Page 12 – Arkansas Economist

Arkansas GDP – 2022:Q2

by Michael Pakko
State GDP
September 30, 2022

New data for state GDP was released today by the Bureau of Economic Analysis. Arkansas GDP was reported to have declined at an annual rate of 3.0% in the second quarter compared to a more modest rate of decline of 0.6% for the United States. Arkansas GDP was previously reported to have declined in the first quarter of 2022 as well, but that statistic has been revised to show a growth rate of +6.5%. Arkansas’ second quarter decline was among the largest in the nation, exceeded only by Indiana (-3.3%), Connecticut (-4.7%), and Wyoming (-4.8%). Overall, GDP decreased in 40 states plus the District of Columbia.

Not only were the data for 2022:Q1 revised, but today’s release also included revisions back to 2017:Q1. The revisions increased the cumulative level of Arkansas GDP considerably: as of the first quarter, revised GDP was 3.9% higher than previously-reported estimates. The largest revisions were for 2020:Q1 (just before the pandemic-related downturn) and the revision for the first quarter of 2022.

With the upward revision to the path for Arkansas GDP, the state’s output shows even more indication of recovery since the pandemic recession. Cumulative growth from 2019:Q4 stood at 6.5% for Arkansas, compared to 3.5% for the U.S.

Breaking down the sources of the second quarter decline in GDP, we see that Construction, Manufacturing and Wholesale trade were substantial negative components for both Arkansas and the U.S. Nationally, Agriculture was a weak sector, although the positive contribution of agriculture to Arkansas GDP was substantial. The weakest sector for Arkansas, accounting for over three-quarters of the overall decline, was Management of Companies and Enterprises. It’s not clear how to account for this factor, but we can note that the second quarter decline represented a partial offset of a sharp upward spike in the first quarter.

One other interesting piece of information that can be gleaned from the GDP report regards inflation. GDP is reported for both nominal (dollar-value) and real (inflation-adjusted) measures. The ratio between the two defines an implicit price index for GDP. The chart below shows year-over-year changes for the implicit price index for private-sector GDP. It suggests that there was less disinflation in Arkansas than the rest of the country in 2020, and a higher rate of price increases since than. From 2021:Q2 to 2022:Q2, this measure of inflation was 9.7% for Arkansas compared to 8.2% for the U.S.

The data showing larger price increases for Arkansas GDP than for the U.S. could indicate the obvious conclusion: that inflation is running higher here in Arkansas. On the other hand, if the BEA’s price adjustments are overstating Arkansas inflation, then real GDP growth could be understated. There is certainly enough uncertainty about future data revisions to not rule out the latter possibility.

An Economic Impact Analysis of the Proposed Arkansas Adult Use Cannabis Amendment

by Michael Pakko
General Information
September 28, 2022

At a press conference today, the results of a study by AEDI on the economic impact of the proposed Arkansas Adult Use Cannabis Amendment were presented. Here is a link to that article:

https://arkansaseconomist.com/wp-content/uploads/2022/09/Adult-Use-FINAL.pdf

Arkansas Employment & Unemployment – August 2022

The newest reports on employment and unemployment in Arkansas indicate some signs of weakening conditions in the state’s labor markets, but payroll employment continues to expand at a healthy pace.

The headline news was an increase in the unemployment rate from 3.3% to 3.4%. In light of the 0.2 percentage point increase in the national unemployment rate in August (to 3.7%), it is not surprising to see Arkansas’ rate edge up slightly as well.

The increase in the unemployment rate reflected an increase of 1,020 in the number of unemployed and a decline of 2,648 in the number of employed. August was the fifth consecutive month of increasing numbers of unemployed persons, up a total of 4,177 since March. The decline in the number of employed represents a departure from the rising employment trend that had prevailed since December of 2021. With the decline in employment exceeding the increase in unemployment, the total labor force (and the labor force participation rate) declined for the month.

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

Although the overall trend in the number of employed has been increasing for over two years, the household employment series has yet to recover to pre-pandemic levels.

Payroll Employment
In contrast to the relatively sluggish growth of household employment, nonfarm payroll employment continues to register strong gains. For August, payroll employment was up 3,700 and the gain for July was revised higher by 1,700 jobs (seasonally adjusted data). Although nonfarm payroll employment growth was sluggish in the early months of the year, there have been 13,400 net new jobs created since March—an increase of 1.0%.

