August 2010

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Warm weather boosts economy.

In July, warm weather salvaged the economy that would otherwise have been marred by the stumbling housing sector. Home sales plunged more than 40% after the end of the home-buyer tax credit. Otherwise, it was a good month for the Coos economy. Labor market unexpectedly rebounded. Industrial electricity sales were up, suggesting a continued improvement in the county’s production activity. However, it was warm weather that provided the largest boost to the economy in the midst of heightened concerns over the fledgling recovery. The estimated rooms and meals revenues and the average Saturday vehicle traffic both advanced, pointing to increased tourist activity. However, the boost to the hospitality sector is likely to be temporary and wane as the hot summer season comes to an end.

The State economy has seen a similar boost to the hospitality sector brought by warm weather in July. In addition, manufacturing activity remained strong, as reflected in a continued upward trend in industrial electricity sales. However, recent developments in the labor and housing market portend a tough road ahead in the State’s economy. The number of employed residents fell for the first time since December. Home sales plunged after the end of the home-buyer tax credit.

Coincident Index

The Coos Coincident Index, which tracks the current state of the Coos economy, ticked up slightly to 95.7 in July from June’s revised value of 95.6, for a gain of 0.1%. This gain follows two consecutive months of declines. On a monthly year-over-year basis, the Index increased 1.2% from its July 2009 value for the fifth consecutive month.

The New Hampshire Coincident Index rebounded to 96.4 in July from June’s revised level of 96.0. This gain was the second time in the past four months. On a monthly year-over-year basis, the Index increased 0.3% from its July 2009 value for the third consecutive month.

How strong are the forces of change?

In July, the Coos Coincident Index ticked up slightly after falling two months in a row. Four of the six component indicators contributed to this gain. The State economy increased for the second time in four months. Four of the six component indicators contributed to this gain.

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, rebounded in July after falling three months in a row, but was still down from its July 2009 value.

New Hampshire

Employment at the state level, adjusted for seasonal variation, declined for the first time in the past seven months, but was still up from its July 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, plunged more than 40% in July from the previous month. And, it was also more than 43% down from where it was a year ago.

New Hampshire

Home sales, adjusted for seasonal variation, took a nosedive nearly 42% in July from the June’s level. On a monthly year-over-year basis, it declined for the first time since October.

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, edged higher in July after falling two straight months. And, it was up from where it was a year ago.

New Hampshire

The estimated rooms and meals revenue, adjusted for seasonal variation and inflation, increased for the third time in four months. Still, it was down from 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, increased in July after three consecutive months of declines. On a monthly year-over-year basis, it turned higher from where it was a year ago for the first time since March.

New Hampshire

Average Saturday traffic counts, adjusted for seasonal variation, inched up in July for the second month in a row, and it was up from its July 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, was stagnant in July. But it was up from its July 2009 level.

New Hampshire

The estimated wages and salary disbursement, adjusted for seasonal variation and inflation, improved in July two months in a row. Still, 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, ticked up slightly in July for the fourth time in five months. And, it was higher than where it was a year ago.

New Hampshire

At the state level, industrial electricity sales, adjusted for seasonal variation, soared in July for the third time in the past five months. And , it was 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 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.