Arkansas unemployment rate increased slightly in August, rising by 0.1 percentage points to 2.7%. The national unemployment rate increased by 0.3 percentage points to 3.8% in August. The increases, particularly for the state, are not yet indicating a change in the underlying trends: with the unemployment rate still lower than 3%, a one-month uptick should not be of great concern.
Source: Bureau of Labor Statistics
The decline in the unemployment rate below 3% in Arkansas has been driven by a sharp drop in the number of unemployed since late 2022. The uptick in the August unemployment rate was similarly associated with an uptick in the number of unemployed. Meanwhile, household employment and the labor force have been expanding steadily throughout 2023.
Source: Bureau of Labor Statistics, Local Area Unemployment Statistics (LAUS)
The sharp decline in the number of employed in recent months is remarkable. When the time comes for annual data revisions at the beginning of next year, we would not be surprised to see the declining unemployment to be largely revised away, along with the sub-3% readings on the unemployment rate. The figure below compares indexes of the number of unemployed for Arkansas and the U.S. In the second half of 2022 both are near 100, indicating roughly the same number of unemployed as in 2019. Since the start of 2023, the Arkansas index dropped by nearly 25% before bouncing up slightly in August. Although it took place over a number of months, this is the type of sharp deviation that is often affected by the annual data revisions. Nevertheless, we wouldn’t expect any revisions to change the general trajectory of sustained very-low unemployment.
Source: Bureau of Labor Statistics
Payroll Employment
Nonfarm payroll employment expanded by 4,200 in August (seasonally adjusted), the fifth consecutive monthly increase. Over the past twelve months, payrolls have expanded by 26,700 representing a 2.0% growth rate that matches the national average. Relative to February 2020, Arkansas employment is up by 5.7%, compared to 2.7% for the U.S.
Source: Bureau of Labor Statistics, Current Employment Statistics (CES)
The August increase in payroll employment was mostly concentrated in the service-providing sectors. Construction employment continued to expand, but manufacturing (especially durable goods) was down for the month. Employment in retail trade dropped significantly, and financial services employment was down slightly. Other service-providing sectors saw increases—particularly Leisure and Hospitality Services, which continues to provide a significant share of job growth over the past year.
Source: Bureau of Labor Statistics, Current Employment Statistics (CES)
JOLTS Data for July
This was one of the unusual months when the state-level data for Job Openings and Labor Turnover Survey (JOLTS) are released on the same day as the state employment report (albeit with a one-month data lag). Although both the state and national national data show some signs of labor markets softening, conditions in Arkansas appear to remain strong. For example, the Quits Rate—which has been taken as an indicator of the “great resignation”—has been trending downward in 2023, but the Arkansas rate remains well-above the national rate.
Source: Bureau of Labor Statistics, Job Openings and Labor Turnover Survey (JOLTS)
One popular measure of the tightness of labor markets is the number of job openings per unemployed person. As shown in the chart below, the national ratio has trended downward from 2.0 in early 2022 to only 1.5 in July. Arkansas, on the other hand, has seen a surge in 2023, reaching a peak of 2.7 job openings per unemployed person in May. The July reading is 2.3.
Source: Bureau of Labor Statistics, Job Openings and Labor Turnover Survey (JOLTS)
The Job-openings/Unemployed ratio might overstate the worker shortage for Arkansas. The measure depends not only on the number of job openings, but also on the number of unemployed. As suggested above, the extremely low reported number of unemployed in Arkansas is somewhat suspect, so the surge in the Job Openings ratio might be overstated. To see this, consider a more general measure, the Job Openings Rate (which is expressed as a fraction of total employment plus job openings). By this measure, job openings in Arkansas remain plentiful in Arkansas, but not by as much as when the number of unemployed is used as a denominator.
Source: Bureau of Labor Statistics, Job Openings and Labor Turnover Survey (JOLTS)
Although the data for both the U.S. and Arkansas show some signs of a softening labor market conditions, there are no unexpected or surprising developments that suggest more serious weakening in the near future.
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Seasonally adjusted data for Arkansas nonfarm payroll employment, reported in a format consistent with the monthly news release from the Arkansas Division of Workforce Services, can be found here: Table-Seasonally Adjusted NFPE.
