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Arkansas Employment and Unemployment – January 2014

The first employment report of the new year came out this morning, and the latest data suggest some positive developments.   The headline from this morning’s release from the Department of Workforce Services was that the unemployment rate declined from 7.4% to 7.3%.

As we have noted recently, the annual exercise of data revisions has revealed notable weakness in Arkansas labor markets during 2012 and 2013.  The unemployment rate has been persistently hovering around 7.5% as the national rate declined, and revisions to payroll employment were expected to show that fewer jobs were created last year than initial reports had suggested.  Nevertheless, the newly-revised data also indicate that trends in both household employment and payroll employment have been improving in recent months.

Household Employment
The unemployment statistics are based on a survey of households, with statistical models used to estimate changes in total employment and unemployment.  As we recently reported, the revised data indicate that employment was lower and unemployment higher than initially reported during much of 2012 and 2013.  But the new data also show an improving trend since August 2013.  As shown in the figures below, January was the fifth consecutive month in which employment increased and unemployment declined.   As a result of these improving trends, the unemployment rate dropped from 7.7% in July and August of last year to 7.3% in January 2014.

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

While Arkansas’ unemployment rate remained stubbornly high at around 7.5% during 2012 and 2013, the national unemployment rate has been falling.  As a result, the national rate fell below Arkansas’ rate last summer.  We expect the downward trend to continue, for both Arkansas and the U.S., but with Arkansas now lagging somewhat behind.

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

Payroll Employment
The payroll employment statistics that came out this morning reflected new benchmark revisions for the period April 2012 through December 2013.  As expected, the level of employment in mid-2013 was revised sharply downward — by approximately 11,000 jobs as of October 2013.  Nevertheless, the routine monthly revision of the December statistics and a relatively strong gain in January employment (+4,500, seasonally adjusted) combined to suggest a significant improvement in recent employment trends.  Consistent with the household data, the newly-revised payroll data show five consecutive months  of employment gains, with a cumulative increase of 16,800 jobs since August 2013.

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

The table below shows the breakdown of payroll employment by sector.  The pattern of employment gains in January was somewhat atypical of the post-recession pattern:  Some of the service-providing sectors which have been showing the largest gains since the end of the recession suffered declines in January, while goods-producing sectors showed some unexpected gains.  Particularly noteworthy was the increase in construction employment — up 2,300 on a seasonally adjusted basis.  Overall, nonfarm payroll employment was 12,400 higher in January 2014 than in January 2013.  That represents a cumulative increase of 39,000 jobs since the post-recession trough of February 2010.  Compared to pre-recession employment levels, however, we are still down by 18,000 jobs.

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

The revisions to both the household and payroll data show that labor market conditions in Arkansas were worse than we thought during much of 2012 and 2013, but both surveys indicate significantly improving conditions over the past five months.  In the long, slow process of recovery from the recession of 2008-09, we are still lagging behind pre-recession labor market conditions — but recent data indicate emerging favorable trends.

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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, can be found here:  Table-Seasonally Adjusted NFPE.

Arkansas Home Sales – June 2013

Late last week, the Arkansas Realtors® Association (ARA) released data for home sales in June.*  As shown in Figure 1, June sales dipped slightly from the relatively high level of the previous month, but sales in both May and June exceeded the peak months of 2011 and 2012.  June sales were 4.0% above the level of a year earlier.  For the year to date, home sales are running 8.9% higher than in 2012.

Figure 1:
Source: Arkansas Realtors® Association

The 2013 recovery of home sales from a flat pace in 2011 and 2012 is more apparent after adjusting for recurring seasonal patterns in the data.  As shown in Figure 2, seasonally-adjusted home sales surged in response to two rounds of Federal home-buyer tax credit programs in 2009 and 2010, but suffered a sharp downturn in the months immediately following those incentive programs.  For the next two years, home sales showed little if any upward momentum.  Sales have been rising since about the beginning of this year.

