April 2010

Recovery gains momentum.

In March, the Coos economy exhibited strong signs of improvement. The Coos Coincident Index advanced three months in a row, contributed by all but one indicator that makes up the index. The number of employed residents continued to increase, indicating the improving labor market. Industrial electricity sales rebounded sharply, pointing to an increase in production activity in the county. Home sales soared as the federal tax credit draw in buyers before its expiration in April. The picture in the hospitality industry was mixed; rooms and meals revenues fell while the average Saturday traffic counts were up.

On the other hand, the State economy still is digging itself out of recession. Although the New Hampshire Coincident Index did manage to inch up two months in a row, the increase was weak. A plunge in rooms and meals revenues was responsible for this feeble increase in the Index, partially offsetting gains in other sectors. The number of employed residents advanced, indicating the rebounding labor market. Industrial electricity sales jumped sharply, suggesting that the State’s production activity is back on the rise again after a brief interruption caused by the windstorm. A rebound in home sales points to a relief in the housing market, thanks to the federal tax credit.

Coincident Index

The Coos Coincident Index, which tracks the current state of the Coos economy, rose to 96.2 in March from February’s revised value of 94.8, for a gain of 1.5%. This gain was the third consecutive increase and the second largest in three years. More notably, the Index turned higher compared to a year ago for the first time since January 2008.

[innerindex]The New Hampshire Coincident Index inched up to 96.7 in March from February’s revised value of 96.5 for a gain of 0.2%. This month-to-month percentage gain was the second increase in a row. On a monthly year-over-year basis, the Index was down 0.1% from its March 2009 value. Losses continued to be abated in the last four months.

How strong are the forces of change?

Month-to-Month Comparison

In March, the Coos Coincident Index rose from February’s level. It was the third consecutive increase in a row and the largest since October 2008. Five of the six indicators that make up the Index contributed to the gain. The increases have become more persistent, stronger and widespread. The recovery is gaining momentum. On the other hand, the New Hampshire Coincident Index managed to inch up in March after a strong gain in February. Five of the six component indicators turned positive. Larger increases in the index should be observed in the coming months before the arrival of recovery.

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, rose in March three months in a row, but was still slightly down from its March 2009 value.

New Hampshire

Employment at the state level, adjusted for seasonal variation, rose in March for the third time in a row, but was down from its March 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, soared in March for the fourth time in the last five months. And, it was up from its March 2009 value.

New Hampshire

Home sales, adjusted for seasonal variation, increased in March following three consecutive months of decrease. On a monthly year-over-year basis, the index increased for the sixth 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, fell in March after increasing two months in a row. But, it was still considerably higher compared to a year ago. This year-over-year gain marks the fourth consecutive month of increase.

New Hampshire

The estimated rooms and meals revenue, adjusted for seasonal variation and inflation, retreated in March after a strong gain in February. But, it was still 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, inched up in March for the third time in a row, and turned up higher compared to a year ago.

New Hampshire

Average Saturday traffic counts, adjusted for seasonal variation, increased in March for the second consecutive month, and were up from its March 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 March two months in a row, and was up from its March 2009 level.

New Hampshire

The estimated wages and salary disbursement, adjusted for seasonal variation and inflation, advanced in March after falling three 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, soared in March, offsetting February’s loss. It was also higher than a year ago.

New Hampshire

At the state level, industrial electricity sales, adjusted for seasonal variation, rebounded in March, partially offsetting February’s loss. It was also 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.