Employment growth in service-providing sectors was generally strong in August; however, there were job losses in Construction, as well as in the Trade, Transportation and Utilities super-sector. Job gains were particularly strong in some of the sectors that have struggled to recover from the pandemic-recession, including Leisure and Hospitality Services (+1,100 jobs) and Other Services (+1,500 jobs).

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

Compared to a year ago, payroll employment is up 39,000 or 3.0%.the only sectors that have contracted over the past year are Mining & Logging, Construction, and Retail Trade. Relative to the business-cycle peak of February 2020, most sectors have shown net increases, with the exceptions of Leisure and Hospitality Services and Other Services. Government employment is still down significantly from pre-pandemic levels, primarily reflecting employment in public schools, colleges and universities.

JOLTS Data
New state-level data from the Job Openings and Labor Turnover Survey (JOLTS) was also released this morning. Lagging the employment figures by one month, today’s report for July suggested some leading indicators of slightly weakening conditions.

Todays JOLTS report noted that Arkansas was among the states with the largest decline in job openings for the month (both in terms of numbers and rates). As a result, the number of job openings per unemployed worker fell below 2.0 for the first time this year.

*Source: Bureau of Labor Statistics, Job Openings and Labor Turnover Survey (JOLTS)*

The JOLTS report also cited Arkansas as one of the states that showed a statistically significant decline in job separations, with the Separation Rate falling from 4.7% of the total number employed to 4.1%. The decline in separations was concentrated in the Quits Rate, which fell from 3.5% to 3.0%. Although the month-to-month decline in quits was statistically significant, the trend remains high, consistent with an ongoing process of labor market churning that has come to be known as “the great resignation.” The Quits Rate for Arkansas remains well above the national average.

The decline in Job Openings, Quits, and overall Separations indicate some narrowing of the gap between job openings and available workers, and also suggest that the labor force might be settling into a more stable expansion path.

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Seasonally adjusted data for Arkansas nonfarm payroll employment, reported in a format consistent with the monthly news release from the Arkansas Division of Workforce Services, can be found here: Table-Seasonally Adjusted NFPE.

Metro Area Employment and Unemployment – July 2020

by Michael Pakko
Employment/Unemployment, Metro Areas (MSAs)
September 1, 2022

The latest report on metro area employment and unemployment mirrors the statewide report released two weeks ago. Unemployment rates generally edged higher, while payroll employment surged.

As shown in the figure and table below, unemployment rates were unchanged in Northwest Arkansas and Texarkana but were higher in the state’s other metro areas. Hot Springs and Pine Bluff saw increases of 0.2 percentage points.

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

Although rates edged higher in July, they are still well below the levels of a year ago, having fallen by at least one-half of a percentage point over the past twelve months.

Payroll Employment
Nonfarm payroll employment increased sharply across the state. Hot Springs was the only exception, with payrolls unchanged for the month. In Little Rock and Texarkana, the percentage increase for July exceeded even the unusually-large 0/9% increase reported for the state. Compared to a year ago, employment increases range from 1.5% in Hot Springs to 5.4% in Northwest Arkansas. With the July gains, only Hot Springs and Pine Bluff remain below pre-pandemic employment levels.

The figure below shows payroll employment trends since the start of 2020. Interestingly, the two metro areas that remain below pre-pandemic employment levels, Hot Springs and Pine Bluff, experienced the two opposite extremes during the pandemic months: Hot Springs was the hardest-hit in early 2020, declining by nearly 18% from February to April, while the downturn in Pine Bluff was less than 7%.

Arkansas Employment and Unemployment – July 2022

On its surface, the latest data on Arkansas employment and unemployment might appear disappointing, but the data also point to some positive developments.

The unemployment rate increased slightly, rising from 3.2% in June to 3.3% in July. Even with the uptick, the unemployment rate is still extraordinarily low and remains below the national unemployment rate (although the difference is not statistically significant).

Underlying the change in the unemployment rate, the data show that the number of unemployed Arkansans increased by 1,084 while the number of employed was essentially unchanged (-36). The rising number of unemployed is certainly a concern, particularly in the context of July being the fourth consecutive month of increase. On the other hand, the labor force has continued to expand. As net new entrants to the labor force expand the pool of workers, it is not surprising to see a transitory increase in the number of unemployed. Meanwhile, the stalling of employment growth in July appears to be more of a pause in steady growth, rather than a change in trend.

