Arkansas Home Sales – June 2013

By , July 31, 2013 3:25 PM

Late last week, the Arkansas Realtors® Association (ARA) released data for home sales in June.*  As shown in Figure 1, June sales dipped slightly from the relatively high level of the previous month, but sales in both May and June exceeded the peak months of 2011 and 2012.  June sales were 4.0% above the level of a year earlier.  For the year to date, home sales are running 8.9% higher than in 2012.

Figure 1:

Source: Arkansas Realtors® Association

The 2013 recovery of home sales from a flat pace in 2011 and 2012 is more apparent after adjusting for recurring seasonal patterns in the data.  As shown in Figure 2, seasonally-adjusted home sales surged in response to two rounds of Federal home-buyer tax credit programs in 2009 and 2010, but suffered a sharp downturn in the months immediately following those incentive programs.  For the next two years, home sales showed little if any upward momentum.  Sales have been rising since about the beginning of this year.

Figure 2:

Source: Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancement

The upturn in sales during 2013 is even more evident after smoothing out the monthly ups and downs by using quarterly sales totals, as shown in Figure 3.

Figure 3:

Source: Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancement

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*The news release from ARA noted that “All 2013 reports have been updated to reflect more accurate numbers for Clark County… January 2012 through June 2012 reports have also been updated. The remaining 2012 reports will be updated each month as the 2013 reports become available.”  A comparison of the revised reports with the previously published data showed that sales information for Johnson County for 2013 was also updated.

The partial nature of the revisions present some conceptual problems for interpreting the existing time-series data.  However, the magnitude of the Clark County revisions for the first six months of 2012 are relatively small:  With an average revision less than 6 home sales per month, the changes are quantitatively insignificant.

Metro Area Employment and Unemployment – June 2013

By , July 30, 2013 2:58 PM

Unemployment rates in Arkansas metro areas were basically unchanged from May to June (seasonally adjusted), but were higher than a year ago in four of the eight metro areas.  First, the not-seasonally adjusted figures shown in the table below reveal that unemployment rates have increased over the past 12 months in Fort Smith, Memphis, Pine Bluff, and Texarkana.  Rates were unchanged in Hot Springs and Jonesboro, and have fallen slightly in Fayetteville and Little Rock.

Source: Bureau of Labor Statistics, Local Area Unemployment Statistics (LAUS)

The news release from the Bureau of Labor Statistics noted that 272 of the nation’s 372 metro areas had lower unemployment rates than a year earlier.  The four metro areas in Arkansas that had higher rates than a year earlier were among the 73 areas nationwide that have experienced increases.  Hot Springs and Jonesboro were among the 27 metro areas across the country where unemployment rates were the same as in June 2012.

To evaluate monthly changes, the second table shows smoothed seasonally adjusted estimates of metro area unemployment rates.  From May to June, rates were unchanged in all metro areas except Pine Bluff, which showed an uptick of 0.1 percentage points.

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

Payroll Employment
The payroll employment survey for June showed modest declines in Hot Springs and Pine Bluff, no change in Texarkana, and increases in the rest of the state’s metro areas.  The largest percentage increase for the month was in Fort Smith, up 0.8%.  Compared to June 2013, payroll employment has declined in Hot Springs, Pine Bluff and Texarkana, but is up in the remaining MSAs.  The monthly increase in Little Rock was large enough to push employment above its level in December 2007 — prior to the onset of the 2008-09 — for the first time since the recovery began.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES)

Arkansas Employment and Unemployment – June 2013

By , July 19, 2013 10:20 AM

The latest data from the Bureau of Labor Statistics and the Arkansas Department of Workforce Services show continuing stagnation in Arkansas labor markets.  The unemployment rate was unchanged at 7.3%, where it has held for most of the past 18 months.

With the number of employed down by 1,732 in June and the number of unemployed up by 628, the state’s labor force declined by 1,104.  Hence, the tentative signs of improvement in the Arkansas’ labor force participation rate that we had seen over the past two months did not persist.  Over the past 12 months, the household survey is showing a decline in employment of nearly 21,000.  The number of unemployed is down by 1,685 but most of that decline took place in the second half of 2012.  Over the first 6 months of 2013, the number of unemployed has shown a net increase of 1,935.

