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Arkansas Taxable Sales – 2011:Q2 (Preliminary*)

Arkansas Taxable Sales decline — and this time high gas prices can’t be blamed

Arkansas Taxable Sales (ATS) registered another slow quarter in 2011:Q2, with the basic series (based on state sales tax data) showing a decline of 0.5% from the previous quarter (seasonally adjusted).  Following weak growth in the previous three quarters, the quarterly drop leaves ATS only 0.1% above the level of a year earlier.

Source: Institute for Economic Advancement (based on data from the Arkansas Department of Finance and Administration and the Oil Price Information Service)
Source: Institute for Economic Advancement (based on data from the Arkansas Department of Finance and Administration and the Oil Price Information Service)

In the first quarter of the year, sharp increases in gasoline prices appeared to be a contributing factor to slow ATS growth of 0.4% (revised).  A measure of taxable sales that includes gasoline expenditures — Arkansas Taxable Sales Including Gasoline (ATSIG) — rose 1.6% from the previous quarter, suggesting that spending on gasoline was sapping some of the purchasing power that would otherwise have been reflected in the sales tax figures.  But the second quarter data show a decline in this broader measure as well (-0.4%). 

Although Arkansas gasoline prices declined during the latter part of the quarter, falling from $3.74 in May to $3.50 in June, prices were higher on a quarterly average basis — $3.63 in the second quarter compared to $3.16 in the first quarter.  However, slow gasoline sales volumes kept ATSIG from growing much faster than the ATS measure without gasoline expenditures.  Relative to a  year earlier, ATSIG was up only 2.1% in the second quarter. 

Source: Institute for Economic Advancement (based on data from the Arkansas Department of Finance and Administration and the Oil Price Information Service)
Source: Institute for Economic Advancement (based on data from the Arkansas Department of Finance and Administration and the Oil Price Information Service)

Nationwide retail sales growth slowed in the second quarter (from 2.5% in 2011:Q1 to 1.2% in 2011:Q2), but not as dramatically as the slowdown in Arkansas Taxable Sales.  As shown in the figure below, ATSIG had been showing growth commensurate with U.S. Retail Sales during the early stages of the economic recovery.  The data for 2011 indicate a troubling slowdown compared to the national statistics.

Sources: Institute for Economic Advancement, U.S. Census Bureau
Sources: Institute for Economic Advancement, U.S. Census Bureau

Recent reports on employment and unemployment in Arkansas have suggested economic weakness in the second quarter, and the statistics on Arkansas Taxable Sales provide corroborating evidence.  Forthcoming data releases for the second quarter should help to clarify the situation (e.g., Personal Income data for 2011:Q2 will come out next month).  Looking forward, recent declines in gasoline prices might relieve some of the strain on household budgets and contribute to a rebound in the second half of 2011.  Stay tuned.

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Arkansas Taxable Sales (ATS) is calculated by the Institute for Economic Advancement to serve as a timely measure of 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 Data 2011:Q2 (Excel file)

* Data are preliminary until the release of the DFA report, Arkansas Fiscal Notes for July 2011, and will be updated when information becomes available.

Arkansas Home Sales – 2011:Q2

The National Association of Realtors® (NAR) released statistics on home sales by state yesterday.  The seasonally-adjusted data for Arkansas show second quarter sales unchanged from the first quarter and down 17.6%% from the second quarter of 2010.  Nationwide, home sales were down 5.4% from the quarter and down 12.7% from the previous year.  The year-ago comparisons are not surprising:  the second round of home-buyer tax credits expired in 2010:Q2, generating a surge in sales. 

The NAR data are consistent with previously released reports from the Arkansas Realtors® Association (ARA).  The ARA data have shown home sales rising through the first half of the year, but this is a typical seasonal pattern.  As shown in the chart below, seasonally adjusted data reveal fairly stagnant home sales — well below the level of the previous year.

