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Arkansas Employment and Unemployment – January 2022

The latest data on Arkansas employment and unemployment was released today, including the annual “benchmark revisions” of the payroll employment data.

The information from the household survey showed a slight drop in the unemployment rate.  After the December figure was revised from 3.1% to 3.3%, the new data for January show a rate of 3.2%.  In both an economic and statistical sense, these small changes in the unemployment rate are not significant.  Broadly speaking, however, a rate lower than 3.5% is arguably approaching a lower-bound—a rate low enough that it represents people who are going through brief spells of unemployment between jobs (frictional unemployment).

Source: Bureau of Labor Statistics, Local Area Unemployment Statistics (LAUS).

The low unemployment rate should be taken in the context of broader measures of labor market activity—the labor force participation rate, for example.  As reported in the context of the data revisions on March 3, the proportion of Arkansas population that is engaged in the labor force (either employed or seeking employment) has dropped significantly since the onset of the pandemic-recession in early 2020. The participation rate ticked up from 56.2% to 56.3%, but remains over two percentage points lower than in February 2020.

Source: Bureau of Labor Statistics, Local Area Unemployment Statistics (LAUS).

Payroll Employment
Today’s release included the annual “benchmark revisions” to the data on nonfarm payroll employment.  In this regular revision process, the data from the Current Employment Statistics (CES) are benchmarked to fit the more comprehensive Quarterly Census of Employment and Wages (QCEW).  In this year’s revision, the Bureau of Labor Statistics also implemented a new model for estimating employment statistics for states and metropolitan areas.

The results of this year’s revision are substantial.  Overall, the revised data show much stronger employment growth during 2021.  Previously published data indicated that Arkansas payroll employment was still slightly lower than at the onset of the pandemic-recession in February 2020.  The revised data showed that we surpassed that level in November.  As of January, the revised data show a net increase of 8,900 jobs between February 2020 and January 2022—a gain of approximately 1.0%.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES).

The table below summarizes the previously-published and revised employment data by sector.  Several sectors were revised upward, accounting for the positive net change in total nonfarm payroll employment:  As of December 2021, estimates of employment in Construction were increased by 3,600 jobs.  Employment in Education & Health Services was revised up by 6,100 and Leisure & Hospitality services by 5,000.  Another significant upward revision was in Government employment, which was entirely in the Local Government subcomponent reflecting higher estimates of employment at public schools than was previously estimated.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES).

There were some significant downward revisions as well.  Overall Manufacturing growth was revised downward by 3,300 jobs.  However, this breaks down to a negative 7,900-job revision to durable goods manufacturing and a 3,900-job positive revision to nondurable goods.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES).

As for January, the newly released data show a monthly increase of 4,000 jobs (seasonally adjusted).  Most sectors showed positive growth, with the notable exception of Construction, which was down by 700 jobs.  In total, nonfarm payroll employment is now reported to have increased by 43,200 jobs since January of 2021, with several sectors showing net gains since the onset of the recession in February 2020.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES).

The revised data suggest that the Arkansas labor market has been exhibiting a much stronger recovery than previously estimated, and is well ahead of the national economy in total employment growth.  After incorporating the data revisions and new statistics for January, Arkansas employment is now 1.0% higher than it was in February of 2020.  In contrast, the nationwide total remains 1.9% lower than the previous cyclical peak.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES).

# # #

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. 

Arkansas Employment & Unemployment – December 2021

The year 2021 ended with another month of robust employment gains in Arkansas.  The state’s unemployment rate fell to a new record low in December, and payroll employment finished the year more than 2% higher than the end of the previous year.

The headline news was another significant drop in the unemployment rate, from 3.4% in November to 3.1% in December.  Arkansas was one of 12 states that registered all-time low unemployment rates for the month.  The number of unemployed, at 42,609 was also a record low for the series (dating back to 1976).  The U.S. unemployment rate 3.9% in December.

Source: Bureau of Labor Statistics

The drop in the unemployment rate reflected a decline of 3,750 in the number of unemployed and an increase of 2,652 in the number of employed.  The net change in the labor force was a decline of 1,098.  Compared to a year ago, the number of unemployed has fallen by over 24,500.  However, owing to the unusual surge in the measured number of employed persons in December 2020, a year-over-year comparison shows the number of employed slightly down in December 2021 (see more below).