Source: Bureau of Labor Statistics, Local Area Unemployment Statistics (LAUS)

Payroll Survey
The payroll survey showed no change in employment for the month (seasonally adjusted).  Employment declines were recorded in Manufacturing, Financial Services, Professional & Business Services, and Education & Health Services.  Employment in the retail sector fell rather sharply (-1,700).  Other service sectors registered employment increases, led by Other Services (+1,900) and Transportation & Utilities (+1,200).  Construction employment was also up slightly.  Compared to a year earlier, payroll employment was up by 8,500.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES)

The latest data from the household and payroll surveys continue to give conflicting signals.  Since mid-2012 the payroll survey has shown slow but positive employment growth while the household survey has shown employment declining sharply.

Source: Bureau of Labor Statistics

One indication of the eventual reconciliation of these trends is suggested by the most recent data from the Quarterly Census of Employment and Wages (QCEW).  The QCEW data are considered more accurate than the monthly payroll surveys, and are used to revise the payroll data during the annual benchmark revision process.  In the most recent release, the QCEW showed an employment increase of only 1,900 jobs during 2012 (December 2011 through December 2012).  In contrast, the current payroll data indicate job growth of 4,000 for the same period.  This suggests that when the payroll data are eventually revised, they will show slower job growth than current payroll statistics are suggesting — at least for the second half of 2012.

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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 Personal Income – How Policy Has Affected Growth

By , July 15, 2013 12:28 PM

Recent statistics on personal income have been subject to significant influences by Federal tax policy.  In the most recent quarter (2013:Q1) Arkansas personal income declined by 1.9%, compared to an average decline of 1.2% nationwide.  These declines followed sharp increases in the fourth quarter of 2012: +3.0% for Arkansas (revised up from 2.2%) and +2.8% for the U.S. (revised up from 1.9%).  The relatively large drop in Arkansas in the first quarter ranked the state #48 among the 50 states plus D.C.  But as noted in the news release from the Bureau of Economic Analysis, “The decline in first-quarter personal income reflected the effects of several special factors including the expiration at the beginning of 2013 of the ‘payroll tax holiday.'”

In Figure 1 below, total personal income for Arkansas and the U.S. are compared on an index scale, with the previous business cycle peak (2008:Q2) normalized to a common value of 100.  Two prominent features are shared by the U.S. and Arkansas series:  a sharp increase in the 1st quarter of 2011 and an equally sharp decline in the 1st quarter of 2013.  These movements largely reflect the initiation and conclusion of the payroll tax holiday.

Figure 1:

Sources: Bureau of Economic Analysis, Institute for Economic Advancement

To get an idea of the magnitude of the tax holiday effect, Figure 2 shows two ratios constructed using the data for Arkansas.  The denominator for both ratios is the sum of “Wage and salary disbursements” and “Proprietor’s income”.  The numerators are (1) “Employee and self-employed contributions for government social insurance” and (2) “Employer contributions for government social insurance.”  The payroll tax holiday affected the first, but not the second.

Figure 2:

Sources: Bureau of Economic Analysis, Institute for Economic Advancement

The sharp drop in the employee ratio represents the payroll taxes that were not deducted from employee paychecks during 2011 and 2012.  By using simple regression methods, we can use the employer contribution ratio to estimate the magnitude of the tax holiday’s impact on wages and salaries (and on total personal income).  The result of this exercise reveals that the payroll tax holiday boosted Arkansas personal income by nearly a full percentage point (0.96%).  A comparable calculation for the U.S. suggests a slightly smaller impact (0.92%).  As a relatively low-income state, the payroll tax holiday had a larger-than-average impact in Arkansas because more wage and salary income is subject to Social Security taxes.

With these calculations in hand, we can answer the hypothetical question:  “What would have been the growth rate of personal income in 2013:Q1 were it not for the expiration of the payroll tax holiday?”  For Arkansas, income growth would have been -0.9% instead of the reported -1.9%.  For the U.S., the growth rate would have been -0.3% instead of the reported -1.2%.

These quarter-to-quarter growth rates are also affected by another set of tax-policy changes:  A number of other income tax increases were scheduled to take effect at the beginning of 2013, prompting “the acceleration of the receipt of income, especially personal dividends and salary bonuses, into the fourth quarter in anticipation of first-quarter changes in individual income tax rates.”  (An example is the special $5 per share dividend paid out by Little Rock-based Dillard’s Inc. at  the end of 2012.)  The impact of this effect is more difficult to quantify since it could potentially impact a number of categories in the personal income accounts; and more importantly, it is driven by behavioral responses to tax rate changes.