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

In fact, the NAR data and the ARA data — while based on different samples and methodologies — are showing a very similar pattern when placed on a comparable basis.  In the chart below, the ARA data is averaged by quarter and both series are indexed to equal 100 in the first quarter of 2009.  Prominent peaks in 2009:Q4 and 2010:Q2 mark the surges associated with tax-credit dates.  Both sets of data show a sharp drop-off in 2010:Q3, and slow sales since then.

Sources:  National Association of Realtors®, Arkansas Realtors® Association, Institute for Economic Advancement
Sources: National Association of Realtors®, Arkansas Realtors® Association, Institute for Economic Advancement

A Note on Per Capita Income in Arkansas MSAs

Yesterday’s personal income report for metropolitan areas did not include the usual calculations for per capita income.  Although population figures from the 2010 Census are available for metropolitan statistical areas, the statistics for 2009 have not yet been reconciled with the new Census data (the available 2009 numbers are extrapolated from the 2000 Census).

Although we cannot yet make comparisons over time, it is possible to calculate levels of per capita income using the 2010 data.  The calculations are shown in the table below: 

Sources:  Census Bureau, Bureau of Economic Analysis
Sources: Census Bureau, Bureau of Economic Analysis

 The highest per capita income levels are in the Little Rock MSA (1.9% below the national average) and the lowest are in Pine Bluff (23.3% below the national average).  Note that the national per capita income level used in the table ($39,901) is for all of the United States, not just the metropolitan portion of the country.  Per capita income for the metro areas of the U.S. is somewhat higher:  $42,254.

Updated Aug 10, 2001 @ 4:16 PM — Corrected figures for U.S. per capita income.

Metro Area Personal Income – 2010

This morning, the Bureau of Economic Analysis (BEA) released statistics on 2010 personal income for the nation’s metropolitan areas.    The BEA reported that “Personal income rose in 2010 in all but four of the nation’s 366 metropolitan statistical areas (MSAs).”  This represents a vast improvement over 2009, when revised figures show that personal income increased in only 131 of the 366 metro areas.  As shown in the map below, many of the fastest-growing MSAs were scattered across the southern U.S.  The top quintile includes the Arkansas MSAs of Fayetteville-Rogers-Springdale and Jonesboro.  Three other MSAs–Fort Smith, Pine Bluff, and Texarkana were in the next highest quintile. 

MSA_PI2010_map

As shown in the table below, personal income growth exceeded the national average for metro areas in all but two of Arkansas’ MSAs.  In Hot Springs, a growth rate of 2.8% nearly matched the national growth rate of 2.9%, while growth in the Little Rock-N. Little Rock-Conway MSA was only 1.4%.  The national rankings diplay in interesting pattern: the slower-growing MSAs in Arkansas for 2010 were among the best performers in the recession year of 2009.  When taken as a two year average, growth rates for all of Arkansas’ MSAs — except Memphis — were at or above the median for the U.S.

Source:  Bureau of Economic Analysis
Source: Bureau of Economic Analysis

The 2009 growth rates reported in the table have been revised since their initial release last year.  The growth rate for Fort Smith (-1.5%) is unchanged from the preliminary figures, but all other growth rates were revised upward.  In fact, the preliminary figures had shown negative growth rates for Hot Springs, Jonesboro and Texarkana, while the revised statistics show positive growth.

The breakdown of personal income sources shown in the table indicates that net earnings growth was positive in all MSAs except for Little Rock.  (Net earnings includes wage and salary disbursements, supplements to wages and salaries, and proprietors’ income.)  Transfer receipts provided substantial support for personal income in all of Arkansas metro areas, especially the smaller MSAs.

— Updated Aug 10, 12:35 PM to include data for Memphis.

Metro Area Employment Summary – 2011:Q2

The latest data on employment and unemployment for Arkansas’ metro areas indicates that  unemployment rates have been increasing across the state.  This morning’s news release from the Bureau of Labor Statistics reported that “unemployment rates were lower in June than a year earlier in 224 of the 372 metropolitan areas…”  Unfortunately, none of Arkansas’ metro areas were included in that total.  In fact, unemployment rates in Arkansas have increased across the board during the second quarter of 2011. 

