Arkansas Economic Development Institute

Personal Consumption Expenditures – 2016

By , October 5, 2017 4:41 PM

The Bureau of Economic Analysis reported yesterday that Personal Consumption Expenditures (PCE) rose by 3.9% in Arkansas in 2016.  Nationwide, the growth rate was 4.0%.  PCE is not adjusted for inflation, so after accounting for a 1.2% increase in prices from 2015 to 2016, Arkansas real PCE increased by about 2.7%.  As shown in the figure below, Arkansas PCE has been increasing at a slower pace than the national averages since 2012.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

The fastest-growing components of PCE in Arkansas included Health care (+7.0%), Other nondurable goods (+6.8%), and Food services and accommodations (+5.6%).  The only category of spending to decline from 2016 to 2016 was Gasoline and other energy goods, which was affected by declines in gasoline prices.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Per Capita PCE
One of the reasons for the slower growth in Arkansas PCE relative to the U.S. average is the relatively slow population growth rate in Arkansas.  Population growth in Arkansas was approximately 0.3% in 2016, while the comparable growth rate for the U.S. population was 0.7%.  Accordingly, on a per capita basis, Arkansas PCE increased by 3.5% in 2016, slightly exceeding the national average growth rate of 3.2%.

The table below displays spending levels and expenditure shares for per capita PCE in 2016.  Overall, per capita spending in Arkansas was $31,117 — 78.5% of the national average.  It is not surprising that spending per capita is relatively low in Arkansas:  income per capita is below the national average and prices also tend to be well below the national average.  Figures from the Regional Price Party data show that prices are approximately 12.6% lower in Arkansas than the national average, with housing costs particularly low — about 36% lower than the national norm.  These price patterns show through to the per capita spending figures, with expenditures on housing nearly 34% lower than the U.S. average.   For two categories of spending, per capita PCE in Arkansas exceeds the national rate:  Motor vehicles and parts, and Gasoline and other energy goods.  At the other extreme, spending on Transportation services amounts to less than one-half of the per capita level nationwide.

Per Cap PCE 2016

Arkansas Personal Income – 2017:Q2

By , October 3, 2017 5:13 PM

Last week’s news release on personal income included new statistics for the second quarter of 2017, along with data revisions for the period 2014-present.

The latest update showed personal income increasing 0.6% in the second quarter, slightly below the national growth rate of 0.7%.  Data from the first quarter were revised to show an increase of 2.0% for Arkansas, up from the 1.0% rate previously reported.  For the four quarters from 2016:Q2 to 2017:Q2, Arkansas’ growth rate was 3.0%.  For the same period, the nation’s income growth rate was 2.9%.  After adjusting for an inflation rate of 1.6% (as measured by the price index for personal consumption expenditures), the real year-over-year growth rates of personal income for Arkansas and the U.S. were 1.4% and 1.3%, respectively.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

The breakdown of personal income growth in the second quarter reveals that nonfarm income rose 0.9%, while the more volatile farm income component decreased by 15.2%.  Among the major sources of income, both Dividends, Interest, and Rent and Wage and Salary Disbursements increased 1.2%.  On a year-over-year basis, Arkansas’ 3.0% growth rate reflected a surge in Proprietors’ Income (+7.8%).  Arkansas’ growth rate also outpaced the nation in Earnings by place of work (3.3% compared to 2.9% nationwide).

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Overall, the annual revisions to the personal income data for 2014-16 raised estimates of Arkansas incomes.  The revisions had the effect of raising total personal income by 1.0% in 2014, by 2.0% in 2015 and by 1.0% in 2016.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

The bulk of the revisions were attributable to Dividends, Interest and Rent.  Cumulatively, that component was revised upward by 10.7%. Personal Current Transfer Receipts were revised upward for 2016 (by 1.0%), but for all other categories of income (including Wage and Salary Disbursements), the cumulative effect of revisions was negative.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