One manifestation of the end-of-year distortion is obvious in the “Dividends, interest, and rent” category of personal income.  Figure 3 shows this category of income as a percent of total personal income (using data for Arkansas).  The “hypothetical” path illustrated in Figure 3 is constructed by simply averaging the values for the prior and subsequent quarters.   This method implicitly assumes that the surge in income in 2012:Q4 would not have been otherwise realized — but it serves as a decent first-approximation of the effect.

Figure 3:

Sources: Bureau of Economic Analysis, Institute for Economic Advancement

If Dividends, etc., had followed the hypothetical path in Figure 3, personal income in Arkansas would have been 0.72% lower than reported in the fourth quarter of 2012.  For the U.S., total personal income would have been 0.60% lower.  This would also have the effect of lowering growth rates for the fourth quarter of 2012, and raising quarterly growth rates for the first quarter of 2013 by similar magnitudes.  Table 1 summarizes the impact of the two effects independently and jointly:

 Table 1:

Sources: Bureau of Economic Analysis, Institute for Economic Advancement

The results of these counterfactual exercises are just estimates, of course.  In particular the fourth quarter surge in income is likely to have affected sources of income other than dividends so the growth-rate adjustment is partial, at best.  We can conclude, however, that the dramatic ups and downs in personal income growth over the past two quarters are related to tax policy changes.  In the absence of these changes, fourth quarter growth would have been lower and first quarter growth higher.

Transfer Payments and Inflation
In addition to the temporary effects of tax policy changes, personal income data are influenced by other factors relating to public policy.  For example, government transfer payments generally follow a counter-cyclical pattern — rising during recessions and tapering off during economic expansions.  In part, this is due to the so-called automatic stabilizer effects of government policies:  For example, unemployment insurance payments increase when the unemployment rate rises.  In addition, policymakers often respond to recessions by adopting specific stimulus policies.

Figure 4 shows how Personal current transfer receipts have grown during and since the recession of 2008-09.  Expressed as a percent of total personal income, transfers increased sharply in 2009 and have since held relatively stable.  For the U.S., transfers rose from less than 15% of total income up to approximately 18%.  For Arkansas the transfer share rose from 20% to more than 24%.  The upticks in these ratios in 2013:Q1 partly reflect continued increases in transfer receipts, but are also related to the decline in total personal income induced by the end of the payroll tax holiday.

Figure 4:

Sources: Bureau of Economic Analysis, Institute for Economic Advancement

By removing “personal current transfer receipts” we can get a clearer view of the strength of income growth in the private sector — wages, salaries, proprietors’ income, etc.  As shown in Figure 5, the recovery in personal income less transfers has not been as substantial as total income (shown in Figure 1).  Whereas total income in the first quarter of 2013 was 8% higher than the previous cyclical peak, the measure that excludes transfers is now only 4 to 5% above early-recession levels.

Figure 5:

Sources: Bureau of Economic Analysis, Institute for Economic Advancement

Finally, one further adjustment is helpful for putting personal income growth into context: accounting for inflation.  Over the past 5 years, inflation has eroded the purchasing power of income by over 8% (as measured by the price index for personal consumption expenditures).  As a result, the real (inflation-adjusted) value of personal income has not risen as much as the nominal (dollar-denominated) value.  Figure 6 shows Real Personal Income less Transfer Receipts.*  After the adjustment for inflation, this measure of personal income remains below its value from the reference-period of 2008:Q2.  The surge in income during 2012:Q4 had briefly raised income to the parity-value of 100 for both Arkansas and the U.S., but the first-quarter downturn brought it back down to -2.6% for Arkansas and -1.9% for the U.S.

Figure 6:

Sources: Bureau of Economic Analysis, Institute for Economic Advancement

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*Real Personal Income less Transfer Receipts is the measure of personal income used by the National Business Cycle Dating Committee to help establish start- and end-dates for recessions.

Metro Area Employment and Unemployment – May 2013

By , July 2, 2013 2:41 PM

The lead from today’s metro area employment and unemployment report noted that “unemployment rates were lower in May than a year earlier in 253 of the 372 metropolitan areas.”  Unfortunately, none of Arkansas’ Metropolitan Statistical Areas (MSAs) were included in that tally.  As shown in the table below, only in Fayetteville was the unemployment rate unchanged compared to May 2012.  Around the rest of the state, increases in unemployment rates ranged from +0.2% in Jonesboro to +0.7% in Pine Bluff.

