Category: Arkansas Forecast

Arkansas Economic Forecast Presentation

By , November 16, 2016 2:06 PM

Little Rock Regional Economic Briefing

Thank you to all who attended this morning’s Regional Economic Briefing, where I presented my annual forecast for the Arkansas economy.  Special thanks to the Little Rock Branch of the Federal Reserve Bank of St. Louis for co-sponsoring the event.

Below are links to the presentations:

Kevin Kliesen:  National Economic Conditions

Charles Gascon:   Startups, STEM Jobs and the Tech Sector

Michael Pakko:  The Arkansas Economic Outlook

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This Year’s “Forecasting a Revision of History”

By , October 31, 2012 4:32 PM

One of the more upbeat prognostications from the 2012 Arkansas Economic Forecast Conference was the prediction that revisions to the employment data will ultimately show much stronger job growth in Arkansas than reported in the currently-published data.  Due to the nature of the expected revisions, this prediction is also somewhat tricky to interpret.  Hence this more detailed explanatory note is in order.

The monthly statistics on payroll employment–the Current Employment Statistics (CES) — are among the most timely and revealing economic indicators available at the state level.  However, they are based on a sample survey of employers, so they are subject to sampling error.  Moreover, important pieces of missing information involves the rate of new business formation and the closure of failed firms.  The Bureau of Labor Statistics estimates the effect of these changes with a “birth/death model.”  Particularly in times of economic turmoil, even the best modeling can end up being far off the mark.  The CES is also subject to a number of other non-sampling errors.

Once per year, the BLS revises the CES data with the more accurate statistics from the Quarterly Census of Employment and Wages (QCEW).  Based on records from state unemployment insurance offices, the QCEW is very comprehensive, covering 98% of all U.S. jobs.  Because it is so comprehensive, however, it is only available after a fairly long lag.  Data for the first quarter of 2012 only came out at the end of September.  These first quarter data will be used to revise the CES data in the annual “Benchmark Revision” process.

The benchmark revisions will not be completed until after the release of monthly CES data at the end of the year, but there is enough information available at this time to make a fairly accurate estimate of what the revision process will reveal.  In recent years, the revisions have been substantial  (see here and here, for example).  The next benchmark revision is expected to reveal a large upward revision to the total employment count in Arkansas.

The chart below illustrates the magnitude of the expected revision.  The revised data projections diverge from currently-published figures in July 2011, with a net increase of 9,700 jobs.  The largest monthly revision is for October 2011 — amounting to nearly 19,000 jobs.  Because the QCEW data extend only through March 2012, job growth for April through September is unrevised, so monthly changes are simply appended to the revised data.

Sources: Bureau of Labor Statistics, Institute for Economic Advancement

Because of the timing of the revisions, the next benchmark revision will show substantial upward adjustment of job growth in 2011.  As a result, the net increase in employment in 2012 will actually be revised downward.  Nevertheless, this downward revision in growth represents a large upward shift in the number of jobs at any particular point in time.   The revisions are expected to raise 2011 job growth from -3,100 to +9,400, an upward revision of 12,500 jobs.  With employment expected to be so much higher at the end of 2011, job growth data for 2012 will actually be lower than current data are showing.  For example, year-over-year growth through September 2012 is currently reported at +10,800, but is likely to be revised to +10,300.

As of September 2012, the benchmark revisions are expected to raise the level of employment by 13,500 jobs.  Estimating the expected benchmark revisions sector by sector, the new data will show a mix of changes — as detailed in the table below (using quarterly-average data).  Some of the larger upward revisions include Professional & Business Services, Retail Trade, and Construction.  Not all sectors will be revised upward, however.  For example, the revised data are expected to show lower government employment, particularly at the state and local level.