On a month-to-month basis, some of the June unemployment rates reported today jumped substantially higher than May.  However, higher unemployment in June is a recurring seasonal phenomenon.  After adjusting for seasonality, the increases in unemployment rates were more modest — but they were increases, nonetheless.  The June jump in unemployment was largest in Fort Smith (+0.5 percentage points), but was also substantial in Fayetteville, Hot Springs, and Pine Bluff (+0.3 percentage points each).  Unemployment in the Little Rock MSA was essentially unchanged. 

Source:  Bureau of Labor Statistics
Source: Bureau of Labor Statistics

When the statewide data was released, we noted that June’s payroll survey indicated somewhat greater strength in labor markets than did the household survey.  The same is true of the metro area data.  Nonfarm payroll employment declined in four of the state’s MSAs, but  increased in three.   Hot Springs showed a particularly large drop in payroll employment in June.  However, this only partly offset substantial increases registered in April and May.  Compared to a year ago, employment in both Hot Springs and Texarkana are up more than one percent.

Source:  Bureau of Labor Statistics
Source: Bureau of Labor Statistics

Relative to the statewide trough in employment registered in February 2010, all but one of Arkansas’ MSAs have shown positive growth.  Employment in Pine Bluff remains 2.2% below the level of February 2010, but is slightly above a low-point registered in February 2011.  Compared to the start of the recession, employment changes range from down 6.3% in Fort Smith to essentially unchanged in Jonesboro.

Arkansas Employment and Unemployment – June 2011

According to new data from the Bureau of Labor Statistics and the Arkansas Department of Workforce Services (DWS), the unemployment rate in Arkansas rose by 0.3 percentage points in June, from 7.8% to 8.1%.  The Arkansas unemployment rate is now higher than it has been at any time during the recession and recovery.  The household survey reported an increase in the number of unemployed by over 2,500 and a decline in the number of employed by approximately 11,000.  At 109,000, the number of unemployed in Arkansas is now at a new all-time high.  As shown in the chart below, recent increases in the Arkansas unemployment rate have been following the national trend, although the rate is still more than one percentage point lower in Arkansas than the national average. 

Source:  Bureau of Labor Statistics
Source: Bureau of Labor Statistics

The news from this morning’s report was not all bad,  however.  This is one of those occasions when the independent payroll survey provides a different picture than the household survey.  According to the payroll report, employment was up by 2,100 in June (seasonally adjusted), with the May number revised upward slightly as well.  Since the trough of February 2010, nonfarm payroll employment in Arkansas has increased by 27,600.  That increase represents approximately 47% of the jobs lost from the start of the recession until February 2010.

Source:  Bureau of Labor Statistics
Source: Bureau of Labor Statistics

As shown in the table below, employment gains were concentrated in the service-providing sectors, particularly Education & Health Services and Professional & Business Services.  The crucial sectors of Manufacturing and Trade, Transportation & Utilities showed rather substantial losses for the month.  Employment in the construction sector showed a welcome increase.  Nevertheless, employment in both Construction and Manufacturing are down for the first six months of the year.

Source:  Bureau of Labor Statistics
Source: Bureau of Labor Statistics

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*Seasonally adjusted data for nonfarm payroll employment, reported in a format compatible with the monthly press release from the Arkansas Department of Workforce Services, are available hereTable – Seasonally Adjusted NFPE

Average Weekly Wages

Last week we reported on the comprehensive employment statistics from the Quarterly Census of Employment and Wages (QCEW).  This week the BLS released a detailed report on Arkansas, and the business media have tended to focus on the wages component of that report.  The Arkansas Democrat-Gazette, for example, ran the story under the headline “$738 weekly salary ranks state at 47th.”  The low ranking for wages in Arkansas should come as no surprise.  Arkansas has long been near the lower end of the nation’s income distribution, and relative rankings change very slowly. 

