2013 Arkansas Economic Forecast - Michael Pakko
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Dr. Michael PakkoChief Economist and State Economic ForecasterInstitute for Economic Advancement, UALR
The Arkansas Economic Outlook
UALR Arkansas Economic Forecast ConferenceNovember 6, 2013
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Arkansas’ Recent Experience• Overview• GDP• Arkansas Coincident Index• Personal Income • Retail Sales• Home Sales (and Prices)• Employment & Unemployment
Arkansas Forecasts
Overview
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Summary• Arkansas has experienced a slow, bumpy
recovery• By some measures, Arkansas has fallen
behind in the pace of expansion• The broad macroeconomic outlook
suggests more of the same• On the other hand … recent trends in
home sales suggest reason for optimism• Forecast: On the high side of a slow-
growth scenario
Overview
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Gross Domestic Product
Source: Bureau of Economic Analysis
14.0
14.2
14.4
14.6
14.8
15.0
15.2
15.4
15.6
15.8
2007 2008 2009 2010 2011 2012 2013
Trillions of cha
ined
(20
05) d
ollars
U.S. Real Gross Domestic Product
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Gross Domestic Product
Source: Bureau of Economic Analysis
‐10
‐8
‐6
‐4
‐2
0
2
4
6
8
2007 2008 2009 2010 2011 2012 2013
Percen
t
U.S. Real Gross Domestic Product Growth (Percent change, annual rates)
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Gross Domestic Product
Source: Bureau of Economic Analysis
-3%
-2%
-1%
0%
1%
2%
3%
2006 2007 2008 2009 2010 2011 2012
Annual GDP Growth
U.S. Arkansas
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Arkansas’ Experience
Source: Federal Reserve Bank of Philadelphia
A bumpy recovery:
90
92
94
96
98
100
102
2007 2008 2009 2010 2011 2012 2013
Inde
x, 2007Q
4=100
Coincident Index of Economic Activity ‐ Arkansas
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Arkansas’ Experience
Source: Federal Reserve Bank of Philadelphia
A bumpy recovery:
-6%
-4%
-2%
0%
2%
4%
2009 2010 2011 2012 2013
Mon
thly
gro
wth
rate
(SA
AR
)
Arkansas Coincident Index - Growth Rates
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Personal Income
Source: Bureau of Economic Analysis
80
85
90
95
100
105
110
2007 2008 2009 2010 2011 2012 2013
Billion
s of dollars
Arkansas Personal Income ‐ 2013 Revisions
Previously Published Revised
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Personal Income
Source: Bureau of Economic Analysis
5.0%
6.0%
7.0%
8.0%
9.0%
2007 2008 2009 2010 2011 2012 2013
Employee and Employer Contributions for Social Insurance (as percentages of Wages and Salaries plus Proprietors' Income)
Employee and Self‐Employed Employer
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Personal Income
Source: Bureau of Economic Analysis
16%
17%
18%
19%
20%
2010 2011 2012 2013
Dividends, Interest, and Rent (as a percent of Total Personal Income)
Actual Hypothetical
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Personal Income
Source: Bureau of Economic Analysis
90
92
94
96
98
100
102
104
106
108
2010Q1 2011Q1 2012Q1 2013Q1
Billion
s of d
ollars
Effects of Tax Policy Changes on Arkansas Personal Income
Actual
Adjusted
+3.7%
+2.7%
+2.5%
+1.9%
-0.9%
+0.7%
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Personal Income
Source: Bureau of Economic Analysis
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Personal Income
Source: Bureau of Economic Analysis
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Personal Income
Source: Bureau of Economic Analysis
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Personal Income
Source: Bureau of Economic Analysis
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Taxable Sales
Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement.
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Taxable Sales
Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement.
ATS ATSIG ATS ATSIG2012:Q3 ‐2.5% ‐2.1% ‐0.5% ‐0.5%
2012:Q4 3.5% 3.3% 1.3% 1.2%
2013:Q1 0.2% 0.2% 0.5% 0.0%
2013:Q2 3.1% 2.4% 4.3% 3.8%
2013:Q3(P) ‐1.7% ‐1.7% 5.1% 4.2%
Change from Previous Quarter
Change from One Year Earlier
Growth Rates of Arkansas Taxable Sales(Seasonally Adjusted)
(P) = Preliminary
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Taxable Sales
Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement, Census Bureau.
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Sources: Arkansas Realtors® Association, Institute for Economic Advancement.
