Institute for Economic Advancement

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.

 

Arkansas Home Prices – 2013:Q1

By , May 24, 2013 11:14 AM

The Commerce Department reported yesterday that the median sales price of new houses sold in April was up 13.1% from a year earlier.  Separately, new data from the Federal Housing Finance Agency (FHFA) confirmed that home values are on the rise, both nationally and here in Arkansas.  As shown in the figure below, house prices continued their upward trajectory in the first quarter of 2013, rising 1.9% for the U.S. and 1.7% for Arkansas.  Compared to the first quarter of 2012, prices were up 6.4% nationally and 5.5% in Arkansas.

Source: Federal Housing Finance Agency

A Note on Methodology:
The “Expanded-Data Indexes” shown in the figure use data from all mortgages purchased or securitized by FannieMae and FreddieMac, augmented with data from local property assessors’ offices.  The FHFA measures are constructed as weighted, repeat-sales indexes (like the Case-Shiller Index).  This methodology is intended to estimate underlying trends in house values more accurately than simple measures such as median or average sales prices.

When it comes to measuring house prices for metropolitan areas, the FHFA publishes measures known as “All-Transactions Indexes,” which include information from actual home sales as well as home refinancings.  The published metro area data are not seasonally adjusted.  Theoretically, there should be no seasonal pattern to house prices:  As long-term durable assets, home values should not be affected by transitory and predictable short run variations.  However, measures of average or median prices often do display seasonal variation.  The explanation is that the mix of home sales varies seasonally, so that average house-price measures show increases during seasons when higher-value homes comprise a relatively larger share of total sales.  Although the weighted, repeat-sales methodology used by the FHFA is intended to control for these short-run fluctuations, it is quite possible for this seasonal effect to have in impact — particularly when there are relatively few underlying data observations.

With this possibility in mind, we tested for seasonality in the data for Arkansas’ Metropolitan Statistical Areas (MSAs).  Statistical tests rejected the presence of any stable seasonality, but did reveal evidence of small, time-varying seasonal fluctuations.  This was especially true for recent data, particularly during the period of relatively low sales volumes since the housing crash.  This is exactly the situation in which compositional variation might be expected to show through to the repeat-sales indexes.  Consequently, the MSA data presented below have been seasonally adjusted (using the standard Census X-12 ARIMA procedure) to provide a clearer view of underlying trends in Arkansas house prices.

Metro Area Data:
Seasonally adjusted measures of the FHFA all-transactions indexes show rising home prices in most, but not all of the state’s metro areas.  Quarterly growth rates were positive for all metro areas except Pine Bluff and Texarkana.  Both of these MSAs have experience cumulative price declines over the past two years; however, Texarkana house prices remain 3.8% above their level of five years ago.

Northwest Arkansas experienced that largest cumulative decline since the downturn in housing prices, but prices have been recovering, rising by more than 2-1/2% over the past two years. Prices have also been generally rising over the past two years in Fort Smith, Hot Springs, Jonesboro, and Little Rock.  House prices in the Memphis MSA have been fairly flat, and remain 12.4% below their levels of five years ago.

Source: Federal Housing Finance Agency; seasonal adjustment by the Institute for Economic Advancement

Source: Federal Housing Finance Agency; seasonal adjustment by the Institute for Economic Advancement

The recovery of house prices is a positive development for two related reasons:  First, the price increases suggest a long-awaited pick-up in demand.  The recovery of home values, in turn, is likely to spur additional sales activity:  discretionary buyers should be more willing to enter the market now that the underlying value of their potential investment is no longer depreciating.  Indeed, although it is still early in the sales year, home sales in 2013 appear to have gotten off to a good start.

Unemployment Demographics in Arkansas

By , May 23, 2013 10:21 AM

The Bureau of Labor Statistics recently published some preliminary statistics on 2012 state unemployment rates – broken down by gender, race, ethnicity and age.  A comparison of Arkansas with the rest of the country yields some interesting observations.

As shown in the table below, the overall unemployment rate in Arkansas was one-half percentage point lower than the national average in 2012, and Arkansas ranked near the median among the 50 states plus District of Columbia.  For the U.S. as a whole, the 2012 unemployment rate was slightly higher for men than for women, but there was no gender difference in Arkansas.