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

Payroll Employment
Nonfarm payroll employment increased by 1,200 in December (seasonally adjusted).  Over the last four months of the year alone, employment was up by 15,000.  From December 2020 to December 2021 the gain was 26,300 (2.1%).

Employment growth in goods-producing sectors was particularly robust in December with Construction and Manufacturing showing solid gains for the month.  Service-providing sectors were more mixed:  Leisure and Hospitality Services showed a strong gain, as did Wholesale Trade.  However, job-losses were recorded in Health Services and Transportation.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES)

Arkansas payroll employment has nearly recovered to the level of the previous cyclical peak (February 2020), with the shortfall now less than 10,000 jobs, or 0.7%.  Nationwide, the data show a remaining employment shortfall of 2.3% relative to February 2020.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES)

Household vs. Payroll Employment
Although there are slight differences in the definitions of the number of employed covered in the household survey and the payroll survey, the two measures tend to show similar trends.  There are times, however, when the two measures give conflicting signals.  If we compare December 2021 to December 2020, the payroll survey shows an increase of 26.3 thousand jobs, while the household survey shows a decline of 1,643.  As shown in the figure below, the difference is attributable to the unusual surge in household employment recorded for December 2020.

Source: Bureau of Labor Statistics

Generally speaking, the payroll data are considered more accurate, although both measures are subject to annual revisions that can change the trends considerably.  We might have expected the December 2020 surge in employment to be revised by now, and it may be changed in the upcoming round of data revisions.  For the time being, however, the trend in Arkansas employment is probably better-represented by the data from the payroll survey rather than the household survey.

The proper measure of employment is important when it comes to evaluating the labor force participation rate.  The participation rate is calculated as the total labor force as a percentage of the population (specifically, the civilian non-institutional population aged 16 and over), where the labor force is calculated using the payroll measures of employed plus unemployed.  As shown in the figure below, Arkansas labor force participation rate–as conventionally measured–inherits the odd December 2020 employment surge.  If we use nonfarm payroll employment (with appropriate scaling and rebasing) to calculate an alternative measures, the pattern of labor force participation appears to correspond much more closely with U.S. trends.  Whichever way it is calculated, however, the participation rate has decline by approximately 1.3 percentage points since early 2020.  For the U.S. data, the decline has been approximately 1.5 percentage points.

Sources: Bureau of Labor Statistics, Arkansas Economic Development Institute

These declines in participation rates matter for interpreting the unemployment rate data.  Although unemployment rates are at or near record lows across the country, these rates are measured relative to significantly smaller bases than before the pandemic.

 

# # #

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. 

 

Arkansas’ New 15.5% Top Income Tax Rate

The Arkansas legislature adopted major income tax legislation this week, with the accomplished goal of lowering the marginal tax rate on high incomes from 5.9% in 2021 to 5.5% in 2022, with further reductions scheduled for subsequent years that would reduce the top marginal tax rate to 4.9% in 2025.

But one quirky feature of the Arkansas tax code results in an anomalous income bracket for which the effective marginal tax rate is actually 15.5%.  Moreover, over this particular income range, the tax code contains over 60 “tax cliffs” in which small increases in pre-tax income can result tax hikes that actually reduce after-tax income.

The reason for this anomaly is Arkansas’ dual tax table arrangement, where incomes up to a certain threshold are subject to one table, while there is a completely different tax table that applies to incomes above that threshold.

Typically, a progressive income tax increases the marginal tax rate (the tax on the next dollar), in uniformly increasing steps.  The result is a relatively smooth, increasing profile for average tax rates (taxes paid/taxable income).  An example is shown in Figure 1, which shows the marginal and average tax rates in the new legislation for incomes up to $84,500.

Figure 1:

But Arkansas’ dual tax-table system includes a more significant break, where the entire tax table changes for incomes above a certain threshold.  In the new legislation, this break-point is $84,500.

Nominally, the tax tables in the new tax code specify that for incomes above $84,500 the marginal tax rates are 2% on the first $4,300 of income, 4% on income between $4,301 and $8,500, and 5.5% for incomes above that.  But this is just silly.  If the tax table only applies to incomes above $84,500, it doesn’t matter what the marginal rates are below that threshold.  It would be more straightforward, and numerically equivalent, to say that the marginal tax rate is 5.247% on every dollar up to taxable income of $84,500 ($4,434) plus 5.5% above that level.

But however it is described, this presents a problem.  The tax for an income level of $84,501 turns out to be $620 higher than it would be if the lower income table was used. That would be an effective marginal tax rate of over 60000% for that 84,501st dollar of income.

