The December Employment Report

By , January 22, 2010 4:08 PM

The December 2009 report on Arkansas employment and unemployment was released this morning by the Bureau of Labor Statistics.  

The household survey showed a record number of unemployed in Arkansas — 105,408.  That represents about 3500 more unemployed Arkansans in December than there were in November.  The survey also showed that the number of employed declined by 10,550 from November to December (although this decline follows an increase of 10,175 in November).   The unemployment rate rose from 7.4 percent to 7.7 percent.  This is the highest unemployment rate for Arkansas since June 1988.

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

The payroll survey provided similarly disapointing news.  The number of workers on nonfarm payrolls declined by 3400 in December (seasonally adjusted).  Losses were largest in Trade, Transportation and Utilities (-2200) and Profesional and Business Services (-1900).  Some sectors experienced increases in employment:  for example, Manufacturing employment increased by 1000, jobs in Financial Services were up by 900, and the number of Education and Health workers rose by 800.  The table below summarizes employment changes by sector over the past six months. 

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

As described in a previous post, the next release of payroll data will include annual benchmark revisions, reflecting more complete information collected in the BLS’s Quarterly Census of Employment and Wages (QCEW).  Based on the most recent information available, the benchmark revisions will show much larger job losses in Arkansas than were previously reported (particularly in 2009Q2).  The table below reports projected revisions to the payroll data, extended through the end of 2009:

Sources:  Bureau of Labor Statistics, Institute for Economic Advancement

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

Repeating a cationary note from the previous post :  The actual benchmark revisions to be released by the BLS on March 10 will be calculated using far more detailed methods and more up-to-date information.   Nevertheless, the revisions are likely to be of the general magnitude presented here.

Forecasting a Revision of History

By , January 15, 2010 10:05 AM

  “The bottom line:  Arkansas has lost 18,000 more jobs since the start of the recession than were previously recorded.”

In the business of monitoring and forecasting economic conditions, data revisions sometimes require tedious attention to detail and usually lead to only subtle changes in perspective.  At other times, revised data can dramatically alter our view of the world.  New data released by the Bureau of Labor Statistics (BLS) earlier this week fall into the latter category.  They  indicate that upcoming revisions to Arkansas employment statistics will reveal significant changes:  The employment situation in our state  is far worse than recent data have been leading us to believe. 

Month-to-month changes in payroll employment—as regularly reported in the media and here on the pages of the Arkansas Economist—come from the BLS’s Current Employment Statistics (CES) program.  According the the BLS, the CES surveys “about 150,000 businesses and government agencies, representing approximately 390,000 individual worksites.”  This sample is used to produce employment estimates for the nation, the states, and metropolitan statistical areas.  It is one of the most timely and accurate measure of economic activity that is available—especially on the regional and local levels.  Nevertheless, it is a survey—subject to sampling error and unmeasured changes in the structure of of the labor market.  Specifically, the CES must use estimates of the number of establishments in a given state or metro area.  During times when there are many business entrances or exits from the market, these estimates can be off the mark.

To improve the accuracy of the statistics compiled by the CES program, the BLS also calculates a Quarterly Census of Employment and Wages (QCEW).  This is the report that came out earlier this week. 

The QCEW is a comrehensive and detailed account of employment, disaggregated by sectors and by counties.  It is constructed from state unemployment insurance records, so it constitutes a full accounting of all covered jobs in the nation.  Because of it’s comprehensive coverage, the QCEW provides a more accurate picture of employment than the CES. 

However, data for the QCEW take longer to compile.   This week’s “new” data cover the period April-June 2009.  Old news.  But this more comprehensive measure will soon be used to “benchmark” the data from the CES.  On March 10, the BLS will release revisions to the CES payroll employment figures, based on the new data from the QCEW.  

For Arkansas, the QCEW showed that employment declined sharply during the first six months of 2009–down by approximately 33 thousand jobs.  In contrast, the monthly payroll employment reports from the CES have been suggesting that Arkansas employment began to stabilize in March (as reported in the Arkansas Economist here and here, for example).  We can be confident that the revisions will show sharply larger job-losses in early 2009 than are presently shown in the CES payroll data.

Rather than wait until March 10th, I have calculated  estimates for benchmarked CES payroll employment data—an exercise in forecasting an upcoming revision of history.  The results of this exercise are summarized in the figure below:

Arkansas Payroll Employment

Sources: Bureau of Labor Statistics and Institute for Economic Advancement

The projected benchmark series is calculated using some simple statistical procedures to estimate the  correspondence between the two measures in the past (Jan. 2001-Dec. 2007) and to forecast that relationship in the more recent past (Jan. 2008-June 2009).  For July 2009 through November 2009 (the most recent month availabile for the CES payroll data), month-to-month percent changes are used to extrapolate these estimates [see technical notes].

The projected revised data far sharply below current CES estimates during the first half of 2009, lowering the estimated level of employment in Arkansas for the second half of the year.  The bottom line:  Arkansas has lost 18,000 more jobs since the start of the recession than were previously recorded.

Investigating in more detail, I also estimated revisions to major sectoral categories of the data.  The results of this exercise, summarized in the table below, reveal that some sectors fared better according to the revised statistics (especially in the earlier stages of the recession, during 2008), but most fared worse (especially during 2009).   Overall, Arkansas lost slightly fewer jobs in 2008 than previously recorded, but lost far more in 2009. 

Sources:  Bureau of Labor Statistics, Institute for Economic Advancement

Sources: Bureau of Labor Statistics, Institute for Economic Advancement

The estimates presented here may not line up precisely with the benchmarked data to be released on March 10.  The BLS will use more detailed methods and up-to-date information to perform the actual benchmarking procedure.  Nevertheless, given the size of the discrepancy between current CES survey data and the available QCEW population data, the revisions are likely to be of this general magnitude.

Although the revisions will reveal a sharply larger employment decline in Arkansas, it remains true that the state has fared better than the nation as a whole.  The benchmarking process is expected to lower employment estimates for the total U.S. , leaving Arkansas in roughly the same relative position. 

Read More:
News — Reuters:  Data suggests U.S. still overstating employment and Recession shows shortcomings in U.S. Economic Data
Methodology — BLS:  QCEW Overview
Background — Pakko & Wall:  Revised Employment Data for Metro Areas in the Eighth District (2009)

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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