We had previously noted that while personal income growth in Arkansas has roughly kept pace with the national average in recent years, its growth has been skewed in favor of the Dividends, Interest and Rent component while Wage and Salary income has grown more slowly than the national average.  The new data revisions exacerbate that differential.  As shown in the table below, Wage and Salary income has accounted for just over one-half of national personal income growth over the course of the economic expansion.  Here in Arkansas, however, Wages and Salaries account for less than 40% of total income growth.   In contrast, Dividends, Interest and Rent accounts for over one-third of Arkansas income growth and only 26% at the national level.  The other component that has been contributing a relatively large share to Arkansas income growth is Personal Current Transfer Receipts.  The growth rates of transfer payments have been roughly the same for Arkansas and the U.S., but that component represents a larger share of total income for Arkansas.

Source: Bureau of Economic Analysis and author's calculations

Source: Bureau of Economic Analysis and author’s calculations

Arkansas per capita personal income in the second quarter was $40,893, representing 81.3% of the national average per capita income of $50,308.  As a percent of the national average, the recent data revisions improved Arkansas standing:  Before the revisions, per capita income stood at 79.4% of the national average (in the first quarter).  It was the cumulative effect of data revisions for 2014-16 that raised estimates for Arkansas back above the 80% line.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Metro Area Employment and Unemployment – August 2017

By , September 28, 2017 5:08 PM

Unemployment rates in Arkansas metro areas remain lower than a year earlier.  Wednesday’s news release from the Bureau of Labor Statistics noted that year-over-year changes in unemployment rates show declines in 323 of the nations 388 metropolitan areas, with all of Arkansas metros included in that total.  Recent monthly changes in unemployment rates have indicated a leveling-off, with most of the declines since August 2016 having taken place in the final months of 2016.

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

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

As previously reported, Arkansas’ statewide unemployment rate ticked up one-tenth of a percentage point in August, with the increase attributable to the first notable increase in the number of unemployed Arkansans since 2011.  Unemployment rates in the state’s metro areas generally followed the same pattern.  An increase in the number of unemployed was reported each of Arkansas’ metro areas except Memphis.  The increases were large enough to push unemployment rates up in Fayetteville, Fort Smith, Jonesboro, Little Rock and Pine Bluff.

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

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

Payroll Employment
Nonfarm payroll employment in Arkansas metro areas also followed the statewide pattern of a downturn in August, with payrolls declining in four of the state’s metro areas.  Declines were particularly pronounced in the rapidly growing northwest and northeast corners of the state, where recent employment growth trends have been the highest.  Payroll employment in Fayetteville was down 0.4% from July to August, but remained up 3.0% from a year earlier.  In Jonesboro, the monthly decline registered 0.5%, leaving employment 1.6% above its August 2016 level.

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

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

 

Metro Area GDP – 2016

By , September 22, 2017 1:23 PM

The Bureau of Economic Analysis released 2016 GDP data for metropolitan areas earlier this week. The data for Arkansas metro areas show relatively strong growth in Fayetteville, Jonesboro, and Texarkana. Real GDP contracted in Fort Smith, Hot Springs and Pine Bluff.

Source:  Bureau of Economic Analysis

Source: Bureau of Economic Analysis

It should be noted that real GDP data are adjusted for the overall rate of inflation.  However, they are not adjusted for changes in population growth.  That is, real GDP growth can be decomposed into two components: growth due to population increase and growth due to the expansion of output per capita. As shown in the table below, the decomposition shows differing characteristics of growth in the various metro areas covering parts of Arkansas. For example, nearly 60% of the GDP growth in the Fayetteville metro area is attributable to population growth, leaving a per capita growth rate of 1.6%. On the other hand, slow population growth in Texarkana means that most of the overall GDP growth in that metro area reflects increases in output per person — at an even faster pace than in Northwest Arkansas!  In Pine Bluff, population is contracting more rapidly than overall GDP growth, implying a positive growth rate per person in spite of the overall negative growth rate.

Sources: Bureau of Economic Analysis, Census Bureau

Sources: Bureau of Economic Analysis, Census Bureau

GDP is intended to measure the entire output of an economy — the sum of all goods and services produced within a particular geographic area.  The calculation of such a comprehensive measure of economic activity is necessarily complex and is often subject to revision as more information becomes available.  Consequently, the initial estimates of 2016 metro area GDP that were released this week are quite likely to be revised in the future.

