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Labor Force Participation

Last Friday’s employment report suggested a contrast between the underlying statistics driving the Arkansas and U.S. unemployment rates.  In particular, the national unemployment rate fell in April but this was at least partly attributable to a decline in the size of the labor force.  Analysts were quick to point out that this phenomenon did not represent positive economic news (see, for example, the Washington Post article:  “Jobs report shows effects of the incredible shrinking U.S. labor force“).  However, the April decline in Arkansas’ unemployment rate took place in the context of an increase in the state’s labor force.   Quoted in the Arkansas Democrat-Gazette, I commented that “we’re seeing the labor force expanding and the employment market is able to absorb those new workers.”

The contrast between the labor force movements in Arkansas and the U.S. reflects more than just a single month’s data:  recent trends in labor force participation rates show distinctly different patterns over the past 9 months.  From July 2011 through April 2012, the unemployment rates for Arkansas and the U.S. both declined by one full percentage point.  But as shown in the chart below, Arkansas labor force participation rate rose from 60.6% to 61.3%, while the U.S. participation rate declined from 64.0% to 63.6%.

Source: Bureau of Labor Statistics

The increase in labor force participation in Arkansas appears to represent a long-awaited reversal of the recessionary decline.  For the U.S., however, the participation rate shows no sign of departing from the downward trend it has followed since the beginning of the recession.

A closely-related measure — the employment/population ratio — reveals another perspective on the difference between labor-market conditions in Arkansas and the U.S. as a whole.  As shown in the chart below, the U.S. employment/population ratio has been flat throughout the period of economic recovery.  Recent gains in nationwide employment have kept pace with population growth, leaving the ratio little-changed.  In Arkansas, however, recent employment growth has outpaced population growth, leading to a higher proportion of the potential workforce with jobs.

Source: Bureau of Labor Statistics

These statistics are not definitive — they are subject to a fairly wide range of uncertainty and are subject to future revision.  Taken at face-value, however, the labor-force participation rate and employment/population ratio provide evidence to support the conclusion that Arkansas’ falling unemployment rate truly reflects improvement in the state’s labor-market conditions.

Arkansas Employment and Unemployment – April 2012

The unemployment rate in Arkansas declined another two-tenths of a percent in April, dropping to 7.2%.  When the U.S. unemployment rate was reported to have fallen in April, many commentators pointed out that the drop was associated with a decline in the labor force.  In Arkansas, however, the underlying statistics are more positive:  The number of unemployed persons declined by 2,800 and the number of employed rose by nearly 3,300, so the labor force increased by almost 500.  April marks the 9th consecutive month in which both the number of employed and the labor force increased, and the number of unemployed decreased.

Source: Bureau of Labor Statistics

The independent report on nonfarm payroll employment also conveyed good news for Arkansas.  Seasonally adjusted data show that employment increased by 5,500 in April, bringing total employment almost back to the peak level observed in April 2011.

Source: Bureau of Labor Statistics

Employment gains were evident in several sectors of the Arkansas economy.  Gains were particularly strong in Education & Health Services and Leisure & Hospitality Services.  Employment in Retail Trade also showed a large increase.  Goods producing sectors also expanded, with welcome employment gains in both Construction and Manufacturing.  Compared to the start of the recession in December 2007, total employment in Arkansas is down by 37,500 — largely due to contraction of the manufacturing sector.

Source: Bureau of Labor Statistics

April’s payroll employment increases do not appear to have been spread evenly around the state.   Data for metropolitan statistical areas (MSAs) show month-to-month gains in Fayetteville, Fort Smith, and Jonesboro.  Employment in Texarkana was unchanged, but the state’s other MSA’s showed declines.  Fort Smith has suffered the largest cumulative drop in employment since the start of the recession, so April’s increase of 2,200 jobs (+2.0%) represented a welcome departure from trend.  The addition of 1,400 jobs in Northwest Arkansas (+0.7%) brings total employment for the Fayetteville MSA up to a level slightly higher than at the beginning of the recession.  Jonesboro and Texarkana are the only other two MSAs in Arkansas that have this far acheived that distinction.

Source: Bureau of Labor Statistics

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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, are available hereTable – Seasonally Adjusted NFPE.

 

Metro Area Unemployment Rates – March 2012

Yesterday, the Bureau of Labor Statistics reported that unemployment rates in March were down from the previous year in 342 of the nation’s 372 metropolitan areas.  All of Arkansas’ metro areas were included in this total.  Year-over-year changes ranged from -0.1 percentage point in Little Rock to -1.1 percent in Memphis.