Sorting by race, unemployment rates were significantly higher for Black or African American residents than for Whites.  This is true both nationwide and for Arkansas; however, the degree of disparity is larger in Arkansas.  Among Whites, the Arkansas unemployment rate was 1.2 percentage points lower than the national average, but for Black or African American Arkansans, the unemployment rate was more than 2 percentage points higher than the U.S. rate.  Rankings among the states also show the relative disparity:  the unemployment rate among Whites was below the median while the unemployment rates among Black or African Americans were well above the median.  For Black or African American men, Arkansas had the 12th highest unemployment rate in the country.

In contrast, unemployment rates among residents with Hispanic or Latino ethnicity, unemployment rates were far lower in Arkansas (5.5%) than for the U.S. as a whole (10.3%).  For that ethnic group, Arkansas unemployment rates ranked among the lowest in the country.  For Latino or Hispanic women, the Arkansas unemployment rate was the fourth-lowest in the U.S.

Source: Bureau of Labor Statistics

Unemployment rates by age group break down similarly for both the U.S. and Arkansas, with rates significantly higher for younger age groups than for older cohorts.  Nevertheless, there are some notable distinctions.  Youth unemployment — 16-19 years and 20-24 years — was higher in Arkansas than the national average, with the state ranking 11th highest in both specific age groups.  Among older workers, unemployment rates in Arkansas are well below the national average. Of particular note is the 55-64 cohort, which has an unemployment rate of only 3.3% in Arkansas, compared to a 5.9% national average.

Among the various age groups, unemployment rates for men and women show some marked differences.  Among Teenagers (16-19), the rate for males is far higher than for females – and well above the national average.  Moving up just one age bracket, the pattern is reversed for 20-24 year olds.  There is also a sharp gender difference in the 45-54 category:  The unemployment rate for women is only 3.8% (compared to 6.2% nationally), while the rate for men is 6.4% — above the national average.

The unemployment rate is an important indicator of labor market performance, but my no means is it the best summary measure.  Labor force participation rates and employment-population ratios also provide important information about the employment status of various demographic groups that can help interpret the unemployment rate.  For example, we noted that unemployment rates among 55-64 year-olds is relatively low in Arkansas.  However, the participation rate for this cohort is only 51.6% in Arkansas, compared to 64.5% nationwide.  As a result, employed persons 55-64 years old comprise only 49.9% of the total population in that age bracket in Arkansas, but for the U.S. the employment-population ratio is 60.6%.  Hence, one reason that unemployment is so low for 55-65 year olds in Arkansas is that far fewer of the members of that cohort are in the labor force.

For those readers interested in looking at these figures in more detail, a supplemental table —  comparing the U.S. and Arkansas in terms of population shares, labor force participation rates, employment-population ratios along with unemployment rates – is available here (Excel spreadsheet)

Arkansas Taxable Sales – Final Figures for 2013:Q1

By , May 21, 2013 3:31 PM

Final figures for Arkansas Taxable Sales are now in:  The revised statistics are essentially unchanged from the preliminary data we published two weeks ago.  Based on state sales tax receipts, Arkansas Taxable Sales (ATS) were up 0.3% in the first quarter.  Compared to the first quarter of 2012, sales were up 0.5%.  Incorporating data from the state’s motor fuel tax, Arkansas Taxable Sales Including Gasoline (ATSIG) were also up 0.3% for the quarter — and unchanged from the previous year.

Sources: Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement

Sources: Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement

Since the recession trough of 2009:Q2, ATS has increased by 12.1% — averaging 3.1% growth at an annual rate.  The corresponding increase for ATSIG is 15.1% — an annual growth rate of 3.8%.  Over that 15-quarter period, inflation has averaged 2.0%, implying that real (inflation-adjusted) sales growth has averaged 1.1% to 1.8%.

By comparison, Census data on national retail sales show a 14-quarter increase of 24.5% — an average annual rate of 6.0%, or 4.0% after inflation.

Sources: U.S. Census Bureau, Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement

# # #

Arkansas Taxable Sales (ATS) is calculated by the Institute for Economic Advancement to serve as a timely proxy for Arkansas retail sales. The series is derived from sales and use tax data, adjusting for the relative timing of tax collections and underlying sales, changes in tax laws, and seasonal patterns in the data.  Arkansas Taxable Sales Including Gasoline (ATSIG) incorporates data on the state motor fuel tax and gasoline prices from the Oil Price Information Service.

A spreadsheet of the data is available here: Arkansas Taxable Sales 2013:Q1 (Excel file)

Arkansas Employment and Unemployment – April 2013

By , May 17, 2013 10:32 AM

Arkansas’ unemployment rate fell slightly in April, declining from 7.2% to 7.1%.  The household survey reported that employment increased by nearly 1,700 and unemployment dropped by more than 800.  The resulting increase in the labor force interrupted a string of 14 consecutive monthly of declines.   The April increase is a welcome change.  Nevertheless, from its recent peak in January 2012, the Arkansas labor force has experienced a cumulative contraction of 36,800.

