June 2010

[innerindex]

The economy offers caution for recovery.

In May, the economic rebound slowed for the Coos economy. Although the Coos Coincident Index managed to edge up for the fifth month in a row, only two of six component indicators contributed to the increase. Moreover, the rate of increase in the Index has slowed over the past two months. A jump in the estimated wage and salary was largely responsible for the increase in the Index. Industrial electricity sales inched up as well. However, no other indicators offered positive news. The number of employed residents slipped for two consecutive months, pointing to the sliding labor market. Both indicators of the hospitality industry – the estimated rooms and meals revenues and the average Saturday vehicle traffic counts – fell. Lastly, two consecutive decreases in home sales are indicative of the vulnerable housing market without the federal tax credit program.

The State economy did not fare much better. The New Hampshire Coincident Index slipped for the first time in four months. Half of the six component indicators contributed to the loss. On a positive note, industrial electricity sales bounced back, suggesting that the manufacturing sector chugged along. The number of employed residents edged up, but the rate of increase has slowed steadily in the last three months, pointing to a still fragile labor market. Along with the estimated rooms and meals revenues, the average Saturday vehicle traffic counts nose-dived, pointing to the vulnerable hospitality industry. Home sales took a plunge, as expected, with the expiration of the federal tax credit program.

Coincident Index

The Coos Coincident Index, which tracks the current state of the Coos economy, rose to 97.3 in May from April’s revised value of 97.1, for a gain of 0.2%. Although this gain was the fifth consecutive increase, the rate of increase has slowed recently. On a monthly year-over-year basis, the Index increased 1.5% from its April 2009 value for the third consecutive month.

The New Hampshire Coincident Index slipped to 97.2 in May from April’s revised value of 97.3 for a loss of 0.2%. This loss follows three straight increases. Still, the Index was up compared to where it was a year ago.

How strong are the forces of change?

In May, the Coos Coincident Index inched up from April’s level. Although it was the fifth consecutive increase in a row, the rate of increase has slowed in the past two months. Moreover, only two of the six component indicators contributed to this increase. The state economy didn’t do better. The New Hampshire Coincident Index slid in May after increasing three straight months. Half of the component indicators turned lower. The economic rebound hit a snag.

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, slid in May for two months in a row, and was down from its May 2009 value.

New Hampshire

Employment at the state level, adjusted for seasonal variation, inched up in May for the fifth time in a row, and was up from its May 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, retreated in May for two months in a row. But, it was still up from its May 2009 value.

New Hampshire

Home sales, adjusted for seasonal variation, fell in May after increasing two straight months. On a monthly year-over-year basis, however, the index increased for the eighth 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, decreased in May for the second time in the last three months. But, it was still up from where it was a year ago.

New Hampshire

The estimated rooms and meals revenue, adjusted for seasonal variation and inflation, retreated for the second time in three months. And, 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, slid in May for two months in a row, and down from where it was a year ago.

New Hampshire

Average Saturday traffic counts, adjusted for seasonal variation, nose-dived after increasing three consecutive months. But, it was still up from its May 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 May for four months in a row, and was up from its May 2009 level.

New Hampshire

The estimated wages and salary disbursement, adjusted for seasonal variation and inflation, increased in May for three months in a row, and was up 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, expanded in May, for the third month in a row. And, it was higher than a year ago.

New Hampshire

At the state level, industrial electricity sales, adjusted for seasonal variation, rose in May for the second time in the last three 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.