Institute for Economic Advancement

Metro Area Employment and Unemployment – May 2016

By , June 29, 2016 3:27 PM

Unemployment rates in Arkansas metro areas continued to trend downward in May, with rates declining by at least one full percentage point over the past twelve months.  The unemployment rate in Memphis was 2.1 percentage points lower than in May 2015 — the largest rate decline among the nation’s 387 metro areas.

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

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

Changes in unemployment rates from April to May were dominated by seasonal movements.  The end of the school year is always associated with higher unemployment as teachers and students seek summer employment (among other factors).  After adjusting for this typical pattern, unemployment rates were little-changed around the state.  Rates ticked downward by one-tenth of a percent in three metro areas, increased by one-tenth in two, and were unchanged in three.

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

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

Payroll Survey
Changes in nonfarm payroll employment were mixed in May.  Monthly employment growth was relatively strong in Little Rock and Fayetteville, and was also positive in Fort Smith, Hot Springs and Jonesboro.  Payrolls declined in Memphis, Pine Bluff and Texarkana.  Over the past 12 months, Pine Bluff is the only Arkansas metro area to have experienced a decline in payroll employment.  Today’s news release from the Bureau of Labor Statistics (BLS) noted that payrolls were down from a year earlier in only 70 of the nations metro areas.

Source: Bureau of Labor Statistics, Current Employment Statistics

Source: Bureau of Labor Statistics, Current Employment Statistics

The two independent data sources reported by the BLS continue to provide conflicting information.  According to the household survey (on which unemployment rate estimates are based), employment has been expanding phenomenally around the state.  In contrast, employment growth measured by the payroll survey has been quite a bit lower.  For Memphis, Texarkana, and the statewide totals, the household survey is showing strong growth for 2016, while the payroll survey is showing employment declines.  The two sources of data differ in methodology and coverage, but it unusual for discrepancies of this magnitude to remain for any extended period of time.

Source: Bureau of Labor Statistics

Source: Bureau of Labor Statistics

Arkansas Personal Income – 2016:Q1

By , June 22, 2016 4:10 PM

Arkansas personal income expanded 1.2% in the first quarter of 2016, outpacing the national average of 1.0%.  The highest growth rate in the nation was Washington state (1.5%), with Arkansas’ growth ranking the sixth-highest among the 50 states.

Source:  Bureau of Economic Analysis

Source: Bureau of Economic Analysis

All major components of Personal Income showed positive growth in the first quarter, led by a 17.1% increase in Farm proprietors’ income.  Wages and salaries grew at a 1.4% pace, while Dividends, interest and rent expanded by only 0.3%.

Total earnings expanded 1.7% — a higher growth rate than any other state except Washington.  The table below shows the growth rates of total earnings by industry, showing that  Arkansas’ strong performance was largely attributable to the gain in Farm income.   Mining (including oil and natural gas extraction) was the weakest sector for both Arkansas and the total U.S.  The news release from the Bureau of Economic Analysis noted that mining income had experienced its 5th consecutive quarterly decline, falling 15.8% nationally since the fourth quarter of 2014.  Over the same period, mining income in Arkansas contracted by 17.4%.  Arkansas’ growth outpaced the nations in most sectors, particularly in service-providing sectors.  However, earnings in durable goods manufacturing declined slightly in Arkansas, in contrast to a small gain nationwide.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

 

Arkansas Employment and Unemployment – May 2016

By , June 17, 2016 2:31 PM

The monthly report on employment and unemployment showed yet another decline in the Arkansas unemployment rate in May:  the rate declined 0.1% to an all-time low of 3.8%.  Over the past 12 months, the unemployment rate has fallen 1.6% — the second-largest decline in the country (next to Tennessee’s 1.7%).

The statistics underlying the falling unemployment rate were less dramatic than earlier in the year: The number of unemployed declined by 1,027 and the number employed increased by 1,073.  As a result, the size of the labor force remained approximately unchanged.  This stands in contrast to the first three months of the year, when employment and labor force growth exceeded  10,000 per month.

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

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

Although there is some reason to be skeptical about the magnitude of the employment gains underlying the unemployment rate decline, it is clear that unemployment is declining.  The number of unemployed has fallen every single months since February 2011, when it stood at nearly 115,000.  The number of unemployed in May was down to 51,773.

Yet even taking the 3.8% unemployment rate at face value, today’s low unemployment arises under different circumstances than previous episodes of low unemployment.  In particular, labor force participation remains low.  As shown in the chart below, the last time that unemployment declined to a cyclical low was just about 10 years ago (2006).  Unemployment was down to 5.0%.  At that time, however, the employment-population ratio was around 64%.   In 2016, while the unemployment rate has fallen below 4%, we only have an employment-population ratio of just over 56%.  So the percentage of Arkansans with jobs is presently 8 percentage points lower than it was a decade ago.