Source: Bureau of Labor Statistics (Local Area Unemployment Estimates)

Smoothed seasonally adjusted estimates showed that the most recent changes in unemployment (from February to March) also indicated improved labor market conditions in the state’s metro areas.  The Hot Springs unemployment rate was unchanged at 7.6%, Little Rock was down 0.1 percentage points to 6.6%, and all the state’s other metro areas showed declines of  0.2 percentage points.

Source: Bureau of Labor Statistics (Smoothed Seasonally Adjusted Metropolitan Area Estimates)

 

Metro Area Employment – 2012:Q1

Last week’s employment report for Arkansas showed a surprising decline in statewide payroll employment.  After two months of growth totalling 6,700 jobs (+0.6%), nonfarm payrolls declined by 1,900 (-0.2%) in March (seasonally adjusted).  Data for the state’s metropolitan areas shows that only Fayetteville and Jonesboro showed positive growth for the month.  Employment was unchanged in Hot Springs and Pine Bluff.  Declines were registered in Memphis, Little Rock, Texarkana and Fort Smith.  Compared to the previous year, employment is up in most of Arkansas’ MSAs — the exceptions being Little Rock (-0.3%) and Fort Smith (-6.3%).  Compared to the start of the recession in December 2007, both Jonesboro and Texarkana are now in positive territory, with Fayetteville close to the break-even point.

Source: Bureau of Labor Statistics

As shown in the chart below, employment patterns among Arkansas metro areas have shown some dinstinct individual patterns.  All of the state’s MSAs showed sharp declines during the depth of the recession in late-2008 through 2009.  Signs of recovery were generally evident in early 2010, but employment growth rates have diverged considerably since then.  Many parts of the state showed weak or negative employment growth during 2011.  Jonesboro and Texarkana continued to experience positive growth — albeit at slower rates.  Hot Springs saw a surge in job growth during 2011, but the increase appears to have been temporary.  Other areas of the state continue to recover slowly.  The clear exception to the pattern of slow, uneven recovery is Fort Smith:  After suffering an 8% decline in employment in 2008 and 2009, recovery in early 2010 was only partial and temporary.  More recent job losses in the Fort Smith MSA have continued to mount.

Source: Bureau of Labor Statistics

Arkansas Employment and Unemployment – March 2012

The unemployment rate in Arkansas fell to 7.4% in March – down 2-tenths of a percent from the previous month.   The new data from the U.S. Bureau of Labor Statistics (BLS) and the Arkansas Department of Workforce Services (DWS) showed that the favorable trends that emerged in the household survey late last year are continuing:  The number of unemployed Arkansans fell by 1,900 in March and the number of employed was up by 5,500.  Hence, the unemployment rate declined while the labor force expanded.  March represents the eighth consecutive month in which we’ve seen these trends.  Since July 2011, the number of unemployed is down by approximately 8,000 and the number of employed is up by more than 32,000.

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

Payroll Employment
The separate payroll survey was not as unambiguously positive.  Seasonally adjusted, total nonfarm payroll employment fell slightly in March — down by 1,900 jobs.  The seasonally adjusted data might be distorted this year by the warm winter and early spring.  Construction employment, for example, was up sharply in January and February, but declined by 2,100 in March.  This pattern might simply reflect an unusually early start to the construction season.

In addition to construction, sectoral declines in the payroll employment data were prominent for Professional & Business Services (-1,700) and Government (-900).  On the other hand, employment in the Leisure & Hospitality sector was up by 2,000 in March, and Education & Health Services saw a gain of 1,000.  Those two super-sectors, along with Mining & Logging and Government, are registering more jobs now than at the start of the recession in December 2007.

Source: Bureau of Labor Statistics (Current Employment Statistics)

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

 

Metro Area Unemployment

The smoothed seasonally-adjusted unemployment rates for metro areas have been updated.  The data for February show monthly declines in Fayetteville, Memphis, Pine Bluff, and Texarkana.  The rate was unchanged for Fort Smith and Little Rock, and moved higher in Hot Springs and Jonesboro.

Source: Bureau of Labor Statistics

Although changes in unemployment rates were mixed for the month, rates are down sharply from their peak levels of September/October 2011.  The declines have been particularly steep in Fayetteville, Memphis, Pine Bluff and Texarkana.

Source: Bureau of Labor Statistics

Metro Area Employment – February 2012

The Bureau of Labor Statistics (BLS) reported this morning that payroll employment in February had increased from the previous year in most of the nation’s metro areas:  “267 metropolitan areas reported over-the-year increases in nonfarm payroll employment, 98 reported decreases, and 7 had no change.”  Here in Arkansas, metro employment was up in only four metro areas (Fayetteville, Little Rock, Memphis, and Texarkana) and it was lower in the other four (Fort Smith, Hot Springs, Jonesboro, and Pine Bluff).

