Arkansas Taxable Sales – 2017:Q4

By , February 13, 2018 1:40 PM

Arkansas Taxable Sales (ATS) surged by 4.9% in the fourth quarter, following particularly weak third quarter in which ATS had declined by 2.3%.  Gasoline prices rose to an average of $2.24 in the fourth quarter, up from $2.17 in the third quarter.  As a result, spending on gasoline is estimated to have increased by 12.7% in the fourth quarter (seasonally adjusted) and our broader measure of consumer spending — Arkansas Taxable Sales Including Gasoline (ATSIG) — increased 5.3%.

Sources: Arkansas Department of Finance & Administration, Oil Price Information Service, Arkansas Economic Development Institute.

Sources: Arkansas Department of Finance & Administration, Oil Price Information Service, Arkansas Economic Development Institute.

The fourth quarter increase mitigates concern about weakness in sales growth during the third quarter.  Compared to the fourth quarter of 2016, ATS and ATSIG were up 5.0% and 5.4%, respectively.  Inflation, as measured by the price index for personal consumption expenditures (BEA), registered 1.7% from 2016:Q4 to 2017:Q4, so the increases in taxable sales represent real, inflation adjusted gains of well over 3%.  Over the longer term, from 2009:Q2 through 2017:Q4, ATS and ATSIG have increased at annual rates of just over 3%, which implies real, inflation-adjusted growth of around 1.6%.

Sources: Arkansas Department of Finance & Administration, Oil Price Information Service, Arkansas Economic Development Institute.

Sources: Arkansas Department of Finance & Administration, Oil Price Information Service, Arkansas Economic Development Institute.

The combined taxable sales figures for November and December provide some insight into the strength of the most recent holiday shopping season.  As illustrated below, ATS in November and December rose 7.2% from the previous year, the largest increase in over a decade.  For the same period, U.S. Retail Sales expanded 4.8%.

Sources: Arkansas Department of Finance & Administration, U.S. Census Bureau

Sources: Arkansas Department of Finance & Administration, U.S. Census Bureau

The 7.2% growth figure is likely to overstate the actual increase in holiday spending since online retailer Amazon was not remitting sales tax receipts in 2016 but was doing so in 2017.  Because information on any specific taxpayer is confidential, we cannot quantify the magnitude of this “Amazon effect.”  According to officials at the Department of Finance and Administration, however, the impact has not been particularly notable (See Arkansas Business article).   One reason for the muted impact of the Amazon effect is that the company is remitting taxes only for its direct sales, and not for third-party vendors who sell products through the Amazon marketplace.  Given the strength of the increase in 2017 holiday sales, and the stated minimal effect of Amazon’s sales tax submissions, it does seem clear that Arkansas retailers experienced a healthy increase in sales compared to the 2016 holiday shopping season.

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Arkansas Taxable Sales (ATS) is calculated by the Arkansas Economic Development Institute 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 2017:Q4 (Excel file).

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Metro Area Employment and Unemployment – December 2017

By , February 6, 2018 3:39 PM

The (preliminary) end-of-year numbers are in for metropolitan employment and unemployment, with Arkansas’ metro areas showing mixed performance for the year.  From December 2016 through December 2017, unemployment rates declined in six of Arkansas metro areas.  The rate in Northwest Arkansas was unchanged at the very low level of 2.7%, while Little Rock’s unemployment rate ticked up one-tenth of a percentage point to 3.4%.

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

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

Over the first half of the year, unemployment rates trended down in all of Arkansas’ metro areas (seasonally adjusted).  From July through December the pattern was mixed: Rates edged up in Fayetteville, Jonesboro, Little Rock, and Pine Bluff.   By the end of the year, over two percentage points separated the highest unemployment rate in the state (Pine Bluff at 5.1%) from the lowest (Fayetteville at 2.8%).

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

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

Payroll Employment
Nonfarm payroll employment ended the year with monthly declines in Fayetteville, Fort Smith, Jonesboro, and Memphis.  Little Rock was the only metro area in the state to experience a monthly increase.  Compared to a year earlier, five metro areas saw expanded employment, with gains ranging from 0.3% in Memphis to 2.4% in Fayetteville.  Employment in four of the eight remains below pre-recession levels of ten years ago.  Two metro areas, Pine Bluff and Texarkana, have yet to recover to the levels of employment that prevailed at the end of the great recession.