That’s what is known as a “tax cliff.” When statutory thresholds become significant enough that people might change their economic behavior (or at last their tax-reporting behavior) to account for quirks in the tax system, then resources are likely being spent inefficiently.  Here at the Arkansas Economist, we pointed out the problem with tax cliffs when the multiple tax-table system was first introduced in 2015.

The Arkansas legislature’s solution to this problem in 2021 has been to introduce over 60 little tax cliffs to the mix.  The new system of “Bracket Adjustments” specifies that anyone with a taxable income of $84,501 to $84,600 is entitled to a tax-reduction of $620.  For each $100 beyond that, the bracket adjustment is reduced by $10, until it reaches zero for incomes above $90,600.

Figure 2 illustrates the multiple tax cliffs in the new legislation, showing the stair-step nature of the bracket adjustment effect on average tax rates.

Figure 2:

At each of these mini tax cliffs, the marginal tax rate approaches infinity as we narrow the definition of “marginal.”  A one dollar increase in income that raises tax burden by $10 can be described as a marginal tax rate of 1000%.  Decreasing the granularity of the calculation, an income increase of $100 over the bracket-adjustment range results in an increase in tax obligation of $10 plus the 5.5% statutory marginal tax rate—a total marginal tax rate of 15.5%.

Figure 3 puts the two tax tables and bracket adjustments together to show the average tax rates and effective marginal tax rates over income ranges from $0 to $120,000.  The marginal tax rate in Figure 3 is calculated as the increase in tax burden for each $100 increase in income.  The result is an effective marginal tax rate of 15.5% over the bracket adjustment range.

Figure 3:
*Marginal Tax Rate as calculated in $100 increments.

So, under the assumption that $100 increments are an appropriate measure of “marginal” that matters to taxpayers (at least those in the bracket-adjustment range), we might expect people to take measures to avoid the 15.5% marginal tax burden.  Those efforts represent the efficiency loss of the tax system’s complexity.

To further illustrate the point, let us consider a tax system that is roughly equivalent to the newly adopted regime, but one that eliminates the tax cliffs.  The calculations underlying Figure 3 provide guidance for how to construct such a system.  Taking the marginal tax rates from the lower-income tax table, extending the table to impose a 15.5% explicit marginal rate on incomes between $84,500 and $90,700, with a return to the 5.5% marginal rate for incomes above $90,700, we can reconstruct an average tax profile that is virtually indistinguishable from the one shown in Figure 3.

Zooming in on the bracket-adjustment range shows how this hypothetical unified tax table eliminates the stair-step nature of the tax cliffs while retaining the ramping-up of average tax rates—revealing the relevance of this near-observationally equivalent representation of the newly-adopted tax code.

Figure 4:

So, in a very real sense, the new tax code includes a 15.5% effective marginal rate over a specific range on incomes.

But does this all matter?  When it comes to a static analysis government revenue, the relevant measure is how the average tax rate schedule and the population income profile overlap. That is also true when it comes to the tax burden on individuals.  But when it comes to economic decision-making, marginal calculations matter  To the extent that the tax-cliffs and brackets with high effective marginal rates affect taxpayer behavior, a static revenue projection might be overstated relative to a dynamic analysis that takes tax-avoidance behavior into account.  Ultimately, whether the effect is quantitatively significant or not is an empirical question.

 

Arkansas Employment and Unemployment – September 2021

The latest report on Arkansas employment and unemployment included positive news along several dimensions.  The number of unemployed and the unemployment rate declined, and both the household and payroll surveys showed increases in employment.

The headline news was a decline in the unemployment rate from 4.2% in August to 4.0% in September. Typically, month-to-month changes in state unemployment rates are not statistically significant; however, today’s BLS report notes that the September decline in Arkansas did meet that threshold. The U.S. unemployment rate had previously been reported to have declined by 0.4 percentage points to 4.8% for the month, but the remaining spread between the national and state rates remains statistically significant.

Source: Bureau of Labor Statistics

The underlying components of the unemployment rate were all going in the right direction:  The number unemployed dropped by 2,967, the largest one-month decline since January.  The number of employed was up by 3,561—the second consecutive month of employment gains over 3,000.  The labor force expanded by 594.

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

Payroll Employment
Nonfarm payroll employment also showed increases for the month.  On a not-seasonally adjusted basis, employment increased by 17,300.  However, more than 15,000 of those job gains were associated with seasonal increases at public and private educational institutions.  After seasonal adjustment, the payroll data showed a gain of 1,000 jobs.

