The October unemployment rates for Metropolitan Statistical Areas (MSAs) were released by the BLS this morning. The report on state unemployment rates released two weeks ago showed that Arkansas’ unemployment rate rose by one-half of one percent to 7.6 percent. The new data for Arkansas’ MSAs show similar sharp increases.
As noted in earlier posts, the MSA data are not seasonally adjusted by BLS. The unadjusted data show that unemployment rates rose slightly or remained steady in October. However, October is a month in which seasonal movements typically result in a falling unemployment rate. After accounting for this recurring pattern, seasonally-adjusted measures show increases in the range of 0.4 to 0.6 percent.
The table below summarizes the MSA unemployment rate data for October.
The Bureau of Labor Statistics released its latest report on state employment and unemployment this morning. The obvious headline for Arkansas is that the unemployment rate rose by one-half of a percentage point to 7.6 percent. This is the highest rate for Arkansas in over two decades–clearly not good news. Nevertheless, the state’s unemployment rate remains well below that national average rate of 10.2 percent.
As alarming as the unemployment rate increase appears, one should never become too concerned about a single observation. Indeed, the Arkansas employment data have recently been subject to considerable month-to-month volatility. Recall that the unemployment rate jumped to 7.4 percent in July before falling back to 7.1 percent in August and September. The chart below illustrates a three-month moving average of the unemployment rate, smoothing out some of the monthly variability. By this measure, the rate has been fairly steady at around 7.25 percent since mid-summer.
Source: Bureau of Labor Statistics
The data on employment in Arkansas has been similarly volatile. In a post last month, I noted that the household survey and payroll survey were providing mixed signals about employment in September. The household survey showed a gain of 8400 jobs, while the payroll survey showed a decline of 7700 jobs. In the latest report, the September employment figure was revised upward, reducing the August-September job loss to 5300. For October, payroll employment was up by 4200 jobs, resulting in a net loss of only 1100 jobs over the two month period. Meanwhile, the household survey for September was revised upward (now showing an increase of nearly 8600 jobs), while the newly-released number for October showed a decline of 4100 jobs.
The chart below puts some of these monthly changes into context. Both measures of employment showed sharp declines from about October 2008 until March 2009. While falling slightly since then, Arkansas employment has evidently stabilized. We continue to see month-to-month movement in both series (some of which is smoothed out by considering a simple average of the two), but no significant upward or downward trend is discernable.
Source: Bureau of Labor Statistics
October’s increase in the unemployment rate will surely generate alarmist headlines, but overall the October employment report shows a continuation of the labor market performance we’ve been observing since spring: sluggish but not deteriorating.
Even before the onset of the recent recession, residential real estate markets have been at the heart of our national economic tribulations. And having just purchased a home in the Little Rock area, I’ve recently taken a personal interest in the Arkansas housing market. So how did the Arkansas housing market fare during the recession, and is it now recovering?
Data on existing home sales in Arkansas are available from both the National Association of Realtors® (NAR) and the Arkansas Realtors® Association (ARA).
Last week (on November 10), the NAR released its quarterly report on state-level existing home sales. The report showed that the markets are improving in most areas of the country, with 45 states and the District of Columbia showing sales increases in the third quarter relative to the second quarter (seasonally adjusted). Arkansas was one of the states showing an increase, up 2.7%. This was the third consecutive increase for Arkansas home sales, following a 4.2% rise in the second quarter and a 3.6% increase in the first quarter. The magnitudes of the quarterly gains are relatively modest compared to some other states, but Arkansas was one of only 6 states to experience sales increases over all three quarters.
Although these data are indicative of the performance of the Arkansas market relative to other parts of the country, they do not necessarily represent the most accurate assessment of market conditions for the state. According to the the NAR’s own description of its methodology, the monthly survey covers only about 30-40% of all existing home sale transactions. The sample data are used to construct aggregates for the four census regions of the U.S., then the State data are derived from those totals.
Indeed, according to Ethan Nobles of the ARA, it is his understanding that the NAR survey excludes some of the important local markets in Arkansas. The ARA releases its own monthly summary of home sales, consisting of the total number of homes sold by Realtors® across the state. The data are subject to some revision as late reports come in, but they represent (as best as possible) a full accounting of the number of homes sold in the state.
The most recent report from the ARA came out earlier this week (November 16). It shows that home sales were up in September over the previous year. This was the second month in the past three that showed a year-over-year increase. The data, shown in the chart below, suggest that home sales in Arkansas have been on a recovery path throughout 2009.
Source: Arkansas Realtors® Association
However, it is also evident from the chart that there is a pronounced seasonal pattern in the data. Home sales tend to be lower during the winter months, and higher during the spring and summer. This makes it difficult to discern trends over periods less than a year in length. And in particular, it is hard to tell how much of the increase since January 2009 represents actual growth as opposed to regular seasonal movement.