Seasonally adjusted data show that from January to February, employment declined in most of Arkansas’ metro areas.  Hot Springs, in particular, showed a substantial monthly decline.  In contrast, employment was up sharply in Texarkana and also rose in Fayetteville and Memphis.  Since the national and statewide employment trough of February 2010, employment growth rates around the state have diverged remarkably.  Texarkana, Fayetteville, and Memphis have all out-performed the statewide average.  In Hot Springs, rapid employment growth during 2011 has reversed, and is now lower than its level in February 2010.  In Pine Bluff and Fort Smith, employment has continued to decline.  In fact, employment in Fort Smith is now 12.8% lower than at the start of the recession in December 2007.

Source: Bureau of Labor Statistics

The BLS report also noted that unemployment rates in February were down from the previous year in 344 of the nation’s 372 metro areas.  Four of the eight metro areas in Arkansas were included on this list.

Source: Bureau of Labor Statistics

The smoothed seasonally-adjusted unemployment rates for Arkansas MSAs will be available later today.

Mass Layoffs in Arkansas

Today’s Arkansas Democrat-Gazette reports on mass layoff events in Arkansas during 2011.  The data from the Bureau of Labor Statistics showed that there were 154 mass layoff actions in Arkansas during 2011, resulting the separation of 16,665 workers (as measured by new filings for unemployment insurance benefits).  This was a record high for Arkansas, yet the data show a net increase in employment overall.  Although mass layoff events generate news headlines, they constitute a relatively small component of dynamic labor market flows.

To put the Arkansas total in context, the following table compares total separations associated with mass layoffs with the size of each state’s labor force.  This calculation allows us to compare the relative importance of mass layoffs among the states, accounting for differences in their sizes.  The comparison shows that total mass-layoff separations in Arkansas amounted to 1.22% of the state’s labor force.  The shares ranged from 0.12% in South Dakota to 2.40% in Wisconsin.  Arkansas ranked number 17 among the 50 states plus D.C.

Mass Layoffs
Source: Bureau of Labor Statistics

More generally, mass layoff events are only one component of gross job flows.  To get a sense of their overall importance, consider the following comparisons for the U.S. in 2011:  Separations associated with mass layoffs nationwide amounted to 1,808,451.  According to the BLS’s Job Openings and Labor Turnover Survey (JOLTS), total layoffs and discharges were 20.7 million.  Hence, mass layoffs accounted for only 8.8% of total layoffs and discharges.  In turn, layoffs and discharges accounted for less than half of the total 48.2 million job separations in 2011.  Meanwhile, new hires totalled 50.1 million.  The gross separations and hiring numbers were more than 25 times as large as the net change in employment — and the net increase in employment (as measured by the JOLTS data) was larger than the total number of mass-layoff separations.  When we hear about monthly or yearly changes in employment, the reported net figures represent only a tiny fraction of total labor market activity.  Similarly, mass layoffs represent a very small share of total employment flows.

Arkansas Employment and Unemployment – February 2012

The unemployment rate for Arkansas 7.6% in February — unchanged from the previous month.   The new data from the U.S. Bureau of Labor Statistics (BLS) and the Arkansas Department of Workforce Services (DWS) showed that changes in the number of employed and unemployed were smaller than in recent months, but the direction of the changes continued to be favorable:  The number of employed was up approximately 3,400 and the number of unemployed was down by 400.  February was the 7th consecutive month of rising employment and falling unemployment.  The U.S. unemployment rate was also unchanged in February, holding at 8.3%.

Unemployment Rates
Source: Bureau of Labor Statistics

The payroll survey showed a small net increase in jobs for the month, up approximately 700 jobs (seasonally adjusted).  Sectors showing job losses included Trade, Transportation & Utilities (-1,800), Education & Health Services (-700), and Manufacturing (-200).  Government employment was up 2,300, largely attributable to an increase in State Government employment (+2,000).  Leisure & Hospitality Services and Other Services were also up for the month.

Arkansas Payroll Employment
Source: Bureau of Labor Statistics

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

Updated Forecasts for 2012 and 2013

At the Arkansas State University Economic Outlook Conference today, we presented revised and updated forecasts for some key economic indicators for the Arkansas economy.  At the time that the original forecasts were complied in late October 2011, data for some series were available only through the first half of the year (e.g., personal income).  Some of the statistics that were available through the third quarter have subsequently been revised (particularly employment data).  Hence, the original projections for 2012 and 2013 incorporated forecast estimates of how 2011 would turn out.  Now that we have at least preliminary data for all of 2011, it seems a propitious time to revisit the forecasts.

