Revisions To State Economic Forecast Include Improving Jobs Picture

Last October, UALR economist Michael Pakko presented his 2012 economic forecast after declaring 2011 “the lost year.”

At the time, Pakko said he expected a “painfully slow” jobs recovery and sluggish improvements in other key Arkansas economic indicators.

On Thursday (March 29), Pakko made revisions to his Arkansas forecast in light of new data provided by several federal and state sources, including an improved jobs picture and a weakening housing market.

Still, he predicts a “steady, but unremarkable growth” as the economy slowly emerges from aftermath of the 2008-09 recession.

“In general, the data have confirmed our expectations that 2011 would show a slowdown in the pace of the economic recovery overall, but with clear signs of improvement in the final months of the year,”  Pakko said.  “In some cases, our expectations for improvement in the waning months of 2011 were exceeded, in other cases our outlook was overly optimistic. Accordingly, the forecast revisions are mixed.  And the outlook in broad strokes continues to be one of steady but unremarkable growth.”

Pakko comments were made today at the Arkansas State University Economic Outlook Conference, according to a press release.

Among 5 key economic indicators, Pakko made the following observations and adjustments:

Personal Income

Pakko said personal income in Arkansas, which we reported on yesterday, fell closely in line with forecast growth of 3.6%. “Hence, revisions to the outlook are minor,” he said. “The forecast for 2013 is unchanged at 3.9%.”

Unemployment Rate

In October, Pakko predicted the unemployment rate in Arkansas would hover around 8% in 2012.

Pakko cited revisions to unemployment rate data for 2011 as reason to forecast the 2012 rate to now average 7.4% by the fourth quarter of this year. He also said the rate could now fall to 7.0% by the fourth quarter of 2013.

“These would be welcome developments if realized. The risk to this revised forecast is that new entrants and re-entrants to the labor force might put upward pressure on the unemployment rate as the labor market continues to improve,” said Pakko.

Payroll Employment

Pakko said the data revision was slightly larger than anticipated for payroll employment in Arkansas from the time of his previous October forecast.

“Nevertheless, relatively strong job growth did materialize in the fourth quarter of 2011, as anticipated. Accordingly, the growth path for employment has not been revised (+1.3% in 2012 and +1.5% in 2013), but the path has been benchmarked to a slightly lower starting point,” he said.

Home Sales

Pakko revised his forecast to scale back expectations on home sales.

“Compared to the previous year, total sales volume was down slightly more than forecasted: down 2.5% from the previous year’s (revised) sales figures. Carrying this weakness forward into the projected sales trajectory, the forecasts for 2012 and 2013 have been revised downward. Expectations of a double-digit growth rate in 2012 have given way to a revised forecast of +7.5%. Sales are still expected to improve by 4.3% in 2013, but end the year with a lower sales volume than previously forecasted,” he said.

Arkansas Taxable Sales Including Gasoline

“Our proxy for state retail sales, Arkansas Taxable Sales Including Gasoline (ATSIG), finished 2011 with a Q4/Q4 growth rate of 5.0% — slightly higher than the 4.4% rate in the forecast. Some of this strength is expected to continue into 2012, prompting a slight upward growth revision from 3.2% to 3.3%,” Pakko said.

You can read his full report from his blog, ArkansasEconomist.com.