Figure 2:
Source: Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancement

The upturn in sales during 2013 is even more evident after smoothing out the monthly ups and downs by using quarterly sales totals, as shown in Figure 3.

Figure 3:
Source: Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancement

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*The news release from ARA noted that “All 2013 reports have been updated to reflect more accurate numbers for Clark County… January 2012 through June 2012 reports have also been updated. The remaining 2012 reports will be updated each month as the 2013 reports become available.”  A comparison of the revised reports with the previously published data showed that sales information for Johnson County for 2013 was also updated.

The partial nature of the revisions present some conceptual problems for interpreting the existing time-series data.  However, the magnitude of the Clark County revisions for the first six months of 2012 are relatively small:  With an average revision less than 6 home sales per month, the changes are quantitatively insignificant.

Metro Area Employment and Unemployment – June 2013

Unemployment rates in Arkansas metro areas were basically unchanged from May to June (seasonally adjusted), but were higher than a year ago in four of the eight metro areas.  First, the not-seasonally adjusted figures shown in the table below reveal that unemployment rates have increased over the past 12 months in Fort Smith, Memphis, Pine Bluff, and Texarkana.  Rates were unchanged in Hot Springs and Jonesboro, and have fallen slightly in Fayetteville and Little Rock.

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

The news release from the Bureau of Labor Statistics noted that 272 of the nation’s 372 metro areas had lower unemployment rates than a year earlier.  The four metro areas in Arkansas that had higher rates than a year earlier were among the 73 areas nationwide that have experienced increases.  Hot Springs and Jonesboro were among the 27 metro areas across the country where unemployment rates were the same as in June 2012.

To evaluate monthly changes, the second table shows smoothed seasonally adjusted estimates of metro area unemployment rates.  From May to June, rates were unchanged in all metro areas except Pine Bluff, which showed an uptick of 0.1 percentage points.

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

Payroll Employment
The payroll employment survey for June showed modest declines in Hot Springs and Pine Bluff, no change in Texarkana, and increases in the rest of the state’s metro areas.  The largest percentage increase for the month was in Fort Smith, up 0.8%.  Compared to June 2013, payroll employment has declined in Hot Springs, Pine Bluff and Texarkana, but is up in the remaining MSAs.  The monthly increase in Little Rock was large enough to push employment above its level in December 2007 — prior to the onset of the 2008-09 — for the first time since the recovery began.

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

Metro Area Employment and Unemployment – May 2013

The lead from today’s metro area employment and unemployment report noted that “unemployment rates were lower in May than a year earlier in 253 of the 372 metropolitan areas.”  Unfortunately, none of Arkansas’ Metropolitan Statistical Areas (MSAs) were included in that tally.  As shown in the table below, only in Fayetteville was the unemployment rate unchanged compared to May 2012.  Around the rest of the state, increases in unemployment rates ranged from +0.2% in Jonesboro to +0.7% in Pine Bluff.

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

As is typical for May, the not-seasonally-adjusted unemployment rates rose compared to the previous month.  But even after seasonal adjustment, rates were higher in May than they were in April.  The smoothed seasonally adjusted metropolitan area estimates, shown below, showed upticks in unemployment rates for all of the state’s MSAs except Little Rock.

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

In part, the higher unemployment rates were attributable to expansions of the labor force.  From April to May, the labor force increased in all of Arkansas’ metro areas except Hot Springs (which was essentially flat).  The number of employed increased in Fayetteville, Fort Smith, Jonesboro and Little Rock.  Nevertheless, the number of unemployed increased in all eight metro areas.

Payroll Employment
In the employer survey, job growth among Arkansas metro areas was mixed.  From April to May, payroll employment declined in Fayetteville, Hot Springs and Texarkana.  Compared to a year ago, employment was lower in Hot Springs, Pine Bluff and Texarkana.  Only Fayetteville and Jonesboro continue to show higher payroll employment than pre-recession levels.

