North Country Economic Index

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What is the North Country Economic Index (NCEI)?

The North Country Economic Index (NCEI) is a quarterly economic report to gauge the performance of the economy in the northern rural New Hampshire, which currently includes Coös County. The NCEI is released four times a year – in March for Winter (December, January and February), in June for Spring (March, April and May), in September for Summer (June, July and August), and in December for Autumn (September, October and November).

NCEI also tracks the economic performance of the State of New Hampshire for the purposes of comparison. Posting county and state indicators side by side makes it clear how the county’s economy fares in comparison to the state’s economy. This State Index is constructed using the same methodology and component indicators used in the construction of the County Index so that the two Indexes can be directly comparable. For more information about the State’s economy, please see the Coincident Index published by the Federal Reserve Bank of Philadelphia.

The NCEI has four sections – coincident indicators, student report, housing market report, and leading indicators. The coincident indicators track the current status of the local economy, while leading indicators tell us where the economy may be heading in the coming months. The coincident indicators are aggregated into a composite index, which provides a snapshot of the current economic conditions. The student section will complement the NCEI report by reporting on episodes and interviews with community leaders. It partially reflects our recognition that aggregate economic data may not reflect some positive side of the economy, particularly when the economy is going through some tough stretches. In addition, it gives students a great opportunity to build relationships within local businesses, governments, and trade organizations before going out to the job market after graduation. And, it’s hoped that it will help lay the foundation for the student’s future career in the region. The report also includes the coverage on the housing market for both Coos County and the state of New Hampshire. Over time, the NCEI will grow, develop, and become even more useful to businesses, community organizations, nonprofit organizations, government agencies, and households.

How is NCEI constructed?

NCEI is modeled after the Conference Board’s Economic Indexes. The difference is the component indicators used in the Index. The indicators used by the Conference Board are reported only annually with a significant time lag at the county level. For this reason, it was necessary to use different indicators, many of which are collected locally. All individual indicators, except for number of employed residents, are smoothed by 12 month moving average to reduce the noise level, and deflated when necessary before being aggregated into the Index. Then, individual indicators are aggregated into a single summary index based on a weighting scheme, which reduces undue influence of volatile indicators by setting the weight based on the inverse of the standard deviation of each series. The table below presents the comparison between the two indexes in their component indicators.

Table 1: Component Variables

Conference Board NCEI
Non-Farm Payrolls (the number of jobs) Household Employment (the number of employed residents)
Personal Income Wage and Salary Disbursements
Manufacturing and Trade Sales Rooms and Meals Revenues, and
Traffic Counts
Industrial Production Industrial Electricity Consumption

Why Coös County?

State-wide economic indicators are dominated by the much more industrial southern regions of the state, and do not adequately represent New Hampshire’s rural regions. Among the four northern counties, Coös County is a good place to start the project because of its geography and economic conditions. There have been significant efforts to revive the County’s economy; and it is hoped that NCEI will play a role as a guiding light for these continuing efforts.

The NCEI will complement other studies currently underway in New Hampshire’s North Country, such as the multifaceted social and demographic research of the Carsey Institute at UNH. Taken together, the NCEI and Carsey Institute research will provide a robust analysis of a rural region undergoing social and economic change. Few rural regions in world have such focused research, and it is likely that other regions in the United States will be able to learn from lessons of New Hampshire’s North Country.

Why is NCEI unique?

Despite the usefulness of economic indicators for government, businesses and individual citizens, they scarcely exist at the county level due to a lack of timely data. There are only two counties nationwide that are currently publishing economic indexes regularly.[1] California’s Humboldt State University has reported the economic index for Humboldt County, which resembles Coös County in that it is a rural county both distant from metropolitan areas and dependent on tourist dollars. In addition, the University of Nevada at Las Vegas has published the business activities index for Clark County. Its focus, however, is on the metropolitan Las Vegas, which has little in common with Coös County’s economy and community structure.

Why is this important?

Community efforts to revive the local economy depend on good information. At sub-state levels, however, economic data are scarcely reported without significant time lag, often two or three years. Communities lack up-to-date information for the real-time decision making. NCEI fills this void by providing an objective tool for measuring the current status of the local economy. Thus, it can help communities better understand their local economy and focus resources on core problems.

How should economic index be interpreted?

An increase in the index indicates improving economic conditions, while a decline means the opposite. Due to the volatility in the economic indicators, however, it is not always clear whether an increase in the index reflects a true change in the underlying trend. The Conference Board recommends “Three Ds” for interpreting decline in its Leading Index – Duration, Depth and Diffusion. “The longer the weakness continues, the deeper it gets; and the more widespread it becomes, the more likely a recession may occur.” [Business Cycle Indicators Handbook, p16] This Three Ds principle may also apply in interpreting the coincident index. The longer the increase (decrease) continues, the larger the increase (decrease) gets; and the more widespread it becomes, the more likely economic conditions are improving (worsening).

What does NCEI not do?

Although NCEI is a good resource to see the current and past economic performance of the local economy, it focuses on providing the up-to-date information and is the only one piece of the decision-making puzzle. The following are sources of additional data for those who are interested in the North Country:

[1] Up until recently, George Mason University had published the monthly economic index for Fairfax County of Virginia. This study ended in June 2009 due to a budget issue.