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The December Employment Report

The December 2009 report on Arkansas employment and unemployment was released this morning by the Bureau of Labor Statistics.  

The household survey showed a record number of unemployed in Arkansas — 105,408.  That represents about 3500 more unemployed Arkansans in December than there were in November.  The survey also showed that the number of employed declined by 10,550 from November to December (although this decline follows an increase of 10,175 in November).   The unemployment rate rose from 7.4 percent to 7.7 percent.  This is the highest unemployment rate for Arkansas since June 1988.

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

The payroll survey provided similarly disapointing news.  The number of workers on nonfarm payrolls declined by 3400 in December (seasonally adjusted).  Losses were largest in Trade, Transportation and Utilities (-2200) and Profesional and Business Services (-1900).  Some sectors experienced increases in employment:  for example, Manufacturing employment increased by 1000, jobs in Financial Services were up by 900, and the number of Education and Health workers rose by 800.  The table below summarizes employment changes by sector over the past six months. 

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

As described in a previous post, the next release of payroll data will include annual benchmark revisions, reflecting more complete information collected in the BLS’s Quarterly Census of Employment and Wages (QCEW).  Based on the most recent information available, the benchmark revisions will show much larger job losses in Arkansas than were previously reported (particularly in 2009Q2).  The table below reports projected revisions to the payroll data, extended through the end of 2009:

Sources:  Bureau of Labor Statistics, Institute for Economic Advancement
Source: Bureau of Labor Statistics. Projected revisions estimated by the Institute for Economic Advancement

Repeating a cationary note from the previous post :  The actual benchmark revisions to be released by the BLS on March 10 will be calculated using far more detailed methods and more up-to-date information.   Nevertheless, the revisions are likely to be of the general magnitude presented here.

Forecasting a Revision of History

  “The bottom line:  Arkansas has lost 18,000 more jobs since the start of the recession than were previously recorded.”

In the business of monitoring and forecasting economic conditions, data revisions sometimes require tedious attention to detail and usually lead to only subtle changes in perspective.  At other times, revised data can dramatically alter our view of the world.  New data released by the Bureau of Labor Statistics (BLS) earlier this week fall into the latter category.  They  indicate that upcoming revisions to Arkansas employment statistics will reveal significant changes:  The employment situation in our state  is far worse than recent data have been leading us to believe. 

Month-to-month changes in payroll employment—as regularly reported in the media and here on the pages of the Arkansas Economist—come from the BLS’s Current Employment Statistics (CES) program.  According the the BLS, the CES surveys “about 150,000 businesses and government agencies, representing approximately 390,000 individual worksites.”  This sample is used to produce employment estimates for the nation, the states, and metropolitan statistical areas.  It is one of the most timely and accurate measure of economic activity that is available—especially on the regional and local levels.  Nevertheless, it is a survey—subject to sampling error and unmeasured changes in the structure of of the labor market.  Specifically, the CES must use estimates of the number of establishments in a given state or metro area.  During times when there are many business entrances or exits from the market, these estimates can be off the mark.

To improve the accuracy of the statistics compiled by the CES program, the BLS also calculates a Quarterly Census of Employment and Wages (QCEW).  This is the report that came out earlier this week. 

The QCEW is a comrehensive and detailed account of employment, disaggregated by sectors and by counties.  It is constructed from state unemployment insurance records, so it constitutes a full accounting of all covered jobs in the nation.  Because of it’s comprehensive coverage, the QCEW provides a more accurate picture of employment than the CES. 

However, data for the QCEW take longer to compile.   This week’s “new” data cover the period April-June 2009.  Old news.  But this more comprehensive measure will soon be used to “benchmark” the data from the CES.  On March 10, the BLS will release revisions to the CES payroll employment figures, based on the new data from the QCEW.  

For Arkansas, the QCEW showed that employment declined sharply during the first six months of 2009–down by approximately 33 thousand jobs.  In contrast, the monthly payroll employment reports from the CES have been suggesting that Arkansas employment began to stabilize in March (as reported in the Arkansas Economist here and here, for example).  We can be confident that the revisions will show sharply larger job-losses in early 2009 than are presently shown in the CES payroll data.

Rather than wait until March 10th, I have calculated  estimates for benchmarked CES payroll employment data—an exercise in forecasting an upcoming revision of history.  The results of this exercise are summarized in the figure below:

Arkansas Payroll Employment
Sources: Bureau of Labor Statistics and Institute for Economic Advancement

The projected benchmark series is calculated using some simple statistical procedures to estimate the  correspondence between the two measures in the past (Jan. 2001-Dec. 2007) and to forecast that relationship in the more recent past (Jan. 2008-June 2009).  For July 2009 through November 2009 (the most recent month availabile for the CES payroll data), month-to-month percent changes are used to extrapolate these estimates [see technical notes].

