Analysis Roundup – March 1, 2013

Some updates from today and this week…

Treasurer Cowell Offers Update During Visit to Rocky Mount
By Kenneth Hunter

North Carolina Treasurer Janet Cowell attended a luncheon this afternoon in Rocky Mount with a diverse group of attendees, including public employees. Here are some highlights of her comments to the group:

  • State pension fund investments (for state and local employees) earned a little under 12% last year, and the fund overall has returned to the value it had prior to the 2008 recession.
  • “We’ve been a State that has managed its finances well. Don’t let anyone tell you otherwise.”
  • State Board of Education worked with the Treasurer’s Office to add financial literacy to the K-12 social studies curriculum. The subject will be discussed in the classroom in a formal matter starting this coming fall, for all grades and Kindergarten.
  • Treasurer’s Office is really pushing its Unclaimed Property Program. They made an award this morning to a man in Nashville worth approximately $7,000. More information is available on their website,
  • Since taking over the State’s employee health plans, the Treasurer’s Office has worked on implementing positive changes encouraged by employees. The Treasurer specifically mentioned that her work with employee health plans for state employees and retirees has been “one of the best personal experiences” in her work with government.
  • When asked by a local government employee about whether or not the State is looking at ways to offer healthcare options for local governments and their employees, the Treasurer mentioned there is no active conversation, though some choice for individual employees may open up with the arrival on insurance exchanges.
  • Soon, State Retirees will have access to Medicare Advantage plans.
  • The State Retirement System, which currently manages and offers pension, 401(k) and 457 plans (their 457 is largest in the country), will soon be offering a 403(b) plan for employees (managed by TIAA-CREF).
  • For the first time in 4 years, the State Government has excess debt capacity. In response to a question, the Treasurer did mention this may open the opportunity (depending on the interests of the legislature) for offering shared debt access for struggling local jurisdictions needed funds for capital projects (like schools).
  • The Treasurer’s Office is “ok” with legislation proposed this year by the General Assembly that would limit non-voter approved debt to only 25% of total debt issued (at the State level). This legislation does not affect locally-issued debt.
  • The Treasurer’s Office will “fight hard” to keep borrowing options open for local government. So far, the General Assembly has agreed with their guidance.
  • Community Colleges, in general, are “popular” with the General Assembly.
  • As a point of information, the Treasurer mentioned that approximately 20% of students in Durham and Pamlico Counties are now attending Charter Schools.
  • With respect to investment plan fees for employees, the size of the Statewide investment pools in 401(k) and 457 plans (more than $7 billion) enables the State Retirement System to leverage its position to keep fees low for its participants (averaging 0.5%). Treasurer also announced that in the near future, members will be paid back extra fees, anywhere from $10 to $120 per employee depending on plan and personal balance.
  • State employees now have access to health incentive programs, such as “Stork” programs for expecting mothers, which do provide benefits for abiding with expectation on pre-natal care and doctor visits.
  • When asked about guidance on implementing and explaining GASB requirements regarding pension fund obligations and unfunded liabilities, the Treasurer said that information will be provided to local governments, especially those who are part of the retirement system in the near future.

Notable Legislation Would Regionalize Charlotte Airport, Limit Collections, Refund Deannexed Area Taxes

Click here to link to an NCLM post discussing 2 of these items. Excerpt below:

SB 81 was given a favorable report by the (Senate Finance) Committee, but not before some debate. The bill would transfer ownership of Charlotte Douglas International Airport from the City of Charlotte to a newly-established Charlotte Regional Airport Authority… A representative from the City of Charlotte also spoke to the Committee and indicated that the City was prepared to conduct a study on the airport’s ownership and present the results prior to the legislature’s adjournment this year, but the bill moved forward nonetheless.

SB 97 would prevent municipalities from collecting property taxes from areas that were part of the city for less than six months and have not yet been billed for their property tax. The idea for the bill was generated by the City of Wilmington and is intended to apply only to the Monkey Junction area, which was legislatively deannexed from Wilmington during last session. However, it is a statewide bill and thus could potentially apply in other areas of the state.

