May 2010

June 1st, 2010 by Daniel Lee

Recovery gains momentum.

In April, the Coos Coincident Index advanced for four months in a row. But, only three of six component indicators contributed to the increase. On the positive note, industrial electricity sales remained strong, pointing to the revitalizing production activity in the county. The estimated rooms and meals revenues rebounded sharply, while the estimated wage and salary disbursements kept expanding. On the negative note, the number of employed residents fell back after advancing three months in a row, suggesting a yet fragile revival of the labor market. Home sales unexpectedly dropped before the end of the federal tax credit program. The average Saturday vehicle traffic counts contracted, painting a mixed picture on the hospitality industry.

On the other hand, the State economy exhibited vivid signs of improvements. The New Hampshire Coincident Index expanded three months in a row. All but one component indicator contributed to the increase. The number of employed residents advanced four months in a row, indicating the steadily improving labor market. Home sales soared thanks to the federal tax credit. Both rooms and meals revenues and Saturday vehicle traffic counts advanced, signaling the reviving State’s hospitality industry. However, industrial electricity sales took a step backward after posting a solid gain in March, suggesting that the recovery in the State’s manufacturing sector is still fragile.

Coincident Index

The Coos Coincident Index, which tracks the current state of the Coos economy, rose to 97.1 in April from March’s revised value of 96.2, for a gain of 0.9%. This gain was the fourth consecutive increase. On a monthly year-over-year basis, the Index increased 2.4% from its March 2009 value for the second month in a row.

The New Hampshire Coincident Index advanced to 97.3 in April from March’s revised value of 96.7 for a gain of 0.7%. This month-to-month percentage gain was the third increase in a row. More notably, the Index turned higher compared to where it was a year ago for the first time since January 2008.

How strong are the forces of change?

Month-to-Month Comparison

In April, the Coos Coincident Index rose from March’s level. Although it was the fourth consecutive increase in a row, this increase was smaller than March’s and only three of the six component indicators contributed to the increase. On the other hand, the New Hampshire Coincident Index advanced strongly in April for the third month in a row. All but one component indicator turned positive. Recovery is gaining traction for the State economy as well.

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, slipped in April after increasing three months in a row, and was down from its April 2009 value.

New Hampshire

Employment at the state level, adjusted for seasonal variation, rose in April for the fourth time in a row, but was still down from its April 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 County

Home sales, adjusted for seasonal variation, retreated in April following a strong gain in March, but they was still considerably higher when compared to April 2009.

New Hampshire

Home sales, adjusted for seasonal variation, soared in April for the second month in a row. On a monthly year-over-year basis, the index increased for the seventh month in a row.

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 seasonal variation and inflation, rose in April for the third time in the last four months. And, it was considerably higher compared to a year ago. This year-over-year gain marks the fifth consecutive month of increase.

New Hampshire

The estimated rooms and meals revenue, adjusted for seasonal variation and inflation, expanded in April, partially offsetting the loss in March. But, it was higher compared to a year ago.

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, adjusted for seasonal variation, retreated in April after increasing for three months in a row, and also turned lower compared to a year ago.

New Hampshire

Average Saturday traffic counts, adjusted for seasonal variation, increased in April for the third consecutive month, and were up from its April 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.

Coos County

The estimated wages and salary disbursement, adjusted for seasonal variation and inflation, advanced in April for three months in a row, and was up from its April 2009 level.

New Hampshire

The estimated wages and salary disbursement, adjusted for seasonal variation and inflation, advanced in April for two months in a row, but was still down compared to a year ago.

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 County

Industrial electricity sales, adjusted for seasonal variation, expanded in April, for the third time in the last four months. And, it was also higher than a year ago.

New Hampshire

At the state level, industrial electricity sales, adjusted for seasonal variation, slipped in April, for the second time in the last five months. The sales were still higher than a year ago.

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. The 3 Ds are duration (how persistent the change has been), diffusion (how widespread the change is) and depth (how large the change is). 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

  • 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 using the Vector Error Correction Model.
  • 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 new and updated data.
  • 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.
  • Seasonal factors are recalculated once a year in February using new and 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.