Arkansas Economic Development Institute

Arkansas Employment and Unemployment – February 2010

By , March 26, 2010 3:01 PM

“… a dismal report”

The February report on state-level employment and unemployment was released by the U.S. Bureau of Labor Statistics and the Arkansas Department of Workforce Services this morning.  Set against the backdrop of expectations for a stabilizing employment situation, the Arkansas report is disappointing at best. 

Household survey

The headline news was an increase in the unemployment rate from 7.6 percent in January to 7.7 in February.  This is not a substantial change, but the upward creep is unwelcome news.  Changes in the underlying components of the unemployment rate highlight the weakness:  The number of employed was down by 1,142 and the number of unemployed was up by 1,285.

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

 

Payroll Survey

Not seasonally adjusted, nonfarm payroll employment in Arkansas fell only slightly in February (down by 300 jobs from January).  However, as shown in the chart below, January is usually a low point in the seasonal cycle of employment, with February tending to show a rebound as we head for the spring months.  After seasonal adjustment, the decline in February was substantial:  down 7,300 jobs.  In percentage terms, this represents a decline of 0.6%–the third largest drop among the 50 states in February.  This is a larger one-month loss than any we observed for Arkansas during the depths of the 2008-09 recession.

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

The table below summarizes the change in employment by sector.  Employment was down in nearly every sector in February.  The largest declines were in Trade, Transportation and Utilities; Professional and Business Services; and Other Services.  Construction employment continues to fall.  In February, construction employment fell below 50,000 (seasonally adjusted) for the first time since January 1999.

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

There were two relatively positive aspects of the report.  First, the data from January were revised to show a larger employment increase than previously reported.  As a result, some service-sector categories have shown positive growth, on net, over the first two months of the year.  The second positive element of the February report was manufacturing employment, which was up by 1,500 jobs.  Manufacturing employment has been experiencing a protracted period of decline.  The February increase provides further evidence that the sector is stabilizing.

One should never put too much emphasis on a single month’s observations—and the numbers released this morning are subject to future revision.  Nevertheless, taken at face value, today’s data-release represents a dismal report.

Arkansas Personal Income – 2009

By , March 25, 2010 11:55 AM

This morning, the Bureau of Economic analysis released their report on State Personal Income for the fourth quarter of 2009.  Because the fourth quarter figures complete the data for 2009, the BEA press release focused on annual income in 2009 compared to 2008.  For the year, 44 states experienced declines in personal income, with an average of -1.7%.   In Arkansas, personal income was down by only 0.2%, placing our state in the top ten in terms of income growth for the year.

PIMap2008-09

Per capita income averaged $31,946 for Arkansas in 2009, down by 1.0% (compared to a 2.6% decline for the U.S. average).  In terms of per capita income growth for the year, Arkansas ranked 12th in the nation.

The quarterly pattern of income growth over the year is also of interest.  Following two quarters of modest declines, Arkansas personal income was up by 1.1% in the fourth quarter.  This was the 9th largest increase in the country. 

The chart below shows the pattern of personal income for Arkansas compared to the U.S.  Both series peaked in the second quarter of 2008, so the data are normalized to equal 1.0 in that quarter.

Sourse:  Bureau of Economic Analysis

Sourse: Bureau of Economic Analysis

For the U.S., personal income fell by to 2.7 percent of its 2008Q2 value by the first quarter of 2009.  By the end of the year, U.S. income was down 1.4% from its peak.  The decline in Arkansas was more protracted and gradual.  Arkansas personal income hit a low point in the third quarter of 2009 (1.7% below peak), but the strong performance in the fourth quarter raised incme to a level only 0.6% below the 2008Q2 peak.

Metro Area Employment & Unemployment – January 2010

By , March 24, 2010 8:59 AM

The latest information on employment and unemployment for Arkansas Metropolitan Statistical Areas (MSAs) was released last week.   The data for January were mixed.  There were no clear signs of recovery in regional labor markets, but no further deterioration was evident either.  This is consistent with the statewide data reported in a previous post–showing the state’s unemployment rate unchanged with only a small increase in payroll employment.

Household Survey

As displayed in the table below, the household survey showed that changes in unemployment rates around the state were mixed.  The unemployment rate ticked up in the Fayetteville, Fort Smith, Hot Springs and Texarkana.  It was unchanged in Little Rock and declined in Jonesboro and Pine Bluff.  

