End-of-year statistics for employment and unemployment in in metropolitan areas were released this morning by the Bureau of Labor Statistics. Unemployment rates (seasonally adjusted*) declined slightly in most of Arkansas’ MSAs in December, but rose in Fort Smith. As shown in the chart below, The lower unemployment rates we saw during the summer were transitory — evidently associated with of temporary Census employment. Rates generally ended the year slightly higher than they were in January, rising by 0.3 to 0.5 percentage points in most of the state’s metro areas. Fort Smith showed an end-of-year increase that took its unemployment rate to 8.6%, up by 0.7 percentage points from January. Only Texarkana’s unemployment rate declined over the course of the year, falling slightly to 7.3 percent in December.
Source: Bureau of Labor Statistics
Employment statistics from the payroll survey showed employment increases in all of Arkansas’ metro areas in December. Hot Springs, Jonesboro and Pine Bluff showed significant increases. For the year as a whole, employment was up in three MSAs: Hot Springs, Texarkana and Jonesboro. In fact, employment in Jonesboro remains higher now than it was at the start of the recession in December 2007. At the other extreme, employment in Fort Smith is now down 8% from the start of the recession.
Source: Bureau of Labor Statistics
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*Seasonally adjusted data for MSA Payroll Employment are available from the Bureau of Labor Statistics. However, data for unemployment rates are not. In order to facilitate comparisons over different months of the year, unemployment rates are seasonally adjusted by the Institute for Economic Advancement using the conventional Census-X12 ARIMA procedure.
This morning, the Arkansas Realtors® Association (ARA) released data on Arkansas home sales for December 2010. As illustrated in the chart below, 2010 was an unusual year for home sales. The typical seasonal pattern features a peak around mid-summer (usually in July), with a low point during the winter months (usually in January). In 2010, the summer peak came early–in April. Sales during the summer months were uncharacteristically low.
Source: Arkansas Realtors® Association
The reason for this unusual pattern was the timing of Federal tax credit programs for home buyers. The second round of credits–which were available for first-time and repeat home buyers–expired at the end of April 2010. Typical delays in the closing process meant that some qualifying sales were not officially recorded until May or June, helping to support sales figures for those months. The subsequent collapse in sales during the late summer and autumn of the year is a reflection of the demand that was shifted forward by the tax credit program: Some households that would have purchased later in the year accelerated their plans to take advantage of the incentive program. The sales pattern induced by the timing of the tax credit program is even more apparent when the sales data are seasonally-adjusted, as shown in the figure below:
Sources: Arkansas Realtors® Association, Institute for Economic Advancement*
(The previous sales peak that is evident in the seasonally-adjusted data coincides with the conclusion of the original first-time home-buyers’ tax credit in November 2009.)
The December 2010 figures that were released this morning show that sales continue to recover from their low point in July. The outlook for 2011 depends crucially on how quickly market conditions will return to “normal”–that is, how long it takes for the effects of policy-induced demand shifts to disippate. The fact that seasonally-adjusted sales during the latter part of 2010 steadily improved suggests that the process of adjustment is taking place fairly rapidly. Indeed, the sales figures for December 2010 are only slightly lower (-0.88%) than the previous year.
Overall, sales during 2010 were down 4.8% from the previous year. The home-buyer tax credit appears to have shifted demand from the second half of the year to the first half, with little evidence of an impact on total annual sales. As the tax credit program recedes further into the past, home sales during 2011 should increasingly reflect current market conditions rather than the delayed effects of special policy factors.
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*Seasonally adjusted data for Arkansas home sales were calculated by the Institute for Economic Advancement, using the Census X-12 ARIMA procedure.
The final employment report for 2010 was released this morning by the U.S. Bureau of Labor Statistics and Arkansas Department of Workforce Services. The data for the month of December were rather unremarkable. However, with preliminary data now available for all of 2010, some interesting trends are apparent.
The unemployment rate in December was 7.9 percent — unchanged from the previous month. The household survey showed that there were nearly 1,300 newly unemployed Arkansans, with unemployment reaching a new record-high of 107,755. However, the number of employed rose by more than 6,000. Hence, for the third consecutive month, Arkansas overall labor force expanded. Since September, the labor force has increased by 18,000, after declining by 37,000 over the first nine months of the year. As job opportunities improve (particularly in comparison to other states), new workers are entering the state and unemployed Arkansans who had become discouraged in their job searches are re-entering the labor market. The entrance of previously discouraged workers places upward pressure on the unemployment rate, even as employment expands. But even at the elevated level of 7.9%, the state’s unemployment rate remains well below the U.S. average.
