Central, NW Arkansas See Slight Q1 Economic Improvements

The City Wire's comprehensive look at regional economic conditions is captured in its quarterly Compass Report.

In the latest view of first quarter statistics, central and northwest Arkansas saw minor improvement in their local economies. The Fort Smith metro region was flat.

Here is a snapshot from the report with commentary from economist Jeff Collins at the end of this post:

FIRST QUARTER SUMMARY: CENTRAL ARKANSAS
The 2012 first quarter economy in the central Arkansas area received a grade of B-, meaning that minor improvements were seen in most current and leading economic indicators.

Year-on-year tax collections at the county level show a positive trend with consumer spending. While there is a lag in sales tax collection reporting by the state, the data suggest retail activity in the capital city has remained relatively steady in recent years.

Sales and use tax collections are up significantly for the region over the last 3 months.  This is not likely to be sustained, but it does point to resurgent retail activity and perhaps, improved consumer confidence.

However, retail sector employment in the region struggles to return to levels reached in 2007. From March 2011 to March 2012 the metro area gained 200 jobs in the trade, transportation, and utility sector of the metro area economy. March 2012 employment in the sector stood at an estimated 64,900.

The overall job picture continues to shine in the area. The regional labor force — estimated number of working-age people in an area — totaled 349,834 during March, ahead of the 346,846 during March 2011. The workforce size is on a three-year positive trend. The average annual monthly labor size was 347,204 during 2011, 344,304 during 2010 and 341,256 during 2009.

(Data covers Faulkner, Grant, Lonoke, Perry, Pulaski and Saline counties.)

FIRST QUARTER SUMMARY: NORTHWEST ARKANSAS
Year-on-year tax collections at the county level show that consumer spending is robust. While there is a lag in sales tax collection reporting by the state, the data suggest local retail activity has recovered from the relative declines seen in some quarters of 2008 and 2009.

Retail sector employment in the region has also rebounded from lows seen in 2009 and 2010. From March 2011 to March 2012 the metro area gained roughly 1,800 jobs in the trade, transportation, and utility sector of the metro area economy. March 2012 employment in the sector stood at an estimated 47,000.

The overall job picture continues to shine in the area. The regional labor force — estimated number of working-age people in an area — totaled 239,412 during March, just short of 10,000 more than the 229,725 during March 2011. The March labor force size is a record high for the Northwest Arkansas area. The average annual monthly labor size was 231,461 during 2011, 227,938 during 2010 and 225,177 during 2009.

Available economic data paint the picture of a regional economy rebounding at a faster rate than other metros in the state and the nation as a whole. The primary growth drivers were not destroyed by the recession, and if anything, the region is likely to become more attractive as other parts of the state and country struggle to create jobs.

(Data covers Benton, Madison and Washington counties.)

FIRST QUARTER SUMMARY: FORT SMITH METRO
First quarter 2012 economic conditions in the Fort Smith metro area remained flat compared to the 2011 period, with an ongoing decline in overall employment and building permit values weighing negatively on continued gains in regional sales tax collections.

Unfortunately, it’s a pattern similar to the fourth quarter of 2011.

Year-on-year tax collections at the county level show that consumer spending has not declined as a result of unemployment issues. While there is a lag in sales tax collection reporting by the state, the data suggest local retail activity has recove

red and stabilized from the sharp downturn experienced during 2009.

“The Fort Smith regional economy has obviously paid a dear price as a result of the long-term erosion of manufacturing employment and the Great Recession. Yet, the retail data suggests spending is stable,” Collins said.

Despite stabilization in the sales tax collections, retail sector employment remains depressed. From March 2011 to March 2012 the Fort Smith Metropolitan Area lost roughly 500 jobs in the trade, transportation, and utility sector of the metro area economy.

The job picture is beginning to be an anchor on the Fort Smith regional economy. The March labor force estimate was 126,843. By comparison, the March 2011 estimated labor force was 134,029. Looking back to data for March 2007, the beginning of the recession, the total Fort Smith metro labor force was estimated to be 137,871. Based on these statistics, the Fort Smith regional economy has lost roughly 11,000 jobs, or 8%.

Expected jobs losses of up to 1,000 at Whirlpool when it closes in mid-2012, and concerns about future employment at Rheem and Trane manufacturing plants in Fort Smith make it difficult to be optimistic about stabilization in this important sector.

(Data covers Crawford, Franklin, Logan, Scott and Sebastian Counties in Arkansas and LeFlore and Sequoyah in Oklahoma.)

KEY TAKEAWAYS:
Jeff Collins, economist with StreetSmart Data, provides analysis of the Compass Report data. He offered the following takeaways.

• The unemployment rate continues to fall, albeit slowly.  Do not look for the rate to improve substantially any time soon.  As the economy improves many workers who were discouraged from seeking employment and therefore not counted among the unemployed will begin to seek work, expanding the labor force faster than the economy can create jobs.

• Growth in non-farm employment is below trend.  The recession has fundamentally changed the structure of the U.S. economy with significant implications for what types of jobs will be created in the future. Gone is the cycle of boom and bust where manufacturers laid off and rehired workers.  Many of those jobs are permanently gone, either outsourced to plants overseas or lost to technological displacement.

• While this phenomenon is well documented, what is less apparent is the restructuring and flattening of U.S. corporations, reducing the number of white collar jobs.  With government also shedding employment, it would be fair to ask, “Where will the new jobs come from?”

• The answer lies in the jobs data by sector.  Growth has been and will continue to be relatively strong in the services, particularly in professional and business services and health care services.

• On the goods producing side, look for construction and natural resources and mining to add employment as the economy continues to expand.

• Economic growth nationally will also imply increased demand for natural gas.  This is good news for the Arkansans as prices have fallen almost 40 percent over the last twelve months.

• Short-term interest rates are expected to remain low until 2014. Long-term interest rates remain depressed despite growth in the U.S. economy and some upward pressure on prices.  For example, the 10-year Treasury Constant Maturity rate has been at roughly 2.0 percent throughout 2012. The 30-year Conventional Mortgage rate was below 4.00 percent for the same period.

• Long-term rates remain low because little inflationary pressure exists in the macro-economy.  Most upward pressure has been due to commodity price fluctuations, particularly oil and oil related products.

You can access the full Compass Report data and much more commentary at this link.