Sources:  Bureau of Labor Statistics, Institute for Economic Advancement

Sources: Bureau of Labor Statistics, Institute for Economic Advancement

The drop in Pine Bluff’s unemployment rate was particularly sharp.  In recent years, Pine Bluff has experienced large swings in employment and unemployment from December to January.  The changes were smaller this year, resulting in a measured decline in the seasonally-adjusted unemployment rate.   We’ll have to wait and see whether this is just a statistical fluke or a significant change.

Payroll Survey

The January payroll survey also showed mixed changes in employment.  Seasonally adjusted, January payroll employment was up slightly from the previous month in Texarkana, unchanged in Jonesboro, and down a bit in the state’s other MSAs. 

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

(Note:  Although we have seen no formal annoucement of the change, the BLS public database now provides seasonally adjusted payroll employment data for Arkansas MSAs.  Assuming that this practice continues, the Arkansas Economist will henceforth rely on these official seasonally adjusted series, rather than using data adjusted by the Institute for Economic Advancement.)

Benchmark Revisions

This data release also included the annual benchmark revisions that have been discussed extensively in recent posts on the Arkansas Economist (MSA revisions were discussed here).  As expected, the revised data show sharply greater job losses during the recession than were previously reported — for most of the state’s MSAs.  The revised data show that Jonesboro was the only metro area to show positive growth in 2008, and all of the states MSAs suffered employment losses during 2009.  The decline in Fort Smith was particularly steep.

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

Although the revisions showed larger employment declines for most of Arkansas’ MSAs, the revised data for Pine Bluff show that job losses were not as large as previously reported.  In this case, it’s no fluke.  The updated statistics are based on very accurate data from the Quarterly Census of Wages and Employment (QCEW)  for 2008 and early 2009.  

The anomolous upward revision to the payroll data for Pine Bluff was anticipated in a previous post on the Arkansas Economist.  A more complete evaluation of our exercise in “forecasting a revision of history” is forthcoming.

Arkansas Taxable Sales

By , March 16, 2010 4:51 PM

A new indicator of economic activity for the Arkansas economy

Retail sales statistics for the U.S. economy are regularly compiled by the Census Bureau.  However, there is no readily-available, timely source of data for retail sales on the state level.  One approach to filling this gap is to use state sales tax collections as a measure of taxable sales.   In principle, the approach is quite simple:  Taxable sales = Sales tax collections/tax rate.  In order to extrapolate sales statistics from tax data, however, it is necessary to consider the coverage of the tax, changes in tax law, and the timing of state revenue collection relative to the underlying sales.

Arkansas has four separate sales taxes imposed on a common base:  a general sales and use tax of 4.5 percent, a tax for the educational adequacy fund of  0.875 percent, a property tax relief tax of 0.5 percent, and a conservation tax of 0.125 percent (for a total tax rate of 6.0 percent).  Each of these taxes could conceivably be used to identify overall sales activity.  However, recent changes in tax structure complicate matters.  In particular, the tax rate on grocery purchases was lowered from 6.0 percent to 3.0 percent in July 2007, then lowered again to 2.0 percent in July 2009.  When these tax cuts were adopted by the state legislature, the associated revenue reductions were specified to be subtracted from three of the four specific taxes, in proportion to their relative rates.  As a result, these three taxes (general sales and use, educational adequacy, and property tax relief) no longer represent a constant fraction of total sales–rather, they represent a weighted average of taxes on non-grocery items (at the statutory rate) and taxes on groceries (at a lower rate).  Only the 1/8-percent conservation tax remains at its statutory rate.  (The conservation tax is not affected by recent tax law changes because it is written into the state constitution.)  The conservation tax is therefore a unique candidate for use in estimating the underlying tax base.

A second important factor for deriving sales information from tax collection data is the timing of tax receipts relative to the  sales being taxed.  Tax laws in Arkansas impose different requirements on different sized businesses.   Some larger firms can choose to pay estimated taxes for the current month, while some smaller firms are required to file and pay only quarterly or annually. For most business, however, the key deadline comes on the 24th day of the month.  On that date, final statements and payments for taxes owed in the previous month are due.

The tax payment deadlines suggest that revenues received by the state during a month primarily reflect taxable sales from the previous month.  An examination of the raw data supports this timing convention.  For example, when the special conservation tax was implemented in 2001—and again when the earmarked educational adequacy tax was introduced in 2004—revenues received in the first month of implementation were a very small proportion of subsequent months.  The seasonal pattern of sales tax receipts is also indicative:  The most prominent recurrent peak in tax receipts occurs in January, one month after the December retail sales peak.  As the payment regulations indicate, tax receipts reflect a mix of taxable sales from current and previous months.  Nevertheless, the best practical estimate seems to be a simple one-month lag.

