Mississippi s Business Monitoring The State s Economy

Mississippi s Business February 2012 Monitoring The State s Economy ECONOMY AT A GLANCE Volume 70 - Number 2 A Publication of the University Research Center, Mississippi Institutions of Higher Learning The Mississippi Index of Leading Indicators continued to climb upward in December. The index has increased for four consecutive months. By reaching the highest level since February 2011, the series has erased almost all of the decline that occurred during the spring and summer months. There is still weakness among the components relative to their level six-months prior which tempers the sense of optimism. The Mississippi Index of Coincident Indicators rose for the seventh straight month, although the latest gain was the weakest since August 2011. National economic news has also been upbeat. The January employment gain was the strongest since April 2011 and light vehicle sales topped an annualized 14 million units for the first time since before the recession. Warmer weather and some quirks in the seasonal adjustment factors may be elevating the economic data somewhat, but the news remains positive nonetheless. The economy is improving, but growth is relatively weak and activity is well below pre-recession levels. We are by no means out of the woods. As indicated last month, the economy is expected to moderate in the first half of 2012 as the fundamental weaknesses in the economy reassert themselves on the modest recovery. However, IHS Global Insight has lowered their probability of recession to 25 percent, on the basis of the stronger U.S. economy. The primary risk remains centered on the European Union and the sovereign debt issues among the members. The sword rattling taking place in the Middle East is also of concern particularly with regard to oil prices. With the weak recovery, a relatively mild shock can have large consequences in terms of growth. Index of Leading Indicators Index of Coincident Indicators 98.0 96.0 94.0 92.0 90.0 88.0 86.0 84.0 82.0 80.0 MS LI US LI 105.0 104.0 103.0 102.0 101.0 100.0 99.0 MS LI US LI 1 1 1 1 The Mississippi Coincident Index is constructed by the Federal Reserve Bank of Philadelphia and re-indexed to 2004. The Index is based on changes in nonfarm employment, the unemployment rate, average manufacturing workweek length and wage and salary disbursements. The Mississippi Leading Index is constructed by the Mississippi University Research Center. The U.S. Indices are both from the Conference Board. All series are indexed to a base year of 2004. IN THIS ISSUE: Economy at a Glance... 1 Index of Leading and Coincident Indicators for December 2011... 2 Mississippi Employment By Sector... 8 State Economist Darrin Webb 3825 Ridgewood Road, Jackson, MS 29211 dwebb@mississippi.edu www.mississippi.edu/urc/economics.html

2 Mississippi s Business February 2012 LEADING AND COINCIDENT INDICATORS, DECEMBER 2011 The Mississippi Index of Leading Economic Indicators rose for the fourth consecutive month in December. With the 1.6 percent gain over the revised November level, the index was 96.4, the highest point since February 2011. The index peaked in February and declined in the spring and summer months hitting a low in August. As of December the index had recouped almost all of the loss that took place over these months. The growth over the prior six months was positive in December for the first time since May. However, the six-month diffusion index continues to show broad weakness among the components, particularly among the Mississippi based components. The index reveals a strengthening economy, but one that remains weak and therefore vulnerable to shocks. The Index was only 0.7 percent above the year ago level. The November gain came on the strength of six components. Two components contributed negatively. The components will be discussed in order of the contribution to the gain. The index reveals a strengthening economy, but one that remains weak and therefore vulnerable to shocks. The U.S. Index of Consumer Expectations 1 rose 10.1 percent to 62.7 in December. Better economic news in the fourth quarter fueled the gain. The latest preliminary report for February 2011 shows a slight dip in sentiment. Small businesses have also improved their outlook as evidenced by the Business Optimism Index. The series has risen for five consecutive months. However, the increase in the January index was relativly weak. Businesses have routinely expressed concern over slow sales. In recent reports however, a growing number of respondents are citing regulations as their greatest concern. The Mississippi Manufacturing Employment Intensity Index rose 3.0 percent in December relative to November. Manufacturing hours worked and employment im- 97.0 96.0 95.0 94.0 93.0 92.0 91.0 90.0 Mississippi Index of Leading Indicators proved for the month. The series declined significantly in November after two months of gain. The December index erased all of the November decline. The monthly fluctuations of this series masks the fact that the index has been relatively flat for the past two years. The Mississippi Diesel Fuel Consumption Index 1 rose 7.0 percent in December relative to November. The index had fallen the previous three months. With the gain, the December index was the highest since August 2011. the previous two months. The December level is the lowest since September 2007. The continued claims series fell as well but remains high historically. Thus, while monthly layoffs have returned to the pre-recession level, the number of individuals receiving unemployment benefits remains high. The Institute for Supply Management Index of U.S. Manufacturing Activity rose for a third month in January reaching a level of 54.1. The January gain was smaller than the previous two and below expectations, but puts the index at the highest level since June. The index shows the manufacturing sector continues to expand although growth remains modest. 1. Three Month Moving Average 3% 1% -1% Mississippi s initial unemployment claims fell a sharp 11.6 percent in December relative to November. The series had increased