Source: Bureau of Labor Statistics
The payroll survey showed a seasonally-adjusted employment decline of 2,500 in December. Sectors showing job losses included Manufacturing (-1,000), Trade, Transportation and Utilities (-1,900) and Other Services (-2,500). Employment increased in some service sectors, including Professional and Business Services (+2,400), Education and Health (+400), and Financial (+200).
Source: Bureau of Labor Statistics
For the year, employment increased by 12,500. Although this increase is not particularly large (representing less than 1 percent of the state’s labor force), it represents a turnaround from the previous two years. Total employment declined by 18,400 in 2008 and by 35,000 in 2009. Employment growth in 2010 therefore represents a replacement of about 23 percent of the jobs lost during the recession and its immediate aftermath.
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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 here: Table – Seasonally Adjusted NFPE
While a great deal of attention today was focused on the state employment/unemployment report, another key set of economic statistics also came out: The Bureau of Economic Analysis reported that Arkansas personal income increased by 1.0% in the third quarter (seasonally adjusted). For the U.S. as a whole, the growth rate was 0.7%. Arkansas’ above-average growth ranked among the ten states with the fastest growing incomes in the nation.
For U.S., the third quarter increase represents the fourth consecutive quarter of growth. For Arkansas, the run of positive growth had now gone for five quarters. The chart below compares the pattern of personal income growth for both the U.S. and Arkansas, relative to their common cyclical peak in 2008:Q2. Total personal income in Arkansas didn’t decline as sharply as the U.S. during the recession, and it has increased slightly faster during the recovery.
Source: Bureau of Economic Analysis
As discussed in a previous article, the BEA definition of personal income includes transfer receipts (social security payments, unemployment insurance, etc.). During recessions transfers tend to rise, serving as a buffer that protects total income from sharp declines. A better measure of the underlying strength of the economy omits transfers: Personal Income less Transfer Receipts. By this measure, incomes peaked in the third quarter of 2008 and declined sharply through the second quarter. U.S. income less transfers declined for another quarter, while in Arkansas the recovery in income growth began rising and has outpaced U.S. growth since then.
Source: Bureau of Economic Analysis
In the third quarter, Personal Income less Transfer Receipts rose by 0.7% in Arkansas and 0.5% for the nation as a whole. Transfer Receipts increased by 1.5% in Arkansas and by 1.3% nationwide. Hence, part of Arkansas relatively high growth rate was due to an relatively larger expansion of transfer payments. But even after accounting for this factor, Arkansas personal income grew at a faster rate than the total for the U.S.
The third quarter personal income report suggests that the economic recovery is ongoing, and that Arkansas continues to emerge slightly ahead of the rest of the the nation.
Data on employment and unemployment were released this morning by the U.S. Bureau of Labor Statistics and Arkansas Department of Workforce Services. The headline news is that the unemployment rate increased by yet another 0.1 percent to 7.9 percent. The number of unemployed workers rose by 1,678 and the number of employed increased by 4,671. Hence the labor force expanded by 6,309. The labor force has been expanding quite rapidly since September, suggesting that unemployed workers who had previously been dropped from the statistics as “discouraged workers” are now returning to the labor market. This tends to result in higher measured unemployment rates, even as employment is expanding.
Source: Bureau of Labor Statistics
After a substantial increase in October, the report for November shows that nonfarm payroll employment continued to rise, albeit at a slower pace. Revised figures for October show an increase of 14,100 jobs rather than 17,400 as originally reported. On net, total payroll employment rose by another 100 jobs from October to November.
Source: Bureau of Labor Statistics
Seasonally adjusted increases were reported for Manufacturing; Trade, Transportation and Utilities; and Education and Health Services. Together, these three super-sectors account for nearly half of the state’s total employment. Seeing job growth in these sectors is particularly encouraging. Gains were also recorded in Mining and Logging; Information Services; Other Services; and Government. Over the past 12 months, approximately 11,000 jobs have been added to the Arkansas economy.
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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 here: Table – Seasonally Adjusted NFPE.
This morning, the Bureau of Labor Statistics released the latest information (for October) on employment and unemployment in Metropolitan Statical Areas (MSAs) around the nation. The report suggests that labor markets in Arkansas’ metro areas are slowly improving.
Household Suvey: Unemployment in three of Arkansas’ MSAs fell in October (seasonally adjusted data*). Rates in both Hot Springs and Texarkana were down 0.1% while Pine Bluff fell 0.3%. Rates in Fort Smith and Little Rock were unchanged. Only two MSAs saw higher unemployment: Rates in Fayetteville and Jonesboro both rose by 0.2%.
Sources: Bureau of Labor Statisics, UALR Institute for Economic Advancement
It might appear that unemployment rates around the state are following a rising trend. But if we take a step back and look at the pattern that rates have followed over the course of 2010 it looks more like a mini-double dip employment recession.