Another bill, HB5, would force cities with area forcibly deannexed last year to refund property tax revenue collected from property owners in the deannexed areas. Depending on the circumstances, this can have a significant impact on finances in a couple municipal areas.

NCSU/Mike Walden
NC Leading Indicators Dip for January, Economy Still Poised Good for 2013


The NCSU INDEX OF NORTH CAROLINA LEADING ECONOMIC INDICATORS (the “Index”), a forecast of the economy’s direction four to six months ahead, gave back a small amount of its recent gains by falling 0.4% in December. The components of the Index were mixed, with the national index, manufacturing hours, and manufacturing earnings improving, while an increase in initial jobless claims and a drop in building permits had negative impacts on the Index. Still the Index is higher than a year ago and much more “bullish” than in mid-2012. The Index is suggesting an acceleration of economic growth in the state – at least through the early part of 2013.

BEA/Wells Fargo
Personal Income Drops Significantly in January

Today’s report on January 2013 national personal income showed a 3.6% decline from the prior month, with a 4% decline in disposable income. Significant loss of total and disposable income was expected in part due to losses in total employment for the month (due to post-holiday transition) and the end of the payroll tax holiday. However, the actual numbers are significantly more than those predicted by forecasters.

January’s cut sliced more than half of the growth in personal income in the past year, pushing the annual growth rate downward to 4% for total income and 3% for real disposable income (Graphs Courtesy Wells Fargo).


End-of-Year GDP Didn’t Contract, But It Didn’t Grow, Either

The Bureau of Econoimic Analysis released their second (revised) estimate for Gross Domestic Product for the Fourth Quarter of 2012. Initially, they estimated a decline of 0.1% within the last three months of the year. This time, however, they determined that there was actually some growth, equivalent to 0.1%.

Federal government expenditures remained the primary driving factor for the stagnant results, showing a 14.8% decline (22% decline in Defense) for the quarter. The GDP price index increased 1.5% for the quarter.

Notably to those whose local economies involve businesses that export products, the revised GDP shows that the real (indexed for inflation) value of exported goods declined 3.9% in the final quarter of 2012, while the real value of imports declined by 4.6% (so we actually had a 0.7% net “gain” to GDP).

Gas Buddy
Fuel Prices Stop Climbing, for at least This Week

Retail prices for gasoline and diesel did go down a little for the past week, though not as much as crude oil, which is ending the week hovering in the $90-91/bbl range.

Articles/Videos/Links of Interest

NCLM LeagueLINC Bulletin

NCACC Legislative Bulletin


Analysis Roundup for November 21, 2012

Watch the skies… “gobble, gobble”

Wells Fargo Economics
Leading Indicators Continue Slow Growth Trend

The national index of Leading Economic Indicators (LEI), updated earlier today, only increased 0.2% for October, indicating continued slow growth.

The six-month annualized rate of change in the LEI has
weakened since the start of the year, but remains well above the
negative 3.5 percent rate which often signals recession…

After the interest rate spread, the next largest contribution was
the Leading Credit Index, followed by first-time claims for
unemployment insurance. As fewer people file for jobless
benefits, this component pushes LEI higher.


BLS/NC Employment Security
October Sees Continued, Slow Employment Growth

Total Employment in North Carolina increased by nearly 44,000 in October, according to last week’s release of seasonally adjusted employment and unemployment data. The adjusted unemployment rate declined from 9.6% to 9.3%. Since last October, the state has gained a little more than 95,000 jobs.

With respect to nonfarm payrolls (more accurate depiction of permanent workforce), North Carolina only saw an increase of 8,000 jobs in October, all the result of private sector employment growth (+8,900). Since last October, total nonfarm payrolls have grown by 35,700, with private sector growth of 40,000. This means that there have been some employment losses in the public sector, reflecting the need for state agencies and local governments to reduce their workforces in response to permanent fiscal challenges.


Overall and private payrolls still remain more than 6% below pre-recession high levels.