3 Mississippi s Business February 2012 U.S. Retail Sales rose 0.1 percent in December, down from the 0.4 percent growth in November. Consumers are moderating their spending. The December gain was the slowest since May 2011. Excluding autos and gasoline, sales were unchanged for the month. Sluggish income growth, high debt levels and slow job gains suggests retail sales will not lead the recovery. In a related statistic, light vehicle sales topped 14 million annualized units for January. That is the highest level since before the recession. Strong incentives, new model releases and pent-up demand are the driving factors in the gain. The value of Mississippi residential building permits 1 fell 1.6 percent in December. The modest dip was the first decline since June 2011. The series declined during the first half of 2011 and improved during the second half. Inflation adjusted Mississippi income tax withholdings 1 fell a substantial 3.0 percent in December over November. This was the lowest level since October 2009. The series has been volatile but as we have pointed out in recent issues, withholdings have yet to establish any real upward momentum since the beginning of the recovery. National trends are discusssed on page 5, Mississippi employment trends on pages 8 and 9. The Mississippi Index of Coincident Indicators was 103.9 in Decmber, the highest level since January 2009. The December index was 0.1 percent above the revised November level. The series has increased for seven consecutive months. showing an expand- Mississippi Index of Coincident Indicators 104.5 2. ing Mississippi 104.0 economy. The 2. 103.5 December gain 103.0 was the smallest monthly in- 102.5 1. 102.0 crease since August 2011. The 101.5 101.0 0. index remains well below the pre-recession level. Mississippi s economy is clearly expanding along with the Nation s. But like the Nation, growth is modest and therefore vulnerable to shocks. 90. 95. A comparison of the December index to the recent peak appears below for the 12 southeastern states and the Nation. States that reach 100 percent of peak have fully recovered from the Great Recession. Mississippi was at 96.6 percent, even with Oklahoma and just below that of the Nation. Texas and Louisiana are the only southeastern states further along in recovery. The map on page five shows the relative performance of the fifty states. The December index is compared to the level three months prior. Red states are states in decline. Blue states are gaining. There were only six states in decline in December. This compares to 17 states in decline in August. This trend supports the idea of a strengthening national economy. 102. 100. 98. 96. 94. 92. 90. 88. 86. 84. 82. 80. Coincident Index: December 2011 as Percentage of Peak 87. 91.9% 95.9% 98. 96. 92.3% 96. 91.9% 96. 100. AL AR FL GA KY LA MS NC OK SC TN TX US 97.

4 Mississippi s Business February 2012 LEADING ECONOMIC INDICATORS Bar Graph: # of Claims 17,000 16,000 15,000 14,000 13,000 12,000 11,000 10,000 MS Initial Unemployment Claims 3 2 1-1 -2-3 Bar Graph: Millions of 2004 $ 105 104 103 102 101 100 99 98 97 MS Income Tax Withholdings Three Month Moving Average 1% -1% - -3% Source: Mississippi Department of Employment Security Bar Graph: Millions of 1982-1984 $ 60 55 50 40 30 MS Value Of Residential Building Permits Three Month Moving Average 1 - -1-1 -2-2 -3 Source: Mississippi Department of Revenue 70 60 50 40 30 20 10 0 ISM Index of U.S. Manufacturing Activity 6 4 2 0-2 -4-6 -8 Source: Bureau of the Census Source: Institute For Supply Management 80.0 79.0 78.0 77.0 76.0 75.0 74.0 73.0 72.0 71.0 70.0 MS MFG Employment Intensity Index 3% 1% -1% - -3% - 1996=100 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 U.S. Consumer Expectations Index - -1-1 -2-2 Source: URC using data from Bureau of Labor Statistics Source: University Of Michigan 104.0 102.0 100.0 98.0 96.0 94.0 92.0 90.0 MS Diesel Fuel Consumption Index Three Month Moving Average 1 8% - Line Graph:% Change Over Year Ago Bar Graph: Millions of $ 405,000 400,000 395,000 390,000 385,000 380,000 375,000 370,000 365,000 360,000 U.S. Retail Sales 1 8% Source: URC using Data from Mississippi Department of Revenue Source: Bureau of the Census