As shown on the map below, there are fairly wide discrepancies in average weekly wages among Arkansas counties.  The fourth quarter data show average weekly wages ranging from a high of $885 in Calhoun County to a low of $436 in Newton County.  None of the counties in Arkansas meet the national average of $971.

Source:  Bureau of Labor Statistics, Quarterly Census of Employment and Wages
Source: Bureau of Labor Statistics, Quarterly Census of Employment and Wages

But income comparisons convey only part of the story.  Differences in the standard of living in different states and regions also depend on costs of living.  In general, states with lower wages also tend to have lower living costs, so that differences in purchasing power are not as pronounced as they might appear when considering wage data alone. 

According to data from Council for Community and Economic Research (C2ER), Arkansas ranks as having the fourth-lowest cost of living in the nation.  Based on a sample that includes groceries, housing, utilities, transportation, health care, and miscellaneous goods and services, the C2ER composite index for Arkansas for 2010:Q4 is 90.61 — that is, the cost of living in Arkansas is almost 10% lower than the national average. 

As shown in the table below differences in cost of living tend to narrow the differences in living standards from state to state.  Using the raw wage data alone, Arkansas average weekly wages of $738 amount to only 76% of the national average.  After adjusting for the relatively low cost of living, the purchasing power of those wages are nearly 84% of the national average, and Arkansas moves up the rankings to #40.

Sources:  Bureau of Labor Statistics, Council for Community and Economic Research
Sources: Bureau of Labor Statistics, Council for Community and Economic Research

The tendency for average wages and the cost-of-living to covary positively is not coincidental.  In international economics, the relationship is known as the Balassa-Saumaulson effect, a productivity-based explanation of  why price levels tend to be lower in low-income countries, after adjusting for exchange rates.  Even in an economy as regionally integrated as the United States (and with no variable exchange-rates to consider),  goods that are traded nationwide can have a local service component.  Lower local wages tend to drive down the local (nontradeable) component of costs, keeping the average price level lower than in high-wage areas.  Over time, we would expect (and hope) that wages in Arkansas tend to converge toward the national average.  The key to this process is capital accumulation — of both physical and human capital.  But a side effect of this process is that we should also expect the cost of living to rise as well.  Convergence in standards of living can therefore be an even slower process than wage convergence.

- Updated July 13, 2011 6:55 PM

Quarterly Census of Employment and Wages – 2010:Q4

Last week, the Bureau of Labor Statistics released the latest Quarterly Census of Employment and Wages (QCEW).  This is the most detailed and accurate of all the employment measures compiled by the BLS.  Data from the QCEW are available for individual counties and industries, and are used in benchmark revisions to bring greater precision to the monthly estimates of the Current Employment Statistics.  The most recent data (for the months of 2010:Q4) show positive net employment growth for the year:  From 2009:Q4 to 2010:Q4, total employment in Arkansas increased by approximately 7,400 jobs — an increase of 0.65%.

As shown in the map below, employment growth rates varied considerably among counties.  Growth rates ranged from a high of  7.6% in Miller County to a low of -10.3% in Little River County.  There is no clear geographic pattern to employment growth rates by county, but generally, growth rates tended to be higher in the northern portion of the state.  Of the state’s 75 counties, 41 showed positive growth rates while 34 contracted.

Source:  Bureau of Labor Statistics, Quarterly Census of Employment and Wages
Source: Bureau of Labor Statistics, Quarterly Census of Employment and Wages

The breakdown of employment growth by industry shows that most of the employment growth during 2010 took place in the service-providing sectors.  Professional and Business services (which include temporary employment agencies) posted a growth rate of over 4%.  Education and Health services continued its robust growth (+1.4%), and Trade, Transportation, and Utilities made a significant rebound (+1.5%).  Both Financial Services and Information Services contracted over the year, but both are relatively small sectors so they did not contribute much to overall job growth.

