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2008-04-20 BACK
The Texarkana Industrial Index
The Texarkana Industrial Index This article originally appeared in the Texarkana Gazette on April 6, 2008 Business Matters Dr. Ed Bashaw, Dean, Texas A&M-Texarkana College of Business The industrial sector is an important part of the Texarkana economy. Our largest non-government and most widely nationally known employers Cooper Tire, Domtar, International Paper, and Alcoa, to name four are a part of this sector. They employ many of our local citizens. In fact, the above named companies employ approximately 3,700 of our fellow citizens. According to Bureau of Labor and Statistics estimates, this amounts to almost $124 million in payroll from the firms in the Index that will be spent in our market. Today, we launch and introduce the Texarkana Industrial Index as a weekly feature to be published in the Texarkana Gazette based on information provided by the Texarkana Market Analysis Project (part of the Texas A&M-Texarkana College of Business). I write this column today to explain why and how it was created and how the reader should interpret this Index each week. The Texarkana Industrial Index (TII) consists of eight publicly traded companies that are a part of the Texarkana area industrial base. These firms are, in alphabetical order, Alcoa, American Electric Power (SWEPCO), Centerpoint Energy, Cooper Tire and Rubber, Domtar, Dow Chemical, Flowers Foods, and International Paper. We’ve collected baseline data at the close of business on December 31, 2007, regarding these firms that we then collectively compare to current conditions to produce an index number. Specifically, we collect two pieces of data to create a weighted average; the number of employees employed by these companies that we update each quarter and the current market capitalization for that company each week. I’ll explain each element of the Index below. The number of employees in the Texarkana area is arguably the most important measure of economic activity to gather from these firms and the most important factor benefitting the Texarkana market given the spending power it provides the market. As such, we have more heavily weighted this measure. Because we cannot readily obtain production output levels from these local units, we use number of employees as a substitute for output. We will update the number of employees each quarter and then recalibrate this aspect of the index. The second variable in the TII is the company’s market capitalization. The market capitalization is a company dollar valuation measure that is calculated by multiplying the current stock price by the number of outstanding shares. It represents the capability and potential to pour resources into Texarkana by the companies included in the TII. As a company’s share price rises, good things can happen to the Texarkana market. For example, the firm is better able to spend resources to expand existing facilities, buy new equipment, and hire additional employees. It is also important to note that these entities pay local taxes that provide city services and help expand educational opportunities. The actual Index number that will appear each week can be thought of as the percent of the weighted average of the current market capitalization and number of employees compared to the weighted average data collected at the close of business on December 31, 2007. So, a number larger than 100 means that the there has been improvement in the industrial base in Texarkana (i.e., improved stock price and/or an increase in number of employees). An improved industrial base, over time, should result in more higher paying jobs, more money spent in the Texarkana market, and more retail shopping opportunities in Texarkana, to name three benefits. You will notice that today’s number is less than 100. This reflects the loss of 284 jobs by the firms in the Index during the first quarter of this year. Additionally, we’ve learned that Dow Chemical, included in the Index, is pulling local operations and we are due to lose the Texarkana employees near term. Another contributing factor is a drop in stock prices of the companies since 12/31/07. The loss of jobs and the drop in stock prices obviously hurt our industrial base. We hope you will follow this Index each week and track the progress of our Texarkana industrial base. We also hope that you find this Index to be useful as a broad gauge of how our industrial economy is performing. We’ll report at regular intervals with some deeper analysis of what the numbers may be indicating. I’d love to answer your questions or take your comments for future columns. You may reach me at Edward.Bashaw@tamut.edu. Note: The information for the data used to develop the Texarkana Industrial Index was collected by the Texarkana Market Analysis Project (TMAP). Headed by Director Dr. David Reavis, TMAP gathers real estate data and economic data such as employment, wages, income, and gross state product for the Texarkana core based statistical area (CBSA). We see new construction and expansion, but without objective, quantitative analyses of the Texarkana CBSA any take on its meaning may be anecdotal and speculative. We’ve begun to provide some of this information and invite you further explore this data on our website, www.tmap.biz.
