Arkansas leads nation with largest jobless rate decline over past year, falls 1.3 percentage points

From July 2015 to July 2016, Arkansas saw the largest unemployment rate decline among all 50 states as the number of unemployed workers fell by more than 16,000, according to the U.S. Bureau of Labor Statistics.

Arkansas was among 10 states and the District of Columbia to experience statistically significant unemployment rate decreases, new data from the BLS shows. That mirrors labor force data, produced by BLS and released by the Arkansas Department of Workforce Services on Aug. 19, showing Arkansas’ seasonally adjusted unemployment rate for July at 3.9%, the same as last month’s revised jobless rate and well below year ago levels at 5.2%.

Overall, the number of unemployed in Arkansas declined from 68,990 to 52,709 in the July 2015 to July 2016 period, a decrease of 16,281, according to BLS. Tennessee, which also saw a 1.3 percentage point drop in its unemployment rate from 5.6% to 4.3%, reported a decrease of 38,652, as the number of unemployed declined from 172,114 to 133,492.

The new BLS data concerning the July job report echoes recent comments made by state and federal labor officials about the momentum in the nation’s growing job market.

“(July’s) jobs report underscores the steadiness and breadth of our economic expansion. With 255,000 jobs added in July, we marked our record 70th straight month of job growth,” said U.S. Commerce Secretary Penny Pritzer. “U.S. businesses have now added 15 million jobs since early 2010, the unemployment rate remains low at 4.9%, and growth in hourly earnings has increased 2.6% in the past year.”

Nationally, California saw the largest decrease in the total number of unemployed workers as 113,749 people were removed from the unemployment line. Three states also saw significant over-the-year unemployment rate increases: North Dakota (+0.4 percentage points), Iowa (+0.5 percentage points), and Wyoming (+1.4 percentage points).

JOB GROWTH FOLLOWS POSITIVE STATE GDP REPORT
This is the second time in the past month Arkansas has landed atop a major economic indicator. On July 27, the U.S. Bureau of Economic Analysis (BEA) reported that the Natural State had the strongest economic expansion in the U.S. among all 50 states in the first quarter of 2016.

According to the BEA, Arkansas’ agriculture, forestry, fishing and hunting sector contributed 2.21 percentage points to the 3.9% growth in Arkansas – the fastest growing state in the first quarter. Other top 10 states in the first quarter of 2016 in GDP growth were Washington and Oregon at 3.9%, followed by Colorado (3.6%), New Hampshire (2.9%), Arizona (2.6%), Michigan (2.6%), Utah (2.4%), Maine (2.3%) and Florida.

The strong first quarter growth was a surprise turnaround from the previous year. Arkansas’ real gross domestic product (GDP) output in the fourth quarter grew at a sluggish 1.6% and ranked 27th among the 50 states as the state’s economy produced nearly $125 billion in economic activity, according to the BEA information.

The only negative to both the BEA and BLS reports is that both federal unemployment data and GDP statistics are subject to downward revisions. In fact, some Arkansas agriculture economists have suggested that the BEA data for Arkansas was flawed and that the numbers will be later corrected to reflect a downturn in the state’s farming sector.

ECONOMIST REFUTES CRITICISM OF GDP DATA
Matthew Pelkki, associate director of the Arkansas Forest Resources Center at the University of Arkansas at Monticello, believes the GDP growth reflected the needs of an expanding housing market for flooring, cabinetry and framing. There is also rising demand for consumer products, along with its need for more packaging and pallets for shipping, he said.

“This growth is no small thing in a state whose economy is four times more dependent on the forestry industry than the United States as a whole. … So when the economy for wood products improves, Arkansas gets a real economic boost,” said Pelkki, an economist within the University of Arkansas System Division of Agriculture.

If Arkansas’s gross state product is roughly $130 billion, Pelkki wrote in a recent article for the University of Arkansas agri division, a 3.9% annual rate for the first quarter would mean about a $1.3 billion actual rise in its first quarter GDP.

“Two major costs of wood products production – timber and energy – remain at record lows,” he said. “Wood as an industrial material has cost advantages due to steady low prices and availability and wood use is growing again in the USA.”

The University of Monticello economist also cites lower labor costs as another factor in the state’s economic expansion.

“The third major cost, labor, has also become readily available to forest industries as the production of natural gas in Arkansas has declined and many workers laid off in that industry have moved to forestry,” he said.

In the last two years, Peikki said there has been significant investment in Arkansas’ sawmills and paper mills. That investment is paying off with lower costs of production, he said.

WAITING FOR THE REVISION
Peikki and other Arkansas economists, however, will have to wait a few more months before finding out if the state GDP data from last month will be revised. According to BEA officials, revised statistics of gross domestic product by state, covering the first quarter of 2013 through the first quarter of 2016, will be released along with the second quarter of 2016 on Dec. 7.

Gross domestic product (GDP) by state is the market value of goods and services produced by the labor and property located in a state. GDP by state is the state counterpart of the nation’s GDP, which is the most comprehensive measure of U.S. economic activity.

The BEA is expected to release its second quarter GDP estimate on Friday, following last month’s first “advance” estimate showing the U.S. economy grew at a weak 1.2%.

On the positive side, The Atlanta Fed’s GDPNow is forecasting strong third quarter GDP growth of 3.6%.