March 2010

March 31st, 2010 by Daniel Lee

Devastating windstorm put a brake on recovery.

In February, a massive windstorm put a damp on the economy that would otherwise have shown stronger forces of recovery. The Coos Coincident Index inched down, for which a plunge in industrial electricity sales was largely responsible. During the power outage, productive activity came to a halt. Otherwise, March report would have posted a brighter picture of the County economy. Labor market continued to rebound as the number of the employed rose. Real estate market jumped although modestly. The picture in hospitality industry was mixed; rooms and meals revenues fell while the average Saturday traffic counts were up.

On the other hand, the State economy continued its course to recovery, despite the windstorm and power outage that swept the entire State. Labor market continued to rebound. Both the number of people with a job and estimated wages moved higher. Hospitality industry also exhibited signs of improvement. Rooms and meals revenues remained strong while the average Saturday traffic counts rebounded sharply. However, housing sector did not fare as well. Home sales continued to fall in recent month, which was contributed by the expiration of the first-time home buyer tax credit in November. A positive effect of the credit extension is not expected until spring.

As NCEI still is being shaped during the first trial year, new features may be found every month. Newly added in March is a special report on the housing market. It will likely be a semi-annual report and should be up on the Web by the first Monday in April. In addition, the About page is revised to include a variety of community-level data sources for anybody interested in the North Country.

Coincident Index

c1_coincident indexc2_coincident index change

The Coos Coincident Index, which tracks the current state of the Coos economy, retreated to 93.8 in February from January’s revised value of 94.1, for a loss of 0.3%. This loss was the second decrease in the last four months. On a monthly year-over-year basis, the Index was down 1.5% from its February 2009 level. February’s monthly year-over-year loss was the 25th consecutive decline.

t1_coincident indicators

The New Hampshire Coincident Index rose to 97.0 in February from January’s revised value of 96.3 for a gain of 0.7%. This month-to-month percentage gain was the largest in three years. On a monthly year-over-year basis, the Index was down 0.4% from its February 2009 value. Although February’s monthly year-over-year loss was the 24th consecutive decline, losses in recent months continued to be abated.

How strong are the forces of change?

Month-to-Month Comparison

In February, the Coos Coincident Index fell from January’s level. It was the first decline, following three consecutive months of increase (duration). The magnitude of the decline was relatively small (depth). Lastly, only two of the six indicators contributed to the decline in the Index (diffusion). It is likely to be a temporary deviation from the course of recovery caused by Mother Nature. On the other hand, the New Hampshire Coincident Index continued to advance despite the massive windstorm. The increase was the largest in three years (depth). The Index rose two months in a row (duration). More than half the six component indicators pointed upward (diffusion). It looks increasingly convincing that recovery is under way in the State economy.

Household Employment

Household employment measures the number of working-age adults who have jobs. 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.

c4_employment

Coos County

Employment index, adjusted for seasonal variation, rose in February two months in a row, but is down from its February 2009 value. This year-over-year loss represents the 24th consecutive decline.

New Hampshire

Employment at the state level, adjusted for seasonal variation, rose in February for the second month in a row. This gain represents the largest month-to-month increase since 2007. But, it was still lower than its February 2009 level.

Home Sales

It tracks the number of homes sold, which include both new and existing homes. 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. The latter is particularly true for new home sales. In interpreting percentage changes in the County’s home sales data, though, one should note that percentage changes can be highly volatile due to small sales volumes.

Coos Countyc5_home

Home sales, adjusted for seasonal variation, inched up in February following a large loss in the previous month. But, it was unchanged compared to a year ago.

New Hampshire

Home sales, adjusted for seasonal variation, dipped in February for the third month in a row, but were still higher than its February 2009 level. This year-over-year gain marks the fifth consecutive month of increase.

Room and Meals Revenues

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

c6_rm Coos County

The estimated rooms and meals revenue, adjusted for seasonal variation and inflation, decreased after four consecutive months of increase. But, it was still considerably higher compared to a year ago. This year-over-year gain was four months in a row.

New Hampshire

The estimated rooms and meals revenue, adjusted for seasonal variation and inflation, increased two months in a row, and was also up from its February 2009 value. This year-over-year increase was the largest in at least two years.

Traffic Counts

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

Coos Countyc7_traffic

Average Saturday traffic counts, adjusted for seasonal variation, advanced in February for the third time in the last four months, but were down from its February 2009 level.

New Hampshire

Average Saturday traffic counts, adjusted for seasonal variation, rose sharply in February, the largest increase since the last June. But, it was still down from its February 2009 level.

Wages and Salaries

The estimated wage and salaries disbursements represent total compensation including pay for vacation, bonuses, stock options, and tips. This data is derived from all workers covered under state and federal unemployment insurance laws; but it excludes self-employed, domestic workers, and most agricultural workers. For its difference in the coverage, wages and salaries series complements household employment in monitoring the labor market conditions. 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.

c8_wages

Coos County

The estimated wages and salary disbursement, adjusted for seasonal variation and inflation, was virtually unchanged in February. But, it was up from its February 2009 level. This year-over-year gain is the first increase since February 2008.

New Hampshire

The estimated wages and salary disbursement, adjusted for seasonal variation and inflation, advanced three months in a row. It was also up from its February 2009 level. This year-over-year gain follows four consecutive months of decline.

Industrial Electricity Sales

It measures sales of electricity (kWh) to industrial customers. Utilities categorize consumers into classes of service, which are used to determine their rates for electric service. 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 industries mentioned above according to the 2006 QCEW data. Therefore, a rise in industrial electricity sales may largely indicate invigorating manufacturing activities in the economy. But one should take caution in interpreting this indicator since its changes may also reflect changes in rates or reclassification of consumers between the industrial and commercial sectors.

Coos Countyc3_electricity

Industrial electricity sales, adjusted for seasonal variation, took a nosedive in February, erasing all of January’s gain. It was also considerably lower than a year ago.

New Hampshire

At the state level, industrial electricity sales, adjusted for seasonal variation, fell sharply in February, erasing all of January’s gain. It was down from its February 2009 level.

Month-to-Month Comparison vs. Year-over-Year Comparison

Interpreting economic indicators may not be as easy as it might seem. This is particularly true when dealing with regional indicators that tend to be highly volatile. The month-to-month changes can be very volatile and may not represent true changes in economic conditions. To reduce the volatility and better detect the underlying trend in the economy, economists often use the year-over-year percent changes. However, this year-over-year percent comparison has a problem of its own. It doesn’t tell us anything about what happened between a year ago and the current period. It misses out the most recent changes in the economy. The recent changes should be reflected in the month-to-month percent changes. The bottom line is that one should be careful in interpreting economic indicators and should examine both the month-to-month changes and the year-over-year changes to get a good sense of what is happening in the economy. In addition, one should also apply the 3 Ds principle in interpreting economic indicators. With respect to this 3 Ds principle, refer to “How should economic index be interpreted?” on the About page.

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

  • The current values of rooms and meals revenues are estimated using the data obtained from participating local hoteliers.
  • Employment is the number of people employed from the household survey.
  • The quarterly wages and salary disbursements are smoothed into the monthly series after the current values are estimated using the Vector Error Correction Model.
  • The data series reported in the dollar values are adjusted for inflation.
  • The data series are adjusted for seasonal variation when identifiable seasonality is present.
  • 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.