I want to start this week with a powerful quote, one that I am thinking will become part of these commentaries on a regular basis as the point is so obvious yet often forgotten. While the quote speaks to States, the statement rings ever so true as you look to the municipalities within the States as well.
“… these United States are not just one nation indivisible. They also are 50 polities, 50 economies, somewhat sovereign states that are similar enough to be comparable and different enough to make comparisons educational.” Thomas Donlan, The States of the Nation, Barron’s (6/16/2014). Emphasis supplied.
This week, we take a look at recently released income-related data and distress-related data and changes in correlations as unearthed by my colleague Mike Craft. This commentary may print longer than usual due to the number of charts.
Before delving into the data, one or two items in this week’s press that I want to highlight. A few days back, there was an article that referenced the reality of States facing shortfalls in income tax collections this year. While we await the official data, this should not come as much of a surprise as we’ve seen wages remain fairly stagnant (see below) and recall there were a host of folks that pushed income into 2012 to avoid the tax hike (we covered this in commentaries around that time). For some reason, some budgets didn’t reflect the reality of the one-time spike. While this outcome should have been less than a surprise (income data supports this reality even looking back a quarter or two), one should also contemplate the impact of the growth of industries that provide income to a few States. Consider the gaming industry. As the WSJ reported earlier this week, the introduction of gambling in States has impacted (and will continue to impact) those States that have historically relied on the gambling industry for revenues. Again, worth looking at those budget projections and the actual economic data post budget and pre-CAFR.
The other item of note is Mary Jo White’s speech at the Economic Club of New York from Friday. If you think the changes we’ve seen to date in the muni space have been significant, Chair White’s speech should be a stark reminder that there is more to come and that the use of technology to support transparency is critical to our market.
Average Weekly Wages – Nothing to Cheer About
A few months back, I made a presentation and wrote about the fact that the US recovery is uneven amongst the States. More recently, I was invited to present an updated version of this presentation for a client. While the results have stayed the same in many respects (an uneven recovery with some States doing ok and others not so much), new data around Average Weekly Wages is worth adding to the discussion.
As a refresher, the presentation focused on the period going from the end of 2008 to the end of 2013. Let’s start with a look at inflation (you know, the number the Fed and others want to see pop a bit). As you look at the below, consider that wages, we hope, need to keep up with inflation for the average Joe to “keep even.”
This next chart provides a view of what has transpired with regard to Average Weekly Wages for 20 States. The blue markers and corresponding data represents the total increase in Average Weekly Wages over the noted period while the yellow markers and data provide a simple average for each year (no compounding). Please note, the US Average is strategically placed at the center of the table. Some other things to note: there are 18 States that have increases greater than the US Average (meaning 33 – PR is included – fall below the line); for 2012 to 2013 the average increase across the US was zero!
DIVER subscribers will receive an email with a comprehensive table that plots all States and 5, 3 and 2 year changes. DIVER Analytics subscribers can also use the Filter or Data Access modules to broaden this analysis to all 50 States and/or counties. Otherwise, please contact us for more details.
Food Stamp Participation Rate’s Connection to Poverty Weakens
Food Stamp Part. Change, State is among the datasets in DIVER Analytics updated this week (See News & Views in Analytics for the others). This monthly dataset measures the year over year change in the Food Stamp Participation Rate for each of the 50 States.
DIVER Analytics, Map Module; USCB.
While the number of food stamp recipients has historically been a good indicator of poverty levels, in the last several years the relationship to poverty indicators has weakened. This is primarily due to a loosening of eligibility requirements in the wake of the recent recession. The chart below, from the USDA, compares the number of food stamp (SNAP) participants to several poverty measures and unemployed individuals.
USDA Office of Policy Support
From 1985 to 2007, the number of SNAP participants tracked closely with measures of poverty. After the financial crisis, poverty measures increased, but SNAP participation climbed at a much faster rate. Again, I remind you of the change in standards that were in effect until earlier this year when Congress did not fully renew the more relaxed eligibility criteria. As such, we think it important to watch these trends for a reversion on other factors that play into Food Stamp Participation Rates.
In this regard, it pays to watch out for “noise” at the State level. The USDA figures include periodic disaster assistance channeled through SNAP. This disaster assistance takes the form of replacement funds for lost food to regular recipients, and also some temporary loosening of eligibility requirements for program participation. Consider that the large year over year decline in participation for North Carolina (-19%) likely reflects the roll off of disaster assistance, and perhaps some lingering effects of approval backlogs due to state specific computer issues from last year.
Nevada (+7%), Connecticut (+4%), California (+4%), West Virginia (+4%) and Hawaii (3%) showed the largest year over year increases in Food Stamp Participation. Importantly, this apparent sign of economic weakness is not confirmed by other datasets. The chart below compares the change in the Food Stamp Participation rate to the change in the Unemployment Rate. For Nevada in particular, the two datasets send conflicting messages. The chart also highlights the unusual nature of North Carolina’s food stamp value.
State-by-State Change in Food Stamp Participation and Unemployment
DIVER Data Services; USCB, BLS
This exercise demonstrates the importance of using multiple datasets from multiple sources to get a complete picture of the economic condition of the states.
As we round the corner on the school year and get closer to the 4th, our travel schedule is a bit lighter. Gregg and Pete will be in Philly on Monday and Pete will be in NY and NJ the balance of the week. Mark will be in NY on Wednesday and Mike will be in Stamford.