Sources: Bureau of Labor Statistics, UALR Institute for Economic Advancement
In actuality, the patterns in the data are related to the hiring and subsequent layoffs of temporary Census workers. Arkansas’ MSA’s have followed the same pattern seen in statewide and national data: rates falling from around April until July, then rising until September or October, leaving unemployment rates about where they were in April. This matches the timing of the surge in the employment of temporary Census workers. Netting out this effect, unemployment has been approximately flat for most of 2010.
Payroll Survey: Changes in nonfarm payroll employment provide encouraging signs: October employment growth was zero or positive in each of the state’s MSAs. This is not surprising, given the state-level data showing that Arkansas’ employment growth was the fastest in the nation in October. Since the end of 2009, payroll growth has been positive in three of the seven MSAs. Relative to a last October, growth has been positive in four MSAs.
Source: Bureau of Labor Statistics
In terms of recovering the jobs that were lost during the recession, the figure below shows the cumulative change in employment since the start of the recession (December 2007). Employment in the MSA’s of Hot Springs, Jonesboro, Texarkana — and more recently, Pine Bluff — have begun to increase from their low points earlier in year. In fact, Jonesboro has experienced positive net employment growth since the start of the recession. The other metro areas have a long way to go.
Source: Bureau of Labor Statistics
Although the effects of temporary Census workers have distorted the statistics, unemployment rates appears to be stabilizing. And payroll employment figures are showing signs of real improvement (particularly in some areas of the state). Employment statistics are lagging indicators (especially the unemployment rate), so even though we are nearly 1 – 1/2 years into the recovery it is likely to take considerably more time before the employment situation returns to a healthy state.
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*Seasonally adjusted data for MSA Payroll Employment are available from the Bureau of Labor Statistics. However, data for unemployment rates are not. In order to facilitate comparisons over different months of the year, unemployment rates are seasonally adjusted by the Institute for Economic Advancement using the conventional Census-X12 ARIMA procedure.
Today’s employment reports from the U.S. Bureau of Labor Statistics and Arkansas Department of Workforce Services included both good news and bad news. The bad news was another uptick in the unemployment rate, up to 7.8% from 7.7% in September. The household survey that underlies the unemployment report indicated an increase of over 2,000 newly unemployed in October.
Source: Bureau of Labor Statistics
The survey of employers, on the other hand, showed a sharp increase in employment in October, following very disappointing jobs numbers from the previous two months. After declining by 11,100 in August and 5,000 in September, October employment was up by 17,400 thousand jobs (seasonally adjusted). In percentage terms this was the largest increase among the 50 states (+1.5%).
Source: Bureau of Labor Statistics
The job gains were particularly notable in service providing sectors. Professional and Business Services were up by 5,900 jobs, Leisure and Hospitality was up by 4,800, and Educational and Health Services were up by 1,700. Since December of 2009, total employment in Arkansas has risen by nearly 19 thousand. This represents considerable progress toward recovering the 49 thousand jobs that were lost over the previous two years.
For the remainder of this year and through next year, employment growth should continue steadily, but somewhat slowly. The unemployment rate, which tends to be a lagging indicator, may climb a bit higher before declining in the second half of 2011.
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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 here: Table – Seasonally Adjusted NFPE.
One of the topics discussed at the UALR Arkansas Economic Forecast Conference last week was the importance of government transfer payments for assessing personal income growth at this stage in the business cycle.
During a recession, transfer payments tend to increase for two reasons: First, payments associated with economic hardship increase directly in response to the downturn in the economy. For example, unemployment insurance payments and other income support payments rise as displaced workers become eligible. This is sometimes referred to as part of the “automatic stablizer” mechanisms of fiscal policy. In addition, the government typically adopts special measures to boost aggregate demand during recessions. In this recession, the main vehicle for this type of support has been the American Recovery and Reinvestment Act (ARRA) — sometimes referred to as the “Obama stimulus” program.
Figure 1 compares data on total personal income (including transfer payments) for Arkansas and the U.S., using indexes based on the second quarter of 2008 (when both series reached their cyclical peaks).
Sources: Bureau of Economic Analysis, Institute for Economic Advancement.
Personal income in both Arkansas and the U.S. declined modestly over the two quarters following the peak. U.S. income took another sharp downward turn in the first quarter of 2009, before beginning a period of uneven recovery. In Arkansas, income stabilized in the first quarter of 2009, and was basically flat until the end of the year. This comparison suggests that income in Arkansas suffered a more modest downturn than the rest of the country, and has been recovering along with the rest of the nation since the fourth quarter of 2009.
But because transfer payments tend to rise during recessions, “Personal Income less Transfer Receipts” is considered to be a better measure of the economy’s underlying strength.1 Indeed, this is the measure of income monitored by the Business Cycle Dating Committee — the official arbiters of business cycles turning points. Figure 2 compares Arkansas to the U.S. using this measure of income.
