Area Job Growth Stats Cause for Concern

Q: What is your overall assessment of the job market?

A: I think the most recent numbers are cause for great pause and great concern in Northwest Arkansas. So many of the plans that have been made and so much of the overall Northwest Arkansas “feel” is associated with spectacular job growth. When I look at these data every month, it didn’t concern me when we saw job growth fall from 6 to 5 to 4 to 3 (percent), because 6 percent was always unsustainable.

Even when you saw it fall below 3, which is our 10-year average, to the 2 (percent) level, again, it wasn’t surprising because we were going through tough economic times. We were feeling the effects of the bursting of the housing boom. It didn’t shock me when we fell below our trend level.

However, as we have approached zero, I get much more concerned about what’s going on. Not just in real estate, but all the projections about what we’re going to need, what we’re going to do, are predicated on the notion that people are going to continue to move here to take jobs.

I don’t think you can overstate the importance of job growth as an economic indicator. What struck me, when you look back at 2007 into 2008 and look at job growth, it looks exactly like the rest of the country. There are people who talk about the Northwest Arkansas economy as if it was “recession proof” and those numbers are based on 2001, when we blew past that recession without a backward glance.

The pressures on the Northwest Arkansas economy in 2008 are very similar to the national side. This notion that because Wal-Mart has counter-recessionary sales growth that Northwest Arkansas is recession-proof, is, I think, false. Wal-Mart is not going to expand its corporate employment just because sales are up. They are going to try and find more productivity.

Q: What is a healthy job growth rate for the region?

A: Well, there’s healthy and there’s healthy. Many of the plans were predicated on extraordinary growth, a continuation of the growth, which would be 3 percent. That is often double the U.S. average growth rate. There’s healthy as in we’re doing as well as the rest of the country and there’s healthy that we’re doing a lot better because we expect more from this area.

Q: What local and national factors have brought Northwest Arkansas in line with the rest of the country?

A: The housing market in Northwest Arkansas engaged in many of the same excesses as the rest of the country. Too many houses chasing too few buyers and unsustainable price increases. When you look at other factors, high gas prices, high food prices, there is no reason Northwest Arkansas is immune to that. Add to that stagnating wages. But if wages were increasing, we’d be in an inflationary period. That’s not necessarily better, but tell that to the person who watches their monthly budget become ever tighter.

Why was Northwest Arkansas different back in 2001? We were still in the middle of what I call the second ring of growth with the suppliers and supply chain companies. We are largely past that phase of growth. Given that we’re at a different phase of our growth, we’re not insulated in the same way.

Q: What do business people need to know and understand about this economy?

A: When we talk about employment growth, they need to be thinking about the factors that will jump-start our economy and into the fourth ring of growth. It could be tourism. There is also a lot of emphasis being put on home-growing our own companies, entrepreneurship, fostering the technology base.

Are we going to grow something here that becomes the center of another wave? Nobody knows the real answer to that yet.

But they are trying very hard to make sure we get to Wave 4.

I encourage people to think about what kind of growth do they expect, and why?

We have an advantage with Wal-Mart being here and its supply chain dominance. We are a natural location for lots of green businesses to pop up here. There’s a lot of leadership working to ensure the business climate here is conducive to that next wave.