Source: Bureau of Labor Statistics, Quarterly Census of Employment and Wages

 

In March 2012, the monthly data from the Current Employment Statistics will be revised using information from the QCEW.   In some previous years, these benchmark revisions have been substantial.  For example, in early 2010, revised data showed a loss of more than 18,000 jobs in Arkansas that had not  been reflected in the monthly CES data for 2009 (see Forecasting a Revision of History).  The data released last week indicate that next year’s revisions are likely to be relatively small.  Our estimates indicate that the revisions will show somwhat higher employment for the first half of the year, but a downward revision to fourth-quarter data. 

Sources:  Bureau of Labor Statistics/QCEW, Projections by IEA
Sources: Bureau of Labor Statistics, Projections by IEA

Metro Area Unemployment Rates – Update

The Bureau of Labor Statistics announced this morning that unemployment rates were “lower in May than a year earlier in 274 of the 372 metropolitan areas, higher in 85, and unchanged in 13.”  Among Arkansas Metropolitan Statistical Areas (MSAs), unemployment rates were lower for only 2, with rates higher in the remainder (relative to a year earlier).   Comparing May to the previous month, seasonally adjusted data show that  the unemployment rate increased in 3 MSAs, declined in 3, and was unchanged in Hot Springs.

Sources:  Bureau of Labor Statistics, Institute for Economic Advancement
Sources: Bureau of Labor Statistics, Institute for Economic Advancement

Arkansas Personal Income – 2011:Q1

Total personal income in Arkansas rose by 1.9% in the first quarter, and is up 4.8% since the first quarter of 2010.  The latest report on state personal income shows that income growth in Arkansas was slightly above the national average rate of 1.8%, ranking 16th among the 50 states.   However, revisions to the data show that income growth was slower than initially reported in 2010, particularly in the fourth quarter.

The figure below tracks personal income for the U.S. and Arkansas, normalizing each series to equal 100 in 2008:Q2 (the previous cyclical peak).  The decline in personal income in Arkansas during the recession was less than the national average, and income growth during the recovery has generally outpaced that of the nation.  The latest observation shows that personal income in Arkansas is 4.8% higher than at the previous cyclical peak.  For the U.S., personal income has shown a net increase of 3.8% over the same period.

Source:  Bureau of Economic Analysis
Source: Bureau of Economic Analysis

A careful comparison of the figure above with a previous version of the same chart  reveals that income growth in Arkansas is not outpacing the U.S. as much as previous data had suggested.  The slow income growth in the fourth quarter, in particular, represents a sharp downward revision to previously-published data.  As shown in the table below, Arkansas income growth was revised downward in each of the four quarters of 2010. 

Source:  Bureau of Economic Analysis
Source: Bureau of Economic Analysis

The report from the Bureau of Economic Analysis points out that a large share of the income growth in the first quarter is attributable to a two percentage-point decline in the Social Security payroll tax rate.  This tax cut, applicable to calendar-year 2011, was part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (i.e., the December political compromise that extended the Bush-era tax cuts, among other things).  For Arkansas, the Social Security tax cut accounted for approximately 0.8 percentage points of the 1.9% personal income growth rate.  Wage and Salary earnings accounted for 0.6 percentage points, with the remaining growth attributable to Dividends, interest and rent (0.44 percentage points); and Personal current transfer receipts (0.15 percentage points).

A breakdown of earnings by industry (which does not include that effects of the Social Security payroll tax cut) is shown in the table below.

Source:  Bureau of Economic Analysis
Source: Bureau of Economic Analysis

Sectors showing the strongest growth in the first quarter included Mining and Durable goods manufacturing (which were among the strongest sectors nationwide).  Earnings showed negative growth in a handful of sectors, including Farm income, Construction, Information services and Real Estate.  The BEA reports that Farm income in agricultural states varied widely, depending on the mix of agricultural products in each state.  “Farm income in some states, such as North Dakota, benefited from surging global wheat demand (which raised prices in the U.S. 18 percent in the first quarter) while farm income in other states, such as Iowa, plummeted because of rising livestock expenses and falling production.”  Farm income in North Dakota was up 66.6%, while farm income in Iowa was down 15.1%.  Arkansas farm income fell between these extremes.