Home Sales
800
1,200
1,600
2,000
2,400
2,800
3,200
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
Homes sold in Arkansas by Realtors®(Not Seasonally Adjusted)
2008 2009 2010 2011 2012 2013
September observations
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Sources: Arkansas Realtors® Association, Institute for Economic Advancement.
Home Sales
800
1,200
1,600
2,000
2,400
2,800
3,200
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
Homes sold in Arkansas by Realtors®(Seasonally Adjusted)
2008 2009 2010 2011
Nov. 2009 Apr. 2010
2012 2013
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Home Sales
Sources: Arkansas Realtors® Association, National Association of Realtors®, Institute for Economic Advancement.
80
90
100
110
120
130
140
2008 2009 2010 2011 2012 2013
Inde
x, 2009:Q1=100
ARA vs. NAR Home Sales, Arkansas
NAR, Existing ARA, New & Existing
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Source: Federal Housing Finance Agency (FHFA)
Home Prices
70
75
80
85
90
95
100
105
2006 2007 2008 2009 2010 2011 2012 2013
Inde
x, 2007:Q1=100
FHFA House PricesExpanded‐Data Indexes (Seasonally Adjusted)
Arkansas
U.S.
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Source: Federal Housing Finance Agency (FHFA)
Home Prices
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Source: Federal Housing Finance Agency (FHFA)
Home Prices
1 quarter 2 quarters 1 year 2 years 5 years
Fayetteville‐Springdale‐Rogers 2.2 3.9 5.0 6.6 ‐11.0Fort Smith 0.5 0.5 0.9 2.3 0.3Hot Springs 0.8 1.1 2.9 0.6 ‐5.6Jonesboro 1.1 1.7 2.1 6.1 5.5
Little Rock‐N. Little Rock‐Conway 0.0 0.3 1.4 2.4 ‐0.3Memphis 0.9 1.3 1.4 1.6 ‐10.4Pine Bluff 2.8 1.0 1.0 0.5 ‐2.6Texarkana 3.5 ‐0.2 3.2 1.9 6.1
Arkansas 0.7 1.4 2.8 3.1 ‐2.8United States 1.9 3.4 4.1 4.2 ‐10.2
*Percent changes to 2013:Q2.
FHFA House Price Changes (All‐Transactions Indexes, Seasonally Adjusted)Percent Changes*
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Building Permits
Source: U.S. Census Bureau, Moody’s
0
50
100
150
200
250
300
350
2007 2008 2009 2010 2011 2012 2013
Inde
x, 2009:Q1=100
Single Family Building Permits
ARKANSAS Fayetteville MSA Little Rock MSA
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Unemployment
Source: Bureau of Labor Statistics.
4
5
6
7
8
9
10
11
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
Perc
ent
Unemployment Rates, Arkansas and U.S.
2008 20122009 2010
Arkansas
U.S.
2011 2013
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Unemployment
Source: Bureau of Labor Statistics.
Local Area Unemployment Statistics (LAUS) - Arkansas
1,220
1,230
1,240
1,250
1,260
1,270
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
Thou
sand
s
Employment
2010 2011 2012 2013
92
96
100
104
108
112
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
Thou
sand
s
Unemployment
20112010 2012 2013
1,320
1,330
1,340
1,350
1,360
1,370
1,380
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
Thou
sand
s
Labor Force
2010 2011 2012 2013
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Unemployment
Source: Bureau of Labor Statistics.
57
58
59
60
61
62
63
64
65
66
67
2006 2007 2008 2009 2010 2011 2012 2013
Perc
ent
Labor Force Participation Rates
U.S.
Arkansas
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Unemployment
Source: Bureau of Labor Statistics.
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Employment
Source: Bureau of Labor Statistics.
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Employment
Source: Bureau of Labor Statistics.
1,100
1,140
1,180
1,220
1,260
1,300
1,340
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
Thou
sand
s, S
easo
nally
Adj
uste
d
Arkansas Employment
2008 2009 2010 2011
Household Survey
Payroll Survey
2012 2013
QCEW
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Employment
Source: Bureau of Labor Statistics.
Current Employment Statistics:
Year ago Feb 2010 Dec 2007Mining & Logging 0.0 0.3 0.4
Construction -0.3 -1.9 -9.5Manufacturing -0.6 -4.1 -33.4
Wholesale Trade -1.7 -0.4 -2.6Retail Trade 7.0 11.1 4.1
Transportation & Utilities 3.9 6.9 -1.5Information Services -0.1 -1.2 -3.4
Financial Services 0.5 0.4 -3.5Professional & Business Services 2.0 8.6 7.1
Education & Health Services 4.9 11.7 20.2Leisure & Hospitality Services -0.9 3.9 0.4
Other Services -1.3 -1.0 -3.5Government -1.2 0.0 2.4
TOTAL 12.2 34.3 -22.8
Arkansas Nonfarm Payroll Employment - August 2013*Employment changes (thousands of jobs) from:
* Seasonally adjusted data.