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

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

Tracing the path of employment over the past 10 years, the figure below illustrates the wide differences in job growth among Arkansas’ metro areas.  From the fourth quarter of 2007 through the fourth quarter of 2017, employment in Fayetteville increased by more than 22%, while employment in Pine Bluff decline by more than 14%.

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

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

Today’s report contains the final preliminary employment data for 2017, with both the household and payroll data scheduled to be revised in coming weeks.  Updated statisics on nonfarm payroll employment will be released for both states and metro areas on March 12, 2018.  Metro area data from the household survey, including unemployment rates, will be revised and updated by April 20, 2018.

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Arkansas Home Sales – 2017

By , February 1, 2018 4:32 PM

Earlier this week, the Arkansas Realtors® Association released sales figure for December 2017.  Total number of homes sold for the year was reported as 35,755, an increase of 5.1% from the previous year.  The 2017 sales increase followed four consecutive years of robust growth:  From 2012 through 2016, average annual sales growth was 9.0%.

Source:  Arkansas Realtors® Association

Source: Arkansas Realtors® Association

This week’s report showed that sales in December 2017 were actually lower than in 2016, a decline of 2.7%.  There was no data reported for November, but by interpolating year-to-date figures between the October and December reports, we can estimate that November 2017 sales were up 6.8% from the same month in 2017.

Source:  Arkansas Realtors® Association

Source: Arkansas Realtors® Association

For the fourth quarter as a whole, sales were up 6.9%.  Seasonal ups-and-downs sometimes make it difficult to observe the underlying trends and how recent observations fit into those trends, but the seasonally-adjusted chart below shows just how robust was the fourth quarter sales total.  The observation that the third quarter came in somewhat below trend suggests that some of the strength in the fourth quarter represented carry-over from the third quarter — i.e., home sales that were delayed in closing until after October 1.

Source:  Arkansas Realtors® Association.  Seasonal adjustment by the Arkansas Economic Development Institute.

Source: Arkansas Realtors® Association. Seasonal adjustment by the Arkansas Economic Development Institute.

Regardless of the monthly and quarterly ups and downs, the point remains that 2017 was another banner year for Arkansas home sales.  As we look ahead to 2018, there is some risk that rising interest rates may dampen the demand for house purchases, but there is little evidence of that having any immediate effect.  Our forecast for 2018 is that robust growth in home sales will continue, with a chance of weakening late in the  year or sometime in 2019.

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Arkansas GDP – 2017:Q3

By , January 24, 2018 4:47 PM

Estimates of state-level GDP growth for the third quarter of 2017 showed Arkansas expanding at an annual rate of 2.0%.  In its news release, the Bureau of Economic Analysis noted that GDP “increased in every state and the District of Columbia in the third quarter.”  Although a 2% growth rates is in line with recent trend growth for both Arkansas and the nation, Arkansas’ growth rate lagged the 3.4% national average for the third quarter, and ranked #43 among the 50 states.

GDP 2017Q3 map

Arkansas’ third quarter growth rate represented a deceleration from the rapid expansion reported for the previous three quarters.  Recent revisions had shown that Arkansas GDP growth had averaged 4.1% from 2016:Q4 through 2017:Q2.  On a year-over-year basis, the third quarter figure — combined with the previous three quarters —  was up 3.6% compared to the nation’s 2.2% rate.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

The breakdown by sector suggests why Arkansas GDP growth slowed relative to previous quarters and relative to the national average.  The BEA reported that Finance and Insurance sector was a major contributor to growth nationwide; and at the other end of the spectrum, Agriculture, forestry, fishing and hunting showed its fourth consecutive quarter of decline.  Finance and insurance contributed positively to Arkansas’ growth rate, but represents a relatively small share of the state’s economy.  Meanwhile, agriculture represents a relatively large share, and the Arkansas economy has not escaped the brunt of that sector’s downturn.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

The state-level GDP estimates are subject to considerable revision as additional information becomes available.  The next report, scheduled for May 4, 2018 will release revised statistics for the first quarter of 2014 through the third quarter of 2017.

