Year In Review: Lost And Found

Arkansas is losing jobs, but no one really knows why.

It is a trend that started in January 2012 and accelerated throughout 2013. In January 2012, Arkansas had an estimated 1,265,900 workers in its labor force. In January 2013, that number dipped to 1,248,000 – a decline of 17,900.

By October 2013 – the latest numbers available – the employed workforce in Arkansas fell to 1,221,700 – a dramatic drop-off of 44,200 workers in less than 24 months.

Did they quit looking for work? Did they move out of state? Do the numbers reflect the shifting demographics of baby boomers who are retiring and will never return to the workforce? Were these workers laid off, and instead of finding new employment, they started their own enterprises? The state’s workforce tracking doesn’t account for employees who fit this bill.

Despite this negative, unexplainable trend, 2013 was a year of pretty positive economic news. Housing rebounded strongly, tax collections were generally robust, and there were plenty of major job announcements and big business deals that would suggest the Arkansas economy is moving in the right direction.

HOUSING
Arkansas’ housing market had its best year since the lousy recession years of 2008 and 2009. Thanks to low interest rates, solid inventory, and recovering incomes, Arkansans bought homes at a pace not seen since 2007.

In the four major metropolitan areas in Arkansas, which account for nearly 75% of the overall state market, home sales from January through October 2013 totaled 17,546, up 13.4% compared to the 2012 period.

For the first 10 months of the year, the number of homes sold in central Arkansas rose 10.39%, 14.4% in the Jonesboro area, 18.74% in Northwest Arkansas, and 8.33% in the Fort Smith area.

The value of homes sold in the four markets in 2013 was $2.932 billion, up 16.06% compared to the same period in 2012 and up 30.29% compared to the same period in 2011.

The average home price was $167,148, up 2.35% compared to the same period in 2012 and up 12.39% compared to the same period in 2011. And, homes sold faster in 2013. The average days on market through October was 87.62, better than the 96.89 in 2012 and 97.09 in 2011.

TAX COLLECTIONS
Arkansas’ income tax collections – typically an indicator of wage health – skyrocketed in the first half of 2013, and for good reason. Thanks to changing federal tax laws centered on the end of the Bush era tax cuts, many Arkansans accelerated income at the end of 2012. Those tax revenues were reflected in what the state received by April 2013 and it boosted the state coffers significantly.

In the big tax month of April, Arkansas revenue officials reported a 9.1% increase in individual income tax collections in large part due to the one-time tax strategies. However by year’s end, they were warning that 2014 would see a decline in that tax revenue because the anomaly would not recur.

Sales tax revenues struggled most of the year – a troubling sign that despite that wage health and seemingly solid disposable income, Arkansans still were spending cautiously in their day-to-day activities.

Still in the second half of the year, sales taxes were trending about 4% higher than one year ago. It was a signal that consumer spending was okay, but not great, and inflation was certainly a contributor to some of that rise.

BIG DEALS
There was no shortage of headlines on the business front as 2013 got off to a huge start with the state’s first superproject announcement, Big River Steel.

Led by steel magnate entrepreneur John Correnti, the $1.2 billion steel mill slated for Osceola in northeast Arkansas has the potential to reshape the Delta landscape in that corner of the state. Nearly 525 jobs averaging $75,000 or more were tantalizing aspects of the deal, but the major infrastructure investment and the opportunity for the ancillary businesses to sprout from the steel mill ecosystem may create more business activity and jobs in the long-run. Competitor Nucor Steel, which has competing plants in the region, led a spirited fight against the superproject for most of the year.

The bank scene in Arkansas underwent a fundamental transformation in 2013 and it will continue into 2014.

Conway-based Home Bancshares, parent company of Centennial Bank, bought Jonesboro-based Liberty Bancshares in a $285 million blockbuster deal. Longtime friends John Allison and Wallace Fowler, leaders of their respective banks, put together a deal that seemed 35 years in the making.