Sectors that showed the largest declines included Education & Health Services and Government, showing that while the start school year brought the typical surge in employment, the magnitude of the increase was not as substantial as typically expected.  Key sectors showing increases in employment included Retail Trade and Transportation & Utilities.  Durable goods manufacturing was up, but employment in manufacturing of nondurables continued to slump.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES)

Job growth continues to show steady progress toward recovery from the COVID-19 recession, with employment gains over the past 12 months totaling 30,200 jobs.  Nevertheless, there remain 23,600 fewer jobs than just before the pandemic hit—a gap of 1.7%.  Nationwide, payroll employment remains 3.3% lower than in February 2020.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES)

# # #

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. 

Personal Consumption Expenditures – 2020

The annual data on state-level Personal Consumption Expenditures (PCE) were published last week by the Bureau of Economic Analysis.  The data for Arkansas reaffirm our observation that Arkansas consumers maintained relatively high levels of spending during the depths of the pandemic.  Nationwide, PCE declined 2.6% from 2019 to 2020.  In Arkansas total spending increased–albeit at a rate of less than 0.1%. Arkansas was one of only four states to show an increase for the year. (The other states were Idaho, Utah and Montana.)

Source: Bureau of Economic Analysis

The brunt of the slowdown was borne by services consumption. With opportunities for spending on services severely limited by pandemic-related closures and lockdowns, consumer spending was diverted toward consumption of goods.  In both the national and Arkansas data, goods consumption increased in 2020.  However, the percent increases were larger for Arkansas in each category of spending.  Two categories of goods—Other durable goods and Gasoline—were lower for the year, but the declines were smaller in the Arkansas data.  Similarly, the declines in services consumption were generally much larger for the U.S. than recorded in the Arkansas data.  The only exception was Health care, which increased slightly more in the national data than in Arkansas.

Source: Bureau of Economic Analysis

One reason for the overall relative strength in the Arkansas statistics is the fact that goods consumption has historically  comprised a larger share of total spending in Arkansas.  This larger share of goods-consumption had the effect of boosting the impact of increased spending on goods and de-emphasizing the declining service-sector spending.  However, this effect was small:  If the sector-by-sector growth rates for Arkansas were re-weighted to reflect the higher service-content of the U.S. consumption basket, Arkansas growth rate for the year would be around -0.1%, instead of +0.1%.

Source: Bureau of Economic Analysis

 

 

 

 

 

Arkansas Retail Sales – June 2021

Arkansas Retail Sales increased by 2.5% in June, remaining well above spending levels of a year earlier and well above pre-pandemic levels as well.  Total Retail Trade and Food Service sales were up 13.0% from June 2020 and up 27.1% from the 2019:H2 average. The data for Arkansas continue to show a pattern similar to the U.S. Retail Sales data, albeit with larger net increases over the past 18 months. The U.S. data, published by the Census Bureau, showed a 0.9% increase in June. Compared to a year earlier, U.S. sales were up 18.7%—a larger increase than shown in the Arkansas data, reflecting relatively lower sales in June 2020.  Compared to the second half of 2019, U.S. Retail Sales were up 20%.

Sources: U.S. Census Bureau, Arkansas Economic Development Institute

Looking at the breakdown by industry groups, the one-month increase in sales was reflected in most components of the total, with slight declines registered at Motor Vehicle and Parts Dealers, Electronics and Appliance Stores, Food and Beverage Stores, and Health and Personal Care Stores.  Substantial increases were registered in Nonstore Retailers (which includes online retailers) and in Furniture and Home Furnishing Stores.

Sources: U.S. Census Bureau, Arkansas Economic Development Institute

Sales levels for Nonstore Retailers have skyrocketed during the pandemic as consumers turn toward online purchases as a substitute for shopping at ‘brick-and-mortar’ stores. During the second half of 2020, Arkansas purchases at nonstore retailers were running nearly 50% above pre-pandemic levels, and have surged to over 80% higher in recent months. The U.S. data show a surge of nearly 25% in late 2020, with recent sales running at a pace that is 38% higher than in the second half of 2019. (The sharp increase shown for Arkansas in July 2019 reflected the change in tax policy that required all out-of-state retailers to remit sales tax receipts, so it measures an increase in measured tax collections, rather than an actual increase in sales.)

