The Compass Report: Job growth ‘anemic’ in central Arkansas

Fourth quarter 2012 economic conditions in the Little Rock-North Little Rock-Conway (central Arkansas) metro area were down slightly compared to the fourth quarter of 2011. The quarter saw gains in building permit numbers and stability with sales tax collections.

The 2012 fourth quarter economy in the central Arkansas area received a grade of C-, meaning that the economy performed just a little off compared to the fourth quarter of 2011, according to The Compass Report.

The quarterly Compass Report is managed by The City Wire, and is the only independent analysis of economic conditions in central Arkansas.

Economist Jeff Collins, who conducts the data collection and analysis for The Compass Report, said the strength of the central Arkansas economy continues to be in retail.

“Sales and use tax data indicates that retail activity continues to expand in Central Arkansas. Growth was led by expansion of retail activity in Pulaski, Lonoke, and Grant Counties. Overall, sales and use tax collections for the region were up 1.8 percent December-to-December,” Collins said.

However, he said the region’s job growth is “anemic.”

Non-farm employment in December 2012 was 340,500, down from 341,600 in December 2011. Manufacturing lost 400 jobs year-on-year according to data for December of this year. Natural resources, mining, and construction lost 600 jobs compared to December 2011.

“The Central Arkansas economy may be the largest in the state but it has not performed well recently, growing at an anemic rate of less than 1 percent,” Collins wrote in the report. “Further evidence of slow growth regionally, nonfarm employment added 1,100 jobs or 0.3 percent since December 2011. Given the size of the Central Arkansas metro this is a poor showing. By comparison, the Northwest Arkansas regional economy added 8,900 or 4.3 percent.”

CENTRAL ARKANSAS
OVERALL GRADES — Central Arkansas regional economy (per quarter)
4Q 2012: B-
3Q 2012: C-
2Q 2012: C+
1Q 2012: C-

DATA AND REPORT DOCUMENTS
Link here for the raw data used to prepare The Compass Report for the Fort Smith area, Northwest Arkansas and central Arkansas.

Link here for more narrative about regional and national economic conditions.

SECTOR DATA
Non-farm employment — C-
Non-farm employment has lagged 2011 figures, with employment in the metro area at 340,500 in December, up from 341,600 in December 2011.

Non-farm employment is an often quoted measure of employment growth. Moreover, it is disaggregated into various employment sectors such as manufacturing, education and health services, etc.

Change in employment drives population growth. The type of employment being created also determines in large part the change in income that drives growth in retail.

Goods-producing employment — C
The decrease in manufacturing jobs as a percentage of the overall workforce helps diversify almost any metro economy. However, given the relatively small percentage of employment in the goods producing sector in the central Arkansas area, this metric is less meaningful than for the Fort Smith or Northwest Arkansas areas. The percentage of manufacturing jobs in the overall workforce was 10.3% in December 2012, down from the 10.5% in December 2011.

This measure speaks to the risk in a local economy from being heavily weighted toward sectors that have been under economic pressure. One of the fundamental principles of reducing risk is diversification.

Metro area Unemployment rate — C
The area unemployment rate, an important gauge in the health of the metro labor market, posted declines in the fourth quarter. Unemployment in December was estimated at 6.3%, compared to 6.7% in December 2011.

Like non-farm employment, the local unemployment rate is also often quoted. Increases in the unemployment rate are correlated with declines in consumer confidence.
The unemployment rate is an important gauge of the health of the local labor market.

Sales and Use tax collections — C
Overall, sales tax collections in the region were up in the fourth quarter. The tax collections, which are good indicators of regional consumer confidence, in the five counties in the region totaled $7.783 million during November 2012 — compared to $7.648 million in November 2011. Little Rock posted November tax collections of $5.613 million, up from $5.561 million in November 2011.

Sales and use tax collections provide an insight into both the total income and change in total income in an area as well as how consumers are responding to new information about the health of the national and local economy. Obviously, this measure is tied to retail activity.

Building Permit (housing) valuation — B-
The total value of permits issued in the fourth quarter (measured in a three-month rolling average) were relatively significantly ahead of the fourth quarter of 2011. The rolling average in December was $18.973 million, ahead of the $17.314 million in December 2011.

Residential building is an indicator of current and expected population growth. As new households are created they induce growth in retail, education services, health care services and other types of businesses that provide goods and services to households. Also, new construction provides employment and tax revenues.

Hospitality employment — C
Hospitality employment in central Arkansas has trended positive for several quarters. December 2012 saw 30,000 jobs in the regional hospitality sector, up from the 29,800 jobs in December 2011.

Growth in the hospitality and leisure sector as measured by growth in employment is included because of the emphasis on creating quality of place in local economic development initiatives.

Unlike enplanements/deplanements, which may not be tied to activity in restaurants, hotels, and cultural venues, hospitality and leisure employment most certainly are influenced by growth of these activities. Another possible measure is hospitality-related tax collections.

Manufacturing employment — D
Manufacturing employment continues a slow decline in the area, not unlike most metro areas in Arkansas. Sector employment in December 2012 was 18,900, down 400 jobs from December 2011 employment of 19,300.

Construction employment — D
This sector, which includes mining/natural resources employment, showed a drop in the fourth quarter, ending at 16,100 jobs in December 2012, compared to 16,700 in December 2011.

The rationale for including construction employment is similar to that for building permits. The employment measure is influenced by changes in both the residential and commercial real estate markets.

Obviously, new space implies new residents and new businesses.