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Cyclical Growth

Description: 

An economic cycle consists of two phases: a growth phase (expansion) and a contraction phase (recession). Commonly, the expansion is split into two parts: the first consists of the recovery from the losses experienced during the last recession while the second part consists of economic production beyond the peak of the prior cycle.

The official dating of the national economic cycle is made by the National Bureau of Economic Research (NBER). These dates of the turning points in the economy are based on a variety of economic measures, with gross domestic product (GDP) given heavy weight. The turning-point dates for any individual indicator vary. In particular, the cycles for employment and unemployment sometimes lag behind the official timing.

The cycles in state economies are not officially dated and may not coincide with the official national timing. It is not possible to replicate the NBER methodology for states since some of the national data are not available by state and because state GDP is reported only annually. Quarterly earnings (conceptually, the indicator most similar to GDP) and monthly employment are the most comprehensive data available by state on a monthly or quarterly basis for a considerable number of years.

The employment estimates are derived from the monthly Current Employment Statistics survey conducted by the U.S. Bureau of labor Statistics (BLS). Since a long time series of seasonally adjusted data are not provided by the BLS, the entire time series was adjusted for seasonality; the seasonally adjusted data used in Arizona Indicators does not match the data provided by the BLS.

Earnings account for the majority of personal income; the category includes wage and salary disbursements, proprietors’ income, and supplements to wages and salaries (employer contributions for employee pensions and insurance). Earnings are reported seasonally adjusted but have been adjusted for inflation (using the U.S. GDP implicit price deflator).

The cumulative change in Arizona earnings by quarter and in employment by month is shown on Arizona Indicators for each economic cycle since 1970. One set of charts looks specifically at the change during recessions while another set presents the change over the entire economic cycle, starting from the peak of the prior cycle. In both cases, the user can select the dating of the cycle: either the official dating of the national cycle or the dating of the turnings points in Arizona earnings/employment.

Data Source: 

Employment data for Arizona are from the U.S. Department of Labor, Bureau of Labor Statistics. Monthly unadjusted estimates extend back to 1939, but the earliest seasonally adjusted data are for 1990. Data updates are released around the 20th of each month: http://www.bls.gov/sae/.

Earnings data for Arizona are from the U.S. Department of Commerce, Bureau of Economic Analysis. Seasonally adjusted quarterly estimates extend back to 1948. Data updates are released three months after the end of each quarter: http://www.bea.gov/regional/index.htm. These estimates are adjusted for inflation using the GDP deflator available from the U.S. Department of Commerce, Bureau of Economic Analysis: http://www.bea.gov/national/index.htm. Click on the “Interactive Tables: GDP and the National Income and Product Account (NIPA) Historical Tables” link; the GDP deflator is in Table 1.1.9 (Section 1: Domestic Product and Income).

Data Quality Comments: 

The monthly employment data, which are limited to nonfarm wage and salary jobs, are derived from a survey and are subject to substantial revision. No distinction is made between full-time and part-time employment. Even after seasonal adjustment, the employment series by state contains significant month-to-month fluctuations that likely reflect data limitations rather than real changes in the economy.

Some of the inputs to the calculation of earnings by state are estimated. While less volatile than employment, the earnings series displays quarter-to-quarter fluctuations.

iconCumulative Percent Change in Inflation-Adjusted and Seasonally Adjusted Earnings in Arizona During Recessions

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Visualization Notes:

During the recession that began in late 2007, inflation-adjusted and seasonally adjusted earnings fell by 8 percent over six quarters in Arizona, using the official dates of the national recession as determined by the National Bureau of Economic Research. The last recession looks quite similar to the 1973-75 recession in magnitude of decline in earnings.

However, since the last recession in Arizona began before and ended after the national recession, the unusual nature of the last recession is seen when using dating specific to Arizona earnings. The length of the recession was at least seven quarters longer than that of any of the preceding five recessions; the total decline was 10 percent.

iconCumulative Percent Change in Seasonally Adjusted Employment in Arizona During Recessions

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Visualization Notes:

During the recession that began in late 2007, seasonally adjusted employment in Arizona fell for 37 months, with a total loss of 12 percent. None of the prior five recessions were nearly as long or deep. Based on the dating of Arizona employment, the 1974-75 recession started deeper than the last recession, but lasted only nine months, with the cumulative decline not even half as large as that of the last recession. The 1981-82 and 2001 recessions progressed similarly to the last recession, but were over in 12 and nine months, respectively.

iconCumulative Percent Change in Inflation-Adjusted and Seasonally Adjusted Earnings in Arizona Over an Entire Economic Cycle Starting From the Peak of the Prior Economic Cycle

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Visualization Notes:

The atypical nature of the current cycle is clearly displayed, especially using the dating of Arizona’s earnings. The period of decline in inflation-adjusted and seasonally adjusted earnings in Arizona was much longer than in prior recessions; only one of the historical cycles was nearly as deep. In that case (the 1973-80 cycle), a strong expansion began as soon as the trough was reached, with the recessionary losses made up during the next five quarters. In the current cycle, the recovery has been less robust. In second quarter 2014 (29 quarters after the prior cyclical peak, using the dating of Arizona earnings), real earnings was still 1.1 percent below the peak — not quite 91 percent of the recessionary losses had been recovered 17 quarters after the trough.

iconCumulative Percent Change in Seasonally Adjusted Employment in Arizona Over an Entire Economic Cycle Starting From the Peak of the Prior Economic Cycle

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Visualization Notes:

The atypical nature of the current cycle is clearly displayed. The recession in seasonally adjusted employment in Arizona was much longer and deeper than in prior cycles and the recovery since then has been modest. In October 2014 (86 months after the prior cyclical peak, using the dating of Arizona employment) employment remained 3.6 percent lower than at the prior cyclical peak — only 70 percent of the lost jobs had been recovered 49 months after the trough.

Data Source

Employment data for Arizona are from the U.S. Department of Labor, Bureau of Labor Statistics. Monthly unadjusted estimates extend back to 1939, but the earliest seasonally adjusted data are for 1990. Data updates are released around the 20th of each month: http://www.bls.gov/sae/.

Earnings data for Arizona are from the U.S. Department of Commerce, Bureau of Economic Analysis. Seasonally adjusted quarterly estimates extend back to 1948. Data updates are released three months after the end of each quarter: http://www.bea.gov/regional/index.htm. These estimates are adjusted for inflation using the GDP deflator available from the U.S. Department of Commerce, Bureau of Economic Analysis: http://www.bea.gov/national/index.htm. Click on the “Interactive Tables: GDP and the National Income and Product Account (NIPA) Historical Tables” link; the GDP deflator is in Table 1.1.9 (Section 1: Domestic Product and Income).