With a longer data series, it would be possible to apply standard statistical techniques directly to the data. In the absense of a long time-series, however, more rudimentary techniques can suffice: The NAR’s monthly report on existing home sales provides estimates of both seasonally-adjusted and not-seasonally-adjusted estimates for the U.S. and the four census regions, over the past 12 months. The ratio of these two sets of estimates provide implicit seasonal factors, as calculated by the NAR (using a census X-11 procedure).
Applying the implicit seasonal factors for the Census South Region to the data for Arkansas from the ARA, we obtain a rough estimate of seasonally-adjusted Arkansas sales. The chart below illustrates the result of this procedure, with the data multiplied by 12 (so they present annualized measures), and averaged over quarters (to smooth out month-to-month variability).
Source: Arkansas Realtors® Association (ARA), National Association of Realtors® (NAR), and the Institute for Economic Advancement (IEA).
It is clear from this chart that home sales in Arkansas were sliding downward before and during the first part of the recession, then dropped sharply in the fourth quarter of 2008. Since then, sales have steadily increased. This confirms the pattern observed in the NAR data suggesting that residential real estate markets in Arkansas have been consistently improving since the beginning of the year.
The UALR Arkansas Economic Forecast Conference took place today. I thank all of those who attended, and extend special thanks to the participants: Richard Bell, Roby Brock, Lane Kidd, Chris Masingill, David Sanders and Julie Stackhouse.
Proceedings of the conference are available on the
September data on Arkansas employment and unemployment were released by the Bureau of Labor Statistics (BLS) this morning. The report provides mixed signals.
The household survey shows that the unemployment rate remained stable in September at 7.1%. Arkansas is now 2.7 percentage points below the national unemployment rate. The household survey also showed that the number of employed rose by more than 8400 from August to September. The number unemployed also rose, but only by 539 jobs.
On the other hand, the payroll survey showed a large decline in the number of Arkansas jobs. The new data show a seasonally-adjusted decline of 7700 jobs in September. Moreover the number for August was revised down by 1600 jobs. By this measure, the trend of stabilizing employment would seem to have collapsed.
Generally speaking, the payroll numbers are more accurate and provide more detail on labor market conditions. However, they are also subject to significant revisions from month to month, and undergo a major benchmark revision in the spring of each year. We may find that the September payroll employment report is a statistical fluke. Nevertheless, we should not dismiss the numbers just yet. The discrepency between the two surveys is an indication of the degree of uncertainty that we have regarding the employment outlook for Arkansas.
Governor Mike Beebe announced today that he had “accepted a recommendation by the Arkansas Department of Finance and Administration to cut the state budget by $100 million for the current fiscal year.” This amounts to a budget reduction of just over 2 percent. The background to this announcement was a report from the Department of Finance and Administration (DF&A) earlier this month that showed that Arkansas tax revenues were sharply lower than expected in the first quarter of fiscal year 2010 (July-Sept 2009).
Year-to-date gross general revenues were down by 7.2 percent from the previous year, and were 6.4 percent below the general revenue forecast. Net available general revenues were down 3.3 percent from the previous year and 7.1 percent below forecast. The report noted that “in percentage terms Corporate Income is below forecast the most (-22.1 percent [-$19.9 million]), but Gross Receipts [sales taxes] are down by a greater amount in dollar terms (-$61.6 million [-10.8 percent]).”
These declines are disconcerting, especially in the context of recent signs of renewed growth in the Arkansas economy. However, there are reasons to believe that this is a temporary problem and that state revenues will recover sufficiently to meet revised revenue projections in the latter part of the fiscal year.
First, tax revenues are recorded by DF&A in the month that they were received, rather than in the month that the tax liabilities were incurred. Reporting and payment lags mean that revenues received in the July-September period reflect economic conditions earlier in the year when the recession was having a greater impact on the economy. Recent signs of stabilization should show through to revenue receipts in coming months.
More important, as the economy recovers from the recession in coming months, economic activity will pick up — further expanding the tax base and revenue receipts.
The depth of the nationwide recession and its impact on the Arkansas economy were more severe than anticipated. Consequently, state revenues will be lower than earlier expected. With prospects of an improving economy on the horizon, however, a modest 2 percent reduction in annual revenue projections and budgetary authority should be sufficient to correct the state’s budget imbalances. As Governor Beebe put it, “Just like any family or business, state government must live within its means.” His response to unexpectedly sharp declines in revenue is a prudent fiscal adjustment.
This morning, the Bureau of Labor Statistics (BLS) released its most recent data on employment and unemployment for Metropolitan Statistical Areas (MSAs). As described in a previous post, the MSA data are generally not seasonally adjusted. When it comes to comparing statistics from month to month, however, it can be important to adjust for regular seasonal patterns. The table below reports unemployment rates for Arkansas’ MSAs. It shows both the unadjusted data from BLS, as well as data that are seasonally adjusted using standard statistical techniques.
