Dr. Michael PakkoChief Economist and State Economic ForecasterInstitute for Economic Advancement, UALR

The Arkansas Economic Outlook

November 16, 2016

The views expressed are my own, and do not necessarily reflect the positions of the Federal Reserve Bank of St. Louis, the Federal Reserve System, the University of Arkansas at Little Rock, the University of Arkansas System, or the Institute for Economic Advancement.

Overview

• Review of Economic Conditions:• Output• Income• Spending• Employment/Unemployment

• Arkansas lagged the nation through much of the economic recovery – particularly in employment. Since 2014, employment growth has accelerated.

• Outlook: Slow, but steady economic growth.

Gross Domestic Product

Source: Bureau of Economic Analysis

Gross Domestic Product

Source: Bureau of Economic Analysis

Gross Domestic Product

Source: Bureau of Economic Analysis

Gross Domestic Product

Source: Bureau of Economic Analysis

Coincident Indexes

Source: Federal Reserve Bank of Philadelphia

Coincident Indexes

Source: Federal Reserve Bank of Philadelphia

Personal Income

Source: Bureau of Economic Analysis

Personal Income

Source: Bureau of Economic Analysis

Personal Income

Source: Bureau of Economic Analysis

Personal Income

Source: Bureau of Economic Analysis

U.S. Arkansas U.S. Arkansas

Personal Income 4.3 4.2 100.0 100.0

Wages & Salaries 4.3 3.6 50.7 40.7

Proprietors' Income 5.6 7.8 11.1 12.3

Dividends, Interest & Rent 5.8 6.8 23.6 29.6

Transfer Receipts 3.0 2.9 12.6 17.5

Personal Income Growth, 2010:Q1 - 2016:Q2

Annualized Growth RatesGrowth as Percent of

Personal Income Growth

Taxable Sales

Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement.

Taxable Sales

Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement.

Taxable Sales

Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement.

Taxable Sales

Sources: Arkansas Department of Finance and Administration, Oil Price Information Service, U.S. Census Bureau, Institute for Economic Advancement.

Sources: Arkansas Realtors® Association, Institute for Economic Advancement.

Home Sales

Sources: Arkansas Realtors® Association, Institute for Economic Advancement.

Home Sales

Unemployment

Source: Bureau of Labor Statistics.

Unemployment

Source: Bureau of Labor Statistics.

Local Area Unemployment Statistics (LAUS) - Arkansas

1,200

1,220

1,240

1,260

1,280

1,300

1,320

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul

Thou

sand

s

Employment 

2010 2011 2012 2013 2014 2015 2016

405060708090100110120

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul

Thou

sand

s

Unemployment

20112010 2012 2013 2014 2015 2016

1,290

1,300

1,310

1,320

1,330

1,340

1,350

1,360

1,370

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul

Thou

sand

s

Labor Force 

2010 2011 2012 2013 2014 2015 2016

Unemployment

Source: Bureau of Labor Statistics.

Unemployment

Source: Bureau of Labor Statistics.

Unemployment

Source: Bureau of Labor Statistics.

Employment

Source: Bureau of Labor Statistics.

Employment

Source: Bureau of Labor Statistics.

Employment

Source: Bureau of Labor Statistics.

Employment

Source: Bureau of Labor Statistics.

Employment

Source: Bureau of Labor Statistics.

As Published

Expected Revision Change

Mining & Logging -2.6 -2.9 -0.3Construction 1.1 3.4 2.3Manufacturing -1.2 -0.1 1.1

Wholesale Trade 1.3 -0.1 -1.4Retail Trade 6.3 4.5 -1.8

Transportation & Utilities 0.7 0.3 -0.4Information Services 0.4 -0.6 -1.0

Financial Services 0.5 2.8 2.3Professional & Business Services 6.1 4.9 -1.2

Education & Health Services 11.5 8.7 -2.8Leisure & Hospitality Services 6.9 6.5 -0.4

Other Services 1.4 1.0 -0.4Government 0.5 -0.5 -1.0

TOTAL 32.9 28.0 -4.9Percent 2.7% 2.3% -0.4%

Arkansas Nonfarm Payroll Employment Employment changes (thousands of jobs), December 2014 - September 2016

Economic Forecasts“Prediction is difficult – particularly when it involves the future."

‐Mark Twain

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 FargoWall Street JournalNABE

Augmentations: Judgmental adjustments and time-series estimation of national-state model linkages and assumptions (e.g. productivity trends).

Employment

Q4/Q4 Growth

2014 19.7K1.7%

2015 26.2K2.2%

2016 10.2K0.8%

2017 11.2K0.9%

2018 11.9K1.0%

Employment

Including expected revision in 2017

Q4/Q4 Growth

2014 19.7K1.7%

2015 19.7K1.6%

2016 11.8K1.0%

2017 11.1K0.9%

2018 11.8K1.0%

EmploymentArkansas Nonfarm Payroll Employment Growth Forecasts for 2016:Q4-2018:Q4

Employment changes Thousands of

Jobs Percent

Mining & Logging 0.3 4.9

Construction 2.1 4.1

Manufacturing -1.2 -0.8

Wholesale Trade 0.7 1.6

Retail Trade 3.4 2.4

Transportation & Utilities 0.4 0.7

Information Services 0.1 0.7

Financial Services 0.5 1.0

Professional & Business Services 6.7 4.7

Education & Health Services 4.5 2.5

Leisure & Hospitality Services 3.3 2.9

Other Services 0.4 0.8

Government 1.7 0.8

TOTAL 22.9 1.9

Real GDP

Real GDP

Q4/Q4 Growth (%)2015 0.82016 2.42017 2.9

2018 2.8

Personal Income

Q4/Q4 Growth (%)2015 1.52016 2.72017 3.0

2018 3.5

Retail Sales

Q4/Q4 Growth (%)2015 0.92016 1.42017 2.12018 2.8

Home Sales

Sales(Pct. Change)

2014 28.1K7.3%

2015   30.9K10.0%

2016 33.6K8.7%

2017 36.5K8.4%

2018 36.5K0.2%

Unemployment

End of Year (Q4)

2015 4.8

2016 4.1

2017 4.3

2018 4.4

Arkansas EconomistFor more information and analysis of the Arkansas Economy,

visit the Arkansas Economist: www.arkansaseconomist.com