Institute for Economic Advancement

August Home Sales

By , September 29, 2011 11:59 AM

The Arkansas Realtors® Association reported this morning that home sales in August were up nearly 20% from the previous year, with total sales of 2,401 residential units.  The strength of the year-over-year growth in home sales is partly attributable to the expiration of home-buyer’s tax credits in April 2010.  A post-tax-credit  hangover last year suppressed sales over the summer months — usually the peak season for home sales.  As a result, the more normal seasonal pattern of home sales this year looks particularly strong compared to the summer of 2010.

Nevertheless, the August sales totals represent an improvement over previous months.  Last month, we reported that July sales “were well-below the level that one would expect during the busy summer months.”  The August figures are an improvement over July, indicating that the summer peak occured in August this year (as it often does).  The strength of the August data are important for projecting annual sales totals:  August sales typically account for nearly 10% of annual home sales in Arkansas, and the July-August total often accounts for as much as 20% of annual sales.  

The chart below shows the patterns of home sales from 2007-2011, both seasonally-adjusted and not-seasonally-adjusted.  The projections shown in the chart are based on an assumption that home sales in September through December will be as strong as indicated in the report for August.  Given typical seasonal patterns, this implies home sales of around 2000 per month in September and October, and nearly 1700 per month in November and December (not seasonally adjusted).  If this strength prevails, the sales total for the year will be about equal to last year’s total.   Under this scenario, therefore, there is about a 50/50 chance that 2011 sales will show an overall improvement over the previous year.   

Source:  Arkansas Realtors® Association

Source: Arkansas Realtors® Association

How likely is this optimistic projected scenario?  Much depends on interpreting the sales peaks associated with the home-buyers tax credits in 2009 and 2010.  Total sales during these surges include three types of home-buyers:

  • Those who would have purchased a home anyway,
  • Those who purchased a home only because of the value of the tax credit, and
  • Those who purchased a home sooner, rather than later.

The key question pertains to the third group:  How much sooner were households induced to move their home purchases because of the tax credit?  Assuming that a substantial share of these home buyers advanced their purchase plans by months, rather than years,  the market should be returning to more normal patterns in the latter months of 2011.  The strength of the August sales report might therefore be taken as a sign that we are in this more-typical market already. 

On the other hand [and there’s always another hand when it comes to economic projections], recent signs of weakness in the general economy and a deterioration of consumer confidence might undermine the pace of home sales in coming months.

Metro Area Employment and Unemployment – August 2011

By , September 28, 2011 10:54 AM

As previously reported, the unemployment rate for the state ticked up one-tenth of a percent in August, so it might appear anomalous that data released this morning by the Bureau of Labor Statistics and Arkansas Workforce Services shows that unemployment rates in each of the state’s metro areas dropped for the month.  The discrepancy is due to the fact that state-level data are seasonally adjusted, whereas the metro area data are reported on a not-seasonally-adjusted basis.  After applying simple statistical procedures for seasonal adjustment, however, unemployment rates in the state’s metro areas generally rose in August — consistent with the statewide data.  (One important seasonal factor affecting unemployment rates in August is the return of teachers to work and students to school.  This tends to lower measured unemployment, but says little about the underlying state of labor markets.  Seasonal adjustment accounts for this recurring pattern.)

As shown in the table below, seasonally-adjusted unemployment rates in August were higher than July in all but two of the state’s Metropolitan Statistical Areas (MSAs).  Memphis was unchanged at 10.2% and Texarkana’s rate ticked down from 7.9% to 7.8%.  Unemployment rates in Fayetteville, Hot Springs, and Jonesboro rose by 0.3%, with smaller increases in Fort Smith, Little Rock and Pine Bluff.

Source:  Bureau of Labor Statistics, Institute for Economic Advancement

Sources: Bureau of Labor Statistics, Institute for Economic Advancement

Seasonally adjusted unemployment rates had been declining during the latter part of 2010, but have clearly been on a rising trajectory since the beginning of this year.  Over the past year and a half, Pine Bluff and Memphis have maintained the highest unemployment rates in the state, Fayetteville and Little Rock the lowest rates, with the state’s other MSA’s clustered near the statewide average. 