5 Mississippi s Business February 2012 Three Month Growth in The Index of Coincident Economic Indicators, December 2011 1.3% WA 0.7% NH 0.9% CA 1.3% OR - AK 1. NV 1. ID 0.3% AZ 1. UT 1. MT -0.1% WY 0. NM CO 2.1% ND SD 0.7% TX 0.1% NE 0.9% KS 0. OK -0.8% MN 0. IA 0.8% MO 0. AR 0. LA -0.7% WI 0.7% IL 0. MS 0. IN 4. MI 0.9% TN 2.1% AL 1. KY 1. OH 0. GA WV VT 1. SC 0.8% NC 0.7% FL PA 0. VA DC 0. NY 0. ME 0.8% NJ MD DE MA -1. RI 1. CT -0.1% HI US 0.7% Less than - Between - to 0. No change Between 0.1% to Greater than National Trends The U.S. Index of Leading Indicators rose 0.4 percent in December relative to November. The index has increased for eight consecutive months. The growth relative to six months prior was an annualized 0.2 percent, much slower than the 5.5 percent observed in the previous six months. The Coincident Index gained 0.3 percent for the month. This was the third consecutive monthly gain. The Conference Board continues to expect modest growth in the coming months. The fourth quarter of 2011 saw the strongest gain in real gross domestic product since the second quarter of 2010. However, growth reached only an annualized 2.8%, not the 3.4 percent expected by IHS Global Insight last month. Still it is a strong finish to an otherwise dismal year. Much of the early economic news for 2012 continues to be upbeat. Employment growth for January was the strongest since April 2011. Both the manufacturing and nonmanufacturing ISM indices continued to trend up in January. Light vehicle sales saw the strongest monthly gain since the Cash-for-Clunkers program in 2009. IHS Global Insight notes two caveats to the good economic news. First, some of the growth can be explained by the unseasonably mild winter weather. This has given a boost to employment and construction activity at the very least. Second, because of the recessionary period of 2008 and 2009, the seasonal adjustment factors are biasing the data upward as they are looking for extra weakness during this period. These factors dim the optimistic assessment, but do not destroy it. The economic news is by-in-large the most positive in a year. Threat of recession remains but has again diminished with the relatively strong National economy. The chance of recession is now 25 percent. The biggest threat to recovery continues to be Europe, although higher oil prices are also a risk.

6 Mississippi s Business February 2012 MISCELLANEOUS ECONOMIC INDICATORS Bar Graph: 160 150 140 130 120 110 100 90 80 MS Continued Unemployment Claims - -1-1 -2-2 -3 Bar Graph: Rate 10.7 10.6 10.5 10.4 10.3 10.2 10.1 10.0 9.9 9.8 MS Unemployment Rate - - - -8% -1 Source: Mississippi Department of Employment Security; Seasonally Adjusted Source: U.S. Bureau of Labor Statistics; Seasonally Adjusted Bar Graph: 2004 Dollars 560.0 550.0 540.0 530.0 520.0 510.0 500.0 490.0 480.0 470.0 460.0 Real Average MFG Weekly Earnings in MS 1 1 8% - Bar Graph: Millions of Dollars 250.0 200.0 150.0 100.0 50.0 0.0 MS Gaming Revenue 1-1 -2-3 -4 Coast River Growth of Total Source: U.S. Bureau of Labor Statistics; Nonseasonally Adjusted Source: MS Department of Revenue; Nonseasonally Adjusted 4. 4. 3. 3. 2. 2. 1. 0. Inflation: Price Growth over Prior Year 3. 3. 3. 3.8% 3.9% 3. 3. 3. 2.7% 2.1% 1. 3. Bar Graph: Rate 62.0 60.0 58.0 56.0 54.0 52.0 50.0 48.0 ISM Nonmanufacturing Activity Index 2 1 1 - -1 Source: U.S. Bureau of Labor Statistics Source: Institute For Supply Management 96.0 94.0 92.0 90.0 88.0 86.0 84.0 Business Optimism Index 8% - - Bar Graph: Millions of Units 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 U.S. Light Vehicle Sales 12.5 12.6 13.2 14.1 13.0 13.1 13.1 13.2 13.6 13.5 11.7 12.2 12.1 11.5 3 2 2 1 1 Source: National Federation of Independent Businesses Source: Bureau of Economic Anlaysis; Seasonally Adjusted Annual Rate