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

Payroll vs. Household Employment
In the context of the statewide employment situation, we have noted that the household and payroll surveys are showing widely divergent trends.  Over the past 12 months, the payroll survey reports a net increase of about 3,000 jobs statewide while the household survey indicates a decline of more than 23,000 jobs.  The discrepancy carries over into the metro area data.  As shown in the table below, household-based employment estimates are showing declines in every MSA except Fayetteville and Jonesboro, while the payroll survey shows only 3 metro areas with year-over-year declines.  In every case, the household survey is showing weaker employment growth than the payroll survey.  Note that the discrepancy does not apply to U.S. data — in fact, the nationwide payroll survey is showing stronger growth than the household-based data.  Given the magnitude and persistence of the divergence, it seems likely that an explanation or reconciliation will only be possible after subsequent revisions of the data.

Source: Bureau of Labor Statistics

April Home Sales

The Arkansas Realtors® Association announced yesterday that April home sales were up 13.6% compared to the previous year.  The fact that home sales are increasing is certainly good news, but the year-over-year comparison probably overstates the magnitude of the improvement.

As shown in the figure below, home sales in April 2012 were unusually low:  Sales typically follow a rising trajectory for the first half of the year but experienced an down-tick in April of last year.  This kind of month-to-month variability is not surprising.  The sales statistics are based on the closing date of sales transactions.  It is often the case that a flurry of closings will take place at the beginning or end of a month, spilling over from one month to the next.  Monthly sales totals reflect this volatility, recommending the use of averages or totals over longer periods of time.  For example, yesterday’s report noted that year-to-date home sales were up 7.9% in April — not as impressive as the 13.6% headline, but a more realistic assessment of improvement in the residential real estate market thus far 2013.

Source: Arkansas Realtors® Association

The second figure, below, illustrates the trend in home sales after removing the prominent recurring seasonal patterns.  After seasonal adjustment, the month-to-month volatility is more noticeable, but so is the generally increasing trend in 2013.  A better illustration of the trend will be available when we have figures for the entire second quarter of the year.  With that data in hand, we will be able to assess the data after seasonal adjustment and quarterly averaging.

Source: Arkansas Realtors® Association; seasonal adjustment by the Institute for Economic Advancement

 

Metro Area Unemployment and Employment – April 2013

Progress toward lower unemployment rates in Arkansas metro areas has ground to a halt.  Statistics for April show that unemployment rates were higher than a year earlier in all the state’s Metropolitan Statistical Areas (MSAs) except for Fayetteville.  The press release from the Bureau of Labor Statistics reported that Fayetteville was one of 276 MSAs around the nation that saw a year-over-year decline.  The state’s other MSAs were among the 78 metro areas that saw higher unemployment rates.

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

The year-over-year comparisons refer to data that are not seasonally adjusted.  For meaningful month-to-month comparisons, the BLS publishes smoothed seasonally adjusted estimates.  As shown in the table below, these estimates show that the unemployment rate was steady in Fort Smith and Jonesboro, but ticked up in the seven other metro areas that include parts of Arkansas.

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

Underlying statistics from the household unemployment-rate data also showed a monthly uptick of employment in the state’s two largest metro areas, but reveal a downward trend in all of the state’s MSAs except for Fayetteville.  As illustrated in the figure below, the downturn in employment is particularly noticeable since the beginning of this year.  In Hot Springs and Texarkana, household employment is more than 2-1/2% lower than in January 2012.  The reason that unemployment rates haven’t risen in response to these employment declines is due to commensurate downward trends in labor force participation.

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

In the statewide data, weak household employment data have contrasted with improving statistics from the payroll employment reports.  The same puzzle seems to exist in the MSA data.  As shown in the table below, nonfarm payroll employment increased in several of the state’s metro areas in April.  Compared to a year earlier, payroll employment was higher in Fayetteville, Hot Springs, Jonesboro, Little Rock, and Memphis.  Employment was flat in Fort Smith and down in Pine Bluff and Texarkana.  Pine Bluff remains the only metro area to have experienced continued contraction since the statewide employment trough of February 2010.  At the other extreme, both Fayetteville and Jonesboro have higher payroll employment in April 2013 than they did before the onset of the 21008-09 recession.