So, using receipts from the conservation tax and adjusting the timing to reflect the one-month collection lag, we can calculate a measure of taxable sales.  Monthly data for this series are illustrated in the figure below:

Arkansas Taxable Sales

 Although there is a great deal of month-to-month variability in this measure, recent observations suggest that sales activity reached a low point around mid-2009, with signs of recovery since then.

In interpreting the data, a number of caveats should be considered:

  • The series is labeled “taxable sales” rather than “retail sales” because Arkansas sales and use taxes apply not only to retail transactions, but also to some business-to-business transactions.
  • Some of the monthly variability in the series can be attributed to specific institutional factors in the tax collection process.  For example, the rather sharp upturn observed for December 2009 (reflecting tax collections in January 2010) was partly attributable to “one-time gains from audit payments” [see General Revenue Report for January (FY 2010)].
  • Another previous change in the tax structure should also be mentioned:  in 2004, with the introduction of the educational adequacy tax, the sales tax base was broadened.  Although there is no evident break in the path of total tax revenues, this consideration warns against making direct comparisons between post-2004 and pre-2004 data.  (The expansion of the tax base accounts for a revenue increase of only about 0.5 percent.)
  • The most recent observations in the series should be considered preliminary.  Data for the conservation tax are not explicitly reported in the General Revenue Reports, but are available in the publication Arkansas Fiscal Notes, which is available a few weeks after the initial report.  Until the publication of Arkansas Fiscal Notes, the change in general gross receipts is used as a preliminary approximation.

Given some of these considerations, it is best not to focus on very short-term changes in the data.  The chart below shows the results of averaging the data over calendar quarters.  The chart juxtaposes Arkansas Taxable Sales with a quarterly measure of  U.S. retail sales.

Sources:  U.S. Census Bureau, Arkansas Department of Finance and Administration, Institute for Economic Advancement.

Sources: U.S. Census Bureau, Arkansas Department of Finance and Administration, Institute for Economic Advancement.

A comparison of the measures for Arkansas and the U.S. reveals an interesting pattern:  Sales in Arkansas reached a peak about one quarter later than the U.S., and experienced sharp declines with a similar lag.  Moreover, the percent change from peak to trough is smaller for the Arkansas data than for the U.S.  This pattern is consistent with the notion that Arkansas’ economy was dragged into recession by economic weakness in the rest of the country.  Both measure show increase toward the end of 2009, confirming the general observation that both the national and Arkansas economies are beginning to recover from the recession of 2008-09.

Arkansas Employment and Unemployment – January 2010

By , March 10, 2010 5:33 PM

The latest state-level data on employment and unemployment were released today, covering January 2010.  We’re getting this monthly information a little bit later than usual because the Bureau of Labor Statistics took some additional time to go through the annual process of revising previously-published data using more complete information.

The unemployment rate in Arkansas held steady at 7.6 percent in January, remaining well below the U.S. average of 9.7 percent.  Today’s data release included a new smoothing technique for seasonally-adjusted unemployment data that eliminates some of the month-to-month variability.  By this new measure, the unemployment rate in Arkansas has been holding in the range of 7.5 to 7.6 percent for the past 6 months.  There is no indication that the unemployment rate is poised to go any higher, but neither is there any indication (yet) of an imminent decline in unemployment.

Source:  Bureau of Labor Statistics
Source: Bureau of Labor Statistics

The payroll employment figures showed some signs of recovery in service-sector employment.  Total nonfarm payrolls increased by 1,700 jobs in January (seasonally adjusted) with increases in the categories of Financial Services, Professional and Business Services, Education and Health Services, Leisure and Hospitality, and Other Services.  We continue to see weakness in the goods-producing sectors.  Manufacturing employment had been up slightly toward the end of 2009, but was down by 1,900 jobs in January.

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

The payroll employment figures that were released this morning incorporated new benchmark revisions.  As reported on previous pages of the Arkansas Economist (here, here and here), the annual exercise of reconciling data from the Current Employment Statistics (CES) program with the Quarterly Census of Wages and Employment (QCEW) was expected to show sharply larger job-losses during 2009 than were previously recorded in the data.  This did, in fact, prove to be the case.  As shown in the figure below, the revised data show that payroll employment declined more sharply during 2008 and 2009 than was reported at the time, with previously unrecorded job losses accumulating to 18,200 by the end of the year (as of December). 