Source: Bureau of Labor Statistics, Local Area Unemployment Statistics (LAUS)

As is typical for May, the not-seasonally-adjusted unemployment rates rose compared to the previous month.  But even after seasonal adjustment, rates were higher in May than they were in April.  The smoothed seasonally adjusted metropolitan area estimates, shown below, showed upticks in unemployment rates for all of the state’s MSAs except Little Rock.

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

In part, the higher unemployment rates were attributable to expansions of the labor force.  From April to May, the labor force increased in all of Arkansas’ metro areas except Hot Springs (which was essentially flat).  The number of employed increased in Fayetteville, Fort Smith, Jonesboro and Little Rock.  Nevertheless, the number of unemployed increased in all eight metro areas.

Payroll Employment
In the employer survey, job growth among Arkansas metro areas was mixed.  From April to May, payroll employment declined in Fayetteville, Hot Springs and Texarkana.  Compared to a year ago, employment was lower in Hot Springs, Pine Bluff and Texarkana.  Only Fayetteville and Jonesboro continue to show higher payroll employment than pre-recession levels.

Source: Bureau of Labor Statistics, Current Employment Estimates (CES)

Payroll vs. Household Employment
In the context of the statewide employment situation, we have noted that the household and payroll surveys are showing widely divergent trends.  Over the past 12 months, the payroll survey reports a net increase of about 3,000 jobs statewide while the household survey indicates a decline of more than 23,000 jobs.  The discrepancy carries over into the metro area data.  As shown in the table below, household-based employment estimates are showing declines in every MSA except Fayetteville and Jonesboro, while the payroll survey shows only 3 metro areas with year-over-year declines.  In every case, the household survey is showing weaker employment growth than the payroll survey.  Note that the discrepancy does not apply to U.S. data — in fact, the nationwide payroll survey is showing stronger growth than the household-based data.  Given the magnitude and persistence of the divergence, it seems likely that an explanation or reconciliation will only be possible after subsequent revisions of the data.

Source: Bureau of Labor Statistics

Arkansas Employment and Unemployment – May 2013

By , June 21, 2013 12:02 PM

The pattern of sluggish labor market performance in Arkansas in recent months continued into May.  According to new data from the Bureau of Labor Statistics and the Arkansas Department of Workforce Services, the unemployment rate ticked up one-tenth of a percent to 7.3% from a revised 7.2% in April.  (The revision to the unemployment rate for April amounted to only 0.00004%, but that was enough to tip the rounding error upward.) The national unemployment rate also rose by one-tenth in May, to 7.6%.  As shown in the chart below, the gap between the state and national unemployment rates has continued to narrow over time.

Source: Bureau of Labor Statistics

There were a couple of positive tidbits in the report from the household survey:  The number of employed and the size of the total labor force were up for the second consecutive month.  Both of these indicators had been declining precipitously since early 2012.  However, the number of unemployed was up by over 1700, bringing the total number of unemployed back up to a level comparable to last October.

Source: Bureau of Labor Statistics, Local Area Unemployment Statistics (LAUS)

Payroll Survey
Data from the survey of employers was no more encouraging than the household survey:  Nonfarm payroll employment declined by 5,900 (seasonally adjusted*).  Many of the service sectors that have been supporting employment growth during the slow recovery were down in May.  For example, Professional & Business Services fell by 2,300 and employment in Leisure & Hospitality Services was down 1,100.  Even employment in Education & Health Services fell by 900.

Source: Bureau of Labor Statistics

Two bright spots in the payroll survey:  Although it remains lower than a year ago, construction employment was up 700 from April to May (seasonally adjusted*).  Jobs in retail trade also increased — up by 1,100.  Retail sector employment is now nearly 13,700 higher than at the employment trough of February 2010, and up 6,700 from pre-recession levels.  Although several service sectors showed employment declines for the month, overall employment in services is generally  higher than before the recession.  But with employment in goods-producing sectors down by over 41,000 since December 2007,  the overall recovery of jobs since February 2010 has been only 32,600 (compared to 57,100 job losses between December 2007 and February 2010).