Payroll Employment
The monthly press release from the Arkansas Division of Workforce Services reported a net decline of 2,900 jobs in July. However, that not-seasonally adjusted number includes 10,800 in government employment, primarily reflecting the summer break at public schools and universities. Net of this sharp, but perfectly explicable and expected decline, payroll employment in other sectors showed healthy increases.

Looking at the seasonally adjusted data, Nonfarm Payroll Employment increased by 11,200 jobs, an increase of 0.9%. The news release from the Bureau of Labor Statistics noted that Arkansas had the second-largest percentage increase of employment in the nation (Hawaii’s growth for the month was 1.3% and Missouri tied with Arkansas at 0.9%). Increases were evident in nearly every sector, including seasonally-adjusted government employment. Gains were particularly notable in Health Services and Leisure & Hospitality Services. As a whole, the Trade, Transportation & Utilities super-sector gained 1,600 jobs Goods-producing industries also added jobs in July, with increases in Construction and both Durable- and Non-Durable manufacturing sectors expanding.

Compared to July 2021, payroll employment is up 36,600 jobs—an increase of greater than 2.8%. Some sectors are down from their highs from the summer of 2021, including Construction and Retail Trade. However, most sectors have shown significant growth, particularly those that continue to recover from the pandemic/recession (e.g. Leisure and Hospitality Services, Health Services and Transportation).

With the July increase of 11,200 jobs, along with an upward revision of 1,500 to June’s total, payroll employment is now 14,800 (2.0%) above the pre-pandemic/recession month of February 2020. Nationwide, payroll employment surpassed its February 2020 peak for the first time (barely) in July.

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Metro Area Employment and Unemployment – June 2022

by Michael Pakko
Employment/Unemployment, Metro Areas (MSAs)
August 3, 2022

The latest report on metro area employment and unemployment was just about as un-newsworthy as the state-level report that came out two weeks ago. Unemployment rates were little changed from May to June, with up-ticks of one-tenth percent in Fayetteville, Fort Smith, and Jonesboro; and a one-tenth down-tick in Pine Bluff. Unemployment rates have remained remarkably low and stable. In the past six months, the only cumulative changes of more than one-tenth of a percentage point were in Memphis (-0.4) and Texarkana (-0.3). Compared to June 2022, unemployment rates are down by about one percentage point across the state. Unemployment rates in Memphis and Hot Springs have fallen the most in the past 12 months, attributable to the fact that rates in those metro areas were higher than others during the pandemic-recession.

Payroll Employment
Changes in nonfarm payroll employment were mixed across metro areas. Six of the eight metro areas saw increases in employment, with the largest gains in Pine Bluff (+1.0%) and Jonesboro (+0.7%). Employment in Little Rock declined by 0.4% and was down slightly in Fort Smith.

Compared to a year ago, employment growth has been relatively strong in all metro areas. The highest growth rates have been in Fayetteville (+5.3%), Memphis (+3.2%) and Jonesboro (+3.0%) Those three metro areas are also the only three where total employment was higher in June 2022 than it was in February 2020, just prior to the pandemic-recession.

Arkansas Employment and Unemployment – June 2022

Arkansas labor market conditions were little-changed in June. The unemployment rate was unchanged at 3.2%, paralleling the national unemployment rate, which was unchanged at 3.6%.

The number of unemployed workers crept slightly higher again in June, rising by 688 compared to the May figures. The number of unemployed has increased for three consecutive months, rising by approximately 2,000 since April. The number of employed rose by 2,050 in June pushing the labor force up by 2,738.

Payroll Employment
Nonfarm payroll employment increased by 4,100 in June, recovering from a downwardly revised decline of 4,400 in the previous month (seasonally adjusted data). Solid job-growth was seen throughout the goods-producing sector and in Trade, Transportation and Utilities. The only sectors where employment declined in June was Professional and Business Services, Leisure and Hospitality Services, Other Services and Government. The decline in Government employment was concentrated in the state and local government, associated with employment in education. The Department of Workforce Services also cited declines in temporary workers at schools as contributing to the decline in the Administrative & Support Services component of Professional and Business Services.

