This Year’s “Forecasting a Revision of History”

By , October 31, 2012 4:32 PM

One of the more upbeat prognostications from the 2012 Arkansas Economic Forecast Conference was the prediction that revisions to the employment data will ultimately show much stronger job growth in Arkansas than reported in the currently-published data.  Due to the nature of the expected revisions, this prediction is also somewhat tricky to interpret.  Hence this more detailed explanatory note is in order.

The monthly statistics on payroll employment–the Current Employment Statistics (CES) — are among the most timely and revealing economic indicators available at the state level.  However, they are based on a sample survey of employers, so they are subject to sampling error.  Moreover, important pieces of missing information involves the rate of new business formation and the closure of failed firms.  The Bureau of Labor Statistics estimates the effect of these changes with a “birth/death model.”  Particularly in times of economic turmoil, even the best modeling can end up being far off the mark.  The CES is also subject to a number of other non-sampling errors.

Once per year, the BLS revises the CES data with the more accurate statistics from the Quarterly Census of Employment and Wages (QCEW).  Based on records from state unemployment insurance offices, the QCEW is very comprehensive, covering 98% of all U.S. jobs.  Because it is so comprehensive, however, it is only available after a fairly long lag.  Data for the first quarter of 2012 only came out at the end of September.  These first quarter data will be used to revise the CES data in the annual “Benchmark Revision” process.

The benchmark revisions will not be completed until after the release of monthly CES data at the end of the year, but there is enough information available at this time to make a fairly accurate estimate of what the revision process will reveal.  In recent years, the revisions have been substantial  (see here and here, for example).  The next benchmark revision is expected to reveal a large upward revision to the total employment count in Arkansas.

The chart below illustrates the magnitude of the expected revision.  The revised data projections diverge from currently-published figures in July 2011, with a net increase of 9,700 jobs.  The largest monthly revision is for October 2011 — amounting to nearly 19,000 jobs.  Because the QCEW data extend only through March 2012, job growth for April through September is unrevised, so monthly changes are simply appended to the revised data.

Sources: Bureau of Labor Statistics, Institute for Economic Advancement

Because of the timing of the revisions, the next benchmark revision will show substantial upward adjustment of job growth in 2011.  As a result, the net increase in employment in 2012 will actually be revised downward.  Nevertheless, this downward revision in growth represents a large upward shift in the number of jobs at any particular point in time.   The revisions are expected to raise 2011 job growth from -3,100 to +9,400, an upward revision of 12,500 jobs.  With employment expected to be so much higher at the end of 2011, job growth data for 2012 will actually be lower than current data are showing.  For example, year-over-year growth through September 2012 is currently reported at +10,800, but is likely to be revised to +10,300.

As of September 2012, the benchmark revisions are expected to raise the level of employment by 13,500 jobs.  Estimating the expected benchmark revisions sector by sector, the new data will show a mix of changes — as detailed in the table below (using quarterly-average data).  Some of the larger upward revisions include Professional & Business Services, Retail Trade, and Construction.  Not all sectors will be revised upward, however.  For example, the revised data are expected to show lower government employment, particularly at the state and local level.

Sources: Bureau of Labor Statistics, Institute for Economic Advancement

The actual benchmark revision process involves far more detail than the rough estimates presented here.  Nevertheless, the simple log-linear regression techniques we have used to estimate the benchmarking have turned out to be quite accurate in the past.  The official revisions will not be available until March 2013.  So in the meantime, data from the CES will need to be interpreted in light of this yet-to-be-incorporated new information.  Although it adds complexity to the interpretation of the data, we’ll be providing that analysis here on the pages of the Arkansas Economist in coming months.  As an illustration of how the expected revisions change the monthly tracking of job growth, the following two tables compare the September jobs report using currently-published data and expected-revised data.

Currently-Published Data

Source: Bureau of Labor Statistics

With Expected Revisions:

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

The most recent month-to-month changes are unaffected by the revision.  The year-over-year figures for total employment growth are revised downward, as described earlier.  Perhaps the most striking difference between the two tables is the column showing cumulative growth since the employment trough-date of February 2010.  The unrevised data show total growth of 15,700 jobs — about one-quarter of the total number of jobs lost during the recession.  After revision, however, the new cumulative job growth total is 29,200 — an increase that represents over half of the recessionary job losses.  Given the projected employment growth embodied in the forecast for 2013 and 2014, this revision makes it likely that we will reach the point of total employment equal to the pre-recession peak by sometime in early 2014, rather than at the end of 2014 as projected using the unrevised data.