The projected revised data far sharply below current CES estimates during the first half of 2009, lowering the estimated level of employment in Arkansas for the second half of the year.  The bottom line:  Arkansas has lost 18,000 more jobs since the start of the recession than were previously recorded.

Investigating in more detail, I also estimated revisions to major sectoral categories of the data.  The results of this exercise, summarized in the table below, reveal that some sectors fared better according to the revised statistics (especially in the earlier stages of the recession, during 2008), but most fared worse (especially during 2009).   Overall, Arkansas lost slightly fewer jobs in 2008 than previously recorded, but lost far more in 2009. 

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

The estimates presented here may not line up precisely with the benchmarked data to be released on March 10.  The BLS will use more detailed methods and up-to-date information to perform the actual benchmarking procedure.  Nevertheless, given the size of the discrepancy between current CES survey data and the available QCEW population data, the revisions are likely to be of this general magnitude.

Although the revisions will reveal a sharply larger employment decline in Arkansas, it remains true that the state has fared better than the nation as a whole.  The benchmarking process is expected to lower employment estimates for the total U.S. , leaving Arkansas in roughly the same relative position. 

Read More:
News — Reuters:  Data suggests U.S. still overstating employment and Recession shows shortcomings in U.S. Economic Data
Methodology — BLS:  QCEW Overview
Background — Pakko & Wall:  Revised Employment Data for Metro Areas in the Eighth District (2009)
 

The November Employment Report

Data on employment and unemployment in Arkansas were released this morning by the Bureau of Labor Statistics.  Overall, the report indicates a continuation of the trends we’ve seen in recent months.   There is no clear inidication of an upturn in employment, but neither is there evidence that the employment situation is deteriorating.  However, buried among the details of the report are some encouraging tidbits.

The household survey showed a decline in the unemployment rate, from 7.6 percent in October to 7.4 percent in November.  More important, the raw numbers that underlie the unemployment rate showed an increase of more than 10,000 in the number of people employed and a decrease of almost 2500 in the number of people unemployed.

The payroll survey showed an increase in jobs for November as well, although the data for October were revised downward to more than offset those gains.  Nevertheless, since March of 2009 nonfarm payrolls have shed only 2,500 jobs —  a decline of about 0.2%.

The sectoral composition of job gains and losses in November showed some interesting features:   Increases were registered in Construction (+1000), Manufacturing (+300), and Transportation (+1100)–three sectors that have been hard-hit during the recession.   In contrast, employment in Education and Health services declined by 1800 jobs in November.  Health services has added 13,000 jobs to the Arkansas economy since the beginning of the recession, but recent budgetary constraints at major hospitals has evidently stalled further expansion in this sector — for now.

Recovery in employment is likely to be a long, slow process.  At this point, the data suggest that we’re still in a period of stabilization.

Metro Area Unemployment in October

The October unemployment rates for Metropolitan Statistical Areas (MSAs) were released by the BLS this morning.  The report on state unemployment rates released two weeks ago showed that Arkansas’ unemployment rate rose by one-half of one percent to 7.6 percent.  The new data for Arkansas’ MSAs show similar sharp increases.

As noted in earlier posts, the MSA data are not seasonally adjusted by BLS.  The unadjusted data show that unemployment rates rose slightly or remained steady in October.  However, October is a month in which seasonal movements typically result in a falling unemployment rate.  After accounting for this recurring pattern, seasonally-adjusted measures show increases in the range of 0.4 to 0.6 percent.

The table below summarizes the MSA unemployment rate data for October.

MSA-urates-Oct09

The October Employment Situation

The Bureau of Labor Statistics released its latest report on state employment and unemployment this morning. The obvious headline for Arkansas is that the unemployment rate rose by one-half of a percentage point to 7.6 percent. This is the highest rate for Arkansas in over two decades–clearly not good news. Nevertheless, the state’s unemployment rate remains well below that national average rate of 10.2 percent.

As alarming as the unemployment rate increase appears, one should never become too concerned about a single observation. Indeed, the Arkansas employment data have recently been subject to considerable month-to-month volatility. Recall that the unemployment rate jumped to 7.4 percent in July before falling back to 7.1 percent in August and September. The chart below illustrates a three-month moving average of the unemployment rate, smoothing out some of the monthly variability. By this measure, the rate has been fairly steady at around 7.25 percent since mid-summer.

