Institute for Economic Advancement

Arkansas Employment and Unemployment – June 2016

By , July 22, 2016 12:22 PM

The unemployment rate in Arkansas remained unchanged at 3.8% in June.  After declining by a full percentage point in only 6 months, it is not surprising that we see a pause in its rapid descent.  Nationwide, the unemployment rate increased by two-tenths of a percent in June.  So at 4.9%, the U.S. unemployment rate is more than a percentage point higher than Arkansas’ rate.  Over the past 12 months, the Arkansas unemployment rate has fallen by 1.5%, the second largest drop in the nation (surpassed only by Tennessee’s 1.6% decline).

Source: Bureau of Labor Statistics

Source: Bureau of Labor Statistics

The changes in employment and unemployment that underlie the unemployment rate calculations were not particularly striking in their magnitude, but do represent a departure from recent trends.  The number of employed declined by more than 3,100 after a string of 29 consecutive months of growth.  The number of unemployed increased by only 344, but it was the first monthly increase in the number of jobless Arkansans since February 2011.

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

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

Payroll Employment
Nonfarm payroll employment increased by 400 in June (seasonally adjusted) and the figure for May was revised upward by 300.  Nevertheless, the level of payroll employment in June was essentially unchanged from December 2015.  The sharp contrast between payroll employment growth over the past 6 months (-100) and the employment gains measured by the household survey (+33,657) is striking.  It is not unusual for the two separate data sources to diverge, but such a large and persistent gap raises questions about measurement problems.  Both employment series are subject to future revision, but the payroll statistics are generally considered to be the more accurate of the two measures.  Combined with the fact that the increases in household employment took place in an unprecedented three consecutive months of 10,000+ increases (January through March), we remain somewhat skeptical of the validity of recent unemployment rate statistics.

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

A breakdown by sectors shows that payroll employment shows gains in most sectors, particularly the service-providing sectors.  A prominent exception was Education & Health services, which declined by 1,300 jobs after expanding 7,400 in the previous 12-month period.  Retail Trade was another sector showing a setback from previous growth trends.  Professional & Business Services continues to be the fastest growing sector, increasing by over 28,000 since the employment trough of February 2010.  Growth in Professional & Business Services has accounted for over one-third of all job growth during this economic expansion.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES)

Source: Bureau of Labor Statistics, Current Employment Statistics (CES)

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*Seasonally adjusted data for Arkansas nonfarm payroll employment, reported in a format compatible with the monthly news release from the Arkansas Department of Workforce Services, can be found hereTable-Seasonally Adjusted NFPE.

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Arkansas Taxable Sales – 2016:Q1

By , July 20, 2016 4:22 PM

Arkansas Taxable Sales Including Gasoline (ATSIG) declined by 1.0% from 2015:Q4 to 2016:Q1, following a decline of 0.5% in the previous quarter.  Compared to a year earlier, ATSIG increased by only 1.0%.  Much of the weakness in the growth rate of ATSIG is attributable to low gasoline prices.  The average price of gasoline in Arkansas in the first quarter was $1.66, down from $1.94.  As a result, spending on gasoline declined by 12.1% (seasonally adjusted).

Not all the slow growth in sales can be attributed to low gas prices, however.  Excluding gasoline, Arkansas Taxable Sales (ATS) declined by 0.5% in the first quarter, following a nearly flat fourth quarter.  From 2015:Q1 to 2016:Q1, ATS rose by only 1.8%.  After adjusting for inflation (as measured by the price index for personal consumption expenditures), real ATS was up only 0.8% over the four-quarter period.

Arkansas Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement.

Arkansas Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement.

Arkansas Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement.

Arkansas Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement.

Given the state’s low unemployment and relatively healthy income growth, it is surprising that the growth rate of Arkansas Taxable Sales has been so sluggish.  Since the trough of the “great recession” in 2009:Q2, ATS has increased at an annual rate of only 3.0%.  Over the same period, U.S. Retail Sales have been growing at a 4.4% pace.  Although the national figures are not completely comparable to ATS, the discrepancy between the growth rates of consumer spending on the national and state levels is notable.  The growing share of internet shopping (which is included in U.S. Retail Sales but not ATS) might account for a portion of the discrepancy, but is unlikely explain the difference completely.

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

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

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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 monthly and quarterly data is available here: Arkansas Taxable Sales 2016:Q1 (Excel file).