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

The 0.1% decline in Arkansas’ unemployment rate matches the drop in the national rate reported for April.  Compared to a year earlier, however, Arkansas unemployment rate has declined by only 0.2%, compared to a drop of 0.6% for the nation as a whole.

Source: Bureau of Labor Statistics

Payroll Employment
Arkansas nonfarm payroll employment increased by 4,500 for the month (seasonally adjusted*) — the largest monthly gain since October of 2012.   Employment in goods-producing sectors was essentially flat, with the job gains concentrated in service providing sectors.  Increases were notable in Professional & Business Services (+2,200) and in Retail Trade (+2,200).  For the first four months of the year, job growth in Arkansas has averaged over 2,000 per month.

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

Since the employment trough of February 2010, cumulative employment growth has added 38,800 jobs to Arkansas payrolls, representing about two-thirds of the jobs lost between December 2007 and February 2010.  Total nonfarm payroll employment in April was 1.5% below its pre-recession peak.  For the entire United States, April employment remained 1.9% below the pre-recession peak.

Source: Bureau of Labor Statistics

#  #  #

*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 Taxable Sales – 2013:Q1 (Preliminary*)

By , May 7, 2013 3:50 PM

Information from last week’s General Revenue Report suggested continued slow growth in Arkansas Taxable Sales.  Sales and Use tax collections in April were down 2.5% from April 2012, and were 6.5% below forecast.  For the first quarter of 2013, Arkansas Taxable Sales (ATS) increased 0.2% from the previous quarter (seasonally adjusted).  Following a 3.3% increase in the first quarter, ATS is now up 0.5% from the previous year, having offset the declines we saw in the second and third quarters of 2012.

Sales of gasoline were up 0.3% in 2013:Q1, so the gasoline component of Arkansas Taxable Sales Including Gasoline (ATSIG) had little effect on the total.  ATSIG was up 0.2% from the previous quarter and was unchanged from the previous year.

Sources: Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement

Sources: Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement

 # # #

Arkansas Taxable Sales (ATS) is calculated by the Institute for Economic Advancement to serve as a timely proxy for Arkansas retail sales. The series is derived from sales and use tax data, adjusting for the relative timing of tax collections and underlying sales, changes in tax laws, and seasonal patterns in the data.  Arkansas Taxable Sales Including Gasoline (ATSIG) incorporates data on the state motor fuel tax and gasoline prices from the Oil Price Information Service.

A spreadsheet of the data is available here: Arkansas Taxable Sales 2013:Q1 (Excel file)

* Data are preliminary until the release of the DFA report, Arkansas Fiscal Notes for April 2013, and will be updated when information becomes available.   The preliminary data also include model-based estimates of gasoline sales for March.  Final figures will incorporate official estimates from DFA’s Motor Fuel Tax section.

Arkansas Home Sales – 2013:Q1

By , May 2, 2013 1:23 PM

The Arkansas Realtors® Association (ARA) announced this morning that March home sales were up 7% from the previous year.  Sales in the first two months of the year had been somewhat volatile, with year-over-year sales up 11.6% in January but down 1.6% in February.  As shown in the figure below, home sales typically start out slow in the early months of the calendar year, reaching a peak in the summertime.  The sharp ramp-up in March bodes well for the outlook for the rest of the year.  In fact, the volume of sales in March 2013 was the highest level we’ve seen for that month since 2010, when the Federal home-buyer’s tax credit was in its penultimate month.

Source: Arkansas Realtors® Association

After seasonally adjusting the data, the zero-growth trend in home sales over the past two years is evident.  But seasonally adjusted sales in March were well above the 2000 homes-per-month pace that seems to have constrained the market in 2011 and 2012.

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

Perhaps the most important aspect of this morning’s report is the cumulative sales total for the first quarter of the year.  The ARA statistics showed a 5.2% increase in year-to-date sales compared to 2012.  After seasonal-adjustment of the quarterly data, the figure below shows a sharp upturn in 2013:Q1.

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

Home sales and residential construction have been among the weakest sectors in the current economic recovery, in spite of historically low mortgage rates and relatively low home prices.  The home sales data for January through March of 2013 suggests that the long-awaited recovery in Arkansas residential real estate markets might finally be emerging.

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