Arkansas Economic Development Institute

Metro Area GDP – 2009

By , February 23, 2011 12:07 PM

It takes some time to compile comprehensive GDP statistics for the nation’s 366 Metropolitan Statistical Areas (MSAs).  This morning, the Bureau of Economic Analysis released figures for 2009.  Although the numbers are not necessarily representative of more current economic conditions, they provide information about how Arkansas fared during the recession.  In that sense, they also give some indication of how the state’s MSAs were positioned to share in the nationwide economic recovery that began in the latter half of 2009 and into 2010.

As discussed in a previous post, Arkansas’ economy was one of only 10 states that showed positive GDP growth in 2009.  As shown in the Table below, GDP contracted in six of the seven MSAs that have a central city in Arkansas.  Only the Little Rock-North Little Rock-Conway MSA showed positive growth in 2009 (+2.4%).  This suggests that much of the growth revealed in the state-level GDP report for Arkansas was concentrated in the central part of the state.

Source:  Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Although the state’s other six MSAs showed negative growth for the year, each compared favorably to nationwide averages.  The BEA reported that real GDP declined in 292 of the nations 366 MSAs (80%).  On average, the metropolitan areas of the nation contracted by 2.4%.  Jonesboro, the Arkansas MSA that showed the largest decline, contracted at a slightly greater pace.  Jonesboro was also the only Arkansas MSA that fell below the median growth rate.  But even the disappointing performance of GDP growth in Jonesboro is tempered by the observation that its economy had expanded by more than 4% in the previous year (an upward revision from previously-released data).  As shown in the map below, the relatively favorable performance of GDP growth in Arkansas’ MSAs fits within a nationwide pattern.  MSAs that experienced above-average growth tended to be concentrated in the region west of the Mississippi River and east of the Rocky Mountains.   

gdpmsa_0211

In the state-level GDP report, Arkansas growth was concentrated in some key sectors:  Mining, Information Services and Management Services.  The breakdown of sectoral contributions to GDP growth in Arkansas’ metro areas show similar patterns.  For example, Natural Resources and Mining contributed 0.4 percentage points to growth in the Little Rock metro area.  (This is undoubtedly related to natural gas extraction activities in the northern part of the MSA.)  Specialized service sectors contributed positively to growth across the state.  For example, Financial Activities expanded in Fayetteville, Jonesboro, Little Rock, Pine Bluff and Texarkana.  Professional and Business services provided positive growth in Hot Springs and Jonesboro.  Education and health services expanded in most of the state’s MSAs.

It will be another year before we see statistics for MSA GDP in 2010.  However, the patterns revealed in the 2009 data (along with other, more recent indicators) suggest that a positive economic growth is likely to have emerged for most regions of the state.

Arkansas Capital Gains Tax Cut

By , February 16, 2011 2:16 PM

HB1002 has become a controversial proposal before the state’s legislature.  As reported by Talk Business, the sponsor of the bill — Rep. Ed Garner (R-Maumelle) — has cited “a UALR study” that shows the revenue impact of the proposed tax cut will be smaller than estimated by the Department of Finance and Administration.

The UALR report cited was written by yours truly.  Representative Garner approached me with a request to take a look at the numbers and see if I had any additional insights to provide.  I went through the numbers and came up with an alternative approach to estimating the revenue impact, using data from a simliar law that is on the books in Oklahoma.

In line with the mission of Arkansas Economist–providing information and analysis about the Arkansas economy–the report can be viewed here:  HB1002 (PDF).

Which set of estimates is correct?  Neither.  There is a great deal of uncertainty associated with forecasting the impact of hypothetical policy changes.  The estimates provided in my report should be viewed as an alternative that helps establish a plausible range of likely outcomes.  I neither endorse nor oppose HB1002, but provide this analysis in the public interest.