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Real Personal Income – 2014

By , July 8, 2016 4:22 PM

The Bureau of Economic Analysis released new figures on real personal income for states and metropolitan areas yesterday.  The data contain a wealth of information on incomes, prices and standards-of-living.  They are based on a relatively new dataset calculating “regional price parities,” (RPPs) which measure differences in the prices levels of goods and services across states and metropolitan areas.  Essentially, RPPs serve as a measure of relative price levels among states and metro areas.

The newest data, which apply to 2014, show that the cost of living in Arkansas is the second-lowest in the nation.   The RPP for Arkansas was 87.5, down from 87.7 in 2013.  This number can be interpreted as saying that the cost of living was 12.5% below the national average in 2014.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Because prices in Arkansas are among the lowest in the nation, the purchasing power of incomes in Arkansas is far closer to the national average than nominal (dollar-denominated) incomes would suggest.  In 2014, per capita personal income in Arkansas was only 82% of the national average–ranking the state #43 among the 50 states plus D.C.  After adjusting for differences in the cost of living, however, real per capita income in Arkansas was 93.9% of the national average–implying a ranking of #34.

The slight down-tick in the RPP for Arkansas (from 87.7 in 2013 to 87.5 in 2014) can be interpreted as indicating a lower rate of inflation in Arkansas than the national average.  The U.S. inflation rate in 2014 (as measured by the Personal Consumption Expenditures Price Index) was 1.4%.  The implied regional price deflator for Arkansas increased by only 1.2%.  Hence, the state’s 3.7% growth rate of nominal personal income translates to a real (inflation-adjusted) growth rate of 2.5%.  For the U.S., the nominal growth rate of 4.4% implied a real growth rate of 2.9%.

The composition of Arkansas’ low RPP is typical of other low cost-of-living states:  Prices for goods are near the national average, but the prices of services — especially rents — are far below the norm.  This is not surprising, of course.  Goods can be transported and sold with little marginal expense.  Services are not so transportable.  In fact, in the jargon of international trade, services are often classified as “non-tradables.”  Statewide, the RPP for goods in Arkansas was 95.1%, implying that prices of goods were only 4.9% below the national average.  The RPP for non-rent services was 93.5, while the RPP for rents (which also proxy for home prices) was only 62.5.

As shown in the table below, there is considerable variation among RPPs in Arkansas metropolitan areas.  Overall RPPs range from 91.9 in Memphis to a low of 82.0 in Jonesboro.  The cost of living in Jonesboro–18% below the national average–is the fifth-lowest in the nation.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

While there is variation in RPP price-levels around the state, all RPPs in Arkansas are below 100, implying below-average costs.  This also translates to higher purchasing power.  As shown in the table below, the Fayetteville-Springdale-Rogers metro area is the only part of the state where dollar-incomes are above the national average, with incomes in Pine Bluff at less than two-thirds of the norm.  After RPP adjustment, incomes in all parts of the state (other than Northwest Arkansas) are closer to the national average.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Changes in RPPs for different metro and nonmetro areas around the state also differ, implying variation in inflation rates.  In economic terms, it is the real inflation-adjusted growth rates of income that matters.  The table below shows both nominal and real income growth for the metro and nonmetro areas of Arkansas.  Note that the differences between total income growth and per capita income growth reflects changes in population.  Much of the total income growth in Northwest Arkansas represents population growth that has accompanied general economic expansion.  On the other hand, total real income growth in Pine Bluff was negative, but the losses in income reflected declining population.  In per capita terms, real income in Pine Bluff remained approximately unchanged from the previous year (+0.1%).

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

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Sales Taxes Across the Nation

By , July 6, 2016 4:40 PM

The Tax Foundation has released an updated list of state and local sales tax rates across the nation, accounting for changes in tax rates that took effect July 1 (the beginning of the fiscal year for most states).  Including both statewide and local sales taxes, Arkansas ranks near the top of the list for the highest rates in the nation.  Compared to the other 49 states plus the District of Columbia, the updated report shows Arkansas’ ranking dropping from #2 to #3 — not because of changes in Arkansas tax rates, but because a statewide tax increase in Louisiana catapulted that state from #3 to #1.

The statistics from the Tax Foundation are based on the sum of statewide tax rates plus a population-weighted measure of local tax rates.  In Arkansas, the state sales tax is 6.5% — tied for the 9th highest in the nation.*  The average local tax rate (weighted by population) is 2.8% — making the combined state/local tax rate 9.3%.  Only Louisiana (9.98%) and  Tennessee (9.45%) have higher combined sales tax rates.

