August 2011

Cause for Concern

[innerindex]The previous June report incorrectly stated the number of employed residents in Coos County, which was caused by a data entry error. The loss in the number of employed residents in the County was about 100 in June, instead of 1000. Consequently, the report overstated the decline in the County Index. Nonetheless, the corrected data showed that the storyline remained the same; the recovery continued to fade away. In July, instead of June as previously reported, the Coos economy declined for the first time since the end of the recession on a monthly year-over-year basis. The labor market continued to struggle; the number of employed residents had fallen faster on a monthly year-over-year basis. So did estimated wages and salaries. The decline in the manufacturing activity became increasingly regular; industrial electricity sales contracted two straight months on a monthly year-over-year basis. The hospitality sector appeared to be the only bright spot in the County economy; estimated rooms and meals revenue was the only indicator that was up from prior year. July data for average Saturday traffic counts has yet to be released by the New Hampshire Department of Transportation. So the Indexes were constructed assuming no change in the variable.

In New Hampshire, the economic recovery continued to slow down. The State Index fell from prior month and, on a monthly year-over-year basis, the pace of its growth declined for the fourth month in a row. The manufacturing sector appeared to be slowing; the monthly year-over-year growth in industrial electricity sales kept falling. The State’s labor market seemed to be heading south as well, the number of employed residents in the State contracted three months in a row on a month-to-month basis. Although it remained up from prior year, its year-over-year growth rate slid for the third consecutive month. Historically in New Hampshire, persistent and pronounced declines in the number of employed residents (12 month percent changes) tend to precede job losses and recession. Should this downward trend in the number of employed residents continue and fall into a negative territory on a year-over-year basis, the State may become vulnerable to a double dip recession.

The real estate market analysis can be found at the end of this report.

Coincident Index

The Coos Coincident Index, which tracks the current state of the Coos economy, dropped to 91.8 from June’s revised value of 92.1. On a monthly year-over-year basis, the Index declined for the first time since April 2010.

The New Hampshire Coincident Index slid to 95.7 in July from prior month. On a monthly year-over-year basis, the Index remained up from a year earlier. However, its growth rate slowed four months in a row.

How strong are the forces of change?

In July, the Coos Coincident Index fell for the first time since the end of recession on a monthly year-over-year basis. Three out of the four available component indicators were down from their July 2010 levels. The State Index increased 11 months in a row on a monthly year-over-year basis. All four available component indicators remained up from prior year. However, its growth rate decreased four months in a row.

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, registered a marginal gain from June after falling four straight months. Still, it remained down from prior year.

New Hampshire

Employment at the state level, adjusted for seasonal variation, contracted for the third straight month. Still, it remained up from the level seen a year earlier.

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 inflation and smoothed by 12 month moving average, decreased from prior month. Still, it remained up from its July 2010 level.

New Hampshire

The estimated rooms and meals revenue, adjusted for inflation and smoothed by 12 month moving average, increased from June. And it remained up from prior year.

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.

The July data has yet to be released by the NH Department of Transportation.

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 inflation and smoothed by 12 month moving average, dropped from June. And, it remained down from a year earlier.

New Hampshire

The estimated wages and salary disbursement, adjusted for inflation and smoothed by 12 month moving average, increased from June. 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.

Coos County

Industrial electricity sales, smoothed by 12 month moving average, fell for the fourth consecutive month. On a monthly year-over-year basis, it retreated for the second consecutive month.

New Hampshire

Industrial electricity sales, smoothed by 12 month moving average, fell for the third time in five months. Still, it remained up from where it was a year ago.

Real Estate

NCEI reports two real estate market indicators – home sales and median home prices. The data tracks residential homes sold, including condos and manufactured homes. The health of the real estate sector is important to the broad economy due to its multiplier effect. 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. In order to minimize volatility in Coos real estate market, indicators are averaged over a 12 month period.

Coos County

In July, there was a glimpse of encouraging signs in the Coos real estate market. Home sales, smoothed by 12-month moving average, rose from June. Although it remained below from prior year, its year-over-year pace of decline had slowed two months in a row. Median home prices, smoothed by 12-month moving average, bounced back from prior month as well. Although it is too early to tell, it might be an early indication that the bottom is near.

New Hampshire

A hint of encouraging signs was noticed in the New Hampshire real estate market as well. Home sales, smoothed by 12-month moving average, rebounded from prior month. Although it remained below from the level seen a year earlier, the year-over-year pace of decline in sales fell. Median home prices, smoothed by 12-month moving average, dropped six months in a row on a monthly year-over-year basis. Should the increase in sales continue in the coming months, it should boost home prices as well.

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.
Seasonal factors for the number of employed residents 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.