Sources:  Bureau of Labor Statistics, Institute for Economic Advancement

Sources: Bureau of Labor Statistics, Institute for Economic Advancement

Data from the separate payroll survey reinforces the weakness indicated by the unemployment figures.  From July to August, payroll employment declined in all of Arkansas’ MSAs except Hot Springs.  Compared to a year ago, employment has declined in Fayetteville, Jonesboro, Little Rock, Pine Bluff, and Texarkana.  Since the statewide employment trough in February 2010, however, most of the states metro areas still show positive net job growth.  Only Memphis and Pine Bluff had lower employment in August 2011 than in February 2010.  Compared to the start of the recession, employment in Hot Springs is up by 4.1%, but is lower in all of the other MSAs — ranging from -0.8% in Jonesboro to -8.4% in Memphis. 

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

Personal Income – Second Quarter 2011

By , September 23, 2011 11:54 AM

Arkansas personal income growth in the second quarter was 1.3%, slightly above the national average rate of 1.1%.  According to the latest statistics from the Bureau of Economic Analysis, Arkansas’ growth rate ranked 15th among the 50 states.  Each of the three major categories of incomes — Net Earnings; Dividends, Interest, and Rent; and Transfer Payments — contributed to the increase. 

Source:  Bureau of Economic Analysis

Source: Bureau of Economic Analysis

The latest state personal income release incorporated recent revisions that were published for the national data in late August.  For Arkansas, total personal income was revised upward by 1.0% for 2008 and downward by 0.8% and 1.2% in 2009 and 2010.  As a result, the decline in income during the 2008-09 recession is now estimated to be considerably larger than previously reported.  From a peak in 2008:Q2 to a trough in 2009:Q3, Arkansas personal income declined by 3.5%.  Previously published data had shown a peak-to-trough decline of only 1.5%.

Source:  Bureau of Economic Analysis

Source: Bureau of Economic Analysis

In comparison to revised data for the U.S., however, the recessionary decline in income in Arkansas was still less severe.  The figure below compares indexes for the U.S. and Arkansas, normalized to the peak quarter of 2008:Q2.  The peak-to-trough decline in income for the U.S. was over 5.5%.  Arkansas income growth since the low point of 2009:Q3 has generally kept pace with national growth.  As of the second quarter of this year, total personal income in Arkansas was 4.3% above the 2008 peak.
 
Source:  Bureau of Economic Analysis

Source: Bureau of Economic Analysis

As reported in previous posts, personal income during recessions tended to be boosted by government transfer payments — through both “automatic stabilizers” that tend to increase when the economy weakens (e.g. unemployment insurance payments) and activist “stimulus” programs.  Consequently, measures of personal income net of government transfers provides a more accurate view of the strength of the underlying private-sector economy.  As shown in the chart below, personal income declined more precipitously during the recession and has been slower to recover when measured net of government transfer payments.  Without transfers, the peak-to-trough decline in  personal income was 6.8% in Arkansas and 8.8% for the U.S.  In both cases, the second quarter data show that personal income less transfer payments have only now recovered to their pre-recession levels.
Source:  Bureau of Economic Analysis

Source: Bureau of Economic Analysis

The fact that Arkansas fared better than many other parts of the country has meant that our relative position in terms of per capita income has improved from pre-recession levels.  In 2008, Arkansas’ per capita income was 80% of the national average.  In 2009 and 2010, it had increased to 82%.  As a result, Arkansas’ relative ranking rose from 47th to 44th.
Source:  Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Arkansas Employment and Unemployment – August 2011

By , September 16, 2011 10:53 AM

The Arkansas unemployment rate rose for the fourth consecutive month in August, up one-tenth of a percent to 8.3%.  According to the Bureau of Labor Statistics (BLS), Arkansas was one of 26 states that saw a rise in the unemployment rate in August.  The statistics from the household survey showed that the number of employed was down 3,148 while the number of unemployed was up by 1,193.  

As shown in the figure below, the unemployment rate in Arkansas has been trending upward since the beginning of the year.  For most of the recession and recovery period, Arkansas unemployment rate was 2 percentage points below the unemployment rate for the U.S.  It has now crept up to within 0.8 percentage points of the the national average. 

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

The payroll survey was also disappointing.  Seasonally adjusted data for August showed a decline of 1,900 jobs, on top of a downward revision to the July data.  After peaking in April, payroll employment has declined by 7,000 jobs in the past four months.  The table below shows that job losses in August were widespread.  The only sectors that showed positive monthly growth were Government (+3,000 jobs) and Manufacturing (+400).  Losses were particularly sharp in Professional and Business Services (-1,700) and Construction (-1,900).  Employment in construction had shown a sharp increase in July, but the August figures erased that gain.