Arkansas Economic Forecast Conference

By , October 30, 2012 3:40 PM

Thanks to all the attendees, presenters and sponsors of this year’s Arkansas Economic Forecast Conference.  Copies of the speakers’ presentations are available on the Forecast Conference Page.

Arkansas Employment and Unemployment – September 2012

By , October 19, 2012 10:28 AM

The unemployment rate in Arkansas declined by 0.2% to 7.1% in September.  According to the news release from the Bureau of Labor Statistics, 44 states plus D.C. saw unemployment declines, with only 6 states seeing increases.  Compared to September 2011, the unemployment rate in Arkansas is down by 1 full percentage point.  The U.S. rate is down 1.2% from a year earlier.  The number of unemployed Arkansans fell by 1,877 to 98,276 — the lowest level since February 2009.  The household survey also showed a decline in the number of unemployed (-759), so the Arkansas labor force also contracted for the month.

Source: Bureau of Labor Statistics

The payroll survey showed a net job loss for the month (seasonally adjusted).  Before seasonal adjustment, the number of payroll jobs was up by 12,300; however, that increase primarily reflects the seasonal return to work at public schools and universities.  After seasonal adjustment, the month-to-month change was -2,600.  Changes in industry employment were mixed.  Relatively large increases were recorded in Education and Health Services (-1,800), Financial Services (-600), and Professional and Business Services (-600).

Compared to a year earlier, employent was up by 10,800 with gains concentrated in several service-providing sectors.  Since the employment trough of February 2010, total payroll employment was up 15,700.  As of September, employment was still 42,000 lower than its pre-recession peak.

Source: Bureau of Labor Statistics

Recently released statistics — including those for September 2012 — have shown disappointing progress toward recovering the jobs lost during the recession.  However, when data revisions are eventually factored into the current employment statistics, the picture is likely to be far more encouraging.  (See, Arkansas Employment and Unemployment – June 2012).  More details and updates to the expected data revisions will be presented at the 2012 Arkansas Economic Forecast Conference.

 

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*Seasonally adjusted data for Arkansas 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.

Arkansas Crop Production Update

By , October 11, 2012 3:54 PM

The USDA’s National Agricultural Statistics Service (NASS) released new forecasts for Arkansas agricultural output today.  The latest projections, if realized, will represent new record-high yields for corn and rice in 2012.  The expected yield for soybeans matches a record high from 2004.  Compared to the forecasts from last month, yield forecasts were revised upward for corn, cotton, rice and sorghum.  Total production for corn is now expected to exceed 2011 output by over 65%.  Sorghum production is projected to be 68% above last year’s level.

Source: USDA National Agricultural Statistics Services

Crop damage due to this summer’s drought was clearly not as devastating as some had feared — at least here in Arkansas.  Across much of the midwest, however, the story is quite different.  Nationwide corn production in 2012 is now expected 13.4% lower than in 2012.

 

Metro Area Employment and Unemployment – August 2012

By , October 3, 2012 12:03 PM

New data from the Bureau of Labor Statistics show unemployment rates trending downward across most of the U.S. — and Arkansas is no exception.  The statistics for August show unemployment lower than the previous year in 325 of the nation’s 372 metro areas.  As shown in the table below, unemployment rate declines in Arkansas ranged from -0.6% in Fort Smith to -1.4% in Pine Bluff.

Source: Bureau of Labor Statistics, Local Area Unemployment Statistics

A quick comparison of August with the July unemployment rates would seem to suggest dramatic monthly declines; however, these changes primarily reflect recurring seasonal patterns — and the conventional unemployment measures for metro areas are not seasonally adjusted.  In this case, an important factor the start of the school year, when many teachers and students return to work or leave the labor force.  As a point of comparison, the headline unemployment rate statewide was unchanged in August at 7.3% (seasonally adjusted) while the not-seasonally-adjusted data showed a monthly decline of 0.9%.

Looking instead at the BLS’s smoothed seasonally adjusted estimates (below) we get a more accurate view of month-to-month changes.  From July to August, the seasonally adjusted figures show declines in Fayetteville, Hot Springs, Little Rock, Memphis and Pine Bluff.  The rate was unchanged in Jonesboro and Texarkana, while it increased in Fort Smith.

Source: Bureau of Labor Statistics, Smoothed Seasonally Adjusted Metropolitan Area Estimates

The following chart shows the trends in seasonally-adjusted unemployment rates over the past three years.  Rates have generally been in decline since autumn of 2011, although there has been some recent increases in Memphis and Fort Smith.