Construction employment increased by 1,100 jobs, but remains slightly below the level of a year ago. Retail Trade, Government Services,and Mining & Logging are also down from June 2021. Total employment over the past 12 months has increased by 32,500, representing an increase of 2.5%. Gains have been small in recent months, however. The cumulative increase in employment since January has been only 500 jobs. Compared to the business-cycle peak of February 2020, Arkansas employment is up by 9,200 (1.0%). A comparable calculation for the United States shows that the nation has yet to recover to pre-pandemic levels, remaining 0.3% below the employment total of February 2020.

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Metro Area Employment and Unemployment – May 2022

by Michael Pakko
Employment/Unemployment, Metro Areas (MSAs)
July 6, 2022

The latest report on metro area employment and unemployment last week showed little change in unemployment rates across the state. The data for May showed unemployment rates unchanged from April in six of the state’s metropolitan areas, with rates ticking up one-tenth of a percentage point in Jonesboro and Pine Bluff. Compared to a year ago, rates are down by more than a full percentage point in all metros.

A comparison across metro areas shows that relative unemployment rates have returned to a pattern similar to before the pandemic/recession. Comparing May 2022 with May 2019, the relative ranking of unemployment rate is essentially unchanged, with lower rates today in Northwest Arkansas, Fort Smith and Jonesboro. In the remaining metro areas, unemployment rates are slightly higher than they were three years ago.

County Unemployment Rates
A comparison of unemployment rates across counties for May 2022 indicates that the relative rates across regions of the state have similarly returned to a pattern reminiscent of before the pandemic/recession. Rates are lowest in the north and west, with Benton and Washington Counties having the lowest rates in the state, 2.2%. The highest unemployment rates are in the south and east, where Chicot County has the statewide high of 7.4% and Ashley, Mississippi, and Phillips Counties all having unemployment rates of at least 6%.

As is the case with comparisons across metro areas, the counties with the highest unemployment rates also tend to be those where rates are higher than before the pandemic/recession. Unemployment rates in May 2022 exceeded rates of May 2019 by more than a full percentage point in Ashley, Desha, Mississippi, and Phillips Counties.

Metro Payroll Employment
On the nonfarm payroll side of the employment report there was somewhat more variation among metro areas. Hot Springs, Jonesboro and Pine Bluff showed monthly increases of at least 0.5%. Employment was up slightly in Little Rock, down somewhat in Memphis and Texarkana, and unchanged in Fayetteville and Fort Smith. All metro areas have shown solid growth over the most recent 12 months, with growth rates ranging from 1.3% in Pine Bluff to 5.3% in Northwest Arkansas.

Relative to the cyclical peak of February 2020, employment has not yet returned to pre-pandemic levels in Fort Smith, Hot Springs, Pine Bluff and Texarkana.

Arkansas Retail Sales – 2022:Q1

by Michael Pakko
Retail Sales
June 28, 2022

The latest data on AEDI’s measure of Arkansas Retail Trade and Food Service Sales indicates that consumer spending remained robust in the first three months of the year. The typical seasonal slowdown in January and February was somewhat sharper than usual, so the seasonally adjusted measure of Retail Sales showed small month-to-month declines (-1.3% in January and -0.6% in February). Sales in March rebounded sharply, however, with seasonally-adjusted retail sales rising 4.6%. Year-over-year growth is somewhat distorted by events last year. In particular, severe winter weather in February 2021 interrupted an acceleration in spending that resumed the following month. If we consider quarterly averages, growth from 2021:Q1 to 2022:Q1 was 10.8%.

*Sources: Arkansas Department of Finance & Administration, Arkansas Economic Development Institute*

A comparison with U.S. data shows that Arkansas retail sales continue to trend higher than the national average. Calculating from a pre-pandemic base period of 2019:Q4, Arkansas retail sales had cumulatively risen 33.5% as of March 2022. For the U.S., the comparable calculation is an increase of 28.2%.

*Sources: Arkansas Department of Finance & Administration, Arkansas Economic Development Institute, U.S. Census Bureau*

The table below shows year-over-year growth rates for the major categories of spending in the retail sales statistics over the past two years. Growth figures are reported for first-quarter averages. By this metric, retail sales increased 15.4% in 2021 and 10.8% in 2022. Data for the U.S. show a similar pattern, with double-digit growth in both years.

