Economist: NWA’s Economic Health Not Indicative of State, Nation

While Northwest Arkansas continues to perform well when it comes to job growth, unemployment and housing starts, the state economy remains sluggish and it’s not yet known if the national economy can reclaim and keep a healthy 3 percent rate of annual growth, said Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas.

Speaking on Wednesday at the Quarterly Business Analysis luncheon at the Shewmaker Center for Business Technologies at Northwest Arkansas Community College, Deck told approximately 100 people from across the region’s economic spectrum that while Northwest Arkansas continues to show good health, it’s not an indicator of what’s going on in the state or the nation.

The metro areas of Pine Bluff, Fort Smith and Little Rock have yet to reclaim the number of jobs they had in 2007, and in Jonesboro, only modest gains have been made beyond 2007 levels. Though the large economic sectors of trade, education and health services have shown growth, Arkansas still shows declines in the important fields of government, manufacturing and construction.

“The state’s not growing,” Deck said, citing information from the Bureau of Labor Statistics.

For Northwest Arkansas, the statistics are undeniably positive. But, said Deck, they come with a caveat.

“We’re coming off a very low base,” she said, referring to increases that are still emerging from the deep trough of the recession.

The region’s unemployment rate and its increase in labor force both outpace state and national levels. Residential building permits, home sales and home prices have improved. Vacancy rates in commercial property and multifamily dwellings are dropping.

“It’s a fantastic place to be,” Deck said. “There have to be pockets in the economy that outperform for the U.S. economy to recover.”

As unique as Northwest Arkansas may be, it’s still linked to the state, national and international economies. And when Deck looks outside the region, she said she becomes worried.

Nationally, the GDP has been up and down since 2009, and the only reason the GDP is predicted to rise in the coming year is due to the way economic models are applied —using a built-in 3 percent rate of growth — not due to hard evidence that the economy will truly recover.

“There are researchers at UCLA who will tell you that we’re not having a recovery,” Deck said.

According to the Small Business Optimism Index, owners are still not convinced that the good times are here again. And homebuilders, according to the National Association of Homebuilders, have yet to regain the confidence they had back in 2005. Real median weekly wages have not risen since the 1970s, and the personal savings rate has plummeted since 2008, according to statistics cited in Deck’s report.

Student debt, little disposable income and household bills are still problems. On the positive side, inflation is flat, interest rates are low, retail sales have proven to be resilient and a lot of bad debt was flushed during the recession, said Deck.

Of Course, whether the news is good or the news is bad, things can always change, said Deck.

As an example, Deck said last summer she was in Istanbul enjoying the peaceful and scenic Taksim Square. Recent plans by the government to demolish the square and build a shopping mall there, however, have made Taksim Square the epicenter of widespread protests that could ultimately affect international commerce.

“It’s amazing how quickly things can deteriorate,” said Deck, who also referenced slowed growth in China. “It all worries me.”