Source: Bureau of Labor Statistics, Smoothed Seasonally Adjusted Metropolitan Area Estimates

Payroll Data
Information from the survey of employers showed a wide range of employment changes among the state’s metro areas.  Texarkana showed a sharp monthly decline, with smaller contractions in Fort Smith, Hot Springs and Little Rock.  Employment was up in Memphis, Fayetteville, Pine Bluff , and especially Jonesboro.  Compared to a year earlier, employment was higher in six of the eight metro areas.  Relative to employment levels at the start of the recession, Arkansas now has three metro areas that have shown positive net job growth.

Source: Bureau of Labor Statistics, Current Employment Statistics

 

 

Arkansas Home Sales – A Sluggish Summer Season

By , September 26, 2012 3:02 PM

The Arkansas Realtors® Association just released new sales figures for July and August.  July home sales were essentially unchanged from the previous year, while August sales were down 5.6% compared to August of 2011.  The sales downturn in August overstates recent weakness in the market:  As shown in the figure below, sales were particularly strong in August 2011, so the percentage change reflects relative strength last year as much as it does relative weakness this year.  Nevertheless, cumulative year-to-date sales as of August are down 2.0% from last year’s totals.

Source: Arkansas Realtors® Association

After seasonal adjustment, the sluggish sales growth of recent months is even more apparent.  On a seasonally-adjusted basis, monthly home sales have been fluctuating within a range of 1,800 to 2,100 per month for the past year or so.  Sales appeared to be slowly trending upward in the second half of 2011, but slowed somewhat in the spring and summer of this year.

Source: Arkansas Realtors® Association; Seasonal adjustment by the Institute for Economic Advancement.

Recent sales reports seem to suggest a shifting of sales activity around the state.  Some of the larger real estate markets that were rebounding strongly a year ago have been areas of slower sales this year.  For example, the central Arkansas counties of Pulaski, Saline and Faulkner were showing double-digit sales growth in mid-2011, but have slowed or contracted slightly in the latest monthly reports.  The same pattern seems to characterize Craighead County home sales.   On the other hand, the Northwest Arkansas counties of Benton and Washington are among the stronger performers in recent sales reports, compounding gains from last year.  This rebound is welcome — and not particularly surprising — in light of the fact that Northwest Arkansas markets were hit harder by the housing market collapse and subsequent recession.

The real estate reports from July and August also documented sharp increases in median sales prices.  In July, the median price was up 13.3% and in August it was up 17.3%.  These increases reflect a combination of factors.  First, they suggest that the higher-priced end of the housing market is showing more activity — this includes the impact of higher relative sales volumes in Northwest Arkansas.  The higher sales prices also reflect the general improvement in home values, as evidenced by recent home-price data from the FHFA.

With home prices appearing to have bottomed-out and with mortgage rates at historic lows, conditions appear favorable for a sharper rebound in home sales.  Factors holding back home sales include tight credit conditions and weak household balance sheets.  Improving labor market conditions should help surmount these obstacles over time.

Arkansas Personal Income – 2012:Q2

By , September 25, 2012 11:39 AM

A new report from the Bureau of Economic Analysis shows that personal income in Arkansas rose by 1.2% in the second quarter of 2012, slightly higher than the U.S. average rate of 1.0%.  Growth was postitive in all 50 states, although it slowed in most states.  Arkansas growth rate was up from the previous quarter, and ranked the state as the 8th fastest-growing in the nation.  Over the past four quarters, cumulative income growth in Arkansas was 3.0%, just slightly lower than the 3.3% growth rate for the U.S.  With a CPI inflation rate of 1.9% for the same period, these figures represent postive real (inflation-adjusted) growth in incomes.

Revised data from the previous quarter also show an improved picture for Arkansas.  Previously reported at 0.3%, first quarter growth is now estimated to have been 0.9%.  The revisions show a particularly large adjustment to farm income:  The new report shows farm income expanding 1.2% in the first quarter instead of contracting by 28.6% as originally reported.

Today’s report also included comprehensive revisions for 2009 through 2011.  As shown in the figure below, the revised data show that incomes fell more sharply during the recession (-4.7%) than previously estimated (-3.3%).  The revised data also show a more variable growth path during the subsequent recovery.

Source: Bureau of Economic Analysis

The revised data continue to show that Arkansas incomes were not as hard-hit by the recession as the national average, but cumulative growth during the recovery has been somewhat slower.   As of the second quarter of 2012, incomes in both Arkansas and the U.S. were up 6.4% from the previous cyclical peak (2008:Q2).

Source: Bureau of Economic Analysis

Today’s report shows that earnings growth was up 1.0% for the quarter, compared to a 0.8% growth rate for the U.S.  Earnings growth was positive for nearly every industry in Arkansas, with only nondurable-goods manufacturing and military pay showing slight declines.

