-adjusted standards of living are less extreme than the unadjusted dollar-values suggest.  The map below, reproduced from the article in the Survey of Current Business, shows how per capita personal income changes after adjusting for regional price parities.  Arkansas is one of the states where the purchasing power of income is increased the most by the adjustment — specifically, price-adjusted per capita income for 2010 is 12.2% higher than unadjusted per capita income.

Source: Bureau of Economic Analysis

The average per capita income in all 50 states plus the District of Columbia was $39,900 in 2010.  By construction, this is also the price-parity-adjusted level of income for the U.S.  Without price adjustment, Arkansas’ per capita income was $32,800 — approximately 82.2% of the national average.  After adjusting for the relatively low cost of living in Arkansas, however, the RPP-adjusted income in Arkansas was the equivalent of $36,800 — about 92.2% of the U.S. average.  The table below summarizes this comparison and presents data on RPP-adjusted incomes for the eight metropolitan areas that include parts of Arkansas.

Source: Bureau of Economic Analysis

The RPP figures for Arkansas are all below the national average of 100, ranging from 82.8 in Jonesboro to 94.7 in the Memphis metro area.  In unadjusted dollar terms, per capita income in Arkansas metro areas range from 75.7% of the national average in Pine Bluff to 96.5% in Little Rock.  After adjusting for regional price parities, however, incomes in Pine Bluff rise to 86.2% of the national average and incomes in Little Rock are 3.5% higher than the national average.  In fact, after re-calculating incomes to account for their greater purchasing power, the RPP-adjusted measures of personal income are above the national average in three of the state’s metro areas.

The research on RPPs is still considered to be experimental, with economists at the BEA and elsewhere working to improve the quality of regional price data and the methodology for compiling them into regional index values.  The data will undoubtedly be refined and revised as research continues.  But the overall implications of the findings are clear:  after adjusting for a relatively low cost of living, incomes in Arkansas allow for a higher standard of living than in some of the higher-cost regions of the country.