Institute for Economic Advancement

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

State Employment Report Provides Mixed Signals

By , October 21, 2009 12:22 PM

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

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

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

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

Two Measures of Employment in Arkansas

Two Measures of Employment in Arkansas

State Revenue Woes (?)

By , October 20, 2009 7:36 PM

Governor Mike Beebe announced today that he had “accepted a recommendation by the Arkansas Department of Finance and Administration to cut the state budget by $100 million for the current fiscal year.”  This amounts to a budget reduction of  just over 2 percent.  The background to this announcement was a report from the Department of Finance and Administration (DF&A) earlier this month that showed that Arkansas tax revenues were sharply lower than expected in the first quarter of fiscal year 2010 (July-Sept 2009).

Year-to-date gross general revenues were down by 7.2 percent from the previous year, and were 6.4 percent below the general revenue forecast.  Net available general revenues were down 3.3 percent from the previous year and 7.1 percent below forecast.  The report noted that “in percentage terms Corporate Income is below forecast the most (-22.1 percent [-$19.9 million]), but Gross Receipts [sales taxes] are down by a greater amount in dollar terms (-$61.6 million [-10.8 percent]).”

These declines are disconcerting, especially in the context of recent signs of renewed growth in the Arkansas economy.  However, there are reasons to believe that this is a temporary problem and that state revenues will recover sufficiently to meet revised revenue projections in the latter part of the fiscal year.

  • First, tax revenues are recorded by DF&A in the month that they were received, rather than in the month that the tax liabilities were incurred.  Reporting and payment lags mean that revenues received in the July-September period reflect economic conditions earlier in the year when the recession was having a greater impact on the economy.  Recent signs of stabilization should show through to revenue receipts in coming months.
  • More important, as the economy recovers from the recession in coming months, economic activity will pick up — further expanding the tax base and revenue receipts.

The depth of the nationwide recession and its impact on the Arkansas economy were more severe than anticipated.  Consequently, state revenues will be lower than earlier expected.  With prospects of an improving economy on the horizon, however, a modest 2 percent reduction in annual revenue projections and budgetary authority should be sufficient to correct the state’s budget imbalances.  As Governor Beebe put it, “Just like any family or business, state government must live within its means.”  His response to unexpectedly sharp declines in revenue is a prudent fiscal adjustment.

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