Mixed Signals
Neither the household survey nor the payroll survey provided much in the way of good news this month.  But more disturbing is the conflicting employment trends indicated by the two reports.  Over the past 12 months, payroll employment has increase by around 3,000 jobs — not very strong growth, but positive.  Over the same period, however, the household survey is showing a decline of more than 23,000 jobs.  It is not unusual for the two surveys to give conflicting signals in the short-run, but rarely do they diverge this significantly over a longer period of time.

Source: Bureau of Labor Statistics

Generally speaking, economists consider the payroll survey to be more accurate, but it is also subject to considerable future revision as more detailed information becomes available.  It is quite likely, therefore, that the divergence between household and payroll reports will be reconciled by a downward revision to the payroll data.  Annual revisions will not be officially published until next March, however, so we’ll be monitoring incoming data closely in an effort to sort through the differences we’re seeing between the two surveys.

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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.

Real Personal Income and Purchasing Power, 2007-2011

By , June 13, 2013 9:10 AM

The Bureau of Economic Analysis (BEA) released a brand new set of data yesterday:  Real Personal Income for States and Metropolitan Areas, 2007-2011 (Prototype Estimates).  The data are not as timely as those we usually cover here on the Arkansas Economist, but they are rich in detail.

When economist refer to “real” magnitudes, it means that the data have been adjusted to reflect price differences.  Typically this involves adjusting “nominal” growth rates to account for changes in the price level over time — i.e., inflation.  What is truly novel about the prototype estimates that came out yesterday is that they are also adjusted to reflect differences in relative price levels from one region to another.

As described in a previous post, the BEA’s new set of Regional Price Parities (RPPs) are intended to measure differences in the cost of living across states and metro areas.  Hence, the “real” personal income statistics released yesterday convert dollar-denominated figures into units of current local purchasing power.

As shown in Figure 1 below, the cost of living varies considerably among the states.  In 2011, the RPP for Arkansas was 89.2, meaning that prices in Arkansas are more than 10% below the national average (which is equal to 100, by definition).  The highest prices in the nation are in Hawaii (116.0) and the lowest are in South Dakota (87.0).  In the 2011 data, Arkansas ranked as having the 5th lowest prices in the nation.

Figure 1:

Source: Bureau of Economic Analysis

As shown in Figure 2, RPPs do not vary much over time, but they do differ even among areas within the state.  As of 2011, the average RPP for metropolitan areas in Arkansas was 90.9, while the non-metro RPP was only 85.5.

Figure 2:

Source: Bureau of Economic Analysis

To the extent that RPPs do vary over time, increases or decreases can be interpreted (roughly) as indicating a higher or lower rate of inflation than the national average.  Typically, nominal growth rates are converted to real values by simply adjusting for the nationwide inflation rate.  By using the RPP adjustments, the real income calculations reflect a more accurate and nuanced measure of income that better reflects purchasing power at the local level.  Figure 3 shows changes in personal income in Arkansas — and for its metro and non-metro areas — from 2008 through 2011.  The recession of 2008-09 is reflected in the negative growth rates in 2009.  Statewide, real income declined by 2.5%, but the downturn was sharper (-3.3%) in the non-metro areas of the state than in the metro areas (-2.1%).  During the recovery in 2010 and 2011, total metro-area income has grown faster than non-metro income.

Figure 3:

Source: Bureau of Economic Analysis

However, there is one additional adjustment that is necessary to evaluate how incomes support real purchasing power:  population growth.  If real income in an area is rising simply because there are more people earning the same amount per person, then living standards have not really improved.  Consequently, the best measure of overall economic welfare is “real per capita personal income,” displayed in Figure 4.

Figure 4:

Source: Bureau of Economic Analysis

In general, the metro areas of the state have been growing in population, while the non-metro regions have experienced slower growth — or even outright population declines (see Arkansas Population Estimates for 2012).  Figure 4 shows that these changes in population are important.  In real per capita terms, the recession hit metro and non-metro areas about equally, and the recovery has been slower in metro areas.  In fact, metro area per capita real income declined in 2011, pulling the statewide average negative.  Non-metro areas displayed a small but positive growth rate.