Wages are Weak and A Correlation Gone Bad
June 23, 2014
I want to start this week with a powerful quote, one that I am thinking will become part of these commentaries on a regular basis as the point is so obvious yet often forgotten. While the quote speaks to States, the statement rings ever so true as you look to the municipalities within the States as well.
“… these United States are not just one nation indivisible. They also are 50 polities, 50 economies, somewhat sovereign states that are similar enough to be comparable and different enough to make comparisons educational.” Thomas Donlan, The States of the Nation, Barron’s (6/16/2014). Emphasis supplied.
This week, we take a look at recently released income-related data and distress-related data and changes in correlations as unearthed by my colleague Mike Craft. This commentary may print longer than usual due to the number of charts.
Before delving into the data, one or two items in this week’s press that I want to highlight. A few days back, there was an article that referenced the reality of States facing shortfalls in income tax collections this year. While we await the official data, this should not come as much of a surprise as we’ve seen wages remain fairly stagnant (see below) and recall there were a host of folks that pushed income into 2012 to avoid the tax hike (we covered this in commentaries around that time). For some reason, some budgets didn’t reflect the reality of the one-time spike. While this outcome should have been less than a surprise (income data supports this reality even looking back a quarter or two), one should also contemplate the impact of the growth of industries that provide income to a few States. Consider the gaming industry. As the WSJ reported earlier this week, the introduction of gambling in States has impacted (and will continue to impact) those States that have historically relied on the gambling industry for revenues. Again, worth looking at those budget projections and the actual economic data post budget and pre-CAFR.
The other item of note is Mary Jo White’s speech at the Economic Club of New York from Friday. If you think the changes we’ve seen to date in the muni space have been significant, Chair White’s speech should be a stark reminder that there is more to come and that the use of technology to support transparency is critical to our market.
Average Weekly Wages – Nothing to Cheer About
A few months back, I made a presentation and wrote about the fact that the US recovery is uneven amongst the States. More recently, I was invited to present an updated version of this presentation for a client. While the results have stayed the same in many respects (an uneven recovery with some States doing ok and others not so much), new data around Average Weekly Wages is worth adding to the discussion.
As a refresher, the presentation focused on the period going from the end of 2008 to the end of 2013. Let’s start with a look at inflation (you know, the number the Fed and others want to see pop a bit). As you look at the below, consider that wages, we hope, need to keep up with inflation for the average Joe to “keep even.”
This next chart provides a view of what has transpired with regard to Average Weekly Wages for 20 States. The blue markers and corresponding data represents the total increase in Average Weekly Wages over the noted period while the yellow markers and data provide a simple average for each year (no compounding). Please note, the US Average is strategically placed at the center of the table. Some other things to note: there are 18 States that have increases greater than the US Average (meaning 33 – PR is included – fall below the line); for 2012 to 2013 the average increase across the US was zero!
DIVER subscribers will receive an email with a comprehensive table that plots all States and 5, 3 and 2 year changes. DIVER Analytics subscribers can also use the Filter or Data Access modules to broaden this analysis to all 50 States and/or counties. Otherwise, please contact us for more details.
Food Stamp Participation Rate’s Connection to Poverty Weakens
Food Stamp Part. Change, State is among the datasets in DIVER Analytics updated this week (See News & Views in Analytics for the others). This monthly dataset measures the year over year change in the Food Stamp Participation Rate for each of the 50 States.
DIVER Analytics, Map Module; USCB.
While the number of food stamp recipients has historically been a good indicator of poverty levels, in the last several years the relationship to poverty indicators has weakened. This is primarily due to a loosening of eligibility requirements in the wake of the recent recession. The chart below, from the USDA, compares the number of food stamp (SNAP) participants to several poverty measures and unemployed individuals.
USDA Office of Policy Support
From 1985 to 2007, the number of SNAP participants tracked closely with measures of poverty. After the financial crisis, poverty measures increased, but SNAP participation climbed at a much faster rate. Again, I remind you of the change in standards that were in effect until earlier this year when Congress did not fully renew the more relaxed eligibility criteria. As such, we think it important to watch these trends for a reversion on other factors that play into Food Stamp Participation Rates.
In this regard, it pays to watch out for “noise” at the State level. The USDA figures include periodic disaster assistance channeled through SNAP. This disaster assistance takes the form of replacement funds for lost food to regular recipients, and also some temporary loosening of eligibility requirements for program participation. Consider that the large year over year decline in participation for North Carolina (-19%) likely reflects the roll off of disaster assistance, and perhaps some lingering effects of approval backlogs due to state specific computer issues from last year.
Nevada (+7%), Connecticut (+4%), California (+4%), West Virginia (+4%) and Hawaii (3%) showed the largest year over year increases in Food Stamp Participation. Importantly, this apparent sign of economic weakness is not confirmed by other datasets. The chart below compares the change in the Food Stamp Participation rate to the change in the Unemployment Rate. For Nevada in particular, the two datasets send conflicting messages. The chart also highlights the unusual nature of North Carolina’s food stamp value.
State-by-State Change in Food Stamp Participation and Unemployment
DIVER Data Services; USCB, BLS
This exercise demonstrates the importance of using multiple datasets from multiple sources to get a complete picture of the economic condition of the states.
As we round the corner on the school year and get closer to the 4th, our travel schedule is a bit lighter. Gregg and Pete will be in Philly on Monday and Pete will be in NY and NJ the balance of the week. Mark will be in NY on Wednesday and Mike will be in Stamford.
Have a great week,
Gregg L. Bienstock & Michael Craft