TOP
The Texarkana Industrial Index
The Texarkana Industrial Index This article originally appeared in the Texarkana Gazette on April 6, 2008 Business Matters Dr. Ed Bashaw, Dean, Texas A&M-Texarkana College of Business The industrial sector is an important part of the Texarkana economy. Our largest non-government and most widely nationally known employers Cooper Tire, Domtar, International Paper, and Alcoa, to name four are a part of this sector. They employ many of our local citizens. In fact, the above named companies employ approximately 3,700 of our fellow citizens. According to Bureau of Labor and Statistics estimates, this amounts to almost $124 million in payroll from the firms in the Index that will be spent in our market. Today, we launch and introduce the Texarkana Industrial Index as a weekly feature to be published in the Texarkana Gazette based on information provided by the Texarkana Market Analysis Project (part of the Texas A&M-Texarkana College of Business). I write this column today to explain why and how it was created and how the reader should interpret this Index each week. The Texarkana Industrial Index (TII) consists of eight publicly traded companies that are a part of the Texarkana area industrial base. These firms are, in alphabetical order, Alcoa, American Electric Power (SWEPCO), Centerpoint Energy, Cooper Tire and Rubber, Domtar, Dow Chemical, Flowers Foods, and International Paper. We’ve collected baseline data at the close of business on December 31, 2007, regarding these firms that we then collectively compare to current conditions to produce an index number. Specifically, we collect two pieces of data to create a weighted average; the number of employees employed by these companies that we update each quarter and the current market capitalization for that company each week. I’ll explain each element of the Index below. The number of employees in the Texarkana area is arguably the most important measure of economic activity to gather from these firms and the most important factor benefitting the Texarkana market given the spending power it provides the market. As such, we have more heavily weighted this measure. Because we cannot readily obtain production output levels from these local units, we use number of employees as a substitute for output. We will update the number of employees each quarter and then recalibrate this aspect of the index. The second variable in the TII is the company’s market capitalization. The market capitalization is a company dollar valuation measure that is calculated by multiplying the current stock price by the number of outstanding shares. It represents the capability and potential to pour resources into Texarkana by the companies included in the TII. As a company’s share price rises, good things can happen to the Texarkana market. For example, the firm is better able to spend resources to expand existing facilities, buy new equipment, and hire additional employees. It is also important to note that these entities pay local taxes that provide city services and help expand educational opportunities. The actual Index number that will appear each week can be thought of as the percent of the weighted average of the current market capitalization and number of employees compared to the weighted average data collected at the close of business on December 31, 2007. So, a number larger than 100 means that the there has been improvement in the industrial base in Texarkana (i.e., improved stock price and/or an increase in number of employees). An improved industrial base, over time, should result in more higher paying jobs, more money spent in the Texarkana market, and more retail shopping opportunities in Texarkana, to name three benefits. You will notice that today’s number is less than 100. This reflects the loss of 284 jobs by the firms in the Index during the first quarter of this year. Additionally, we’ve learned that Dow Chemical, included in the Index, is pulling local operations and we are due to lose the Texarkana employees near term. Another contributing factor is a drop in stock prices of the companies since 12/31/07. The loss of jobs and the drop in stock prices obviously hurt our industrial base. We hope you will follow this Index each week and track the progress of our Texarkana industrial base. We also hope that you find this Index to be useful as a broad gauge of how our industrial economy is performing. We’ll report at regular intervals with some deeper analysis of what the numbers may be indicating. I’d love to answer your questions or take your comments for future columns. You may reach me at Edward.Bashaw@tamut.edu. Note: The information for the data used to develop the Texarkana Industrial Index was collected by the Texarkana Market Analysis Project (TMAP). Headed by Director Dr. David Reavis, TMAP gathers real estate data and economic data such as employment, wages, income, and gross state product for the Texarkana core based statistical area (CBSA). We see new construction and expansion, but without objective, quantitative analyses of the Texarkana CBSA any take on its meaning may be anecdotal and speculative. We’ve begun to provide some of this information and invite you further explore this data on our website, www.tmap.biz.
TOP