Economic indicators from the Federal Reserve Bank of Philadelphia indicate that the Kansas economy is not yet in a state of sustained recovery from the recession.
KSPHCI is the Coincident Economic Activity Index. It includes four indicators, according to its creators: nonfarm payroll employment, the unemployment rate, average hours worked in manufacturing, and wages and salaries. This is the index of current economic activity in Kansas. It’s plotted in blue, and measured against the left axis. Data is through February 1, 2011.
The course of the index over the past five years clearly shows the effect of the recession. It also shows a recovery, but also a slow drift downwards over the past several months, having reached its most recent maximum in June, 2010.
KSSLIND is the leading index for Kansas, which predicts the six-month growth rate of the state’s coincident index. According to its creators, in addition to the coincident index, “the models include other variables that lead the economy: state-level housing permits (1 to 4 units), state initial unemployment insurance claims, delivery times from the Institute for Supply Management (ISM) manufacturing survey, and the interest rate spread between the 10-year Treasury bond and the 3-month Treasury bill.” This index is plotted in red, and measured against the right axis. Data again is through February 1.
This index, which is again a leading indicator with a six-month time lag, has lately hovered around zero or, in the case of the last six months, negative values. This explains why the current economic activity index is not rising.
Today the Kansas consensus revenue estimating group meets to arrive at a forecast of revenue for the next fiscal year, and perhaps adjusting the estimates for the last few months of the current fiscal year (2011, which ends on June 30, 2011). It will be interesting to see how this group’s estimates compare to KSSLIND. Based on this index, I would not expect a very rosy forecast for next year, or as Kansas Policy Institute has pointed out, for the remainder of the current fiscal year.