Sources: Bureau of Labor Statistics, Institute for Economic Advancement

The actual benchmark revision process involves far more detail than the rough estimates presented here.  Nevertheless, the simple log-linear regression techniques we have used to estimate the benchmarking have turned out to be quite accurate in the past.  The official revisions will not be available until March 2013.  So in the meantime, data from the CES will need to be interpreted in light of this yet-to-be-incorporated new information.  Although it adds complexity to the interpretation of the data, we’ll be providing that analysis here on the pages of the Arkansas Economist in coming months.  As an illustration of how the expected revisions change the monthly tracking of job growth, the following two tables compare the September jobs report using currently-published data and expected-revised data.

Currently-Published Data

Source: Bureau of Labor Statistics

With Expected Revisions:

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

The most recent month-to-month changes are unaffected by the revision.  The year-over-year figures for total employment growth are revised downward, as described earlier.  Perhaps the most striking difference between the two tables is the column showing cumulative growth since the employment trough-date of February 2010.  The unrevised data show total growth of 15,700 jobs — about one-quarter of the total number of jobs lost during the recession.  After revision, however, the new cumulative job growth total is 29,200 — an increase that represents over half of the recessionary job losses.  Given the projected employment growth embodied in the forecast for 2013 and 2014, this revision makes it likely that we will reach the point of total employment equal to the pre-recession peak by sometime in early 2014, rather than at the end of 2014 as projected using the unrevised data.

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Updated Forecasts for 2012 and 2013

By , March 29, 2012 1:00 PM

At the Arkansas State University Economic Outlook Conference today, we presented revised and updated forecasts for some key economic indicators for the Arkansas economy.  At the time that the original forecasts were complied in late October 2011, data for some series were available only through the first half of the year (e.g., personal income).  Some of the statistics that were available through the third quarter have subsequently been revised (particularly employment data).  Hence, the original projections for 2012 and 2013 incorporated forecast estimates of how 2011 would turn out.  Now that we have at least preliminary data for all of 2011, it seems a propitious time to revisit the forecasts.

In general, the data have confirmed our expectations that 2011 would show a slowdown in the pace of  the economic recovery overall, but with clear signs of improvement in the final months of the year.  In some cases, our expectations for improvement in the waning months of 2011 were exceeded — in other cases our outlook was overly optimistic.  Accordingly, the forecast revisions are mixed. And the outlook — in broad strokes — continues to be one of steady but unremarkable growth as we slowly emerge from the aftermath of the 2008-09 recession.

Personal Income
Yesterday’s data-release from the Bureau of Economic Analysis showed that total Personal Income in Arkansas grew by 3.7 percent in 2011 (Q4/Q4).  This fell closely in line with our forecast of 3.6% growth for the year.  Hence revisions to the outlook are minor.  Due, in part, to lower-than-expected transfer payments in the second half of 2011, the forecast for personal income growth in 2012 has been revised down from 5.1% to 5.0%.  The forecast for 2013 is unchanged at 3.9%.

Personal Income

Sources: Bureau of Economic Analysis, Institute for Economic Advancement

Arkansas Taxable Sales Including Gasoline
Our proxy for state retail sales, Arkansas Taxable Sales Including Gasoline (ATSIG), finished 2011 with a Q4/Q4 growth rate of 5.0% — slightly higher than the 4.4% rate in the forecast.  Some of this strength is expected to continue into 2012, prompting a slight upward growth revision from 3.2% to 3.3%.  (The slowdown from 2011 reflects, in part, the expectation of slightly lower inflation rate.)  Our original forecast included a (somewhat anomalous) slowdown in growth for 2013 (2.0%).  Such a slowdown now appears less likely, and we are now forecasting 2013 growth of 3.9%.

Arkansas Taxable Sales Including Gasoline

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

Home Sales
Arkansas home sales had been steadily improving during 2011 (on a seasonally-adjusted basis), but after having been supported by home-buyer tax credit programs in the previous two years, 2011 was still expected to be have the lowest total annual sales volume in recent memory.  Sales in the last three months of the year were fairly strong, but were somewhat below our expectations.  Compared to the previous year, total sales volume was down slightly more than forecasted: down 2.5% from the previous year’s (revised) sales figures.  Carrying this weakness forward into the projected sales trajectory, the forecasts for 2012 and 2013 have been revised downward.  Expectations of a double-digit growth rate in 2012 have given way to a revised forecast of +7.5%.  Sales are still expected to improve by 4.3% in 2013, but end the year with a lower sales volume than previously forecasted.