Sales Taxes

The Tax Foundation figures do not incorporate exemptions for some categories of goods.  For example, in Arkansas and in other states the sales tax on groceries is lower than on other items.  The statistics also do not include additional sales taxes that are imposed on specific goods and services.  For example, several cities impose special taxes on prepared foods (the “hamburger tax”).  Moreover, the Tax Foundation statistics do not include excise taxes that are imposed at the wholesale level and therefore incorporated into retail prices.

Although the aggregate state/local sales tax rate for Arkansas did not change in the latest report from the Tax Foundation, tax rates in several local jurisdictions changed as of July 1.  The list of changes and resulting local tax rates is as follows:

  • Big Flat:  1.00%, newly enacted
  • Danville: 1.00%, decreased from 1.50%
  • Oak Grove Heights 1.00%, newly enacted
  • Ozark:  2.00%, increased from 1.00%
  • Rudy: 0.50%, newly enacted
  • Drew County:  2.25%, reduced from 2.50%
  • Marion County: 1.25%, increased from 1.00%

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*Note:  The 6.5% statewide sales tax rate is actually an aggregate of 5 individual taxes.  The general sales tax rate is 4.5%, with additional taxes earmarked for special purposes:  Educational Adequacy 0.875%, Property Tax Relief 0.5%, Arkansas Highways 0.5%, and Conservation Tax 0.125%.

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Metro Area Employment and Unemployment – May 2016

By , June 29, 2016 3:27 PM

Unemployment rates in Arkansas metro areas continued to trend downward in May, with rates declining by at least one full percentage point over the past twelve months.  The unemployment rate in Memphis was 2.1 percentage points lower than in May 2015 — the largest rate decline among the nation’s 387 metro areas.

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

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

Changes in unemployment rates from April to May were dominated by seasonal movements.  The end of the school year is always associated with higher unemployment as teachers and students seek summer employment (among other factors).  After adjusting for this typical pattern, unemployment rates were little-changed around the state.  Rates ticked downward by one-tenth of a percent in three metro areas, increased by one-tenth in two, and were unchanged in three.

Source: Bureau of Labor Statistics, Seasonally Adjusted Metropolitan Area Estimates

Source: Bureau of Labor Statistics, Seasonally Adjusted Metropolitan Area Estimates

Payroll Survey
Changes in nonfarm payroll employment were mixed in May.  Monthly employment growth was relatively strong in Little Rock and Fayetteville, and was also positive in Fort Smith, Hot Springs and Jonesboro.  Payrolls declined in Memphis, Pine Bluff and Texarkana.  Over the past 12 months, Pine Bluff is the only Arkansas metro area to have experienced a decline in payroll employment.  Today’s news release from the Bureau of Labor Statistics (BLS) noted that payrolls were down from a year earlier in only 70 of the nations metro areas.

Source: Bureau of Labor Statistics, Current Employment Statistics

Source: Bureau of Labor Statistics, Current Employment Statistics

The two independent data sources reported by the BLS continue to provide conflicting information.  According to the household survey (on which unemployment rate estimates are based), employment has been expanding phenomenally around the state.  In contrast, employment growth measured by the payroll survey has been quite a bit lower.  For Memphis, Texarkana, and the statewide totals, the household survey is showing strong growth for 2016, while the payroll survey is showing employment declines.  The two sources of data differ in methodology and coverage, but it unusual for discrepancies of this magnitude to remain for any extended period of time.

Source: Bureau of Labor Statistics

Source: Bureau of Labor Statistics

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Arkansas Personal Income – 2016:Q1

By , June 22, 2016 4:10 PM

Arkansas personal income expanded 1.2% in the first quarter of 2016, outpacing the national average of 1.0%.  The highest growth rate in the nation was Washington state (1.5%), with Arkansas’ growth ranking the sixth-highest among the 50 states.

Source:  Bureau of Economic Analysis

Source: Bureau of Economic Analysis

All major components of Personal Income showed positive growth in the first quarter, led by a 17.1% increase in Farm proprietors’ income.  Wages and salaries grew at a 1.4% pace, while Dividends, interest and rent expanded by only 0.3%.