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

The contrast between the household and payroll employment reports is a puzzle.  Typically, the payroll reports are considered to be more accurate, but are also subject to substantial revision.  For that reason, the renewed weakness in household employment is a concerning trend that we will continue to monitor closely.

 

Arkansas Home Prices – 2013:Q1

The Commerce Department reported yesterday that the median sales price of new houses sold in April was up 13.1% from a year earlier.  Separately, new data from the Federal Housing Finance Agency (FHFA) confirmed that home values are on the rise, both nationally and here in Arkansas.  As shown in the figure below, house prices continued their upward trajectory in the first quarter of 2013, rising 1.9% for the U.S. and 1.7% for Arkansas.  Compared to the first quarter of 2012, prices were up 6.4% nationally and 5.5% in Arkansas.

Source: Federal Housing Finance Agency

A Note on Methodology:
The “Expanded-Data Indexes” shown in the figure use data from all mortgages purchased or securitized by FannieMae and FreddieMac, augmented with data from local property assessors’ offices.  The FHFA measures are constructed as weighted, repeat-sales indexes (like the Case-Shiller Index).  This methodology is intended to estimate underlying trends in house values more accurately than simple measures such as median or average sales prices.

When it comes to measuring house prices for metropolitan areas, the FHFA publishes measures known as “All-Transactions Indexes,” which include information from actual home sales as well as home refinancings.  The published metro area data are not seasonally adjusted.  Theoretically, there should be no seasonal pattern to house prices:  As long-term durable assets, home values should not be affected by transitory and predictable short run variations.  However, measures of average or median prices often do display seasonal variation.  The explanation is that the mix of home sales varies seasonally, so that average house-price measures show increases during seasons when higher-value homes comprise a relatively larger share of total sales.  Although the weighted, repeat-sales methodology used by the FHFA is intended to control for these short-run fluctuations, it is quite possible for this seasonal effect to have in impact — particularly when there are relatively few underlying data observations.

With this possibility in mind, we tested for seasonality in the data for Arkansas’ Metropolitan Statistical Areas (MSAs).  Statistical tests rejected the presence of any stable seasonality, but did reveal evidence of small, time-varying seasonal fluctuations.  This was especially true for recent data, particularly during the period of relatively low sales volumes since the housing crash.  This is exactly the situation in which compositional variation might be expected to show through to the repeat-sales indexes.  Consequently, the MSA data presented below have been seasonally adjusted (using the standard Census X-12 ARIMA procedure) to provide a clearer view of underlying trends in Arkansas house prices.

Metro Area Data:
Seasonally adjusted measures of the FHFA all-transactions indexes show rising home prices in most, but not all of the state’s metro areas.  Quarterly growth rates were positive for all metro areas except Pine Bluff and Texarkana.  Both of these MSAs have experience cumulative price declines over the past two years; however, Texarkana house prices remain 3.8% above their level of five years ago.

Northwest Arkansas experienced that largest cumulative decline since the downturn in housing prices, but prices have been recovering, rising by more than 2-1/2% over the past two years. Prices have also been generally rising over the past two years in Fort Smith, Hot Springs, Jonesboro, and Little Rock.  House prices in the Memphis MSA have been fairly flat, and remain 12.4% below their levels of five years ago.

Source: Federal Housing Finance Agency; seasonal adjustment by the Institute for Economic Advancement
Source: Federal Housing Finance Agency; seasonal adjustment by the Institute for Economic Advancement

The recovery of house prices is a positive development for two related reasons:  First, the price increases suggest a long-awaited pick-up in demand.  The recovery of home values, in turn, is likely to spur additional sales activity:  discretionary buyers should be more willing to enter the market now that the underlying value of their potential investment is no longer depreciating.  Indeed, although it is still early in the sales year, home sales in 2013 appear to have gotten off to a good start.