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Economic Outlook
"I have seen the future and it is very much like the present, only longer."
- Kehlog Albran, The Profit
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Forecast Methodology
Model: Arkansas Baseline from Moody’s Analytics.Structural econometric model of the U.S. EconomyArkansas linked to US forecast, by sectorForecast tied to Moody’s macroeconomic U.S. model
Alternative Forecast Paths: Moody’sWells FargoNABEWall Street Journal
Macroeconomic Advisers PNC FinancialEtc. …
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Real GDP
Q4/Q4 Growth (%)2012 2.02013 1.92014 2.3
2015 2.8
‐10
‐8
‐6
‐4
‐2
0
2
4
6
2007 2008 2009 2010 2011 2012 2013 2014 2015
Percen
t
U.S. Real Gross Domestic Product Growth (Percent change, annual rates)
Forecast
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Real GDP
0.3%
-2.0%
2.6%
0.7%
1.3%
2.6% 2.7%3.0%
-3%
-2%
-1%
0%
1%
2%
3%
4%
2008 2009 2010 2011 2012 2013 2014 2015
Arkansas Real GDP Growth
Actual Forecast
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Personal Income
Q4/Q4 Growth (%)
2012 5.3
2013 2.0
2014 4.1
2015 4.5
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Retail Sales
Q4/Q4 Growth (%)
2012 1.22013 2.02014 5.6
2015 4.6
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Home Sales
Sales(Pct. Change)
2011 24.4K‐1.2%
2012 24.0K‐1.1%
2013 26.7K+13.8%
2014 28.6K+7.2%
2015 28.8K+0.8%
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Employment
Q4/Q4 Growth
2011 +12.2K+1.0%
2012 +4.2K+0.4%
2013 +8.6K+0.7%
2014 +22.5K+1.9%
2015 +23.6K+1.9%
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Employment
2012 2013 2014 2015 2012 2013 2014 2015
Total Nonagricultural 4.2 8.6 22.5 23.6 0.4 0.7 1.9 1.9 Natural resources and Mining ‐1.4 0.1 0.1 0.1 ‐12.0 1.5 1.0 1.2 Construction ‐2.1 1.5 2.3 1.4 ‐4.4 3.2 4.8 2.9 Manufacturing ‐2.1 ‐1.0 ‐0.5 0.3 ‐1.3 ‐0.7 ‐0.3 0.2 Trade, Transportation & Utilities 7.8 4.1 0.8 1.4 3.3 1.6 0.3 0.6
Wholesale Trade 0.8 ‐0.6 0.2 0.4 1.8 ‐1.3 0.5 0.8 Retail Trade 4.4 4.5 0.4 0.6 3.3 3.3 0.3 0.4 Transportation & Utilities 2.6 0.2 0.2 0.4 4.2 0.3 0.3 0.7
Information ‐0.3 0.0 0.3 0.3 ‐2.0 0.2 2.1 1.9 Financial Activities 0.5 0.0 0.5 0.8 1.1 0.1 1.1 1.6 Professional & Business Services ‐1.6 3.2 4.4 5.3 ‐1.3 2.6 3.5 4.1 Education & Health Services 2.7 4.4 5.5 6.0 1.6 2.5 3.1 3.3 Leisure & Hospitality 1.4 0.6 4.4 4.6 1.4 0.6 4.2 4.3 Other Services 0.1 ‐1.8 0.4 0.6 0.2 ‐4.1 1.0 1.3 Government ‐0.9 ‐2.6 4.2 2.7 ‐0.4 ‐1.2 2.0 1.2
Federal Government ‐0.1 ‐0.9 ‐0.1 ‐0.1 ‐0.6 ‐4.2 ‐0.7 ‐0.8 State government 0.4 0.6 2.1 1.5 0.5 0.8 2.7 1.9 Local government ‐1.1 ‐2.3 2.3 1.3 ‐0.9 ‐1.9 2.0 1.1
Employment Growth Forecasts by Sector (Q4/Q4)Thousands Percent
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Unemployment
End of Year (Q4)
2012 7.2
2013 7.3
2014 6.6
2015 5.9
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Arkansas EconomistFor more information and analysis of the Arkansas Economy,
visit the Arkansas Economist: www.arkansaseconomist.com