December 2011

December 30th, 2011 by Daniel Lee

No recovery within sight for Coos economy

In November, the Coos Index fell for the sixth month in a row on a monthly year-over-year basis, hitting the lowest point since the beginning of the latest recession. The recovery, which started since the mid-2009, lost steam in the second half of 2011. The downward trend is increasingly apparent in all but one component indicator; four out of five component indicators had persistently decreased in recent months on a year-over-year basis. The goods-producing activity, mostly manufacturing, were in decline; industrial electricity sales had decreased at an increasingly faster pace since May on a monthly year-over-year basis. The labor market never recovered from the latest recession; neither number of employed residents nor estimated wages and salaries had registered a year-over-year gain in 2011. The hospitality industry had been better off than other industries; estimated rooms and meals revenues surpassed the pre-recession level and kept rising, although average Saturday traffic counts remained stagnant. This New Year may be a better one, though, considering encouraging news from the Gorham area, such as the biomass plant construction and the reopened paper mill.

The economic recovery gained momentum in the State. The revised data showed that economic growth picked up pace for the first time since March on a monthly year-over-year basis. Three of five component indicators were up from prior year. The labor market continued to rebound; the monthly year-over-year growth rate of number of employed residents rose three months in a row after falling four straight months. However, the aggregate employment data may paint the picture better than it actually is. New Hampshire Employment Security reported that nearly half of the increase in jobs in November came from the accommodation and food services industry, where many jobs tend to be part-time. On the other hand, the higher-paying manufacturing industry lost jobs. This is consistent with one of the NCEI component indicators, industrial electricity sales, which declined two months in a row on a monthly year-over-year basis.  The picture in the hospitality industry was mixed; estimated rooms and meals revenues posted a strong gain from a year earlier, while average Saturday traffic counts continued to decline.

The real estate market analysis can be found at the end of this report.

December 2010

January 3rd, 2011 by Daniel Lee

Slowly Looming Recovery

I’m glad to announce that a paper on the NCEI project was presented to an academic conference in November. Before and after the presentation, the NCEI methodology had been carefully reviewed. As a result, two major modifications were made. First, 12 month moving average was adopted for all the component indicators, except for number of employed residents. By far, the biggest challenge in the NCEI’s inaugural year was the volatility in the data, which made very difficult to interpret month-to-month changes. Analyses showed that the use of 12 month moving average dramatically reduced the volatility problem while still approximating the business cycle. In addition, it avoided errors associated with seasonal adjustment process, thus increasing the accuracy of the report. Secondly, home sales series was excluded from the construction of the NCEI index in order to improve its conformity to the business cycle. Home sales series appears to have been decoupled from the business cycle for the past two decades. However, it will still be included in the report due to the importance of the real estate market to the economy. We believe these measures will make it easier to read changes in the direction of the economy. The detailed information will be posted in the methodology page in January.

The new and improved NCEI exhibits that the Coos economy had been stagnant in much of the early 2010, but slowly advanced in the second half. In November, the County Index advanced for the fifth consecutive month on a year-over-year basis. The production activity remained strong; the industrial electricity sales series was up from prior year. The hospitality sector did better than last year as well. Both the estimated rooms and meals revenues and the average Saturday vehicle traffic counts marked higher than where they were a year ago. In particular, a rebound in rooms and meals revenues was remarkable; it recuperated its pre-Great Recession level. However, the news from the labor market was mixed. The number of employed residents was up from where it was a year ago, while the estimated total wages and salaries continued to slide.

The signs of recovery were much clearer in the State’s economy. The State Index advanced three months in a row on a year-over-year basis at an increasing pace. The recovery seemed to have gained traction. The encouraging signs were apparent in the labor market. Both the number of employed residents and the estimated total wages and salaries are up from prior year. The manufacturing sector continued its expansion as well. However, the recovery wasn’t so strong in the hospitality sector. The estimated rooms and meals revenues remained stagnant.