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

The data on employment in Arkansas has been similarly volatile. In a post last month, I noted that the household survey and payroll survey were providing mixed signals about employment in September. The household survey showed a gain of 8400 jobs, while the payroll survey showed a decline of 7700 jobs. In the latest report, the September employment figure was revised upward, reducing the August-September job loss to 5300. For October, payroll employment was up by 4200 jobs, resulting in a net loss of only 1100 jobs over the two month period. Meanwhile, the household survey for September was revised upward (now showing an increase of nearly 8600 jobs), while the newly-released number for October showed a decline of 4100 jobs.

The chart below puts some of these monthly changes into context. Both measures of employment showed sharp declines from about October 2008 until March 2009. While falling slightly since then, Arkansas employment has evidently stabilized. We continue to see month-to-month movement in both series (some of which is smoothed out by considering a simple average of the two), but no significant upward or downward trend is discernable.

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

October’s increase in the unemployment rate will surely generate alarmist headlines, but overall the October employment report shows a continuation of the labor market performance we’ve been observing since spring: sluggish but not deteriorating.

State Employment Report Provides Mixed Signals

September data on Arkansas employment and unemployment were released by the Bureau of Labor Statistics (BLS)  this morning.  The report provides mixed signals.

The household survey shows that the unemployment rate remained stable in September at 7.1%.  Arkansas is now 2.7 percentage points below the national unemployment rate.  The household survey also showed that the number of employed rose by more than 8400 from August to September.  The number unemployed also rose, but only by 539 jobs.

On the other hand, the payroll survey showed a large decline in the number of Arkansas jobs.   The new data show a seasonally-adjusted decline of 7700 jobs in September.  Moreover the number for August was revised down by 1600 jobs.  By this measure, the trend of stabilizing employment would seem to have collapsed.

Generally speaking, the payroll numbers are more accurate and provide more detail on labor market conditions.   However, they are also subject to significant revisions from month to month, and undergo a major benchmark revision in the spring of each year.  We may find that the September payroll employment report is a statistical fluke.  Nevertheless, we should not dismiss the numbers just yet.  The discrepency between the two surveys is an indication of the degree of uncertainty that we have regarding the employment outlook for Arkansas.

Two Measures of Employment in Arkansas
Two Measures of Employment in Arkansas

New Data on Employment in Arkansas Metro Areas

This morning, the Bureau of Labor Statistics (BLS) released its most recent data on employment and unemployment for Metropolitan Statistical Areas (MSAs). As described in a previous post, the MSA data are generally not seasonally adjusted. When it comes to comparing statistics from month to month, however, it can be important to adjust for regular seasonal patterns. The table below reports unemployment rates for Arkansas’ MSAs. It shows both the unadjusted data from BLS, as well as data that are seasonally adjusted using standard statistical techniques.

The seasonally adjusted data show that the unemployment rate remained constant from July to August in four of seven Arkansas MSAs. The unemployment rate fell slightly both in Jonesboro and in the Little Rock MSA. It rose by two-tenths of one percent in Texarkana. Unemployment rates around the state continue to be considerably higher than they were a year ago, but have remained fairly stable over the summer months.

Unemployment Rates for Arkansas MSAs
Unemployment Rates for Arkansas MSAs

The data on nonfarm payroll employment for MSAs is similarly unadjusted for seasonal patterns. After seasonal adjustment, trends over time are more easily identifiable. The set of figures below illustrates the trends for Arkansas metro areas. As with the state-level data on employment, the data are characterized by three distinct sub-periods since the onset of the recession (particularly for the two largest MSAs – Little Rock and Fayetteville): From December 2007 until about October 2008, employment growth was slow, but with no large job losses evident. The largest job losses occurred during the period from October 2008 through March 2009. Since March, employment has remained fairly stable.

In some of the MSAs, the recession had no discernible effect at all: Jonesboro experienced steady job gains throughout the recession. In Pine Bluff, the recession didn’t have much of an impact on a steady decline in jobs. In both Fort Smith and Hot Springs, employment has rebounded over the past three months. In fact, both Hot Springs and Jonesboro had more jobs in August 2009 than they did at the start of the recession in December 2007 (seasonally adjusted).

Nonfarm Payroll Employment in Arkansas MSAs
Nonfarm Payroll Employment in Arkansas MSAs

Click HERE to see a full size image of the figure above (PDF).

Three phases of recession for Arkansas MSAs
Three phases of recession for Arkansas MSAs

It’s too soon to say whether the upturn in job growth that we’re seeing in some of Arkansas metro areas reflects an incipient recovery from the recession. We will continue to monitor the data, looking for evidence of a broad-based, statewide upturn.