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Arkansas Employment and Unemployment – December 2017

By , January 23, 2018 4:30 PM

The last state employment report for 2017 came out today with somewhat disappointing numbers.  Although the unemployment rate remained unchanged in December at the low level of 3.7%, the number of unemployed crept upward for a sixth consecutive month and the number of employed Arkansans declined for a third consecutive month.  From September through December, the household employment survey showed an increase in the number of unemployed of 1,561 and an employment decline of 19,000.

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 declined by 6,500 jobs in December (seasonally adjusted).  The decline was broad-based, affecting both goods-producing and service-providing sectors.  Professional and Business services, a sector that has been leading the way in job growth in recent years, declined by 1,700 jobs in December.  Leisure and Hospitality services were down by 800 jobs.  Educational and Health Services continued to expand (+500 total), with Health Care jobs increasing by 400.

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

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

Compared to the end of 2016, payroll employment increased 11,300 (seasonally adjusted) in 2017.  Over the course of the year, the sector adding the most jobs to the economy was education and health services, up 5,300 jobs.  Manufacturing staged an impressive comeback in 2017, adding 4,700 jobs over the course of the year.

As shown in the figure below, the household and payroll surveys both show a distinct slowdown in job growth during in the latter part of 2017.  As mentioned, household employment was down 19,000 over the last three months of the year.  From June through December, household employment was down by 7,100 while nonfarm payroll employment declined by 5,100 jobs.

Source: Bureau of Labor Statistics

Source: Bureau of Labor Statistics

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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 here:  Table-Seasonally Adjusted NFPE.

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Arkansas Employment and Unemployment – November 2017

By , December 22, 2017 10:56 AM

The latest information on Arkansas employment and unemployment was disappointing, with both the household and payroll reports showing weakness in November.

The unemployment rate edged up by 0.1% to 3.7%, with a sharp decline in the number of employed (-6,784) and a fifth consecutive monthly increase in the number of unemployed (+536).  In October and November combined, the number of employed dropped by over 9,000.

Source: Bureau of Labor Statistics

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

Payroll Employment
Total nonfarm payroll employment declined by 2,100 in November (seasonally adjusted).  Moreover, the previously-reported total for October was revised downward by 2,000.   The November decline included a sharp drop in Leisure and Hospitality Services (-1,900 seasonally adjusted) which contracted by about twice as much as typical seasonal patterns would indicate.  The Arkansas Department of Workforce Services reported that the decline was at least partly attributable to “reported staff reductions and closures at full service restaurants.” Other sectors contributing to the decline included Retail Trade, Transportation and Utilities, Other Services and Manufacturing.

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

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

Compared to a year ago, payroll employment is up 20,600, with gains in nearly all sectors.   As in the case of the household survey, slower growth is a recent break from the strong growth exhibited earlier in the year.  As the comparison below illustrates, the household and payroll reports do not always give the same signals, especially on a month-to-month basis.  For 2017, however, both are showing a rapid growth trend over the first half of the year, with signs of weakening in late summer and into the fall.

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

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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 here:  Table-Seasonally Adjusted NFPE.

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Arkansas Personal Income – 2017:Q3

By , December 20, 2017 11:03 AM

The Bureau of Economic Analysis reported this morning that personal income in Arkansas increased 0.5% in the third quarter of 2017, a bit below the national average of 0.7%.  A drop in the volatile Farm Income component slowed growth both nationally and here in Arkansas, but accounted for a larger reduction in total growth for Arkansas (because it accounts for a larger share of income).  This morning’s report also showed a downward revision to second quarter growth in Arkansas:  Originally reported at 0.6%, the revised data show a growth rate of 0.4%.  The downward revision was more than accounted for by a lower estimate of Wage and Salary growth, which was marked down from 1.2% to 0.5%.  Over the past four quarters, Arkansas personal income is up 3.3%, compared to 2.6% nationally.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Earnings by place of work rose 0.6% in Arkansas in the third quarter.  Wage and Salary growth was particularly strong at 1.0%.  Proprietors’ income was down due to the farm component.  Nonfarm proprietors’ income was up 0.8%.   From 2016:Q3 through 2017:Q3, Arkansas earnings growth has outpaced the nation — 3.8% versus 2.6% — with all components growing faster than the national average.  Growth in Personal Current Transfer Receipts has been somewhat slower in Arkansas than the U.S. average.