Sources: U.S. Census Bureau, Arkansas Economic Development Institute

Recent trends in the Furniture and Home Furnishings sector illustrate several key features of Arkansas Retail Sales growth: A sharp decline in the U.S. data measured over 50% during the recessionary trough month of April 2020, while the decline in Arkansas was only 20%. By late 2020, nationwide sales had recovered to approximately 6% above pre-pandemic levels and have surged to 21% above 2019:H2 over the most recent four months. The increases in Arkansas have persistently exceeded the U.S. averages, with sales in late 2020 up 13% and sales over the most recent four months up 38%. A sharp, but temporary decline in spending is evident in both the state and national data for February, reflecting the impact of unusually sever snowstorms that month.

Sources: U.S. Census Bureau, Arkansas Economic Development Institute

Another sector that has been particularly hard-hit by the COVID-19 pandemic is Food Services and Drinking Places. Spending at bars and restaurants plummeted during the downturn of early 2020, falling by over 50% nationwide–but only by 23% in Arkansas. By the end of 2020, bar and restaurant sales had returned to pre-pandemic levels in Arkansas, while U.S. data continued to show weak sales until spring of 2021. In June, national bar and restaurant sales had recovered into positive territory (+8.4%), while sales in Arkansas sales surged to 18.3% above pre-pandemic levels.

Sources: U.S. Census Bureau, Arkansas Economic Development Institute

County-Level Retail Sales
Month-to-month fluctuations in measured retail sales sometimes obscure the underlying trends, particularly as the geographic focus narrows to the county level. With data now in for the second quarter of 2021, we can take a look at smoothed quarterly trends. Our county-level data do not include gasoline (because there are no sales taxes on gasoline at the county level), and are not seasonally adjusted. Consequently, we’ll consider Total Retail Sales excluding Gasoline. From an index value of 100 in 2019:H2, this measure of total sales increased statewide by over 10% by the second half of 2020, and by the second quarter of 2021 had risen to about 28% above pre-pandemic levels (not seasonally adjusted).

Sources: U.S. Census Bureau, Arkansas Economic Development Institute

The map below shows the growth rate of Retail Sales excluding Gasoline from 2019:H2 through 2020:Q2.  The color-coding shows counties with growth rates below the statewide average in reddish hues and counties with growth rates above the statewide average in greenish hues.  In all, 51 counties were above the statewide average and 24 counties below. However, the map shows that 35 counties show growth rates in the range of 24% to 32%—roughly equal to statewide growth (+/- 4 percentage points). Reds and greens are used to indicate growth rates of <24% and >32%, respectively.

Counties that have shown above-average growth tend to be clustered in the northern half of the state, particularly the north-central region.  Below-average growth rates are more predominant in the southeast of the state.  All 75 counties have higher retail sales in 2021:Q2 than pre-pandemic levels, with the growth rates ranging from +4.9% in Arkansas county to +56.7% in Fulton County.

# # #

Documentation of Methodology is available here: Arkansas Retail Sales—A New Data Set from AEDI.

Data for Arkansas Retail and Food Service Sales for July 2017 through April 2021 are available in an Excel Spreadsheet:  Arkansas-Retail-Sales-May-2020.  The data set includes statewide aggregates and components, both seasonally adjusted and not-seasonally adjusted. County-level data for Total Retail and Food Service Sales excluding Gasoline are available on a not-seasonally adjusted basis.

Arkansas Retail Sales – May 2021

Arkansas Retail Sales declined slightly for a second month in May, but remained well above levels of a year ago or before the onset of the COVID-19 pandemic.  Total Retail and Food Services Sales were down 3%, following a 3.4% decline in April.  The two monthly declines only partly offset a 22% surge in March.  Data from the U.S. Census Bureau showed that national retail sales declined 1.4% in May.

Source: U.S. Census Bureau, Arkansas Economic Development Institute.

Many industry groups within the retail sector declined from recent highs, with only Motor Vehicles, Electronics and Appliance Stores, and Food & Beverage stores showing monthly increases.  All sectors except for Food and Beverage stores were well above levels of a year earlier.

Sources: U.S. Census Bureau, Arkansas Economic Development Institute.

For both the state and national data, sharp increases in sales since May 2020 reflect the extent of weak retail spending over a year ago.  Clothing Stores, for example, showed a pandemic-related decline of more than 50% in Arkansas in April of 2020, while sales were down nearly 90% in the nationwide data.

