September 2010

October 1st, 2010 by Daniel Lee

Recovery may be slipping away.

This month’s report reflects some major revisions to the data. Models – constructed to estimate the current values of rooms and meals revenues, and wages and salaries – were revised to increase accuracy. In addition, industrial electricity sales series for Coos County has been corrected by data provider. Unfortunately, these revisions helped heighten concerns that recovery might be slipping away. The stumbling housing market remained a major obstacle for recovery. The labor market showed no signs of improvement either. However, the hospitality industry remained strong as warm weather continued to draw tourists to the region. The estimated rooms and meals revenues and the average Saturday vehicle traffic both stayed up from where they were a year ago. The county’s production activity chugged along, as well. Industrial electricity sales remained up from where it was a year ago, but there were signs that it too had been slowing down.

The State Index fell below where it stood a year ago for the first time since March after steady declines in recent months. The stagnant labor market and the stumbling housing sector largely contributed to this fall. The hospitality sector struggled as well, despite the warm weather. The estimated rooms and meals revenues and the average Saturday vehicle traffic both fell from the July’s level. On a more positive note, the manufacturing industry chugged along, as reflected in a continued upward trend in industrial electricity sales.

Coincident Index

The Coos Coincident Index, which tracks the current state of the Coos economy, slipped to 93.5 in August from July’s revised value of 94.5, for a loss of 1%. On a monthly year-over-year basis, the Index decreased 0.6% from its August 2009 value for the third time in four months.

The New Hampshire Coincident Index fell to 95.4 in August from July’s revised level of 96.3 for the third consecutive month. More notably, the Index dropped below where it was a year ago for the first time since March.

How strong are the forces of change?

In August, the Coos Coincident Index dropped for the third time in four months. Five out of six component indicators contributed to this loss. The State economy continued the downward trend by falling three months in a row. Four of the six component indicators contributed to this loss, while one indicator was nearly unchanged.

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 fourth time in five months. And it remained below where it was a year ago.

New Hampshire

Employment at the state level, adjusted for seasonal variation, was stagnant, but was still up from its August 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 five months in a row. And, it was more than 47% down from where it was a year ago.

New Hampshire

Home sales, adjusted for seasonal variation, bounced back after taking a plunge in July. Still, it was down from where it stood in August 2009.

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, declined in August for the third time in four months. Still, it was slightly higher than where it was a year ago.

New Hampshire

The estimated rooms and meals revenue, adjusted for seasonal variation and inflation, slipped in August for the second time in three months. Still, it was up from where it was 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, advanced two straight months. And, it was up from where it was a year ago.

New Hampshire

Average Saturday traffic counts, adjusted for seasonal variation, slipped in August after increasing two months in a row. And, it was down from where it was a year ago.

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, contracted two months in a row. Still, it remained up from its August 2009 level.

New Hampshire

The estimated wages and salary disbursement, adjusted for seasonal variation and inflation, dropped two months in a row in August. And, it was 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.

Coos County

Industrial electricity sales, adjusted for seasonal variation, contracted for the third time in four months. Still, it remained up from where it was a year ago.

New Hampshire

At the state level, industrial electricity sales, adjusted for seasonal variation, fell back after an increase in July. Still, it remained up from where it was 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.
  • 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.