Home Sales

Sources: Arkansas Realtors Association, Institute for Economic Advancement

Payroll Employment
At the UALR Arkansas Economic Forecast Conference, we predicted that downward revisions to the payroll employment data would show that the year would end with a lower level of employment than the previous year — in sharp contrast to data that was available at the time.  The actual data revision was slightly larger than anticipated, showing a Q4/Q4 employment loss of 0.4%, rather than the 0.2% that had been forecasted.  Nevertheless, relatively strong job growth did materialize in the fourth quarter of 2011, as anticipated.  Accordingly, the growth path for employment has not been revised (+1.3% in 2012 and +1.5% in 2013), but the path has been benchmarked to a slightly lower starting point.

Payroll Employment

Source: U.S. Bureau of Labor Statistics, Institute for Economic Advancement

Unemployment Rate
Unemployment rate data for 2011 were also recently revised.  The updated statistics showed that unemployment was not quite as high in mid-2011 as previously estimated.  Moreover, the rate dropped over the last three months of the year much more rapidly than expected.  Consequently, our unemployment rate forecasts have been revised downward significantly.  2011 ended with a rate of 7.9%, instead of the expected 8.2% rate.  The downward trajectory of unemployment has been adjusted downward from this lower starting point.  We now expect the unemployment rate to average 7.4% in the fourth quarter of 2012 (instead of 7.9%) and to fall to 7.0% by the fourth quarter of 2013 (instead of 7.6%).  These would be welcome developments, if realized.  The risk to this revised forecast is that new entrants and re-entrants to the labor force might put upward pressure on the unemployment rate as the labor market continues to improve.

Unemployment Rate

Sources: U.S. Bureau of Labor Statistics, Institute for Economic Advancement

# # #

Methodological Note:  The original forecasts of November 2011 were produced using the Moody’s Economy.com Arkansas model, benchmarked to a composite of national economic forecasts.  The revised projections presented here represent adjustments to the original forecasts in light of new and revised data.   Underlying forecast assumptions and model estimates were not generally re-evaluated as a part of this exercise, but updated model forecasts for the unemployment rate and retail sales were factored into the analysis.

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Arkansas Economic Forecast Conference – November 2

By , October 25, 2011 3:34 PM

The 2011 Arkansas Economic Forecast Conference is only one week away.  This year’s conference features the national outlook from Ken Simonson, Chief Economist for the Associated General Contractors of America.  A panel of speakers will address specific areas of the Arkansas Economy, including Roby Brock of Talk Business, Ray Dillon of Deltic Timber, Lane Kidd of the Arkansas Trucking Association, and J. French Hill of Delta Trust.  Jon Harrison, former GM of Caterpillar in North Little Rock will be the luncheon speaker.  And of course, the conference will also include forecasts for the Arkansas Economy presented by Dr. Michael Pakko, State Economic Forecaster.

Registrations are being taken online or by contacting Tonya Hass by phone at (501) 683-7407 or by email at tghass@ualr.edu.

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2010 UALR Arkansas Economic Forecast Conference

By , November 10, 2010 9:00 PM
Nov. 10, 2010

The UALR Arkansas Economic Forecast conference took place today.  Thanks to all who attended, and special thanks to the program participants:  Phillip Baldwin, Michael Dueker, Vic Hiryak, Richard Plotkin, and Randy Zook.

A copy of the Charts and Tables from the Arkansas Outlook presentation are available here.

– Michael Pakko

PS:  A post-conference interview with Roby Brock of Talk Business can be seen on the Arkansas Economist Media Page.

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Another Round of State Budget Cuts

By , 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).

Gross General Revenues

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:

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The UALR Arkansas Economic Forecast Conference

By , 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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