Sources: U.S. Census Bureau, Arkansas Economic Development Institute.

Compared to pre-pandemic sales (in the second half of 2019) sales at Clothing and Accessories Stores are up 13.7% for the U.S., and up 23.6% in Arkansas.  Nationwide, total Retail Trade and Food Service Sales are 19% higher than in 2019H2.  The same comparison shows a 24% increase for Arkansas.

The data for May include an innovation to the measurement of automobile sales data. As described in Arkansas Retail Sales—A New Data Set from AEDI, the data on county-level sales tax collections for autos yields an index of the number of vehicles.  In the past, we have converted this index to a dollar value by scaling the total so that automobile sales have the same relative weight in the state data as in the national data, with 2019 average values as a reference point.  Sales tax receipts on most goods automatically incorporate price changes (since the sales tax is an ad valorem tax), but not so with the county auto tax.  However, price spikes in the markets for new and used automobiles have recently been quite prominent.  For example, used car prices were the single largest contributor to a surge in Consumer Price Index (CPI) in May registering a monthly increase of 7.3% and a year-over-year increase of 30%.

In order to incorporate these significant price swings in the retail sales data for Arkansas, we have applied the price data for New and Used Automobiles to the index values generated from county sales tax receipts.  The valuation base remains the 2019 average.  As shown in the figure below, the incorporation of price data has little effect on the sales data until recent months.  In May 2021, the total for Motor Vehicle and Parts Dealers was up 5.8% from the previous year without price adjustment.  After accounting for price inflation, adjusted sales are up 17.9%.

Sources: U.S. Bureau of Labor Statistics, Arkansas Economic Development Institute.

After accounting for the recent surge in auto prices, the data for Arkansas and the U.S. show similar patterns.  The surge in auto sales in 2020 happened earlier in Arkansas than in the rest of the nation, and the persistent increase relative to 2019 has been somewhat larger in Arkansas.  As of May, the nationwide total for sales at Motor vehicle and Parts Dealers was up 28.7% for the U.S. and up 36.6% in Arkansas (relative to the second half of 2019).

Sources: U.S. Census Bureau, Arkansas Economic Development Institute.

# # #

Documentation of Methodology is available here: Arkansas Retail Sales—A New Data Set from AEDI.

Data for Arkansas Retail and Food Service Sales for July 2017 through April 2021 are available in an Excel Spreadsheet:  Arkansas-Retail-Sales-May-2020.  The data set includes statewide aggregates and components, both seasonally adjusted and not-seasonally adjusted. County-level data for Total Retail and Food Service Sales excluding Gasoline are available on a not-seasonally adjusted basis.

[box] This month’s data required on technical adjustment of note: The raw data for Garland County showed gross tax revenue of over $5 million for the sector 4441: Building Materials and Supplies Dealers. This was up from an average monthly value of about $216,000. In fact, the entire monthly tax receipts for Garland County are typically far less than $5 million, and this particular monthly report includes an unexplained “other adjustments” to  total net tax revenue that offsets most of the impact of the outlier on the county’s bottom line.  Rather than assume that the adjustment reflects a direct offset to the reported sales in sector 4441, however, we estimated a time-series model using data from the City of Hot Springs to forecast changes in Garland County sales for that sector.  (Log first-differences of the two series have a correlation coefficient of 0.939.)[/box]

 

 

 

 

Arkansas Home Sales

In the midst of the COVID-19 pandemic we haven’t been tracking home sales on a regular basis, but housing markets have been following a roller-coaster ride along with every other sector of the economy.  Housing Market Reports from the Arkansas Realtors® Association were intermittent for a time, but are now up-to-date through January 2021.  The data show that the number of homes sold in Arkansas were at an all-time high in 2020.  The cumulative sales figure for December 2020 was 42,980 new and existing homes sold, up 15.2% from the previous year.

Source: Arkansas Realtors® Association

The seasonal pattern of home sales was distorted by pandemic-related disruptions, with slow sales in April and May.  Compared to the same period a year earlier, sales were down 11.6% during those two months.  Those declines were more than offset by strong sales later in the year:  Sales hit a record-high 4,577 in July, and the average year-over-year growth rate averaged 24.3% over the second half of the year.  January is always the slowest month of the year for home-sale closings, but markets had plenty of momentum going into 2021:  Sales in January 2021 were up 9.4% from January 2020.

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

Looking at quarterly averages, the contrast between the sales slow-down in the second quarter and the resurgence over the second half of the year is even more evident.