Metro Area Unemployment & Employment – January 2013

The Bureau of Labor Statistics (BLS) announced new data on metro area employment and unemployment this morning. The BLS news release noted that unemployment rates were lower in January 2013 than a year earlier in 227 of the nation’s 372 metropolitan areas.  Most of Arkansas’ Metropolitan Statistical Areas (MSAs) fall into this category, with the exception of Memphis and Pine Bluff.  The largest year-over-year declines were in Fayetteville (-0.4%), Jonesboro (-0.3%), and Texarkana (-0.3%).

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

A look at the month-to-month changes in unemployment rates around the state might appear as cause for alarm.  As shown in the table below, unemployment rates were up sharply, with increases ranging from +0.6% in Fort Smith to +1.5% in Pine Bluff and Texarkana.

However, the primary explanation for these large increases is seasonal variation.  With the end of the holiday shopping season, cold weather suppressing construction activity, and many public schools still on winter break, unemployment always rises in January.  Indeed, the not-seasonally-adjusted numbers for statewide unemployment show an increase of more than a full percentage point in January — in contrast to the +0.1% (seasonally adjusted) that was headlined earlier this week.

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

The figure below illustrates the annual seasonal pattern for statewide unemployment rates.  Seasonal patterns for metro areas often have distinctive characteristics, but generally follow a similar pattern.  On average, the unemployment rate rises from December to January by nearly a full percentage point — due solely to recurring seasonal factors.  Looking ahead, the good news is that seasonal factors typically drive the unemployment rate down by more than one-half of a percentage point in both March and April.

These recurring swings in unemployment are interesting illustration of the seasonal cycle, but they can get in the way of evaluating labor market conditions relative to the business cycle.  That is, if we are interested in evaluating the recovery of labor markets from the last recession, seasonal components can give misleading signals when comparing monthly changes in not-seasonally-adjusted data.

Sources: Bureau of Labor Statistics, author’s calculations

The value of seasonal adjustment is that it removes the seasonal component leaving only the cyclical component (ideally, at least).  Although national and state unemployment rates are routinely released in seasonally-adjusted form, the metro area data are not — at least not in the “headline” news release.  However, the BLS does publish Smoothed Seasonally Adjusted Estimates, which are summarized for Arkansas’ metro areas for January 2013 in the table below.

By these estimates, unemployment rates were higher in Memphis, Pine Bluff, and Texarkana — but only by two- to three-tenths of a percentage point.  Rates were unchanged in Hot Springs, Jonesboro, and Little Rock.  After seasonal adjustment, unemployment rates were actually down for the month in Fayetteville and Fort Smith.

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

These statistics are far from perfect, and one should never put too much emphasis on data for a single month.  Nevertheless, they provide better information on the cyclical state of labor markets in Arkansas (i.e., how they are recovering relative to the last recession) than the not-seasonally adjusted estimates.

Payroll Employment
The annual benchmark revisions to the metro area payroll employment statistics were described in a previous post.  The table below summarizes the newly-revised data for January 2013.  From December to January, payroll employment was up in Fayetteville, Fort Smith, Hot Springs and Jonesboro.  Declines were registered for Little Rock, Memphis, Pine Bluff, and Texarkana.

Compared to January 2011, employment is higher or essentially unchanged in all of Arkansas’ metro areas except Pine Bluff.  Pine Bluff is also the only metro area that has experienced an ongoing contraction since the statewide employment trough of February 2010.  With the newly-revised data, only Fayetteville and Jonesboro have employment levels higher than before the onset of the last recession (December 2007).

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

 

Arkansas Home Sales in 2012 – Zero Growth

The Arkansas Realtors® Association (ARA) released new home sales data yesterday, covering the final two months of 2012.  November sales were up 6.6% from the previous year, while December sales were down 6.2%.  For the two-month average, home sales were essentially flat (+0.1%) compared to the same period in 2011.  The chart below shows that Arkansas home sales in 2012 were a repeat of the 2011 experience:  a typical seasonal pattern with no apparent change in trend.  In fact, the annual figures from the ARA show that sales in 2012 were down 1.1% for the year as a whole.