Total earnings expanded 1.7% — a higher growth rate than any other state except Washington.  The table below shows the growth rates of total earnings by industry, showing that  Arkansas’ strong performance was largely attributable to the gain in Farm income.   Mining (including oil and natural gas extraction) was the weakest sector for both Arkansas and the total U.S.  The news release from the Bureau of Economic Analysis noted that mining income had experienced its 5th consecutive quarterly decline, falling 15.8% nationally since the fourth quarter of 2014.  Over the same period, mining income in Arkansas contracted by 17.4%.  Arkansas’ growth outpaced the nations in most sectors, particularly in service-providing sectors.  However, earnings in durable goods manufacturing declined slightly in Arkansas, in contrast to a small gain nationwide.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

 

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Arkansas Employment and Unemployment – May 2016

By , June 17, 2016 2:31 PM

The monthly report on employment and unemployment showed yet another decline in the Arkansas unemployment rate in May:  the rate declined 0.1% to an all-time low of 3.8%.  Over the past 12 months, the unemployment rate has fallen 1.6% — the second-largest decline in the country (next to Tennessee’s 1.7%).

The statistics underlying the falling unemployment rate were less dramatic than earlier in the year: The number of unemployed declined by 1,027 and the number employed increased by 1,073.  As a result, the size of the labor force remained approximately unchanged.  This stands in contrast to the first three months of the year, when employment and labor force growth exceeded  10,000 per month.

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

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

Although there is some reason to be skeptical about the magnitude of the employment gains underlying the unemployment rate decline, it is clear that unemployment is declining.  The number of unemployed has fallen every single months since February 2011, when it stood at nearly 115,000.  The number of unemployed in May was down to 51,773.

Yet even taking the 3.8% unemployment rate at face value, today’s low unemployment arises under different circumstances than previous episodes of low unemployment.  In particular, labor force participation remains low.  As shown in the chart below, the last time that unemployment declined to a cyclical low was just about 10 years ago (2006).  Unemployment was down to 5.0%.  At that time, however, the employment-population ratio was around 64%.   In 2016, while the unemployment rate has fallen below 4%, we only have an employment-population ratio of just over 56%.  So the percentage of Arkansans with jobs is presently 8 percentage points lower than it was a decade ago.

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

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

Payroll Employment
One important reason to question the statistics derived from the household survey is the conflicting information from the payroll survey.  Nonfarm payroll employment rose by 1,200 in May–about in line with the increase in household employment.  Over the past 5 months, however, the net change in payroll employment has been -800, compared to an increase of 36,778 reported in the household data. Payroll employment is 22,100 higher than it was in May 2015, but most of that increase took place in the latter months of 2015.

Source: Bureau of Labor Statistics

Source: Bureau of Labor Statistics

The monthly change in payroll employment was dominated by an increase of 2,200 jobs in Education and Health Services — all of which was accounted for by rising employment in the health care sector.  Total employment in goods-producing sectors was down for the month, and changes in employment by service-providing sectors was mixed.  Over the past year, the strongest sectors continue to be Education & Health Services, Professional & Business Services, and Retail Trade.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES)

Source: Bureau of Labor Statistics, Current Employment Statistics (CES)

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*Seasonally adjusted data for Arkansas nonfarm payroll employment, reported in a format compatible with the monthly news release from the Arkansas Department of Workforce Services, can be found hereTable-Seasonally Adjusted NFPE.

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Arkansas GDP – 2015

By , June 14, 2016 3:56 PM

Arkansas’ GDP grew at an annualized rate of 1.6% in the fourth quarter of 2015, down somewhat from the 4.8% and 4.1% growth rates (revised) registered in the second and third quarters of the year.  The four quarter growth rate was 1.4% and the annual rate of change (2015 vs. 2014) was 1.5%.  The GDP data support a general assessment of Arkansas’ economy as having grown at a healthy (albeit not exceptional) pace over the past three years.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

The table below shows growth rates by sector for 2015:Q4, along with annual growth rates for 2015. Several sectors expanded sharply at the end of 2015, including Construction, Nondurable goods manufacturing, Wholesale trade, and some service-providing sectors. The expansion of nondurable goods manufacturing was a welcome improvement, as were surges in the growth rates of Arts, Entertainment & Recreation and Other Services.  For the  year as a whole, growth was strongest in Agriculture, Construction, Wholesale & Retail Trade, some sub-categories of Professional & Business Services, and Health Services.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

The report from the Bureau of Economic Analysis also included revisions to state GDP data for 2008-2014.  As shown in the figure below, growth rates for Arkansas GDP were revised sharply higher for 2013 and 2014.  The originally-reported growth rate for 2014 (0.8%) seemed particularly inconsistent with the strong employment growth recorded for that year. The revised figure (2.1%) is more consistent with other contemporaneous measures of state economic activity.  Viewed from a longer-term trend perspective, the latest GDP data suggest that Arkansas has been on a steady growth path since the end of 2012.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