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

Arkansas Employment and Unemployment – February 2021

Arkansas labor market conditions changed little in February.  The unemployment rate ticked down by 0.1 percentage point to 4.5%, but both the household and payroll data showed declines in total employment.  One year after the pre-COVID-19 business cycle peak, employment growth remains weak and the unemployment rate elevated.  Nevertheless, the Arkansas data show that labor market conditions remain significantly better than the national economy overall.  The U.S. unemployment rate was 6.2% in February.

Source: Bureau of Labor Statistics

The downtick in the unemployment rate reflected a continuing decline in the number of unemployed, which has declined from a peak of over 137 thousand in April to 61.6 thousand in February 2021 — about 9.5 thousand higher than a year ago.  Household employment also declined in February, down 10.8 thousand.  Compared to a year earlier, employment is down by over 18 thousand.  The Labor Force (the sum of employed and unemployed) dropped by nearly 13 thousand in February.

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

Payroll Employment
Arkansas nonfarm payroll employment declined by 3.4 thousand in February, the first reported decline since last April (seasonally adjusted data, recently revised). Employment remained about 2.8% below year-ago levels, while the national statistics show year-over-year job losses of 6.2%.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES)

Employment declines were distributed broadly across sectors, with only two sectors increasing:  Education and Health services increased by 300 jobs (entirely in Health Care) and Other Services increased by 600.  As shown in the third column of the table below, job losses were relatively large in three sectors that have been recovering with particular vigor:  Construction was down by 900, Retail Trade was down by 400, and Leisure & Hospitality was down 2,200.  All three are likely to have been affected by severe weather conditions in mid-February.  Both Construction and Retail remain above levels of a year earlier, but all other sectors show year-over-year declines to varying degrees.

Source: Bureau of Labor Statistics, Current Employment Statistics (CES)

Overall, the employment report for February is mixed.  A decline in the number of unemployed is welcome, but declines in employment suggest a pause in the pace of recovery.  However, there is no indication of a new, ongoing period of weakness setting in.  The mixed nature of the report suggests that recovery in labor markets is a long, gradual process—sometimes with bumps along the way.

# # #

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. 

 

 

Leisure and Hospitality Industries in Arkansas – 2020

Of all the sectors of the economy that have been disrupted by the COVID-19 pandemic, industries in the Leisure and Hospitality category have been among the hardest-hit.  These industries continue to show persistent declines in sales and employment, with many businesses remaining at-risk while other sectors of the economy recover.

This article documents the performance of Leisure and Hospitality industries in Arkansas relative to the United States as a whole.  Using payroll employment data and statistics derived from tax-collection data, we show that Arkansas has experienced smaller downturns in the Leisure and Hospitality sector than the national average, but the data also suggest persistent declines at both the state and national levels.

Figure 1 shows the composition and relative sizes of industries within the Leisure and Hospitality sector, in terms of employment shares in 2019. The total sector represents a smaller employment share in Arkansas than in the national totals, 9.4% versus 11.0%.  Restaurants and bars account for the overwhelming share of employment within the Leisure and Hospitality sector, particularly in Arkansas.

Figure 1:
Source: U.S. Bureau of Labor Statistics

Food Services and Drinking Places
The largest subset of industries in the Leisure and Hospitality Sector comprises bars and restaurants.  As shown in Figure 2, employment dropped dramatically in April 2020, falling more than 48% from the previous year nationwide.  In Arkansas the decline was somewhat smaller—only 38.5%.  After recovering during the summer months, employment levels were still down nearly 20% nationwide and about 10% in Arkansas at the end of the year.

Figure 2:
Source:  U.S. Bureau of Labor Statistics

 Figure 3 shows sales figures for the Food Services & Drinking Places sector.  Data for the U.S. are drawn from the U.S. Retail Trade and Food Services survey, published by the U.S. Census Bureau.  Sales figures for Arkansas are derived from county-level sales tax revenue, available by four-digit industry sector from the Arkansas Department of Finance and Administration.  Tax distributions for Food Services and Drinking Places are extracted from the overall figures, adjusted for changes in tax rates, then aggregated across counties.

The percentage changes in sales shown in Figure 3 display a pattern similar to the employment changes in Figure 2.  Nationwide restaurant and bar sales plunged over 50%, while in Arkansas the drop was 24%. By October, nationwide sales remained 12.5% below year-ago levels, while Arkansas sales had recovered to near pre-pandemic levels.  However, data available for November and December suggest renewed weakness.