Wells Fargo Economics
November Outlook focuses Globally

This month’s video outlook from Wells Fargo Economics Group provides further analysis on current global economic conditions and how they are influencing conditions here in the US. This month’s outlook host, Wells Fargo Economist Michael Brown, will present an Economic Update during the Winter 2012 NCLGBA Conference in Concord on December 7th.

NCSU/Dr. Michael Walden
NC Leading Indicators Improve a Little

Dr. Walden’s Index of Leading Economic Indicators in North Carolina did show a slight increase for September (+0.2%), ending four consecutive months of decline. All of the measures incorporated into the index showed improvement except building permits, which fell by 25%.

Compared to a year ago, the overall index is up 2.4%, with all categories except personal earnings showing improvement.

Wells Fargo/Modeled Behavior
October Home Sales Continue Market Improvement Trend

2012 has been a good year for the housing market, compared to where its position since the start of the last recession. Existing sales continued to improve in October, volume increasing 2.1% to an annual rate of 4.79 million units.

In a blog post, UNC School of Government Economist Karl Smith provides some analysis on the appearance of growth in housing starts, a prediction he discussed during his presentation at the Winter 2011 NCLGBA Conference. If trends pick up in a manner consistent with his original prediction (which he admits anticipated housing growth sooner in 2012 than what actually took place), overall economic activity might look better in 2013.

Finviz/Gas Buddy
Oil Prices Rise with Middle East Tension, Gas Prices Slide Little More

Some parts of NC are seeing retail prices for Regular Unleaded below $3.20/Gallon this week. Crude prices did go above $90/bbl this week as a result of hostilities initiated by terrorists in Gaza against Israel, creating concern for a prolonged conflict and potential supply disruptions. Weak demand, however, does limit the impact of this developing situation, especially here in the US.

Articles of Interest

Philadelphia Fed – November 2012 Business Outlook Survey

Firms responding to the November Business Outlook Survey reported declines in business activity this month following the disruptive effects of Hurricane Sandy on the region. The survey’s indicators for general activity, which had shown improvement in October, fell back into negative territory this month. Firms reported slight declines in shipments, employment, and hours worked. Indicators for the firms’ expectations over the next six months were near their levels in the previous month, but expectations for future employment and capital spending have weakened in the last two months.

WSJ – Investment Falls Off a Cliff

Forbes – The Entrepreneurs of Plymouth Rock

WITN – Computer Frozen, Message Says You’re Under FBI Investigation

GovLoop – Either Way a Fiscal Cliff

TBJ – Top 7 Emerging Trends in Real Estate

Bloomberg – Hospital Medicare Cash Lures Doctors as Costs Increase

St. Louis Fed – Price Level Targeting… The Fed Has It About Right(?)

Census – Facts for Features: Thanksgiving Day!

Have a Happy, Safe and Enjoyable Thanksgiving Holiday!


NC Leading Indicators Index Drops in September

NC Leading Indicators Index Drops in September

One new measure of economic health for the Tar Heel State is the Index of North Carolina Leading Economic Indicators, developed and published monthly by N.C. State University Economist, Dr. Michael Walden.

In its most recent report, updated for September, the leading indicator index fell 0.8% compared to August. The index was near even (+0.1%) with its level in September 2009.

The index include five components, some of which showed significant volatility during September:

  • Economic Cycle Research Institute Weekly Leading Index: +1.0% for 1-month, -4.3% for 1-year
  • Statewide Initial Unemployment Claims: -3.6% for 1-month, -30% for 1-year
  • Statewide Building Permits: -15.2% for 1-month, -32% for 1-year
  • Average Weekly Hours, NC Manufacturing Jobs: +0.2% for 1-month, +3.3% for 1-year
  • Average Weekly Earnings, NC Manufacturing Jobs: -2.7% for 1-month, +2.4% for 1-year

Leading indicators are often used to predict economic activity within the upcoming 6 months. While Dr. Walden’s index has shown a downward trend since April 2010, he does not declare this as the on-set of another recession within the state.

Click here to access the October 2010 NCLEI Report (PDF)