Source: Bureau of Economic Analysis

 

Arkansas Employment and Unemployment – August 2012

By , September 21, 2012 10:17 AM

The unemployment rate in Arkansas was unchanged in August, remaining at 7.3%.  According to the news release from the Bureau of Labor Statistics, 26 states saw increases in unemployment, 12 states saw decreases, and Arkansas was one of 12 states where the rate was unchanged.  Both employment and unemployment were down for the month, with the labor force declining by 3,600.  In percentage terms, this is nearly identical to the labor force contraction that was widely noted in the national unemployment statistics released two weeks ago.  From July 2011 through May of this year, Arkansas had been running counter to the national trend with labor force participation rising steadily.  August represents the third consecutive monthly decline.

Source: Bureau of Labor Statistics

Payroll Employment:

Information from the payroll survey was a bit more upbeat.  Total employment was up 2,600 for the month (seasonally adjusted).   Construction employment alone was up by 2,000, reversing the sharp decline that we saw in July.   Employment in several service sectors also increased, including Education & Health Services and Leisure & Hospitality Services.  Government employment was also higher, with net increases in Federal, State, and Local government hiring.

On the down side, employment contracted in both Wholesale and Retail trade sectors (-1,200 combined) and was also down in the Manufacturing sectors (-1,300).  Manufacturing job-losses were present in both durable and nondurable goods production.

On a year-over-year basis, payroll employment is up by around 10,000 jobs, but most of that increase took place in the final months of 2011.  Total employment in August was essentially unchanged from its level at the beginning of 2012.

Source: Bureau of Labor Statistics (CES)

Overall, the data from August reinforce the view that the steadily improving conditions we saw in Arkansas labor markets during the second half of 2011 and the first part of this year have given way to relative stagnation.  The unemployment rate is stuck in the range of 7.1 to 7.3, and payroll employment is similarly showing no clear trend in recent months.

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*Seasonally adjusted data for Arkansas 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.

USDA Forecasts Solid Gains for Arkansas Agricultural Production

By , September 13, 2012 8:30 AM

New forecasts from the USDA’s National Agricultural Statistics Service (NASS) project sizable increases in Arkansas agricultural output in 2012.   Output figures from 2011 and projections for 2012 are summarized in the table below.

Source: USDA National Agricultural Statistics Service.

  • Corn production, in particular, is expected to be up sharply from last year.  The increase is attributable to increases in both the number of acres harvested (+23%) and the yield per acre (+23%).
  • Cotton production is expected to fall slightly, in spite of a 7% increase in yield.  The number of acres expected to be harvested is down 12%.
  • Rice production is expected to be up 18%, with gains coming from increases in both acreage (+11%), and yield (+6%).
  • Sorghum output is also expected to benefit from higher acreage (+22%) and yield (+11%).
  • Soybean production is expected to be essentially unchanged from last year, with acreage down 2% and yield up 3%.

These statistics suggest that damage from this summer’s drought and from Hurrican Isaac are not as severe as many had feared — at least in Arkansas.  Nationwide, the drought has had a larger impact.  For example, U.S. corn production is forecast to be down 13% and soybean production down 14%.  (Crop Production, September 2012).

A Note on Poverty in 2011

By , September 12, 2012 12:21 PM

This morning, the Census Bureau released new statistics on Income, Poverty, and Health Insurance Coverage in the United States: 2011.  The headline of the report was that the official U.S. poverty rate was 15.0% in 2011, little changed from the previous year.

The report did not contain any specific information on individual states, but some of the underlying data from the Current Population Survey Annual Social and Economic Supplement (CPS ASEC) are now available.  Those data tell us that here in Arkansas, the poverty rate was 18.7%.  That was the fifth highest rate in the nation (of all 50 states plus the District of Columbia).  Median Family Income in Arkansas was  approximately $51,000, amounting to 84.3% of the national median of $60,500.  Arkansas’ ranking on family income was 46th.*

These statistics are based on the Census Bureau’s measure of “money income,” which does not include income from many programs intended to alleviate poverty.  For example, money income does not include Supplemental Nutrition Assitance Program (food stamps), housing subsidies, low-income energy assitance, or the earned-income tax credit.  A new Supplemental Poverty Measure which incorporates these income sources—along with updating the methodolgy for calculating the poverty threshold—were introduced last year.  Statistics on these alternative calculations will not be available until November.

It should also be pointed out that income and poverty data for individual states are more accurately measured in the Census Bureau’s American Community Survey (ACS) and the Small Area Income and Poverty Estimates (SAIPE), which will come out later this month and in November, respectively.
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*Median income figures are calculated using the standard method and may differ from published Census estimates that are calculated using linear interpolation.

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