The seasonally adjusted data show that the unemployment rate remained constant from July to August in four of seven Arkansas MSAs. The unemployment rate fell slightly both in Jonesboro and in the Little Rock MSA. It rose by two-tenths of one percent in Texarkana. Unemployment rates around the state continue to be considerably higher than they were a year ago, but have remained fairly stable over the summer months.
Unemployment Rates for Arkansas MSAs
The data on nonfarm payroll employment for MSAs is similarly unadjusted for seasonal patterns. After seasonal adjustment, trends over time are more easily identifiable. The set of figures below illustrates the trends for Arkansas metro areas. As with the state-level data on employment, the data are characterized by three distinct sub-periods since the onset of the recession (particularly for the two largest MSAs – Little Rock and Fayetteville): From December 2007 until about October 2008, employment growth was slow, but with no large job losses evident. The largest job losses occurred during the period from October 2008 through March 2009. Since March, employment has remained fairly stable.
In some of the MSAs, the recession had no discernible effect at all: Jonesboro experienced steady job gains throughout the recession. In Pine Bluff, the recession didn’t have much of an impact on a steady decline in jobs. In both Fort Smith and Hot Springs, employment has rebounded over the past three months. In fact, both Hot Springs and Jonesboro had more jobs in August 2009 than they did at the start of the recession in December 2007 (seasonally adjusted).
It’s too soon to say whether the upturn in job growth that we’re seeing in some of Arkansas metro areas reflects an incipient recovery from the recession. We will continue to monitor the data, looking for evidence of a broad-based, statewide upturn.
The first event of the new Arkansas Economic Issues Breakfast series took place this morning. Linking seven different locations around the state in a statewide videoconference presented some technological challenges, but we managed to pull it off without any serious problems. Governor Beebe kicked-off the event, then we saw presentations by Kathy Deck in Fayetteville, Alan McVey in Jonesboro, and me in Little Rock. The meeting also included a discussion group session where attendees talked about some of the issues relevant for their local economies.
In addition to the locations in Little Rock, Fayetteville, and Jonesboro, simultaneous sessions took place in Magnolia, Monticello, Pine Bluff and Fort Smith. Across the state, we estimate that over 800 people participated.
All the background inforamation, presentation materials, and summaries of the discussion groups will be posted shortly on the Arkansas Economic Issues Breakfast website.
In contrast, conditions in the Louisville zone were reported as “mixed.” In the St. Louis zone conditions “ranged from weak to mixed.” In the Memphis zone, economic activity “continued to weaken during the third quarter of 2009.” Relative to these neighboring regions, the summary of Arkansas’ situation is clearly more optimistic.
The Burgundy Book provides useful information about the regional economy. I don’t say that just because I am a former Federal Reserve economist who helped to develop the Burgundy Book program. Solid data on regional and local economic conditions can be scarce and is often out-of-date. The Burgundy Books provide anecdotal information that can be used to fill in the gaps—especially when it comes to up-to-date assessments of economic conditions.
A bit of background information: The Federal Reserve System puts out a report called the “Beige Book.” (The formal title is “Summary of Commentary on Current Economic Conditions by Federal Reserve District,” but it’s easier to refer to it by the color of its cover.) The Beige Book reports information derived from survey data, reports from members of the Fed’s Boards of Directors, and other informal contacts with businesses on a local level. The Burgundy Books parse that information for the St. Louis Federal Reserve District into separate reports for the district’s four local “zones.”
Here are some highlights of the September report for the Little Rock zone:
Consumer Spending: Among general retailers, “75 percent noted that sales levels met their expectations and 25 percent reported sales above expectations… The sales outlook for September and October was mostly optimistic among general retailers,” with 83 percent expecting a sales increase relative to 2008.
Manufacturing and Other Business Activity: “Manufacturing … has begun to expand slightly since our previous report, with a few firms reporting an increase in new hiring activity… Firms in the aerospace, fabricated metal, furniture, and paper product manufacturing industries announced plans to expand operations and hire new workers… Contacts in the service sector reported new hires related to government services or as a result of federal stimulus dollars. However, firms in business support services reported layoffs as they consolidated operations.”
Banking and Finance: “On net, lending activity for commercial and industrial loans decreased slightly, despite a few isolated reports indicating an increase in demand for these loans. Reports on the level of lending to consumers ranged from unchanged to slightly increased… Residential mortgage lending activity decreased slightly, with several contacts indicating that new loan applications and refinancing activity have both slowed since the second quarter. Most contacts reported an increase in delinquencies, although to a lesser extent than earlier in the year. ”
A chart from the Little Rock Zone Burgundy Book
This report reinforces an assessment that I have been seeing in the economic data and hearing from focus groups around the state: Arkansas is poised to recover from this recession in relatively good shape.
I’ll be the guest on the AETN television program Unconventional Wisdom with David Sanders this evening (6:30 PM). Watch for it on your local Arkansas public television station, or see the video at http://www.aetn.org/programs/unconventional/video.