Source: Arkansas Realtors® Association

After seasonally adjusting the data to statistically remove recurring annual patterns, the flat-line for Arkansas home sales becomes even more evident.  In the figures below, seasonally-adjusted data are displayed for the monthly sales data and for quarterly totals.  Both charts illustrate the absence of any discernible trend over the past two years.

Sources: Arkansas Realtors® Association, Institute for Economic Advancement
Sources: Arkansas Realtors® Association, Institute for Economic Advancement

The release of sales data for November and December was, in some sense, anticlimactic — the final two months are typically among the slowest sales months of the year, so there was little chance of a substantial year-end surprise.  Sales during the peak summer months of 2012 had already shown that annual totals would be little-changed from the previous year.

Looking ahead to 2013, there are reasons to be cautiously optimistic:  Financing rates remain at all-time lows, home prices have appear to have bottomed-out, and general economic conditions continue to improve (albeit slowly).  Foreclosures and distressed sales will continue to be a negative factor, since foreclosures add to available inventory and tend to put downward pressure on prices.  Nevertheless, this is likely to be less of a drag on home sales over time as the pace of foreclosure activity continues to slow.  Overall, our forecast for home sales in 2013 remains a modest increase of about 6%.

Metro Area Employment and Unemployment — December 2012

Unemployment rates in Arkansas metro areas ratcheted up in December — a typical seasonal pattern.  After seasonal adjustment, however, rates were essentially unchanged across the state.  As shown in the table below, unemployment rates were lower than the previous year in all of Arkansas’ metro areas, with declines ranging from -0.3% in Memphis to -1.2% in Texarkana (not seasonally adjusted).  Across the nation, the Bureau of Labor Statistics reported that unemployment rates were down from the previous year in 290 of the 370 metropolitan areas, higher in 68 metro areas, and unchanged in 14 areas.

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

December unemployment rates were up from the previous month, but such increases are typical of December when schools and universities break for the year-end holidays.  The BLS smoothed seasonally adjusted estimates provide a more informative comparison of month-to-month changes.  The smoothed seasonally adjusted numbers show little change in unemployment rates across the state.  Rates ticked down by 0.1% in Fort Smith and Texarkana and ticked up by 0.1% all the other metro areas except Jonesboro (which was unchanged).

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

Payroll Employment
Nonfarm payrolls expanded in December for Jonesboro (+1.0%) and Hot Springs (+0.3%), but were unchanged or lower the state’s other metro areas.  Compared to December of 2011, employment was up in Fayetteville, Jonesboro, Pine Bluff, and Texarkana.  However, it was unchanged or lower in Fort Smith, Hot Springs, Little Rock, and Memphis.

Source: Bureau of Labor Statistics (Current Employment Statistics)

As detailed last month, the next publication of metro area employment data will incorporate the annual benchmark revisions.  The revised data will show a somewhat different picture of employment conditions around the state, particularly in the figures for cumulative employment changes over time.  The table below details our best estimates of what the revised data will indicate.  The new figures will show that employment declined during 2012 in only two metro areas:  Little Rock and Memphis.  The revised data are expected to show a substantial upward revision to the data for Fort Smith, with the result that cumulative changes since the trough of February 2010 will be positive for all metro areas in the state.   On the other extreme, payroll data for Texarkana are expected to be revised downward — resulting in the reversal of cumulative gains since the pre-recession peak of December 2007.

Sources: Bureau of Labor Statistics, Institute for Economic Advancement

These expected revisions are only estimates.  Data for metro areas can also be subject to substantial changes in estimated seasonal factors, so the post-benchmark data may differ from the figures summarized in the table above.  Nevertheless, the magnitude of expected revisions for Fort Smith and Texarkana, in particular, are likely to be notable.