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

It is never advisable to put too much emphasis on one month’s data, or on any one particular statistic.  But today’s employment report is the fourth consecutive report indicating weakness in Arkansas’ job market.  Data from both the household survey and and payroll survey suggest that conditions have deteriorated markedly since April. 

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*Seasonally adjusted data for nonfarm payroll employment, reported in a format compatible with the monthly news release from the Arkansas Department of Workforce Services, are available hereTable – Seasonally Adjusted NFPE

Metro Area GDP – 2010

By , September 14, 2011 3:50 PM

The Bureau of Economic Analysis released its “advance” estimates on metro area GDP for 2010 on Tuesday.  For all U.S. metropolitan areas combined, the report showed that real (inflation-adjusted) GDP increased by 2.5% in 2010 after declining 2.5% in 2009.  Increases were reported in 304 of the nation’s 366 Metropolitan Statistical Areas (MSAs).  As shown in the table below, each of Arkansas’ MSAs showed positive growth, with Fayetteville, Fort Smith, Jonesboro and Pine Bluff all showing growth in excess of the national average.  Little Rock was the slowest-growing MSA, but it was also the only metro area in the state to have experienced positive growth in 2009.

Source:  Bureau of Economic Analysis

Source: Bureau of Economic Analysis

The 2010 statistics are classified as “advance” statistics, meaning that they are preliminary and based on incomplete source data.  Only time will tell what subsequent revisions to the data will show.  Tuesday’s release included revisions to previous years’ data.  Each of Arkansas’ MSAs showed a downward revision compared to earlier-released estimates (see Metro Area GDP – 2009).

Income and Poverty in 2010

By , September 14, 2011 11:56 AM

U.S. incomes decline and poverty rises – but Arkansas fares better than most other states

Yesterday’s report from the Census Bureau showed that real household median income in the U.S. declined by 2.3% in 2010, and the share of the population below the poverty level rose to 15.1%–the highest level since 1993.  Clearly, the severity of the 2008-09 recession and the sluggish pace of the subsequent recovery are continuing to suppress standards of living.  Nevertheless, there are caveats to the coverage of the Census statistics that moderate some of the dismal interpretations of these statistics.  Moreover, the data for Arkansas contain some relatively positive news.

One important detail about the Census Bureau’s measurement of income is that it includes only “money income.”  It does not include government transfers such as housing subsidies, the value of publicly provided medical care, and food stamps.  The value of these transfers has grown rapidly in recent years, particularly since the onset of the recession.  If we consider overall standards of living — especially for the lower-income segment of households — comparisons to previous years’ money-income figures tell only part of the story.

Arkansas has long been among the lowest-income states in the nation.  Yesterday’s report did not change that generalization.  Median household income in Arkansas was $38,571, the second lowest in the nation.  Given the uncertainty associated with sampling and measurement error, Arkansas is one of nine states in which a three-year average of median household income is not significantly different from the lowest level (statistically speaking). 

However, in inflation adjusted terms, the 2010 income figure represents an increase of 3.8% compared to the previous year.  Arkansas was one of only 22 states to see an increase, and in fact, ranked as the 7th highest growth rate among the 50 states plus the District of Columbia.

The Poverty Rate in Arkansas was 15.5% in 2010 — nearly equal to the national average.  In comparison to 2009, the poverty rate in Arkansas was down from 18.9%.   Arkansas was one of only 16 states to see a decline, and the drop of 3.4 percentage points was the largest in the nation.  There is a range of statistical uncertainty in the poverty numbers as well, but using a 2-year moving average measure, the Arkansas’ poverty rate was basically unchanged from 2008-09 to 2009-10.

One important factor to consider when comparing income and poverty in Arkansas to the rest of the country is differences in cost-of-living.  The median income statistics and poverty levels are adjusted for inflation, but not for differences in prices across states and regions.  According to the most recent statistics on relative cost of living indexes, Arkansas has the fifth-lowest cost of living in the nation, with the general price level equal to about 91.4% of the national average.  If the income and poverty statistics were adjusted for differences in prices, the standard of living in Arkansas is higher than indicated by the uniform national statistics (see previous post:  The Poverty Rate and the Cost of Living).

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