The most significant implication of using RPPs to adjust nominal incomes is how it affects comparisons of the relative purchasing-power of incomes.  It is often noted that Arkansas is far below the national average of per capita income.  However, when regional differences in prices are taken into account, the standard of living in Arkansas is much closer to the national norm.  In nominal terms, Arkansas per capita income was only 81% of the U.S. average in 2011.  But after adjusting for price differences, real per capita income (RPP-adjusted) was 91.2% of the national average.  The adjustment for relative prices moves Arkansas up in the rankings among the 50 states plus D.C. from #46 to #41.

Figure 5:

Source: Bureau of Economic Analysis, with calculations by IEA.

Although the adjustment of per capita income using RPPs brings the statewide standard of living closer to the U.S. average, there remain significant differences between the metro and non-metro areas of the state.  As of 2011, real per capita personal income in Arkansas’ metro areas was 95.7% of the U.S. average, while the corresponding figure for the state’s non-metro areas was only 84.5%.

Metropolitan Areas
The RPP data in yesterday’s report are also broken down by individual Metropolitan Statistical Areas (MSAs).  Even among the various MSAs, Relative Price Parities differ considerably (Figure 6).  Prices are higher in the larger MSAs of Memphis, Little Rock, and Fayetteville.  The smaller metro areas have prices that are comparable to the non-metro areas of the state.

Figure 6:

Source: Bureau of Economic Analysis

Real per capita income growth rates in Figure 7, below, reveal an uneven pace of recovery among the state’s metro areas during 2010 and 2011.  In 2010, the negative growth in total metro area income (shown in Figure 4) was concentrated entirely in three MSAs:  Fort Smith, Little Rock, and Jonesboro. Growth was positive in Arkansas’ other metro areas.   In 2011, however, growth rates were positive for all areas of the state.

Figure 7:

Source: Bureau of Economic Analysis

Finally, how do the state’s MSAs stack up in terms of real per capita personal income, adjusted for purchasing power?  Figure 8 shows that even though prices tend to be higher in larger metropolitan areas, higher incomes tend to compensate for the differences.  In dollar terms, incomes in Arkansas MSAs range from 74.3% of the national average in Pine Bluff to 96% in Little Rock.  After adjusting for relative prices, the real per capita income figures show that Little Rock has a standard-of-living slightly above the national average.  Pine Bluff remains the MSA with the lowest relative income level, but the standard of living is nearly 11 percentage points higher than the nominal, dollar-denominated figures suggest.

Figure 8:

Source: Bureau of Economic Analysis, with calculations by IEA

The new RPP data have now moved from the experimental phase to prototype.  There are likely to be further refinement in the methodology and coverage of the data, but it is extremely useful to now have an official set of measurements for geographic relative price differences.  As detailed here and in yesterday’s report from the BEA, the new data bring a novel perspective to the examination of income differences across the nation and within the state of Arkansas.

Arkansas GDP Growth in 2012

By , June 6, 2013 3:15 PM

Arkansas GDP grew only 1.3% in 2012, but revisions to prior years raised estimates by an additional 1.3%.

Preliminary statistics on state-level GDP show that Arkansas grew at a 1.3% rate last year.  According to the report from the Bureau of Economic Analysis, Arkansas’ growth rate was more than a percentage point lower than the national growth rate of 2.5%.  Among the 50 states plus D.C., Arkansas’ growth ranked #38. 

The table below shows the breakdown of GDP growth by sector, comparing Arkansas to the U.S. total.  A number of sectors in Arkansas grew faster than the national average, including Agriculture, forestry, fishing, and hunting; Utilities; and Management of companies and enterprises.  However, several of Arkansas sectors contracted, including Mining and several service-providing sectors.

Source: Bureau of Economic Analysis

In addition to individual-sector growth rates, the table also shows the contribution of each sector to total GDP growth.  The size of the contribution depends not only on its growth rate, but also on the relative importance of the sector in the overall economy.  So, for example, even though Mining contracted at a rate of 8.65%, it is a relatively small sector of the Arkansas economy (about 2%) so its contribution to lower total GDP growth by only 0.19%.

Manufacturing — amounting to over 14% of total GDP — is a far more important sector to the Arkansas economy.  Consequently, even though both durable and nondurable-goods manufacturing expanded last year, the fact that growth was lower than the national average accounted for much of the relatively slow growth in Arkansas’ economy.  If Manufacturing growth in Arkansas matched the national average, total Arkansas GDP growth would have been nearly one-half percentage point higher.