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

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

Payroll Employment
One important reason to question the statistics derived from the household survey is the conflicting information from the payroll survey.  Nonfarm payroll employment rose by 1,200 in May–about in line with the increase in household employment.  Over the past 5 months, however, the net change in payroll employment has been -800, compared to an increase of 36,778 reported in the household data. Payroll employment is 22,100 higher than it was in May 2015, but most of that increase took place in the latter months of 2015.

Source: Bureau of Labor Statistics

Source: Bureau of Labor Statistics

The monthly change in payroll employment was dominated by an increase of 2,200 jobs in Education and Health Services — all of which was accounted for by rising employment in the health care sector.  Total employment in goods-producing sectors was down for the month, and changes in employment by service-providing sectors was mixed.  Over the past year, the strongest sectors continue to be Education & Health Services, Professional & Business Services, and Retail Trade.

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

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

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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, can be found hereTable-Seasonally Adjusted NFPE.

Arkansas GDP – 2015

By , June 14, 2016 3:56 PM

Arkansas’ GDP grew at an annualized rate of 1.6% in the fourth quarter of 2015, down somewhat from the 4.8% and 4.1% growth rates (revised) registered in the second and third quarters of the year.  The four quarter growth rate was 1.4% and the annual rate of change (2015 vs. 2014) was 1.5%.  The GDP data support a general assessment of Arkansas’ economy as having grown at a healthy (albeit not exceptional) pace over the past three years.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

The table below shows growth rates by sector for 2015:Q4, along with annual growth rates for 2015. Several sectors expanded sharply at the end of 2015, including Construction, Nondurable goods manufacturing, Wholesale trade, and some service-providing sectors. The expansion of nondurable goods manufacturing was a welcome improvement, as were surges in the growth rates of Arts, Entertainment & Recreation and Other Services.  For the  year as a whole, growth was strongest in Agriculture, Construction, Wholesale & Retail Trade, some sub-categories of Professional & Business Services, and Health Services.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

The report from the Bureau of Economic Analysis also included revisions to state GDP data for 2008-2014.  As shown in the figure below, growth rates for Arkansas GDP were revised sharply higher for 2013 and 2014.  The originally-reported growth rate for 2014 (0.8%) seemed particularly inconsistent with the strong employment growth recorded for that year. The revised figure (2.1%) is more consistent with other contemporaneous measures of state economic activity.  Viewed from a longer-term trend perspective, the latest GDP data suggest that Arkansas has been on a steady growth path since the end of 2012.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Metro Area Employment and Unemployment – April 2016

By , June 3, 2016 4:31 PM

This week’s report on metro area employment and unemployment in April revealed another round of plummeting unemployment rates, accompanied by mixed readings on job creation.  The conflicting signals from the household and payroll surveys continue to present something of a puzzle.  As shown in the first table below, unemployment rates have declined sharply over the past 12 months — by nearly two percentage points in some areas (and even more in Pine Bluff).

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

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

The not-seasonally adjusted unemployment rates fell precipitously from March to April, but seasonality was an important part of the story.  On average, Arkansas’ not-seasonally adjusted unemployment rate falls by 0.4% in April, even in a stable job market.  The unemployment rates in the state’s metro areas follow similar patterns.  As shown in the next table, declines of 0.5% to 0.8% in the not-seasonally adjusted figures translate to more modest declines after adjusting for seasonal patterns.  In Memphis, the unadjusted decline in unemployment translates to an increase in unemployment after seasonal adjustment.

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

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

Payroll Employment
The monthly changes in nonfarm payroll employment in Arkansas’ metro areas was not nearly as impressive as the falling unemployment rates suggest.  Payroll employment growth from March to April was strong in Fort Smith and Hot Springs, but the gains were much smaller in other metro areas — and payrolls declined in Little Rock and Texarkana.

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

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

The contrast between the household and payroll surveys is highlighted in the final table below, which reports the change in employment from December through April, as measured by the two data sets.  The declines in unemployment rates are based, in part, on the employment gains measured by the household survey.  The four-month percentage changes range from 1.3% in Fort Smith to 3.1% in Jonesboro.  On an annual basis, these growth rates translate to as much as 9%.  Meanwhile, the numbers from the payroll survey show much more muted gains, and in the case of Fort Smith and Texarkana, even negative growth.

Source: Burea of Labor Statistics

Source: Burea of Labor Statistics

Generally speaking, the numbers from the payroll survey are considered more reliable, but  both sets of data are subject to revision at the end of the year.  It might be some time before the diverging patterns are reconciled.  In the meantime, while it is clear that the trends are generally positive, it is probably wise to remain somewhat circumspect about the implications of recent readings on unemployment.

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