A year-ending survey of business contacts indicated that nearly half expect economic conditions in 2016 will be somewhat better than in 2015 as employment growth continue to strengthen across the state, according to the Federal Reserve’s “Burgundy Book.”
The report provides statistical and anecdotal notes on 62 of the state’s 75 counties. The Little Rock Zone covers six state metro areas, including Little Rock/North Little Rock/Conway, Pine Bluff, Hot Springs, Texarkana, Fort Smith and Fayetteville/Springdale/Rogers.
Categories including housing, real estate, construction, employment, manufacturing, banking, consumer debt, and agriculture are covered in the economic report.
According to a November survey of business contacts, 48% expect that economic conditions in 2016 will be somewhat better than in 2015, while only 14% of contacts expect economic conditions will be somewhat worse.
Measured from a year earlier, nonfarm payroll employment in the Little Rock MSA rose 2.3% in the third quarter of 2015. This was the strongest growth since the third quarter of 2006. Employment growth was slightly weaker in the Fayetteville MSA, was unchanged in the Texarkana MSA, but fell slightly in the Fort Smith MSA. The zone’s unemployment rate averaged 5.1% in the third quarter of 2015, its lowest level since the third quarter of 2008.
In other areas of the economy, single-family building permits increased in the third quarter in four of the six MSAs. House prices were up from a year earlier in all six MSAs, paced by increases in the Hot Springs and Texarkana MSAs that exceeded the national average.
Per capita total debt balances rose in the Little Rock zone in the third quarter, as mortgage debt rose from year-earlier levels for the first time since 2012. In the third quarter, return on average assets at Arkansas banks remained appreciably higher than at U.S. peer banks. Arkansas bankers reported that loan demand in the fourth quarter was unchanged from a year earlier.
According to preliminary estimates, Arkansas farmers harvested less corn, cotton, and rice in 2015 compared with a year earlier.
Other notes and highlights from the Little Rock Burgundy Book include:
• The fastest-growing sectors were the natural resource and construction, leisure and hospitality, and education and health services sectors, together adding about 6,300 jobs in the last year, or about 80% of the total jobs added since the third quarter of 2014.
• In Fayetteville, employment growth slowed down but remained positive, with government employment growth offsetting the slowdown in the private sector. The unemployment rate also declined significantly from the previous quarter. Job growth in Fort Smith and Texarkana remain weak.
• After a few quarters of growth, manufacturing employment in Arkansas contracted in the third quarter of 2015. Declines occurred in the manufacturing of both durable and nondurable goods. Manufacturing employment in Arkansas is now nearly 20% below its pre-recession level (see figure). One bright spot was the Little Rock metro area, where employment growth in the sector slightly exceeded the national average.
• Employment growth in the transportation and warehousing sector slowed significantly in Arkansas, from 2.6% to 0.6%. In Little Rock, the number of employees in the sector decreased.
• Contacts in transportation report that freight volume is weak for this time of year, and some report laying-off truck drivers due to lack of volume.
MEMPHIS ZONE REPORT
Despite growing optimism in the Little Rock area, business contacts in the Memphis zone were mixed about expectations for 2016. The Memphis zone of the Federal Reserve comprises northern Mississippi, eastern Arkansas, and western Tennessee and a total population of approximately 3.1 million people, including the 1.3 million who live in the Memphis MSA.
According to a November survey, about 35% of Memphis-zone business contacts expect local economic conditions to worsen in 2016, while about 31% expect conditions to improve.
In the third quarter, nonfarm payroll employment rose by one percent in the Memphis MSA and by 1.8% in the Jackson MSA. Employment gains remained the strongest in the Jonesboro MSA, as employment was up by 4.5% over the past year.
In Mississippi, nondurable goods manufacturing employment in the third quarter increased at its fastest rate in more than a decade. The Memphis zone’s unemployment rate averaged 6.7 percent in the third quarter of 2015, down 1.1 percentage points from a year earlier and at its lowest rate since the first quarter of 2008.
Residential real estate activity in the Memphis zone continued to be weaker than for the nation in the third quarter. However, there have been pockets of strength, as seen by solid year-to-date growth of home sales in the Memphis MSA and healthy house price gains in the Jonesboro MSA over the past year. In the Memphis zone, per capita auto debt continued to rise rapidly in the third quarter.
By contrast, per capita mortgage debt as a share of total debt fell to its lowest level in about 15 years. Commercial bankers reported that business loan demand continued to strengthen in the fourth quarter, and most expect further increases in loan demand in the first quarter of 2016.
Like most of the South, Cotton and rice production in 2015 was down sharply from a year earlier in Arkansas, Mississippi and Tennessee according to preliminary estimates.
Overall, slightly more than half of business contacts in the St. Louis’ Eighth District, which includes Arkansas and portions of Illinois, Indiana, Kentucky, Mississippi, the eastern half of Missouri and West Tennessee, expect that local economic conditions will improve in 2016. Roughly 21% of contacts expect conditions to worsen in 2016.