Total Non-Farm Employment

Comparing Arkansas’ total non-farm employment to the U.S. indicates the State is performing better relative to the U.S.  The chart below graphs the natural logs of the monthly values for each series normalized to January 2015. Normalization to this date reflects the relative performance beginning when Governor Hutchinson took office.

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Note that the slope of the Arkansas line exceeds that for the U.S. beginning January 2018 until January 2019. The Arkansas slope dips a bit relative to the U.S. after January 16 the recovers until the spring 0f 2020. The the coronavirus hit hammering both AR and the U.S.

Arkansas non-farm employment growth rate dipped a bit in mid 2017 and again in January 2019.  Now, both the US and AR normalized employment have tanked.

The outlook for total non-farm employment is shown in the following graph. Following the sharp decline in the Spring, the recovery is slow and flattens out in the Spring of 2021.

Note employment in Arkansas is closely aligned with employment in the U.S.  A statistical analysis in Arkansas employment related to the U.S. employment indicates that 99.9% of the variation in Arkansas employment is ‘explained’ by the variation in U.S. employment. One consequence of this strong dependency is that there are very few policy options available to Arkansas that will have a direct impact on the State’s employment.

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The Bureau of Labor Statistics updates the State’s employment mid-month following the end of the previous month.

Updated 19 January 2021 using the data ending November 2020.

SOURCE: FRED, US – PAYEMS, ARKANSAS – ARNA and the author’s calculations

Lottery Revenues

A graph reveals that lottery revenues peaked in May 2011 (not shown) followed by a long decline reaching a minimum in December 2014. A major revamp of the lottery yielded a strong upward thrust which peaked in August 2016 followed by a gradual decline. The data suggests when new games are added lottery revenues increase. Lottery revenues vary seasonally by month of the year.

Using monthly total monthly sales thru December 2020, the forecast for total 12 month sales thru June 2021= $571,311,000.  The Departments official lottery revenue forecast ending June 2021 is $497,000,000. The updated forecasts show a peak in April 2021 followed by a decline. The forecast remains above the the official forecast.

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Forecasts updated on 18 January using the data ending in December 2020.

SOURCE: Lottery Commission, monthly disclosure reports, all counties total sales. The Commission updates its revenue collections approximately eight – ten days after the end of the month.

NET REVENUES

SUMMARY OF MONTHLY NET REVENUE FORECASTS FOR 2021

The graph shows the actual net revenues for the ending 12 months from January 2017 thru October 2020.  The forecast for the net available revenues for the 12 months ending 30 June 2021 = $5,674,530.  As an additional month of actual net revenues is reported, a new 12 month total is calculated. The new 12 month total is used, along with all the previous actual month’s totals, to calculate an updated forecast for the 12 months ending June 2021. In essence, the forecast for the 12 months ending June 2021 is revised monthly as actual monthly net revenues are reported and the forecast updated.

The State’s official forecast issued 2 April 2020 for the 12 months ending June 2021 = $5,687,300.  This updated forecast is significantly higher than the State’s earlier official forecast.

 

The resumption of the upward trend suggests the effects of the coronavirus have diminished.

SUMMARY OF MONTHLY NET REVENUE FORECASTS FOR 2021

The following graph shows the June 2021 forecasts calculated at the end of each month for net revenues.

The monthly updated forecasts for the 12 months ending June 2021 reflects a significant increase over the monthly forecasts using data July – December 2020. Using the data ending March 2021, this forecast shows the net revenue collections ending June 2021 will exceed the official forecast by about $900m.

The updated monthly forecasts follow:

The following discussion uses the following 2020 Updated Monthly Forecasts as the reference.

Note that the upper and lower limits are wider surrounding the forecast made in June 2019 forecast compared to the much narrower limits surrounding the June 2019 forecast made in May 2020. The wider vs. narrow limits reflect that the equation for the confidence intervals for the forecasts 12 months ahead made in July 2019 includes the number 12 while the formula for one period ahead made in May 2020 includes the number one.  Hence, the farther ahead the forecast the greater uncertainty as evidenced by the wider confidence limits.

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The graph above shows the monthly forecasts slowly  increasing from July 2019 until March 2020 when the decline began and continues thru the end of the fiscal year in June.