Figure 3:
Sources: U.S. Census Bureau, Arkansas Department of Finance and Administration, Arkansas Economic Development Institute

Accommodations
The Accommodations industry includes hotels and motels, campgrounds, RV parks, etc.  Employment in the Accommodations nationwide dropped 43% in April 2020 and was down 48% in May.  In Arkansas the decline was approximately 35.5% in both months. Employment levels in the industry remain low.  For the U.S., employment in Accommodations was down nearly 33% in December from the previous year.  In Arkansas it was down about 25%.

Figure 4:
Source:  U.S. Bureau of Labor Statistics

There are two measures of state-level sales available to consider:  in addition to the county sales tax statistics, the state collects a 2% Tourism Tax that applies directly to the service of providing “accommodation to a transient guest.” Figure 4 shows year-over-year growth rates of these two proxies for sales in the Accommodations industry.  They show very similar patterns, especially the COVID-related downturn in April which amounted to a loss of approximately two-thirds of total revenues in the Accommodations sector.

Figure 5:
Sources: Department of Finance and Administration, Arkansas Economic Development Institute

The two revenue measures diverge during the summer months, with county sales tax receipts showing sustained declines from the previous year (down 23%) while the tourism tax indicated a slightly better recovery from the spring downturn.  One possible explanation of this patterns is that the tourism tax applies solely to accommodations, while the sales tax applies to other services provided by hotels and motels, including catering, providing meeting space, etc.  The sustained decline in the sales tax measure suggests that revenue losses in the Accommodation industry run deeper than just a dearth of travelers.

To give an indication of how sales in the Accommodation industry in Arkansas compare to national trends, Figure 6 compares the Arkansas tourism tax to a national measure of revenue per available room.  Under the assumption that the number of available rooms an Arkansas has changed little over time, the national revenue per room should correspond to the Arkansas revenue measure derived from the tourism tax.  Figure 6 shows that the decline in revenues nationwide was even sharper than the downturn in Arkansas.  Revenue per room in April was down 80% from the previous year, and continues to trend 50% lower than pre-pandemic levels.

Figure 6:
Sources: Arkansas Department of Finance and Administration, STR Global.

Arts, Entertainment, and Recreation
The final set of industries to consider in the Leisure and Hospitality Sector is Arts, Entertainment and Recreation.  This category covers a wide range of industries, including Performing Arts, Spectator Sports, Museums, Amusement Parks, Gambling Industries and other various Amusement and Recreation activities.  Figure 7 shows employment in this set of industries for Arkansas and the U.S.  While U.S. employment plunged over 50% in April and May, Arkansas dropped only 12.4%.  By the end of 2020, nationwide employment was still down 30%, while Arkansas recovered to only 5% below the previous year.

Figure 7:
Source:  U.S. Bureau of Labor Statistics

Sales tax data for industries in Arts, Entertainment and Recreation are somewhat sparse.  In any specific county, data are suppressed in sectors with fewer than three firms, so the totals are likely incomplete.  Moreover, comparable sales data on the national level are available only on a quarterly basis (from the U.S. Census Bureau’s Quarterly Services Survey).  Figure 8 displays year-over-year growth rates Arkansas and the U.S.  The Arkansas figures are constructed by aggregating total county-level sales tax data for the entire set of industries, then averaging over calendar quarters.  The series for the U.S. is the growth rate of Total Revenue for Arts, Entertainment, and Recreation from the Census Bureau.

Figure 8:
Sources: Arkansas Department of Finance and Administration, Arkansas Economic Development Institute, U.S. Census Bureau

The revenue data for the U.S. show a pattern similar to the employment data.  A sharp drop in the second quarter of 2020 represented a 57% decline from the previous year, and revenues remained down more than 30% by the end of the year.  In Arkansas, the second-quarter decline was only 28.4%. Arkansas revenues from Arts, Entertainment, and Recreation recovered sharply in the third quarter, but data for the fourth quarter suggests renewed weakness.

As comparisons in other industries have shown, economic activity in Arkansas was not as severely impacted by the COVID-19 pandemic as in other parts of the nation.  This appears to be true for Leisure and Hospitality sectors as well.  Although employment, sales and revenue have partly recovered from sharp declines in the spring of 2020, economic activity in the Leisure and Hospitality industries remained well below year-earlier levels at the end of 2020.

A PDF file of this report is available HERE.