It is important to note that today’s data for 2012 are preliminary “advance statistics,” subject to future revision.  In fact, the revisions of data for 2009-2011 that were released today illustrate the importance of new information that becomes available over time.  As shown in the figure below, Arkansas growth rates were revised upward for each of the previous three years.  For example, growth in 2011 was originally reported at 0.34% but is now estimated to be nearly twice that rate (0.66%).  Even more significantly, the magnitude of the recessionary contraction in 2009 is now estimated to be much smaller than previously-published data suggested.

Source: Bureau of Economic Analysis

The cumulative effect of today’s revisions was to raise the estimated total of Arkansas real GDP by 1.3% as of 2011.  The 1.3% growth for 2012 comes on top of that upwardly-revised measure of economic activity in 2011.

Source: Bureau of Economic Analysis

April Home Sales

By , May 30, 2013 10:17 AM

The Arkansas Realtors® Association announced yesterday that April home sales were up 13.6% compared to the previous year.  The fact that home sales are increasing is certainly good news, but the year-over-year comparison probably overstates the magnitude of the improvement.

As shown in the figure below, home sales in April 2012 were unusually low:  Sales typically follow a rising trajectory for the first half of the year but experienced an down-tick in April of last year.  This kind of month-to-month variability is not surprising.  The sales statistics are based on the closing date of sales transactions.  It is often the case that a flurry of closings will take place at the beginning or end of a month, spilling over from one month to the next.  Monthly sales totals reflect this volatility, recommending the use of averages or totals over longer periods of time.  For example, yesterday’s report noted that year-to-date home sales were up 7.9% in April — not as impressive as the 13.6% headline, but a more realistic assessment of improvement in the residential real estate market thus far 2013.

Source: Arkansas Realtors® Association

The second figure, below, illustrates the trend in home sales after removing the prominent recurring seasonal patterns.  After seasonal adjustment, the month-to-month volatility is more noticeable, but so is the generally increasing trend in 2013.  A better illustration of the trend will be available when we have figures for the entire second quarter of the year.  With that data in hand, we will be able to assess the data after seasonal adjustment and quarterly averaging.

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

 

Metro Area Unemployment and Employment – April 2013

By , May 29, 2013 1:39 PM

Progress toward lower unemployment rates in Arkansas metro areas has ground to a halt.  Statistics for April show that unemployment rates were higher than a year earlier in all the state’s Metropolitan Statistical Areas (MSAs) except for Fayetteville.  The press release from the Bureau of Labor Statistics reported that Fayetteville was one of 276 MSAs around the nation that saw a year-over-year decline.  The state’s other MSAs were among the 78 metro areas that saw higher unemployment rates.

Source: Bureau of Labor Statistics, Local Area Unemployment Statistics (LAUS)

The year-over-year comparisons refer to data that are not seasonally adjusted.  For meaningful month-to-month comparisons, the BLS publishes smoothed seasonally adjusted estimates.  As shown in the table below, these estimates show that the unemployment rate was steady in Fort Smith and Jonesboro, but ticked up in the seven other metro areas that include parts of Arkansas.

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

Underlying statistics from the household unemployment-rate data also showed a monthly uptick of employment in the state’s two largest metro areas, but reveal a downward trend in all of the state’s MSAs except for Fayetteville.  As illustrated in the figure below, the downturn in employment is particularly noticeable since the beginning of this year.  In Hot Springs and Texarkana, household employment is more than 2-1/2% lower than in January 2012.  The reason that unemployment rates haven’t risen in response to these employment declines is due to commensurate downward trends in labor force participation.

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

In the statewide data, weak household employment data have contrasted with improving statistics from the payroll employment reports.  The same puzzle seems to exist in the MSA data.  As shown in the table below, nonfarm payroll employment increased in several of the state’s metro areas in April.  Compared to a year earlier, payroll employment was higher in Fayetteville, Hot Springs, Jonesboro, Little Rock, and Memphis.  Employment was flat in Fort Smith and down in Pine Bluff and Texarkana.  Pine Bluff remains the only metro area to have experienced continued contraction since the statewide employment trough of February 2010.  At the other extreme, both Fayetteville and Jonesboro have higher payroll employment in April 2013 than they did before the onset of the 21008-09 recession.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES)

The contrast between the household and payroll employment reports is a puzzle.  Typically, the payroll reports are considered to be more accurate, but are also subject to substantial revision.  For that reason, the renewed weakness in household employment is a concerning trend that we will continue to monitor closely.

 

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