The monthly updates for the forecast net revenue collections using data ending the previous month are:

Monthly revisions for the forecast for 12 months ending June 2021 using data ending in the month of the forecast origin:

Origin                                                                     Forecast

July                                                                           $5,762,820

August                                                                     $5,623,180

September                                                              $5,700,781

October                                                                   $5,674,530

November                                                               $5,677,200

December                                                               $5,672,110

January                                                                   $6,457,087

February                                                                 $6,205,820

March                                                                     $6,344,040                                          

April

May

June

Monthly revisions for the forecast for 12 months ending June 2020:

Origin                                                                     Forecast

July                                                                          $5,873,700

August                                                                     $5,953,580

September                                                              $5,944,460

October                                                                   $5,998,230

November                                                              $6,035,090

December                                                               $6,049,138

January                                                                   $6,040,400

February                                                                 $6,142,890

March                                                                      $6,127,520

April                                                                         $5,752,450

May                                                                          $5,752,450

June                                                                          $5,456,109

12 months ending June 2020 actual collections = $5,753,300.

Updated 3 April 2021 using net revenue collected thru March 2021.

Source:  Arkansas Dept. of Revenue and Finance

Housing Permits

The graph shows the New Private Housing Units Authorized by Building Permits: 1 – Unit Structures for Arkansas, not seasonally adjusted. The series exhibits significant variation and is highly seasonal with November and December permits significantly lower that the other ten months.

The updated forecasts thru July 2021 are shown below.

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The number of housing starts for January 2021 is unusually high.  Accounting for this value, the forecasts return their normal pattern thru July 2021.

The U.S. Bureau of Census updates this data series approximately 45 days after the end of the month.

Updated 3 March 2021 with last data point January 2020.

Source: FRED:  Series = ARBP1FH, NSA

US and ARKANSAS LEADING ECONOMIC INDICATORS

The Federal Reserve Bank of Philadelphia ceases publication of the U.S. and states leading economic index in February 2020.  The spread of the virus produced turmoil in the data series used in the index.

US and ARKANSAS COINCIDENT ECONOMIC INDICATORS

The Philadelphia Federal Reserve Bank produces a monthly coincident economic index for the U.S.  A coincident indicator is a metric that shows the current state of economic activity within a particular area. Coincident indicators are important because they show economists and policymakers the current state of the economy. The coincident index is calculated using employment, real earnings, average weekly hours worked in manufacturing, and the unemployment rate.

Both the U.S. and AR coincident indicators are normalized to the January 2015 origin.  The following graph shows both normalized indicators.

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From January 2015 thru February 2020 the index for AR grew faster than the U.S. index. In February the effect of the virus hit both the U.S. and AR.  However, the decline in the AR index was significantly less than the decline in the U.S. The recover was faster in the U.S. index than in the AR index and now both are increasing with AR remaining above the U.S.

The forecast for the AR index is shown in the following graph.

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The rapid growth in the AR index is forecast to continue to increase but at a declining rate.

Forecasts updated 4 December 2020 reflecting data ending October 2020.

Source: FRED: Arkansas data = ARPHCI and US data = USPHCI and author’s calculations.

Arkansas Total Non-Farm Employment

Arkansas total non-farm employment is closely aligned with U.S. payroll employment.  In an analysis (not shown) 99.9% of the variation in Arkansas employment is explained by the variation in U.S. payroll employment and the historical values of Arkansas’ non-farm employment. Conclusion: As U.S. payroll employment moves up and down, so goes Arkansas’ employment.

Forecasts of Arkansas’ expected total payroll employment can be shown as the 12 month % change.  The graphic pattern shows a steady 12 month percentage change from January 2016 thru December 2018.  Since then, the 12 month percentage change has trended down until April 2020.

Again, the pattern of the 12 month % change in AR non-farm employment follows the pattern of the U.S. employment. The AR recovery in April has lost its momentum, as has the U.S. employment.

The reader is familiar with discussions about a recovery in the shape of a ‘W’. The graph below shows a classic ‘W’ shape for the forecast for the 12 month % change in non-farm employment in AR.

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Forecasts updated on 22 November 2020 using data thru October 2020.

SOURCE: FRED, series = ARNA, seasonally adjusted