Pine Bluff-based Simmons First shocked the banking world when it outbid Bentonville-based Arvest Bank and a Dallas investment group for Little Rock-based Metropolitan National Bank. The price tag was a whopping $53.6 million – a high-priced buyout for a bank whose parent company Rogers Bancshares was undergoing bankruptcy in the wake of the death of its former leader, Doyle Rogers.

Other bank deals abounded, including Arvest’s acquisition of National Bank of Arkansas and Harrison-based First Federal’s quiet move to acquire banks in Hot Springs and Jonesboro.

Other big deals in 2013 involved legislators hammering out the “private option” health insurance expansion, nearly $90 million in tax cuts, as well as deals on an underfunded teacher insurance program and Attorney General Dustin McDaniel’s brokerage of a desegregation settlement.

PUBLIC PROFILES
The high-profile public companies that call Arkansas home also made significant news in 2013.

Wal-Mart, the world’s largest retailer, announced it will anoint a new CEO in 2014. Mike Duke will leave the helm of the retail giant and 47-year old Doug McMillon will take over in February 2014. McMillon, a Jonesboro native, started on the floor of a local Wal-Mart and eventually led the company’s international division before being tabbed for the CEO spot.

He’ll get to keep fighting for growth in a variety of ways that Wal-Mart is positioning itself for the future: online sales, neighborhood stores, urban retail centers, and international expansion. McMillon and Wal-Mart will also face more scrutiny from a probe of its actions years ago. The company is accused of engaging in bribery to aid its swift overseas growth and of violating the Foreign Practices Corruption Act.

Perhaps the biggest deal of 2013, at least from a revenue perspective, was the low-key spin-off of Murphy Oil Corporation’s retail and refinery business into a new public firm, Murphy USA.

Andrew Clyde was named the new CEO and the enterprise launched around Labor Day in a fairly seamless separation. Murphy USA accounted for nearly two-thirds of Murphy Oil’s revenue, so as a standalone company the El Dorado-based retailer already is positioned as the third largest publicly traded firm in Arkansas. And its growth potential is huge as Clyde indicated he has smart, strategic and fast growth plans for Murphy USA.

Tyson Foods, the Springdale-based protein giant, had a great 2013. It recorded $34.3 billion in sales, but more importantly Tyson Foods posted a huge profit of $778 million. Nearly all phases of the company’s operations rebounded in 2013, positioning the company for a solid year in 2014.

On the trucking front, USA Truck battled a new hostile takeover bid. The Van Buren-based dry goods hauler was surprised when Phoenix-based Knight Transportation publicly revealed its takeover offer to the company. USA Truck promptly rejected the $9 a share proposal and a PR battle ensued for weeks as various sides projected their arguments for change versus the status quo.

Arkansas Best could count its blessings in 2013. The Fort Smith less-than-truckload transportation giant resolved a long-running contract dispute with its labor union, the Teamsters. The deal was full of concessions that Arkansas Best contended would make it more competitive and be on an even playing field with its other labor-supported trucking peers. Arkansas Best also posted its best quarter in recent years with a $13.8 million profit in the third quarter of 2013.

POLITICAL FALLOUT
For political observers, no one could have predicted the tumultuousness of 2013.

Fathom this: Attorney General Dustin McDaniel, the frontrunner for the Democratic nomination for Governor, dropped out of the race for the state’s top chief executive after he admitted to an “inappropriate relationship” with a Hot Springs attorney.

That triggered the entry of former Lt. Governor Bill Halter to enter the race. Later in the year, he exited the Governor’s race after big money sided with former Cong. Mike Ross, who had said he wouldn’t run for office in 2014, but changed his mind after the McDaniel affair unfolded.

Cong. Tom Cotton bolted to the U.S. Senate race as expected to challenge incumbent Democrat Sen. Mark Pryor. That move opened up the Fourth Congressional District seat for the second consecutive cycle, and Cong. Tim Griffin surprised politicos by announcing that he wouldn’t seek re-election in 2014 in order to spend more time with his family. The departure of Griffin, who was recently appointed to the influential House Ways and Means Committee, led to a quickly crowded field in the Second District in what will likely be a very competitive battle for control of the seat.