Source:  Bureau of Economic Analysis

Source: Bureau of Economic Analysis

The table below breaks down Earnings growth by industry sector.  The fastest-growing sector was Educational Services, while the largest contribution to total personal income growth came from Health Care and Social Assistance.  Earnings from Construction and Wholesale Trade also increased sharply.

Source:  Bureau of Economic Analysis

Source: Bureau of Economic Analysis

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Arkansas Taxable Sales – 2017:Q3

By , December 13, 2017 4:11 PM

Arkansas Taxable Sales (ATS) declined 2.1% in the third quarter following increases of 0.4% and 1.8% in the first two quarters of the year.  Gasoline prices were up slightly in the third quarter, averaging $2.166 compared to $2.110 in the second quarter.  As a result, spending on gasoline was up 2.1% and a broader measure of retail spending, Arkansas Taxable Sales Including Gasoline (ATSIG) declined by only 1.9%.  Compared to a year earlier, both ATS and ATSIG were up slightly, 0.3% and 0.7%, respectively.

Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Arkansas Economic Development Institute.

Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Arkansas Economic Development Institute.

Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Arkansas Economic Development Institute.

Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Arkansas Economic Development Institute.

Revenue reports from the department of Finance and Administration attributed some of the decline in third quarter sales tax collection to reduced spending on automobiles, along with general weakness in some categories of taxable business spending.  One factor mentioned in the October revenue report was relatively low tax collections from the utilities portion of the sales tax, which was held lower by cooler weather during the summer billing months.  Although taxable sales growth has been slower than anticipated throughout the current economic expansion, recent weakness is at least partly attributable to temporary factors.  Fourth quarter growth will be dependent on the robustness of the holiday shopping season, which is expected to be relatively strong.  Our forecast models suggest year-over-year growth of close to 3%.

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Arkansas Taxable Sales (ATS) is calculated by the Arkansas Economic Development Institute 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 2017:Q3 (Excel file).

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Arkansas Economic Outlook Presentation

By , December 1, 2017 12:35 PM

Thanks to all who attended this morning’s Little Rock Regional Economic Briefing, where I presented my forecast for the Arkansas economy.

Special thanks to the Little Rock Branch of the Federal Reserve Bank of St. Louis for co-sponsoring and hosting the event, and particularly to President James Bullard for his presentation on monetary policy and the national economic outlook.

Here is a copy of handouts for my presentation:  Pakko Forecast 2017.

Dr. Bullard’s presentation can be found at https://www.stlouisfed.org/from-the-president.

 

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Arkansas GDP – 2017:Q2

By , November 21, 2017 9:43 AM

Arkansas’ contribution to the nation’s gross domestic product expanded at an annual rate of 3.5% in the second quarter of 2017, outpacing the U.S. average of 2.8% and ranking as the 15th highest growth rate among the 50 states.*  This morning’s report from the Bureau of Economic Analysis also revised estimates for Arkansas GDP growth in the previous two quarters.  Originally reported as 1.3%, the (annualized) growth rate in the first quarter of 2017 was revised upward to 4.0%.  For 2006:Q4 the figure was revised from 0.5% to 4.8%!  For the period 2016Q2-2017:Q2, Arkansas GDP growth is now estimated to have grown by 2.4% – slightly higher than the national average of 2.0%.

Source:  Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Revisions to previously published data went back to 2014:Q4.  The figure below illustrates the effect of these revisions for Arkansas.  Although the level of economic activity was revised upward for most of the period, the cumulative effect on growth from 2014:Q1 through 2016:Q3 was essentially nil.  But the substantial revisions to the next two quarters had the cumulative effect of increasing GDP estimates by 1.8%, with the new data for the second quarter adding another 0.9% (not annualized).

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Breaking down the data by sector, the composition of growth in the second quarter was similar for Arkansas and the U.S.*  Sectors contributing to the higher growth rate in Arkansas included nondurable goods manufacturing and wholesale trade.  Those two sectors were also the largest contributors to the overall growth rate in Arkansas, together accounting for more than a full percentage point.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

These new readings on Arkansas GDP growth, while subject to future revision, provide an auspicious view of recent developments in the Arkansas economy.  To find out how this affects the outlook for 2018 and beyond, be sure to attend my presentation of the Arkansas forecast on December 1!

LR Ec Brief 2

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*Data for U.S. values used in this report differ from the national income and product accounts because the state accounts exclude federal military and civilian activity located overseas that cannot be attributed to a particular state.

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