Growth rates among various sectors differed considerably, reflecting various rates of recovery from the 2020 pandemic/recession. The fastest-growth sector from 2021 to 2022 has been Gasoline Stations, with the increases driven exclusively by higher prices. (According to state gasoline tax statistics, the number of gasoline gallons sold in 2022:Q1 was down 0.1% from 2021:Q1.) Some of the slower-growing sectors (e.g. Health and Personal Care; Sporting Goods, etc.) has previously shown significant increases in 2021.

Retail Sales and Inflation
Of course, gasoline is not the only good that has been rising in price. Consumer price inflation was 8.0% from 2021:Q1 to 2022:Q1. Consequently, if we adjust total retail sales for the all-items CPI, the increase in “real” (inflation adjusted) spending over that period was approximately 2.6%. After inflation adjustment, the rising trend in spending over the second half of 2021 turns out to represent little if any real growth.

*Sources: Arkansas Department of Finance & Administration, Arkansas Economic Development Institute, U.S. Bureau of Labor Statistics*

In some sectors, adjusting for inflation can have important implications for longer term trends. For example, nominal spending at Food and Beverage Stores appears to have permanently shifted higher in the post-pandemic era. After adjusting for Consumer Prices on Food at Home, grocery and liquor store sales appear to be trending back toward pre-pandemic spending patterns.

Similarly, rapidly rising prices for new and used automobiles has affected the nominal vs. real behavior of the Motor Vehicles and Parts component of retail sales. In nominal terms, this component has risen 30.0% from 2020:Q1 to 2022:Q1. The CPI for New & Used Autos, however, rose 27.1% over the same period. Consequently, real spending on motor vehicles and parts is now only slightly higher than at the start of the pandemic/recession.

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Documentation of Methodology is available here: Arkansas Retail Sales—A New Data Set from AEDI.
NOTE: As of the release of data for December 2021, the seasonal adjustment procedure has been updated from the crude regression-based approach used in earlier analyses. With data covering over four years, it is now possible to implement more sophisticated techniques. Specifically, we have implemented a version of the Census X-13 ARIMA model to seasonally adjust the data by sector.

Data for Arkansas Retail and Food Service Sales for July 2017 through March 2022 are available in an Excel Spreadsheet: Arkansas-Retail-Sales-March-2022. 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 Employment and Unemployment – May 2022

Labor markets in Arkansas continue to display tight conditions with unemployment near historic lows, yet payroll employment growth seems to have stalled in the first half of 2022.

The report for May showed the unemployment rate unchanged at 3.2%. The U.S. unemployment rate was also unchanged for the month, remaining at 3.6% (the difference is not statistically significant).

Underlying the unemployment rate calculation: The number of unemployed edged slightly higher (+178) and the number of employed rose by 2,367, resulting in a net gain in the labor force of 2,545. The increases in the number of employed and in the labor force have been substantial over the first 5 months of the year, but both measures remain well-below pre-pandemic totals.

Payroll Employment
In contrast to the measures of employment from the household survey, the payroll side of the employment report indicates that total employment surpassed pre-pandemic levels in November 2021. However, growth since then has been minimal. Today’s report showed a monthly decline of 2,300 jobs, and the data for April were revised downward by 1,400 (seasonally adjusted data). Total nonfarm payroll employment for May stood at 1,307,500, cumulatively down 1,500 jobs since January. Relative to the previous business cycle peak (February 2020), Arkansas payroll employment is up by 0.9%. Nationwide employment remains slightly lower than in February 2020–down 0.5%.

Although the not-seasonally adjusted data showed a slight increase in payroll employment for May, the typical growth in employment that takes place between January and mid-year has been lackluster. A breakdown of the seasonally adjusted decline of 2,300 jobs in May shows particularly prominent job-losses in Retail Trade and Health Services–two sectors that were hard-hit during the early phases of the pandemic but which have showed significant recovery since. Similarly, Leisure and Hospitality services showed a monthly decline after significant progress toward recovery. Other service-providing sectors showed job gains, including Professional & Business Services and Financial Services.

Most sectors have recovered relative to the pandemic-recession, but Leisure & Hospitality Services and Government (particularly state and local education-related employment) remain below the previous peak of February 2020.

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