The October Employment Situation

By , November 20, 2009 1:45 PM

The Bureau of Labor Statistics released its latest report on state employment and unemployment this morning. The obvious headline for Arkansas is that the unemployment rate rose by one-half of a percentage point to 7.6 percent. This is the highest rate for Arkansas in over two decades–clearly not good news. Nevertheless, the state’s unemployment rate remains well below that national average rate of 10.2 percent.

As alarming as the unemployment rate increase appears, one should never become too concerned about a single observation. Indeed, the Arkansas employment data have recently been subject to considerable month-to-month volatility. Recall that the unemployment rate jumped to 7.4 percent in July before falling back to 7.1 percent in August and September. The chart below illustrates a three-month moving average of the unemployment rate, smoothing out some of the monthly variability. By this measure, the rate has been fairly steady at around 7.25 percent since mid-summer.

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

The data on employment in Arkansas has been similarly volatile. In a post last month, I noted that the household survey and payroll survey were providing mixed signals about employment in September. The household survey showed a gain of 8400 jobs, while the payroll survey showed a decline of 7700 jobs. In the latest report, the September employment figure was revised upward, reducing the August-September job loss to 5300. For October, payroll employment was up by 4200 jobs, resulting in a net loss of only 1100 jobs over the two month period. Meanwhile, the household survey for September was revised upward (now showing an increase of nearly 8600 jobs), while the newly-released number for October showed a decline of 4100 jobs.

The chart below puts some of these monthly changes into context. Both measures of employment showed sharp declines from about October 2008 until March 2009. While falling slightly since then, Arkansas employment has evidently stabilized. We continue to see month-to-month movement in both series (some of which is smoothed out by considering a simple average of the two), but no significant upward or downward trend is discernable.

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

October’s increase in the unemployment rate will surely generate alarmist headlines, but overall the October employment report shows a continuation of the labor market performance we’ve been observing since spring: sluggish but not deteriorating.

Arkansas Home Sales

By , November 19, 2009 7:58 PM

Even before the onset of the recent recession, residential real estate markets have been at the heart of our national economic tribulations. And having just purchased a home in the Little Rock area, I’ve recently taken a personal interest in the Arkansas housing market. So how did the Arkansas housing market fare during the recession, and is it now recovering?

Data on existing home sales in Arkansas are available from both the National Association of Realtors® (NAR) and the Arkansas Realtors® Association (ARA).

Last week (on November 10), the NAR released its quarterly report on state-level existing home sales. The report showed that the markets are improving in most areas of the country, with 45 states and the District of Columbia showing sales increases in the third quarter relative to the second quarter (seasonally adjusted). Arkansas was one of the states showing an increase, up 2.7%. This was the third consecutive increase for Arkansas home sales, following a 4.2% rise in the second quarter and a 3.6% increase in the first quarter. The magnitudes of the quarterly gains are relatively modest compared to some other states, but Arkansas was one of only 6 states to experience sales increases over all three quarters.

Although these data are indicative of the performance of the Arkansas market relative to other parts of the country, they do not necessarily represent the most accurate assessment of market conditions for the state. According to the the NAR’s own description of its methodology, the monthly survey covers only about 30-40% of all existing home sale transactions. The sample data are used to construct aggregates for the four census regions of the U.S., then the State data are derived from those totals.

Indeed, according to Ethan Nobles of the ARA, it is his understanding that the NAR survey excludes some of the important local markets in Arkansas. The ARA releases its own monthly summary of home sales, consisting of the total number of homes sold by Realtors® across the state. The data are subject to some revision as late reports come in, but they represent (as best as possible) a full accounting of the number of homes sold in the state.

The most recent report from the ARA came out earlier this week (November 16). It shows that home sales were up in September over the previous year. This was the second month in the past three that showed a year-over-year increase. The data, shown in the chart below, suggest that home sales in Arkansas have been on a recovery path throughout 2009.

Source:  Arkansas Realtors® Association

Source: Arkansas Realtors® Association

However, it is also evident from the chart that there is a pronounced seasonal pattern in the data. Home sales tend to be lower during the winter months, and higher during the spring and summer. This makes it difficult to discern trends over periods less than a year in length. And in particular, it is hard to tell how much of the increase since January 2009 represents actual growth as opposed to regular seasonal movement.

With a longer data series, it would be possible to apply standard statistical techniques directly to the data. In the absense of a long time-series, however, more rudimentary techniques can suffice: The NAR’s monthly report on existing home sales provides estimates of both seasonally-adjusted and not-seasonally-adjusted estimates for the U.S. and the four census regions, over the past 12 months. The ratio of these two sets of estimates provide implicit seasonal factors, as calculated by the NAR (using a census X-11 procedure).

Applying the implicit seasonal factors for the Census South Region to the data for Arkansas from the ARA, we obtain a rough estimate of seasonally-adjusted Arkansas sales. The chart below illustrates the result of this procedure, with the data multiplied by 12 (so they present annualized measures), and averaged over quarters (to smooth out month-to-month variability).

Source:  Arkansas Realtors® Association and the Institute for Economic Advancement

Source: Arkansas Realtors® Association (ARA), National Association of Realtors® (NAR), and the Institute for Economic Advancement (IEA).

It is clear from this chart that home sales in Arkansas were sliding downward before and during the first part of the recession, then dropped sharply in the fourth quarter of 2008. Since then, sales have steadily increased. This confirms the pattern observed in the NAR data suggesting that residential real estate markets in Arkansas have been consistently improving since the beginning of the year.

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