In general, the data have confirmed our expectations that 2011 would show a slowdown in the pace of  the economic recovery overall, but with clear signs of improvement in the final months of the year.  In some cases, our expectations for improvement in the waning months of 2011 were exceeded — in other cases our outlook was overly optimistic.  Accordingly, the forecast revisions are mixed. And the outlook — in broad strokes — continues to be one of steady but unremarkable growth as we slowly emerge from the aftermath of the 2008-09 recession.

Personal Income
Yesterday’s data-release from the Bureau of Economic Analysis showed that total Personal Income in Arkansas grew by 3.7 percent in 2011 (Q4/Q4).  This fell closely in line with our forecast of 3.6% growth for the year.  Hence revisions to the outlook are minor.  Due, in part, to lower-than-expected transfer payments in the second half of 2011, the forecast for personal income growth in 2012 has been revised down from 5.1% to 5.0%.  The forecast for 2013 is unchanged at 3.9%.

Personal Income
Sources: Bureau of Economic Analysis, Institute for Economic Advancement

Arkansas Taxable Sales Including Gasoline
Our proxy for state retail sales, Arkansas Taxable Sales Including Gasoline (ATSIG), finished 2011 with a Q4/Q4 growth rate of 5.0% — slightly higher than the 4.4% rate in the forecast.  Some of this strength is expected to continue into 2012, prompting a slight upward growth revision from 3.2% to 3.3%.  (The slowdown from 2011 reflects, in part, the expectation of slightly lower inflation rate.)  Our original forecast included a (somewhat anomalous) slowdown in growth for 2013 (2.0%).  Such a slowdown now appears less likely, and we are now forecasting 2013 growth of 3.9%.

Arkansas Taxable Sales Including Gasoline
Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement

Home Sales
Arkansas home sales had been steadily improving during 2011 (on a seasonally-adjusted basis), but after having been supported by home-buyer tax credit programs in the previous two years, 2011 was still expected to be have the lowest total annual sales volume in recent memory.  Sales in the last three months of the year were fairly strong, but were somewhat below our expectations.  Compared to the previous year, total sales volume was down slightly more than forecasted: down 2.5% from the previous year’s (revised) sales figures.  Carrying this weakness forward into the projected sales trajectory, the forecasts for 2012 and 2013 have been revised downward.  Expectations of a double-digit growth rate in 2012 have given way to a revised forecast of +7.5%.  Sales are still expected to improve by 4.3% in 2013, but end the year with a lower sales volume than previously forecasted.

Home Sales
Sources: Arkansas Realtors Association, Institute for Economic Advancement

Payroll Employment
At the UALR Arkansas Economic Forecast Conference, we predicted that downward revisions to the payroll employment data would show that the year would end with a lower level of employment than the previous year — in sharp contrast to data that was available at the time.  The actual data revision was slightly larger than anticipated, showing a Q4/Q4 employment loss of 0.4%, rather than the 0.2% that had been forecasted.  Nevertheless, relatively strong job growth did materialize in the fourth quarter of 2011, as anticipated.  Accordingly, the growth path for employment has not been revised (+1.3% in 2012 and +1.5% in 2013), but the path has been benchmarked to a slightly lower starting point.

Payroll Employment
Source: U.S. Bureau of Labor Statistics, Institute for Economic Advancement

Unemployment Rate
Unemployment rate data for 2011 were also recently revised.  The updated statistics showed that unemployment was not quite as high in mid-2011 as previously estimated.  Moreover, the rate dropped over the last three months of the year much more rapidly than expected.  Consequently, our unemployment rate forecasts have been revised downward significantly.  2011 ended with a rate of 7.9%, instead of the expected 8.2% rate.  The downward trajectory of unemployment has been adjusted downward from this lower starting point.  We now expect the unemployment rate to average 7.4% in the fourth quarter of 2012 (instead of 7.9%) and to fall to 7.0% by the fourth quarter of 2013 (instead of 7.6%).  These would be welcome developments, if realized.  The risk to this revised forecast is that new entrants and re-entrants to the labor force might put upward pressure on the unemployment rate as the labor market continues to improve.

Unemployment Rate
Sources: U.S. Bureau of Labor Statistics, Institute for Economic Advancement

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Methodological Note:  The original forecasts of November 2011 were produced using the Moody’s Economy.com Arkansas model, benchmarked to a composite of national economic forecasts.  The revised projections presented here represent adjustments to the original forecasts in light of new and revised data.   Underlying forecast assumptions and model estimates were not generally re-evaluated as a part of this exercise, but updated model forecasts for the unemployment rate and retail sales were factored into the analysis.