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According to the latest economic data, both the national and state economies continue their slow recovery from the depths of the Great Recession. But is the recovery ending?
Lately, the federal government has released new economic data that shows unemployment is falling, jobs are being created, incomes are rising and the economy is growing. However, much of this data is simply reporting past economic activity.
For example, at the end of June, the U.S. Bureau of Economic Analysis will release its final estimate of national economic activity from January to March. State personal income data released in March covered January to December of 2010. Finally, while changes in the unemployment rate are released each month, those changes typically lag economic activity by six months.
In other words, it is often difficult to tell what is happening in the economy right now.
At the state and local level, however, there is one piece of evidence that is pretty useful. I have long argued that the best way to tell what is currently happening in the Oklahoma economy is to track the level of state sales tax collections, as this data series is current and should be highly correlated with overall economic activity. Of course, sales tax receipts follow a predictable pattern each year — with high collections around Christmas and lower collections at the beginning of the year. However, economists have a way to correct for these seasonal variations.
These corrected — or seasonally adjusted — sales tax receipts, therefore, are a current and valid indicator of state economic activity. In fact, many economic data series released by the federal government are seasonally adjusted for this reason: to give current, reliable information on the state of the economy.
So, what does that series tell us about the state of the Oklahoma economy? According to my analysis, the state economy entered into the recession in the fall of 2008 and contracted dramatically throughout most of 2009, before bottoming in September 2009. Beginning the fall of 200, however, the state economy rebounded nicely before stagnating in April (shown by seasonally adjusted sales tax collections holding steady throughout the remainder of 2010).
The good news is that in the last few months, the data series is showing a strong recovery resuming. In fact, March’s reading is the highest since February 2009 — when the state economy was still in free fall. As the accompanying chart shows, the trend today is definitely up.
This does not mean that all is well in Oklahoma or the nation. Whether it’s the rising national debt, soaring gasoline prices, or deflated confidence, there are still some significant threats to the economy. However, my data series, when considered along with other state and national data, shows that the Oklahoma economy, as of now, continues to improve.
It is clear that neither the state nor national economies have fully recovered from the Great Recession. Unemployment remains too high, and job creation remains too low. The good news is that my analysis shows that the recovery is once more gaining steam here in Oklahoma.
Hepner is dean of the College of Business Administration at the University of Central Oklahoma.