Lt. Governor Mark Darr, the state’s highest-ranking Republican, once considered the Fourth District race. However, he dropped out soon after entering when a local blog revealed scores of questionable expenses on his campaign finance reports and in his office spending. At year’s end, there were several financial matters still under review and calls for his resignation were growing.

Democratic State Treasurer Martha Shoffner resigned from office in the spring after FBI agents caught her receiving $6,000 in cash in a pie box – part of an alleged cash-for-state business scandal that will go to trial in 2014. State Sen. Paul Bookout, once the leader of the Arkansas State Senate, also resigned amidst an ethics investigation that showed he used thousands of dollars in campaign funds for personal expenses.

GOP IN CHARGE
Republicans got a taste of true power when they presided over the state legislature for the first time since Reconstruction. With a large majority in the Senate and a slim majority in the House, Republicans and Democrats cobbled together an innovative plan to use Medicaid expansion funds to provide private insurance for lower-income Arkansans.

Known as the “private option,” the controversial new law will be tested in the early 2014 fiscal session when lawmakers must renew its funding. The troubled national health care rollout has torpedoed confidence in public insurance programs and instilled new resolve in opponents of the federal health care law and its offshoots.

Other accomplishments of the GOP-led legislature included major tax reform, resolution of a teacher insurance funding crisis, and the passage of anti-abortion measures and a controversial voter ID law.

McDANIEL RETURNS
AG McDaniel had a rehabilitative year after the scandal that sunk his Governor’s run. An ExxonMobil pipeline burst near Mayflower leaked oil into neighborhoods and the environment, and the state’s top legal officer pushed to hold the oil behemoth accountable through a series of PR and legal actions. Cong. Tim Griffin also pilloried the company in urging it to move the pipeline out of the Lake Maumelle watershed and to “do right” for the residents of the area.

McDaniel also had a breakthrough in a legal case that has challenged the state of Arkansas’ education system for three decades. In late November, the Attorney General’s office struck a deal to end the Pulaski County desegregation case. McDaniel’s staff negotiated a resolution that all of the major parties could sign off on, and if approved by a federal judge, the state could stop paying nearly $65 million annually to three Pulaski County school districts at the end of 2017.

BIG RACES GET HEATED
As mentioned earlier, the U.S. Senate race between Tom Cotton and Mark Pryor may prove to be epic in Arkansas history.

Cotton, a conservative who appeals to establishment and Tea Party conservatives, will be well-funded in his challenge to take out the last remaining Democrat in the state’s federal delegation. Tying Pryor to Obama at every opportunity, the blueprint for Cotton’s campaign is readily apparent.

Pryor spent the better part of 2013 defining Cotton as a “reckless” choice to replace him. Citing votes that denied funding to women, natural disaster victims, and seniors, Pryor had the resources and the ability to introduce Cotton to Arkansas voters outside of the Fourth District in a negative light before Cotton could define himself.

The two men sparred during a high-profile failure to draft a final Farm Bill, and there was plenty of political fodder for both sides in the federal government shutdown and debt ceiling debate.

By year’s end, the two Senate candidates were defining themselves: Cotton by his military service, Pryor with his faith.

The Governor’s race will be another high-profile campaign in 2014. Republican Asa Hutchinson, who faces primary opponents Rep. Debra Hobbs and Curtis Coleman, began laying the foundation for his presumed general election opponent, Mike Ross.

Hutchinson, who leads in the polls by a slim margin, is promising tax relief for lower- and middle-income Arkansans. Ross adopted a business-first tax cut approach aimed at stoking job creation.

Ross blew the doors off the fundraising charts with a record $2 million first quarter in contributions. Hutchinson, whose camp contends he is on track for fundraising goals, was behind on the money trail, but he’s promised that he’ll be competitive for the fall.

ROUNDTABLE DISCUSSION
On our year-end Talk Business & Politics roundtable discussion, Talk Business blogger Jason Tolbert, Delta Trust Insurance and State Rep. Allen Kerr (R-Little Rock), and Centennial Bank SVP and House Speaker Davy Carter (R-Cabot) covered the year in business and politics.