The Arkansas Economic Outlook

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1 The Arkansas Economic Outlook Dr. Michael Pakko Chief Economist and State Economic Forecaster Arkansas Economic Development Institute, UALR December 1, 2017 Overview Review of Economic Conditions: Output Income Spending Employment/Unemployment Since 2014, Arkansas has experienced trendrate growth of income and employment. Geographically, economic gains have been uneven. Outlook: Slow, but steady economic growth; weakening in second half of

2 Gross Domestic Product Gross Domestic Product 2

3 Gross Domestic Product 2.2% Gross Domestic Product 3

4 Gross Domestic Product Gross Domestic Product 4

5 Gross Domestic Product Population Source: Census Bureau 5

6 Population Personal Income 6

7 Personal Income Personal Income 7

8 Personal Income Personal Income Components of Personal Income Growth, 2010:Q1-2017:Q2 Annualized Growth Rates Growth as Percent of Personal Income Growth U.S. Arkansas U.S. Arkansas Personal Income Wages & Salaries Proprietors' Income Dividends, Interest & Rent Transfer Receipts

9 Personal Income Components of Personal Income Growth, 2010:Q1-2017:Q2 Annualized Growth Rates Growth as Percent of Personal Income Growth U.S. Arkansas U.S. Arkansas Personal Income Wages & Salaries Proprietors' Income Dividends, Interest & Rent Transfer Receipts Personal Income 54,000 Per Capita Personal Income 50,000 46,000 U.S. 42,000 38,000 Arkansas 34,000 30, % 82% Arkansas as a percent of U.S. 81% 80% 79% 78%

10 Personal Income Consumption Spending 10

11 Consumption Spending Taxable Sales Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Arkansas Economic Development Institute. 11

12 Taxable Sales Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Arkansas Economic Development Institute. Home Sales Sources: Arkansas Realtors Association, Arkansas Economic Development Institute.. 12

13 Home Sales Sources: Arkansas Realtors Association, Arkansas Economic Development Institute.. House Prices Source: Federal Housing Finance Agency. 13

14 House Prices Source: Federal Housing Finance Agency; Seasonally adjusted by the Arkansas Economic Development Institute. Employment Source: Bureau of Labor Statistics. 14

15 Employment Arkansas Nonfarm Payroll Employment - October 2017* Employment changes (thousands of jobs) from: Month ago Year ago Feb 2010 Dec 2007 Mining & Logging Construction Manufacturing Wholesale Trade Retail Trade Transportation & Utilities Information Services Financial Services Professional & Business Services Education & Health Services Leisure & Hospitality Services Other Services Government TOTAL * Seasonally adjusted data. Source: Bureau of Labor Statistics. Employment Arkansas Nonfarm Payroll Employment - October 2017* Employment changes (thousands of jobs) from: Month ago Year ago Feb 2010 Dec 2007 Mining & Logging Construction Manufacturing Wholesale Trade Retail Trade Transportation & Utilities Information Services Financial Services Professional & Business Services Education & Health Services Leisure & Hospitality Services Other Services Government TOTAL * Seasonally adjusted data. Source: Bureau of Labor Statistics. 15

16 Employment Source: Bureau of Labor Statistics. Employment 16

17 Unemployment Source: Bureau of Labor Statistics. Unemployment Source: Bureau of Labor Statistics. 17

18 Unemployment Source: Bureau of Labor Statistics. Unemployment 18

19 Employment Source: Bureau of Labor Statistics. Unemployment Source: Bureau of Labor Statistics. 19

20 Forecasts Prediction is very difficult, especially about the future. - Niels Bohr, Danish physicist ( ) Forecast Methodology Model: Arkansas Baseline from Moody s Analytics. Part of a structural econometric model of the U.S. Economy Linked to US forecast, with relationships estimated by sector Baseline forecast from Moody s macroeconomic U.S. model Alternative Forecast Paths: Wells Fargo Wall Street Journal NABE Augmentations: Adjustments and time-series estimation of national-state model linkages and assumptions (e.g. productivity trends). 20

21 Forecast Methodology Assumptions (Moody s Model): Monetary policy tightening, with peak federal funds rate of 4% Government spending and deficits expected to rise Energy prices expected to rise over time Slowdown in the second half of 2019 Forecast risks (upside): Slower pace of Fed tightening and/or smaller responses to tightening Slower rise in energy prices Continued growth through 2019 Population 21

22 GDP GDP 22

23 Personal Income Personal Income 23

24 Personal Income Retail Sales 24

25 Home Sales Sales (Pct. Change) K 10.0% 33.6K 9.0% 35.5K 5.4% 38.9K 9.7% 40.3K 3.7% Employment 25

26 Employment Employment Arkansas Nonfarm Payroll Employment Growth Forecasts for 2017:Q3-2019:Q4 Employment changes Thousands of Jobs Percent Mining & Logging Construction Manufacturing Wholesale Trade Retail Trade Transportation & Utilities Information Services Financial Services Professional & Business Services Education & Health Services Leisure & Hospitality Services Other Services Government TOTAL * Seasonally adjusted data. 26

27 Unemployment Arkansas Economist For more information and analysis of the Arkansas economy, visit the Arkansas Economist: 27

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