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Metro Area Employment and Unemployment – April 2016

By , June 3, 2016 4:31 PM

This week’s report on metro area employment and unemployment in April revealed another round of plummeting unemployment rates, accompanied by mixed readings on job creation.  The conflicting signals from the household and payroll surveys continue to present something of a puzzle.  As shown in the first table below, unemployment rates have declined sharply over the past 12 months — by nearly two percentage points in some areas (and even more in Pine Bluff).

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

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

The not-seasonally adjusted unemployment rates fell precipitously from March to April, but seasonality was an important part of the story.  On average, Arkansas’ not-seasonally adjusted unemployment rate falls by 0.4% in April, even in a stable job market.  The unemployment rates in the state’s metro areas follow similar patterns.  As shown in the next table, declines of 0.5% to 0.8% in the not-seasonally adjusted figures translate to more modest declines after adjusting for seasonal patterns.  In Memphis, the unadjusted decline in unemployment translates to an increase in unemployment after seasonal adjustment.

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

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

Payroll Employment
The monthly changes in nonfarm payroll employment in Arkansas’ metro areas was not nearly as impressive as the falling unemployment rates suggest.  Payroll employment growth from March to April was strong in Fort Smith and Hot Springs, but the gains were much smaller in other metro areas — and payrolls declined in Little Rock and Texarkana.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES)

Source: Bureau of Labor Statistics, Current Employment Statistics (CES)

The contrast between the household and payroll surveys is highlighted in the final table below, which reports the change in employment from December through April, as measured by the two data sets.  The declines in unemployment rates are based, in part, on the employment gains measured by the household survey.  The four-month percentage changes range from 1.3% in Fort Smith to 3.1% in Jonesboro.  On an annual basis, these growth rates translate to as much as 9%.  Meanwhile, the numbers from the payroll survey show much more muted gains, and in the case of Fort Smith and Texarkana, even negative growth.

Source: Burea of Labor Statistics

Source: Burea of Labor Statistics

Generally speaking, the numbers from the payroll survey are considered more reliable, but  both sets of data are subject to revision at the end of the year.  It might be some time before the diverging patterns are reconciled.  In the meantime, while it is clear that the trends are generally positive, it is probably wise to remain somewhat circumspect about the implications of recent readings on unemployment.

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Arkansas House Prices – 2016:Q1

By , May 25, 2016 4:40 PM

New data from the Federal Housing Finance Agency (FHFA) show that, overall, house prices in Arkansas continue to rise, albeit more slowly than the national average.  According to the FHFA Expanded Data Indexes*, Arkansas house prices rose by 0.8% in the first quarter, compared to a 1.5% increase nationwide.  Since the first quarter of 2015, Arkansas prices were up 4.15 while prices for the total U.S. were up 5.5%.  As shown in the figure below, the most recent price increase in Arkansas lifts the expanded-data index above the level of it’s pre-recession peak.

Source: Federal Housing Finance Agency (FHFA)

Source: Federal Housing Finance Agency (FHFA)

The expanded-data indexes are not available for metropolitan areas, but the FHFA does publish “All-Transactions Indexes*” for metro areas.  The table below shows that by this measure, prices in Arkansas were down slightly in the first quarter, and declined in Fort Smith, Hot Springs, Texarkana, and the non-metropolitan areas of the state as well.  Over the past four quarters, however, prices are up in every metro area except Fort Smith.

Source:  Federal Housing Finance Agency, Seasonally Adjusted by the Institute for Economic Advancement.

Source: Federal Housing Finance Agency, Seasonally Adjusted by the Institute for Economic Advancement.

As shown in the accompanying figure, the metro areas that have experienced the largest price increases over the past five years are generally those that experienced the largest price-declines during the 2007-2011 housing market collapse.  That pattern is generally true for other parts of the nation as well.

Source:  Federal Housing Finance Agency, Seasonally Adjusted by the Institute for Economic Advancement.

Source: Federal Housing Finance Agency, Seasonally Adjusted by the Institute for Economic Advancement.

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* The “All-Transactions Indexes” are constructed using all home sales and refinancing information collected by Fannie Mae and Freddie Mac.  The “Expanded Data Indexes” enhance this information with information collected from county recorders’ offices.

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