November 2010

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Reviving hope for recovery?

The November report reflects the traffic counts series, which was revised to improve its conformity to the business cycle. In October, the Coos economy showed encouraging signs for recovery. The Coos Index was up from where it stood a year ago for the first time since April. The labor market seemed to have gained some strength; the number of employed residents expanded two months in a row on a year-over-year basis. The hospitality industry did better than a year ago, although it wasn’t nearly enough to boost the business owners’ confidence in the industry. Both the estimated rooms and meals revenues and the average Saturday vehicle traffic counts marked higher than where they were a year ago. The only blemish in the news was the housing sector. Home sales remained nearly half the October 2009 level.

Likewise, the revised data revealed that the State economy remained strong. The State Index advanced for the seventh month in a row on a year-over-year basis. For the second consecutive month, it posted a 1.7% gain, the largest since the beginning of the recession. The steadily improving labor market was most impressive. The number of employed residents expanded six months in a row on a year-over-year basis at an increasing pace. However, the stumbling housing market remained as a threat to recovery. Home sales took a step backward after having recovered from hiccups after the expiration of the federal home buyer tax credit.

Coincident Index

The Coos Coincident Index, which tracks the current state of the Coos economy, rose to 95.6 in October from September’s revised value of 94.2, for a gain of 1.5%. On a monthly year-over-year basis, the Index went up from a year ago level for the first time since April, posting a 0.5% gain.

The New Hampshire Coincident Index remained unchanged in October. On a monthly year-over-year basis, the Index continued its expansion for the seventh month in a row.

How strong are the forces of change?

In October, the Coos Coincident Index was up from where it was a year ago for the first time since April. Four out of six component indicators were up from their October 2009 level. In the meantime, the State Index continued its strong expansion by gaining 1.7% from where it stood a year ago. For two months in a row, the Index posted a 1.7% year-over-year gain, which is the largest increase since the beginning of the recession. Four of the six component indicators were up from where they were a year ago.

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, fell back after posting a strong gain in September. Still, it was up from where it was a year ago.

New Hampshire

Employment at the state level, adjusted for seasonal variation, expanded for the ninth time in ten months. And, it was up from its October 2009 level.

Home Sales

It tracks the number of residential homes sold, including condos and manufactured 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 after increasing in September. As a result, it remained practically half the October 2009 level.

New Hampshire

Home sales, adjusted for seasonal variation, contracted after posting gains two months in a row. On a monthly year-over-year basis, it was more than 30% down from where it stood in October 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, expanded following two consecutive losses. On a monthly year-over-year basis, it rose for five straight months. However, it showed a steady decline in the pace of increase.

New Hampshire

The estimated rooms and meals revenue, adjusted for seasonal variation and inflation, contracted for the second time in four months. And, it was below 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, bounced back after taking a plunge in September. And, it was up from where it was a year ago.

New Hampshire

Average Saturday traffic counts, adjusted for seasonal variation, slipped in October for the second straight months. Still, it was up 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 obtained from all workers covered under state and federal unemployment insurance laws; in other words, it is full population counts, not sample-based estimates. Unlike the household employment report, however, it excludes self-employed, domestic workers, and most agricultural workers. For this difference, wages and salaries series complements the number of employed residents in monitoring the labor market conditions as well as the economy. 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, increased in October. Still, it was down from its October 2009 level.

New Hampshire

The estimated wages and salary disbursement, adjusted for seasonal variation and inflation, expanded in October. And, it was up from where it stood a year ago.

Industrial Electricity Sales

It measures sales of electricity (kWh) to industrial customers. Utilities categorize consumers based on the North American Industry Classification System, demand, or usages. 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 industrial sector 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 after posting a large loss in the previous month. As a result, it rose above where it was a year ago.

New Hampshire

Industrial electricity sales, adjusted for seasonal variation, inched up two months in a row. And, 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 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 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.