Arkansas Taxable Sales Down Slightly in 2010:Q4

By , February 3, 2011 12:02 PM

Recent data on sales tax collections from the Arkansas Department of Finance and Administration (DFA) show that taxable sales growth stalled at the end of 2010.  After adjusting for the timing of tax collections, changes in tax law, and recurring seasonal fluctuations, the latest tax collection data show that Arkansas Taxable Sales declined by 0.7%  in the fourth quarter of 2010.*   After revision of seasonal factors, the fourth-quarter decline almost exactly offsets a gain of 0.7% seen in the third quarter.  For 2010 as a whole, total taxable sales were up 4.2 from the previous year.

Sources:  Arkansas Department of Finance and Administration, Institute for Economic Advancement

Sources: Department of Finance and Administration, Institute for Economic Advancement

The fourth quarter decline was primarily attributable to a sharp drop-off in December.  DFA reports sales tax collections as of the month they are received by the state — generally after a one month lag.   Consequently, the decline in December sales corresponds to sales tax receipts for January, as reported by DFA yesterday.  The DFA monthly general revenue report noted the decline, citing a 3.1 percent decline in gross receipts collections that resulted in a total that was 4.9 percent below forecast.   The holiday shopping season is usually associated with a surge in December sales, so the process of seasonally-adjusting the data reinforces the unusual nature of the decline at the end of 2010.

Sources:  Department of Finance and Administration, Institute for Economic Advancement

Sources: Department of Finance and Administration, Institute for Economic Advancement

The weak sales growth in December is surprising given anecdotal information about the relative strength of the holiday shopping season.  It is possible that the source of the weakness is in non-retail areas of sales and use tax collections.  For instance, tax collections from utilities might have been low due to relatively favorable weather and low energy costs.  It might also be the case that holiday shoppers spent more money on online purchases, for which sales and use tax collection is not always complete.  However, there is really no solid evidence available to explain the downturn.

The fourth quarter decline in Arkansas Taxable Sales is surprising — and disconcerting.  However, we should be cautious about putting too much emphasis on a single monthly data observation.  We’ll just have to wait and see how the numbers come in for the first few months of 2011 before concluding that the December number represented either a change in trend or an anomaly. 

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The Arkansas Taxable Sales series is calculated by IEA to serve as a timely measure of Arkansas retail sales.  The series is derived from sales and use tax data from DFA, adjusting for the relative timing of tax collections and underlying sales, changes in tax laws, and seasonal patterns in the data.

A spreadsheet of the most recent data is available here:  Arkansas Taxable Sales data (Excel file)

Metro Area Employment and Unemployment – December 2010

By , February 2, 2011 7:11 PM

End-of-year statistics for employment and unemployment in in metropolitan areas were released this morning by the Bureau of Labor Statistics.  Unemployment rates (seasonally adjusted*) declined slightly in most of Arkansas’ MSAs in December, but rose in Fort Smith.  As shown in the chart below,  The lower unemployment rates we saw during the summer were transitory — evidently associated with of temporary Census employment.  Rates generally ended the year slightly higher than they were in January, rising by 0.3 to 0.5 percentage points in most of the state’s metro areas.  Fort Smith showed an end-of-year increase that took its unemployment rate to 8.6%, up by 0.7  percentage points from January.   Only Texarkana’s unemployment rate declined over the course of the year, falling slightly to 7.3 percent in December. 

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

Employment statistics from the payroll survey showed employment increases in all of Arkansas’ metro areas in December.  Hot Springs, Jonesboro and Pine Bluff showed significant increases.  For the year as a whole, employment was up in three MSAs:  Hot Springs, Texarkana and Jonesboro.  In fact, employment in Jonesboro remains higher now than it was at the start of the recession in December 2007.  At the other extreme, employment in Fort Smith is now down 8% from the start of the recession. 

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

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*Seasonally adjusted data for MSA Payroll Employment are available from the Bureau of Labor Statistics.  However, data for unemployment rates are not.  In order to facilitate comparisons over different months of the year, unemployment rates are seasonally adjusted by the Institute for Economic Advancement using the conventional Census-X12 ARIMA procedure.

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