The data released earlier this week includes revisions to the previously published estimates for 2001-2015.  As illustrated by the set of charts below, the magnitude of these revisions can be substantial. For example, the data that came a year ago showed Hot Springs growth in the range of 3 to 4% in 2012 and 2013. The newly revised and updated figures show growth over the same period to have been negative 3 to 4%.  This is a rather extreme example of the revisions typically observed, but it highlights the uncertainty associated with originally published estimates of metro area GDP statistics.

Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

 

Arkansas Employment and Unemployment – August 2017

By , September 15, 2017 12:40 PM

The August report on employment and unemployment was a bit disappointing in several respects, but the latest month-to-month readings should be considered against a backdrop of positive longer-term trends.  The headline news was an uptick in Arkansas’ unemployment rate, up from 3.4% to 3.5%. The rise was attributable to an increase in the number of unemployed by over 1,200 — the first notable increase in that figure since early 2011.  But with unemployment at historic lows, it is not surprising to see some ups and downs in the monthly data.  The number of employed and the total labor force both increased again in August, albeit at a slower pace than in the previous four months.

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

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

Compared to August 2016, the unemployment rate was down 0.5% with the number employed up 41,710 and the number of employed down 6,501.  The magnitude of the year-over-year employment gains is likely to be reduced when the data are revised early next year, but the direction of the trend remains clearly positive.

Payroll Employment
The report on nonfarm payroll employment showed a decline of 7,200 jobs in August (seasonally adjusted).  Employment in goods-producing sectors declined slightly from July to August, with construction down by 1,500 and Manufacturing off by 300.  Service-providing industries also shed jobs in August, with declines totaling 5,400 jobs.  Losses were registered in some of the sectors that have been showing the largest gains in recent months, including a downturn in Professional & Business Services (-1,100) and Leisure & Hospitality Services (-600).  Even Health Care and Social Assistance showed a decline of 900 jobs.

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

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

Despite these one-month losses, the trends in payroll employment remain strong.  From August 2016 to August 2017, the net employment increase was 23,400, or 1.9%. The year-over-year increases are attributable to both goods-producing and service-providing sectors, but with the largest gains in the service sectors.  Over the same period, nonfarm payroll employment nationwide increased by 1.5%.

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

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

# # #

 *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 here:  Table-Seasonally Adjusted NFPE.

 

Metro Area Employment and Unemployment – July 2017

By , September 1, 2017 4:06 PM

July data on employment and unemployment in metropolitan areas showed that unemployment rates were lower than a year earlier in all Metro areas covering parts of Arkansas.  Year-over-year changes in not-seasonally adjusted data range from -0.3 percentage points in Northwest Arkansas to -0.9 in Memphis and Pine Bluff.

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

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

Unemployment rates were unchanged or down slightly from June to July for most metro areas, although the Memphis metro area (which includes one county in Arkansas) saw an increase of 0.2 percentage points in July.  Rates were down in Fort Smith, Pine Bluff, and Texarkana.

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

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

Payroll Employment
Nonfarm payroll employment show wider variations among metro areas than do the data from the household survey. From June to July, payroll employment was unchanged in Little Rock, Memphis and Pine Bluff.  Employment was up Fayetteville, Hot Springs and Jonesboro, while Texarkana saw a decline.  From July 2016 to July 2017, Fayetteville, Hot Springs, Jonesboro and Memphis have experienced net growth, while the year-over-year changes were negative for Fort Smith, Pine Bluff and Texarkana.  Payroll employment in the Little Rock Metro area was unchanged from a year earlier.

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

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

Arkansas House Prices – 2017:Q2

By , August 23, 2017 4:41 PM

The Federal Housing Finance Agency (FHFA) has published new statistics on house prices across the nation.  The data for Arkansas continue to show an upward trend in prices, but with slower rate of appreciation than the nationwide average.  The most comprehensive of the FHFA indexes, Expanded Data Indexes†, show that house prices in Arkansas rose 1.2% in the second quarter of 2017, compared to an increase of 1.7% for the U.S.   Year-over-year growth rates were 4.2% for Arkansas and 6.7% for the U.S.