An Encouraging State Employment Report

One should always be cautious about placing too much emphasis on data for a single month, but the state employment report for August (released this morning by the Bureau of Labor Statistics) includes several encouraging signs for Arkansas.  Among the highlights of the report:

  • The unemployment rate in Arkansas fell by three-tenths of a percent to 7.1%.  The Arkansas unemployment rate is now 2.6 percentage points lower than the national average.  Arkansas was one of only 16 states to experience an unemployment rate decline.
  • Underlying the decline in the unemployment rate was a decrease in the number of people unemployed.  In July, Arkansas unemployment rolls topped 100,000 for the first time.  The August report shows that  number falling to 96.5 thousand.
  • Nonfarm payroll employment rose slightly in August.  Arkansas was one of only 8 states to experience an increase.  Moreover, the data for July were revised upward to show a net gain for that month as well.  (Arkansas was one of only 3 states to experience employment gains in both July and August).
  • Employment in goods producing sectors remains weak, but some of the key service-providing industries continue to show reslience.  For July and August, net job gains were recorded in Professional and Business Services, Education and Health Services, Other Services, and Government. 
  • The payroll employment data confirm a trend observed in a previous post:  After declining by 26.4 thousand between October 2008 and March 2009, the employment situation in Arkansas is stablizing.  Since March, employment has been approximately flat, with a net increase of 600 jobs through August.

– Michael Pakko

 arkempaug

Seasonally Adjusted Unemployment Rates for Arkansas MSAs

Earlier this week (on Sept. 1), the U.S. Bureau of Labor Statistics (BLS) announced the release of its latest estimates of unemployment rates for metropolitan statistical areas (MSAs) around the country. The data for Arkansas MSAs showed that unemployment rates remained lower than the national average, but were well above their levels of a year earlier. The data released by the BLS also showed that unemployment rose from June to July in every metro area of the state except Fort Smith.
    
The latter observation might be misleading. While the national and state-level data are released on a seasonally adjusted basis, the BLS does not seasonally adjust the data for MSAs.  But it is important to recognize seasonal patterns. Most economic data series follow a distinct seasonal pattern. Economists call this pattern “the seasonal cycle.” Unlike the business cycle—which is irregular and often unpredictable—the seasonal cycle is recurring and predictable.
    
In the case of the unemployment rate there are some obvious reasons for a seasonal pattern: The unemployment rate tends to fall near the end of the year as temporary workers are hired to take on the extra demand of holiday shopping. It tends to rise sharply in January and then recover during the spring. When students enter the employment market in search of summer jobs, the unemployment rate rises again.  Typically, July represents the high point of the summer.
    
So when one asks the question, “Why did unemployment rise in July?” the answer might very well be: “Because it was July.” That doesn’t help explain the more pressing question, “Where do we stand in this irregular and unpredictable business cycle?”
    
Seasonally adjusted data can help to illuminate the answer to that question. Research on the development of seasonal adjustment techniques has been formidable, but the application of state-of-the-art methods is not rocket science: most statistical software packages that are designed for economic analysis include seasonal-adjustment as a standard procedure.
    
So I took it upon myself to seasonally-adjust the unemployment rate data for Arkansas’ MSAs (using data from January 1999 through July 2009). Some statistics from that exercise are reported in the table below.
 
Unemployment Rates for Arkansas MSAs
Unemployment Rates for Arkansas MSAs

The seasonally adjusted data show that the unemployment rate fell or remained stable in four MSAs, not just in Fort Smith as suggested by the not-seasonally-adjusted data.  In Fayetteville, Hot Springs, and Jonesboro, the not-seasonally-adjusted unemployment rate rose “because it was July.”  After accounting for seasonal factors, the situation doesn’t seem so bad after all.  In fact, for every metro area in Arkansas the level of the unemployment rate is lower after adjusting for seasonal patterns.  So why do the data show such high unemployment rates for Arkansas’ MSAs in July? . . .  “Because it was July.”

— Michael Pakko

Arkansas employment stabilizing

The latest payroll employment data for Arkansas (July 2009) indicate that the severe job losses we witnessed in late 2008 and early 2009 have subsided.  From October 2008 through March 2009, Arkansas suffered a net decline of more than 26 thousand jobs.  From March through July, the net loss has totaled only about 400 jobs.

Job losses are never good news, but the fact that we are no longer seeing the steep declines that we did during the most severe phase of the recession suggests that the worst might be over.  Employment tends to be a lagging indicator, so when we see job growth moving in a positive direction it will be a very good sign. 

Arkansas Nonfarm Payroll Employment