March 2011

April 1st, 2011 by Daniel Lee

Long Road to Recovery

In February, the Coos economy struggled to stay on course to recovery. Four out of five component indicators fell from prior month, January 2011, although the same number of indicators was up from prior year, February 2010. It indicates that, while the county economy remained on the long-term growth path, recovery would be long and slow. A strong recovery would require a robust rebound in the labor market. In February, number of employed residents continued to fall, while estimated wages and salary disbursements posted a year-over-year gain for the first time since the latest recession. All other sectors – manufacturing and hospitality – remained strong compared to prior year. Both indicators of the hospitality industry – estimated rooms and meals revenues and the average Saturday vehicle traffic counts – kept expanding on a year-over-year basis. As a sign of a rebounding manufacturing sector, industrial electricity sales remained up from a year earlier.

There was little sign of change in the State economy’s strong rebound it’d shown since the last recession. The State Index advanced six months in a row on a year-over-year basis. More impressively, the pace of increase has been on the rise as well. All five component indicators unanimously point up to improving economic conditions. All remained up from where they were a year ago. However, uncertainties around the proposed budget cuts and large layoffs in the state and local governments could impact the recovery down the road. The struggling real estate market remains as a threat to recovery as well.

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

Coincident Index

The Coos Coincident Index, which tracks the current state of the Coos economy, inched up to 93.4 in February for the third month in a row. The Index advanced nine straight months on a monthly year-over-year basis.

The New Hampshire Coincident Index rose to 96.0 in February for the eleventh consecutive month. On a monthly year-over-year basis, the Index expanded for the sixth month in a row.

How strong are the forces of change?

In February, the Coos Coincident Index was up from where it was a year ago for the tenth time in a row. Four out of the five component indicators were up from their February 2010 levels. The growth rate has ticked up a bit on a monthly year-over-year basis. In the meantime, the state economy kept on its expansion at an increasingly faster pace. Its growth rate accelerated six months in a row. Furthermore, all five component indicators remained up from where they were a year ago.

Household Employment

Household employment measures the number of employed residents. In contrast to non-farm payroll employment that is more commonly used in the national and state indexes, household employment includes self-employed, unpaid domestic help and both farm and non-farm workers, all of which may be more significant in rural than urban economy. Employment tends to rise as economy grows.

Coos County

Employment index, adjusted for seasonal variation, contracted for the second time in four months. On a monthly year over year basis, it fell for the eleventh month in a row.

New Hampshire

Employment at the state level, adjusted for seasonal variation, ticked up fifteen months in a row. It was up from its February 2010 level.

Rooms and Meals Revenues

It is estimated from total tax yielded from rooms and meals sales. It tends to increase with tourism activities.

Coos County

The estimated rooms and meals revenue, adjusted for inflation and smoothed by 12 month moving average, dipped following eight consecutive months of increase. Still, it was up from its February 2010 level.

New Hampshire

The estimated rooms and meals revenue, adjusted for inflation and smoothed by 12 month moving average, rose for the sixth straight month. On a monthly year-over-year basis, it advanced four months in a row.

Traffic Counts

It tracks the average vehicle traffic counts on Saturdays each month, which is automatically collected from traffic recorders located throughout the State. Two recorders are placed in the Coos county – Jefferson and Northumberland.

Coos County

Average Saturday traffic counts, smoothed by 12 month moving average, fell for the second time in four months. Still, it was up from where it was a year ago.

New Hampshire

Average Saturday traffic counts, smoothed by 12 month moving average, fell in February three months in a row. Still, it advanced eleven months in a row on a monthly year-over-year basis.

Wages and Salaries

The estimated wage and salaries disbursements represent total compensation including pay for vacation, bonuses, stock options, and tips. This data is obtained from all workers covered under state and federal unemployment insurance laws; in other words, it is full population counts, not sample-based estimates. Unlike the household employment report, however, it excludes self-employed, domestic workers, and most agricultural workers. For this difference, wages and salaries series complements the number of employed residents in monitoring the labor market conditions as well as the economy. A change in wages and salaries, adjusted for inflation, may reflect changes in the number of jobs, the ratio between part-time and full-time jobs, and wage rates.

Coos County

The estimated wages and salary disbursement, adjusted for inflation and smoothed by 12 month moving average, rose three months in a row. As a result, it moved up higher from year earlier for the first time since the latest recession.

New Hampshire

The estimated wages and salary disbursement, adjusted for inflation and smoothed by 12 month moving average, expanded for the eleventh consecutive month. And, it was up from where it stood a year ago.

Industrial Electricity Sales

It measures sales of electricity (kWh) to industrial customers. Utilities categorize consumers based on the North American Industry Classification System, demand, or usages. The industrial sector includes manufacturing, construction, mining, agriculture, fishing, and forestry establishments. Among these industries, manufacturing is a primary industry in Coos County making up 69% (73% for New Hampshire in 2008) of the total number of jobs in the industrial sector mentioned above according to the 2006 QCEW data. Therefore, a rise in industrial electricity sales may largely indicate invigorating manufacturing activities in the economy.

Coos County

Industrial electricity sales, smoothed by 12 month moving average, fell after increasing four months in a row. On a monthly year-over-year basis, it expanded eleven straight months.

New Hampshire

Industrial electricity sales, smoothed by 12 month moving average, inched up twelve months in a row. And, it remained up from where it was a year ago.

Real Estate

NCEI reports two real estate market indicators – home sales and median home prices. The data tracks residential homes sold, including condos and manufactured homes. The health of the real estate sector is important to the broad economy due to its multiplier effect. Home transactions not only generate income for real estate brokers and mortgage bankers but also bring more businesses in other sectors including moving services, home furnishings and appliances. In order to minimize volatility in Coos real estate market, indicators are averaged over a 12 month period.

Coos County

There were no signs of rebound in the Coos real estate market. Home sales fell six months in a row on a monthly year-over-year basis. As a result, the pace of increase in the median home price on a year-over-year basis remained at a single digit for the second month in a row.

New Hampshire

Slow home sales led a drop in home prices in New Hampshire as well. Home sales fell four months in a row on a monthly year-over-year basis. Consequently, the median home price dipped for the first time since August on a year-over-year basis.

Leading Indicators

This section is under construction. The future reports will include building permits, initial unemployment claims, new business formation, real estate indicators and possibly freight volumes.

Technical Notes

  • Employment is the number of people employed from the household survey.
  • The current values of rooms and meals revenues are estimated using the data obtained from participating local hoteliers.
  • The quarterly wages and salary disbursements are smoothed into the monthly series after the current values are estimated.
  • These models to estimate the current values of rooms and meals revenues and wages and salary disbursements are re estimated once a year in February using updated data.
  • The data series reported in the dollar values are adjusted for inflation.
  • Seasonal factors for the number of employed residents are recalculated once a year in February using updated data. Thus, the seasonally adjusted data series are to be revised accordingly.
  • Real Estate data is obtained from the Northern New England Real Estate Network (NNEREN). All analysis and commentary related to the statistics is that of the authors, and not that of NNEREN.

© Copyright 2010: Daniel Lee and Vedran Lelas, College of Business Administration, Plymouth State University.