Source: Federal Housing Finance Agency

Source: Federal Housing Finance Agency

Increases in Arkansas house prices have been consistently lower than the nationwide average throughout the post 2011 housing recovery.  In part, this is simply a function of having experienced a less severe downturn during the 2007-11 housing price collapse.  Compared to the beginning of 2007, the net increase in housing prices in Arkansas has been 3.9% while the comparable figure for the U.S. average is 2.8%.

The Expanded Data indexes are not calculated for metropolitan areas, but the FHFA does publish figures for its All-Transactions Indexes†.  By this measure, house prices increased in the second quarter throughout much of the state, with quarterly declines registered for Fort Smith and Pine Bluff.  Prices in Jonesboro were essentially unchanged.  Over the past year, prices have risen in all metro areas except Pine Bluff, which has seen a decline of 7.9%.

Source: Federal Housing Finance Agency; Seasonal adjustment by the Arkansas Economic Development Institute.

Source: Federal Housing Finance Agency. Seasonal adjustment by the Arkansas Economic Development Institute.

Over a longer span of time, it is clear that Fayetteville and Memphis are seeing the most rapid rates of appreciation.  As illustrated in the figure below, these were also the metro areas that suffered the largest price declines during the period of falling prices.  Meanwhile, house prices in Texarkana and Jonesboro have not increased as rapidly in recent years, but were largely unaffected by the housing price collapse.  Compared to 10 years ago, the metro area with the greatest house-price appreciation has been Texarkana, with Jonesboro also registering above-average increases.

Source: Federal Housing Finance Agency. Seasonal adjustment by the Arkansas Economic Development Institute.

Source: Federal Housing Finance Agency. Seasonal adjustment by the Arkansas Economic Development Institute.

# # #

†The FHFA produces several house price indexes with different coverage.  The basic Purchase-Only Index includes prices from home sales that were financed through the federal enterprises Fannie Mae and Freddie Mac.  The All-Transactions Index also incorporates appraisals associated with refinancing.  Finally, the Expanded Index incorporates information from county recorders’ offices, capturing home sales that were not financed through the government housing enterprises.

Arkansas Employment and Unemployment – July 2017

By , August 18, 2017 1:29 PM

The latest report on state level employment and unemployment showed another strong month for Arkansas.  The unemployment rate remained unchanged at the very low level of 3.4%, and remains 0.9% lower than the national average.  The underlying components of the unemployment rate have also continued to suggest a strong job market:  The number of unemployed was essentially unchanged in July but has declined by over 6,000 since the end of 2016. Meanwhile, the household survey shows an increase in the number of employed Arkansans of over 43,000 in 2017 — with a gain of over 35,000 in just the most recent four months.

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

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

The household employment gains reported over the past four months are extraordinary, and if taken at face value reveal record-breaking employment growth for the state.  Looking over the entire history of the data for Arkansas (1976-present), the four largest monthly changes in household employment have taken place in April, May, June and July of 2017.  The situation is reminiscent of early 2016, when the originally-reported monthly employment gains were equally incredible.  The magnitude of the 2016 increases was significantly reduced when the data were revised earlier this year, and we expect similar revisions to the 2017 data when all is said and done.

What accounts for the rapid growth in employment?  Mathematically, the new employment is reflected in a higher labor force participation rate.  As shown in the chart below, Arkansas suffered a sharp decline in labor force participation during the slowdown of 2012-13, declining from 60.4% to 56.8%. That represents a decline in the number of Arkansans who were either employed or looking for a job amounting to 3-1/2% of the state’s working age population.  The surge in employment thus far in 2017 is matched by an increase in participation, indicating that many of the workers who had left the labor force during the 2012-13 doldrums are either returning to find jobs, or are being replaced by a surge of new entrants.  Either explanation supports the conclusion of favorable conditions for job-seekers.