7 Mississippi s Business February 2012 SELECTED ECONOMIC INDICATORS December November December Change from Indicator 2011 2011 2010 Last Month Last Year US Index of Coincident Indicators 103.4 103.1 100.8 0.3% 2. MS Index of Coincident Indicators 103.9 103.8 102.5 0.1% 1. US Index of Leading Indicators 94.3 93.9 91.7 0. 2.8% MS Index of Leading Indicators 96.4 94.9 95.7 1. 0.7% MS Initial Unemployment Claims 11,183 12,648 12,586 11. 1 MS Value Of Res. Building Permits 46.2 47.0 50.4 1. 8. MS Income Tax Withholdings 99.62 102.74 102. 3. 2.7% MS MFG Emp. Intensity Index 76.4 74.1 73.9 3. 3.3% MS Diesel Fuel Consumption Index 101.5 94.8 97.6 7. 4. US Index of Consumer Expectations 62.7 56.9 67.2 10.1% 6.7% US ISM Index of MFG Activity 54.1 53.9 58.5 0. 7. US Retail Sales 400,614 400,268 376,208 0.1% 6. US Consumer Price Index 119.5 119.8 116.0 0. 3. MS Unemployment Rate 10. 1 10. 0.1% 0. MS Continued Unemp. Claims 122,550 122,917 144,097 0.3% 15. US Mortgage Rates 4. 4.1% 4.8% 0.1% 0.8% MS Avg. Hourly Wage for MFG 52.60 52.00 57.10 1. 7.9% MS Avg. Wkly Earnings for MFG 547.9 526.6 504.7 4. 8. Gaming Revenue 186.1 165.8 183.8 12. 1. Coast Counties 86.9 81.1 86.6 7. 0. River Counties 99.2 84.7 97.2 17.1% 2. Business Optimism Index 93.8 92.0 92.6 2. 1.3% Components of the MS Index of Leading Indicators Economic Indices Miscellaneous Indicators