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

The fact that job losses during 2009 were greater than previously measured is–to some extent–old news.  However, it means that it will take longer to see employment increase to the levels we saw prior to the onset of recession.

Gasoline Prices

By , March 9, 2010 9:12 AM

Rising gasoline prices are in the news again.  According to AAA Fuel Gauge Report, the national average price for a gallon of regular grade gasoline has risen to $2.76 per gallon–up six cents in the past week and ten cents from a month ago.   Here in Arkansas we’ve seen similar price increases, with the current average price reported to be $2.66 per gallon.

Price changes play an important role in any market.  Gasoline prices tend receive more attention than other prices–perhaps because gasoline is a commodity that we use on a daily basis, or perhaps just because gasoline prices are prominently posted on every street corner.  But like any other price, understanding movements in the price of gasoline ultimately comes down to considering supply and demand.

About half the cost of gasoline can be traced back to crude oil prices.  In the past month, world oil prices have risen from around $70 to over $80 per barrel.  Specific market factors have been mentioned as playing a part in this increase:  On the supply side, an insurgency in Nigeria (an OPEC member nation) has been causing some production disruptions, and there has been some uncertainty about the prospects for Iranian oil production as well.   Meanwhile, it is anticipated that China will be adding to its strategic petroleum reserves this year, raising demand.  More fundamentally, the world economy is seen as recovering from the deep recession of the past two years, bringing stronger demand for energy overall.

Other factors affect the price of gasoline specifically.  With the warmer weather, refiners are switching to their summer formulations, contributing to a seasonal increase to production costs.  Demand for gasoline also tends to rise in the spring as consumers come out of hibernation to drive more.  This year, strengthening demand is expected to be particularly important.   With the economy emerging from recession and consumer spending showing signs of picking up, it is anticipated that demand for gasoline will be especially strong during the spring and summer months of 2010.

For both crude oil and refined gasoline, rising demand associated with economic recovery is seen as the fundamental factor driving prices upward.  Some industry analysts are predicting gasoline prices as high as $3.00 per gallon by this summer, but the alternative–lower gas prices in the face of weaker-than-expected consumer demand–is not an attractive prospect either.

In current market conditions, higher prices are serving as a signal to producers and distributors to unleash their inventories of oil and gasoline.  The time is now to bring the product to market.  In fact, the Financial Times reports  that the relationship between crude oil prices on the spot and futures markets is in the process of moving from “contango” toward “backwardation.”    The market has been in contango for some time, as weak demand during the recession has kept spot prices low relative to foward prices.  The market appears to be moving to a reversal, known as backwardation, in which forward prices fall below spot prices.  This serves as a signal for prompt delivery of product to market.  A similar process appears to be occuring in the markets for gasoline as well.

So in some sense, higher gasoline prices are serving as an indicator that the economy is strengthening, and should be considered a positive development.    For Arkansans, the other good news is that gasoline prices in our state remain about ten cents below the national average.  In fact, a “top ten list” of the lowest gas prices in the nation (see below) includes Arkansas, along with several of its neighboring states.  If you’re willing to pay one or two cents more for gasoline, Mississippi and Louisiana join the list as well.  So no matter which direction you head on a road trip from Arkansas this spring and summer, you’re likely to find relatively low gas prices.

Source:  AAA Fuel Gauge Report, March 9, 2010

Source: AAA Fuel Gauge Report, March 9, 2010

New Poverty Measures to be Developed

By , March 3, 2010 10:23 AM

The Commerce Department yesterday outlined plans for a new methodology for measuring the poverty rate [“Census Bureau to Develop Supplemental Poverty Measure”].  The new measure will not replace the existing poverty-rate calculation, but serve as a supplement:  “the supplemental measure will not be the measure used to estimate eligibility for government programs. Instead, it will be an additional macroeconomic statistic, providing further understanding of economic conditions and trends.”

As reported in a previous article on the Arkansas Economist, intensive research on new measures of poverty has been underway for many years.  The new measure will incorporate many of the changes that have been recommended by researchers, including the adjustment of poverty measures for differences in the cost of living across geographic areas. 

Final details about the new measure are still being worked out — it will not be available until the fall of 2011 (when the poverty statistics for 2010 are released). 

To see how differences in cost-of-living affect Arkansas’ rankings in the poverty statistics, see my previous post on the topic:  “The Poverty Rate and the Cost of Living.”

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