Source: Bureau of Labor Statistics

Source: Bureau of Labor Statistics

The magnitude of recent increases in labor force participation are just as extraordinary as the rise in household employment.  From January through July, the participation rate has increased from 55.4% to 57.1%.   Once again, it is unlikely that the magnitude of this increase will withstand future data revisions. Nevertheless, there is good reason to believe that the statistics are revealing more than just statistical noise.  The independent payroll survey has been showing strong employment growth during 2017 as well (as described in more detail below).  The two measures of employment are not defined precisely the same way and are collected using different sources and methodologies, so when both are indicating similar patterns of job growth, our confidence in the overall trend in market conditions is enhanced.

Source: Bureau of Labor Statistics

Source: Bureau of Labor Statistics

Payroll Employment
From June to July, Nonfarm Payroll Employment increased by 6,100 jobs (seasonally adjusted).  Moreover, the data for June were revised upward by 3,900 jobs, raising the May-June increase from +4,700  to +8,600.  Over the past 12 months, payroll employment is up 32,700, or 2.7%.  The monthly news release from the Bureau of Labor Statistics noted that Arkansas’ year-over-year employment growth rate was among the highest four in the nation (a virtual three-way tie for second place).

Monthly employment gains – as well as year-over-year changes – have been spread across a wide range of sectors.  Service-providing sectors continue to account for the bulk of total job growth.  The three fastest-growing supersectors (Professional and Business, Education & Health, and Leisure & Hospitality) have accounted for nearly two-thirds of the net job creation over the past year.  We’ve also seen growth in goods-producing sectors in recent months: Compared to July 2016, Construction employment is up by 1,600 and Manufacturing is up 3,900.

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

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

If we compare July’s employment pre-recession levels (since the end of 2007), Arkansas employment has increased by 52,400 jobs, or 4.1%.  In comparison, nationwide employment has increased by 5.9% over the same period.

Source: Bureau of Labor Statistics

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, can be found here:  Table-Seasonally Adjusted NFPE.

Arkansas Taxable Sales – 2017:Q2

By , August 16, 2017 1:04 PM

The growth rate of Arkansas Taxable Sales (ATS) surged in the second quarter of 2017, increasing by 2.2% (an 8.9% annual rate).  From the second quarter of 2006, ATS has increased by 4.8%.  Although gasoline prices were unchanged from the first quarter to the second quarter, seasonally adjusted gasoline sales were down by 10%.  Accordingly, Arkansas Taxable Sales Including Gasoline (ATSIG) increased at a lower rate than ATS, rising 1.5% for the quarter.

Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Arkansas Economic Development Institute

Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Arkansas Economic Development Institute

Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Arkansas Economic Development Institute

Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Arkansas Economic Development Institute

Since the end of the 2008-09 recession, ATS and ATSIG have grown at average rates of 3.1% and 2.9%, respectively.  Over the same period, however, inflation has averaged about 1.5%.  Hence, only about half of the expansion in taxable sales over the past 8 years can be attributable to real (inflation-adjusted) growth.

# # #

Arkansas Taxable Sales (ATS) is calculated by the Arkansas Economic Development Institute 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 monthly and quarterly data is available here: Arkansas Taxable Sales 2017:Q2 (Excel file).

Arkansas Home Sales – 2017:Q2

By , August 14, 2017 5:17 PM

The latest data from the Arkansas Realtors® Association show continued growth in home sales over the first half of 2017.  The monthly report for June 2017 reported a sales increase of 5.9% compared to the previous June, with year-to-date totals up 6.2%.  The growth rate is down somewhat from the double-digit rates that have driven the market over the past four years.  However, the slowdown is not surprising given the extent to which sales have recovered from the pre-recession housing market crash.

Source:  Arkansas Realtors® Association

Source: Arkansas Realtors® Association

As shown in the figure below, home sales so far in 2017 exceed the sales pace of early 2006, before housing sales began collapsing in 2007.  After seasonal adjustment, it is also clear that the post-2013 rising trend in sales is ongoing.

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

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

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