8 Mississippi s Business February 2012 Sector Source: U.S. Bureau of Labor Statitiscs MISSISSIPPI EMPLOYMENT BY SECTOR Change from Change from December November December Prior Month Prior Year 2011 2011 2010 Level % Level % Total Nonfarm 1,099,900 1,103,500 1,097,200 (3,600) 0.3% 2,700 0. Mining and Logging 9,000 9,100 8,900 (100) 100 Construction 47,400 47,400 49,400 0. (2,000) 4. Manufacturing 133,000 132,200 1,600 800 0. (1,600) 1. Trade, Transportation & Utlities 215,500 216,000 214,100 (500) 0. 1,400 0.7% Retail Trade 133,700 1,000 131,900 (300) 0. 1,800 1. Information 12,2 12,2 12,551 10 0.1% (200) 1. Financial Activities,129 44,785 44,422 4 0.8% 707 1. Services 390,800 393,600 385,600 (2,800) 0.7% 5,200 1.3% Professional and Business Services 98,700 100,800 94,900 (2,100) 2.1% 3,800 4. Education and Health Services 139,100 139,600 1,600 (500) 0. 4,500 3.3% Leisure and Hospitality 118,500 118,400 121,100 100 0.1% (2,600) 2.1% Other Services,500,800,000 (300) 0.9% (500) 1. Government 246,400 248,000 247,300 (1,600) 0. (900) 0. Mississippi Employment Trends Mississippi nonfarm employment fell 3,600 jobs or 0.3 percent in December relative to November. The decline ended a three month run of consecutive increases. The decline occurred primarily in the professional and business service sector and government. Manufacturing actually saw an increase as did financial activities. Construction was unchanged for the month. The construction sector has been trending down in employment since February 2011. Relative to the year ago, Mississippi employment was up 2,700 jobs or 0.2 percent in December. In terms of percentages, the largest increase occurred in the professional and business service sector along with education and health services. Taking the full twelve months together, Mississippi saw an average gain of 6,525 jobs or 0.6 percent in 2011. However as the map to the right indicates, not all counties in Mississippi gained jobs for the year. In fact 46 counties saw a decrease. The strongest gains were of course in the population centers of the state. County Employment Gains 2010-2011 (655) Adams 114 Wilkinson (169) Bolivar (733) Washington 59 Humphreys 176 Sharkey (5) Issaquena (1,8) Warren (466) Claiborne 70 Jefferson 6 Franklin (633) Tunica (563) (192) Leflore Sunflower (193) Amite (529) Lincoln (214) Pike (1,022) De Soto (2) Walthall (61) Tate 693 91 Panola 11 Coahoma Quitman 166 Tallahatchie (50) Yazoo 123 Madison 758 Hinds 37 Copiah (568) Grenada 16 Carroll Holmes 53 Simpson 395 Yalobusha 619 Rankin Decline Less than 100 Jobs Gained Greater than 100 Jobs Gained (2) Marion (461) Marshall (742) Lafayette (188) Attala (85) Leake (42) Scott (212) (65) Covington Lawrence 207 Jefferson Davis (3) Pearl River (906) Neshoba (1,576) Jones (2) Tippah (755) Union 64 Calhoun 123 Chickasaw 81 Webster 92 Montgomery 93 Choctaw 205 Smith 185 Lamar 128 Hancock 102 Benton 110 Pontotoc (842) Lee (625) Oktibbeha (4) Winston (120) Newton (74) Jasper 175 Forrest (15) Perry 15 Stone 1,120 Harrison (312) Clay (586) Alcorn 84 Prentiss (781) Lowndes (940) Lauderdale (389) Wayne (153) Monroe (41) Kemper 86 Clarke 80 Greene 5 George (1,025) Jackson (152) Tishomingo (95) Itawamba 115 Noxubee

9 Mississippi s Business February 2012-5. -4. -3. -2. -1. 0. 1. 2. 1,070 1,075 1,080 1,085 1,090 1,095 1,100 1,105 1,110 1 1 1 Nonfarm Employment -10. -9. -8. -7. -6. -5. -4. -3. -2. -1. 0. 130 131 132 133 1 1 136 137 138 1 1 1 Manufacturing -4. -3. -2. -1. 0. 1. 2. 44 44 44 44 46 1 1 1 Financial Activities -5. -4. -3. -2. -1. 0. 1. 2. 3. 4. 115 116 117 118 119 120 121 122 1 1 1 Leisure and Hospitality Services -20. -15. -10. -5. 0. 5. 10. 15. 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5 1 1 1 Natural Resources -4. -3. -2. -1. 0. 1. 2. 209 210 211 212 213 214 215 216 217 1 1 1 Trade, Transportation and Utilities -8. -6. -4. -2. 0. 2. 4. 6. 8. 10. 12. 14. 75 80 85 90 95 100 105 1 1 1 Professional and Business Services -5. -4. -3. -2. -1. 0. 1. 2. 1 1 1 Other Services -20. -15. -10. -5. 0. 5. 10. 30 40 50 55 1 1 1 Construction -10. -8. -6. -4. -2. 0. 2. 4. 11.9 12.0 12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 1 1 1 Information 0. 1. 2. 3. 4. 5. 6. 126 128 130 132 1 136 138 140 142 1 1 1 Education and Health Services -3. -3. -2. -2. - -1. - 0. 1. 238 240 242 244 246 248 250 252 254 1 1 1 Government MISSISSIPPI EMPLOYMENT TRENDS Left Axis: Bar Graphs - Employment Levels. Right Axis: Line graphs - Annual Growth. Source: U.S. Bureau of Labor Statistics.