Institute for Economic Advancement

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

# # #

*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.

#  #  #

*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

# # #

*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

Panorama Theme by Themocracy

AWSOM Powered