December 2010

[innerindex]

Slowly Looming Recovery

I’m glad to announce that a paper on the NCEI project was presented to an academic conference in November. Before and after the presentation, the NCEI methodology had been carefully reviewed. As a result, two major modifications were made. First, 12 month moving average was adopted for all the component indicators, except for number of employed residents. By far, the biggest challenge in the NCEI’s inaugural year was the volatility in the data, which made very difficult to interpret month-to-month changes. Analyses showed that the use of 12 month moving average dramatically reduced the volatility problem while still approximating the business cycle. In addition, it avoided errors associated with seasonal adjustment process, thus increasing the accuracy of the report. Secondly, home sales series was excluded from the construction of the NCEI index in order to improve its conformity to the business cycle. Home sales series appears to have been decoupled from the business cycle for the past two decades. However, it will still be included in the report due to the importance of the real estate market to the economy. We believe these measures will make it easier to read changes in the direction of the economy. The detailed information will be posted in the methodology page in January.

The new and improved NCEI exhibits that the Coos economy had been stagnant in much of the early 2010, but slowly advanced in the second half. In November, the County Index advanced for the fifth consecutive month on a year-over-year basis. The production activity remained strong; the industrial electricity sales series was up from prior year. The hospitality sector did better than last year as well. Both the estimated rooms and meals revenues and the average Saturday vehicle traffic counts marked higher than where they were a year ago. In particular, a rebound in rooms and meals revenues was remarkable; it recuperated its pre-Great Recession level. However, the news from the labor market was mixed. The number of employed residents was up from where it was a year ago, while the estimated total wages and salaries continued to slide.

The signs of recovery were much clearer in the State’s economy. The State Index advanced three months in a row on a year-over-year basis at an increasing pace. The recovery seemed to have gained traction. The encouraging signs were apparent in the labor market. Both the number of employed residents and the estimated total wages and salaries are up from prior year. The manufacturing sector continued its expansion as well. However, the recovery wasn’t so strong in the hospitality sector. The estimated rooms and meals revenues remained stagnant.

Coincident Index

The Coos Coincident Index, which tracks the current state of the Coos economy, fell to 92.6 in November from October’s revised value of 92.9, for a loss of 0.3%. The loss followed four straight months of increases. On a monthly year-over-year basis, the Index advanced five straight months.

The New Hampshire Coincident Index rose to 95.8 for the ninth consecutive increase in November. On a monthly year-over-year basis, the Index expanded for the third month in a row.

How strong are the forces of change?

In November, the Coos Coincident Index was up from where it was a year ago for the fifth time in a row. Four out of five component indicators were up from their November 2009 level. However, the pace of increase was not as strong. In the meantime, the recovery of the state economy appeared to have picked up some momentum. The State Index continued its strong expansion by gaining 1.7% from where it stood a year ago. This increase is the largest since the NCEI began tracking the economy. In addition, four of the five 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, retreated two months in a row. 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 tenth time in eleven months. And, it was up from its November 2009 level.

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, expanded six months in a row. On a monthly year-over-year basis, it rose for twelve straight months.

New Hampshire

The estimated rooms and meals revenue, adjusted for inflation and smoothed by 12 month moving average, rose for the fourth time in five months. Still, 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, smoothed by 12 month moving average, increased for the fourth time in five months. And, it was up from where it was a year ago.

New Hampshire

Average Saturday traffic counts, smoothed by 12 month moving average, increased in November for the ninth straight month. On a monthly year-over-year basis, it advanced eight months in a row.

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, contracted four months in a row. And, it was down from its November 2009 level.

New Hampshire

The estimated wages and salary disbursement, adjusted for inflation and smoothed by 12 month moving average, expanded for the tenth consecutive month. 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, smoothed by 12 month moving average, ticked up for the fourth time in five months. On a monthly year-over-year basis, it expanded eight straight months.

New Hampshire

Industrial electricity sales, smoothed by 12 month moving average, inched up nine months in a row. And, it remained up from where it was a year ago.

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.

Home sales series is not included in this month report due to an issue with software upgrade. It will be up again in January report.

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.