Sources: Bureau of Economic Analysis, Institute for Economic Advancement.
Excluding transfer payments, the peak in income took place in the third quarter of 2008, instead of the second quarter.2 The U.S. still shows a sharper decline than Arkansas in the first quarter of 2009, but income in Arkansas began to recover by the second quarter of 2009–one quarter earlier than the U.S.
Figure 3 illustrates how non-transfer income and transfer income contributed to changes in Arkansas personal income in 2009 and 2010. It also shows the specific contribution of ARRA transfer income to the total.3
Source: Bureau of Economic Analysis
The increase in transfer income during the recession clearly helped to smooth total personal income in Arkansas. This is particularly evident for ARRA-related transfers, even though they constituted a small fraction of the total (averaging 0.9 percent from 2009Q2 through 2010Q2). Figure 3 also shows how income from transfer payments tended to mask the underlying turning point in non-transfer income in 2009Q2.
To show the relative magnitude of recent changes in transfer and non-transfer income, Figure 4 presents personal current transfer receipts as a share of total personal income. This measure rose sharply during the recession, and has continued to increase during the economic recovery.
Source: Bureau of Economic Analysis
For the U.S., transfers rose from 14.5 percent of personal income in 2007Q4 to 18.3 percent in 2010Q2. Over the same period, transfer payments in Arkansas rose from 19.7 percent to 24.5 percent of total income. Transfers associated with ARRA accounted for less than one percent of these increases.
Rising transfer reciepts have supported personal incomes during the recession and early stages of the recovery, but their contributions to growth are temporary. Transfer receipts contribute positively to income growth when they are increasing, but looking forward as unemployment declines and ARRA programs reach their completion, declining transfer reciepts will produce a drag on total personal income growth.
The table below illustrates this point, decomposing quarter-to-quarter growth rates of personal income into non-transfer income, transfers less ARRA, and ARRA components.
Sources: Bureau of Economic Analysis and author's calculations.
On a quarter-to-quarter basis, ARRA-related transfer receipts contributed significantly to income growth only in the second quarter of 2009, when the programs initially ramped-up. Quarterly ups-and-downs in ARRA transfers since then have contributed little to total personal income growth. Non-ARRA transfer receipts have risen in each quarter, but the “automatic stabilizer” mechanism that drives these increases will dissipate as unemployment gradually declines.
In the forecasts for 2011 and 2012, persistently high unemployment is expected to keep transfer payments growing slightly, but contributing little to total personal income growth in Arkansas: For 2011, growth in transfers contribute 0.8 percentage points to the total personal income growth forecast of 4.1 percent (Q4/Q4 growth). In 2012, the contribution is only 0.4 percentage points to the 6.0 percent forecast for total personal income growth. Transfer payments should begin to decline as a proportion of total personal income during 2012, and are expected to decline in absolute terms after that.
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Notes:
1 Personal Current Transfer Receipts include social security payments and veterans benefits, as well as unemployment insurance benefits and other general assistance programs.
2 The prior peak in Arkansas personal income, in 2007Q4, reflects payments associated with the buyout of Alltel–a one-time special factor.
Data for Gross Domestic Product by State were released this morning by the Bureau of Economic Analysis. The numbers for Arkansas were something of a surprise. Our state was one of only 10 that experienced positive growth in total output. Arkansas’ growth rate of 0.6 percent (compared to the previous year) ranked 8th among the 50 states. Overall, the United States experienced a decline of 2.1 percent.
A natural question that arises is this: How can we reconcile relatively strong output growth with weak performance of labor markets? After all, payroll employment in 2009 was down by more than 37 thousand jobs compared to the previous year.
In part, the answer involves rising productivity. Businesses managed to produce more goods and services with fewer labor resources. More important is the composition of growth. GDP growth was concentrated in industries that are important for the Arkansas economy, but not necessarily the largest employers in the state. The largest contributors to output growth included mining (+22.3%), Information Services (+20.8%), and Management services (+10.8%). These three sectors together account for less than 5 percent of total employment in Arkansas. On the other hand, some of the sectors that employ the most workers in Arkansas experienced contractions in 2009. For example, output was lower in Manufacturing (-8.1%), and Transportation and Warehousing (-6.3%). Manufacturing alone accounts for over 14 percent of Arkansas total employment.
Available data for 2010 suggest that output growth is spreading more broadly across the economy. Sales, income, and employment are all showing signs of recovery. When the GDP data for 2010 become available (a year from now), they should show more rapid and broad-based growth.
The UALR Arkansas Economic Forecast conference took place today. Thanks to all who attended, and special thanks to the program participants: Phillip Baldwin, Michael Dueker, Vic Hiryak, Richard Plotkin, and Randy Zook.
