Forecast: Politics Trumps All in 2016

Every election year in the U.S. carries a certain amount of weight, especially so in years of a presidential election.

As such, 2016 will be greatly influenced by the political industry, where changes in leadership and policy can have a significant effect on any number of other industries, not to mention the attitudes of decision-makers at large

“[Elections] clearly and directly affect consumer sentiment,” said economist Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas. “There is a broad consensus that if my candidate wins, everything will be fine, and if my candidate loses, it’s all going to fall apart.”

To that end, it made sense for our annual economic forecast story to include a best guess of what the upcoming year may look like in the political arena, on both the national and state level.

There is no shortage of candidates who are vying to become the next U.S. President, and here at home, five of the six members of Arkansas’ U.S. Congressional delegation are up for re-election, including Republican Sen. John Boozman of Rogers, whose race against Democratic challenger and former U.S. Attorney Conner Eldridge of Fayetteville will garner significant national interest.

 

POLITICS

The election timeline in Arkansas will be different in 2016. The state’s party primary, traditionally held in May of a presidential election year, will be held March 1.

The general election will be Nov. 8.

Dr. Janine Parry, a political science professor at the UA, said she does not expect the national presidential race to be sorted out until well into the spring, specifically on the Republican side. But regardless of nominee, all signs will point to a Republican victory in Arkansas.

“There are some counterpoints you could make, but the majority of evidence points to a double-digit victory for the Republican nominee in the general election,” she concluded.

As for the U.S. Senate race between Boozman and Eldridge (Boozman is also facing a primary challenge from Curtis Coleman of Little Rock), Parry said a significant increase in outside money will fully nationalize the race, a trend that was seen in other states “decades” before it was seen in Arkansas.

“Down-ballot races could still be somewhat localized with good name recognition and political networks throughout the states, but national messaging has made that impossible,” she said. “Republicans have been able to say, ‘This is what all Democrats are like’ and Democrats haven’t been able to say, ‘But, I’m a southern Democrat’ very effectively anymore. As hard as Eldridge will try and do that, I think the time for that messaging may be over.”

Parry added Arkansas will have a stronger relevance in the presidential election process than in the past because of the state’s moved-up primary date. Arkansas will join six other states in the South who will head to the polls on March 1.

 

TRANSPORTATION & LOGISTICS

Most industry economists are predicting continued, yet limited growth within the transportation and logistics industry for 2016, said Shannon Newton, president of the Arkansas Trucking Association.

“Entering the eighth year of an economic recovery, growth has leveled and is only expected to be between 2 and 2.5 percent,” she said.

Also, the requirement of motor carriers to use electronic logging devices could negatively affect capacity as much as 7 percent in the next two years, Newton said. The release of that rule is due by the end of the year, and it should trigger an uptick in the adoption of the devices in 2016.

A shortage of employees, especially professional truck drivers, has been the biggest challenge facing the industry during the last few years, and 2016 will be no different, Newton said.

“This will continue to be an issue as long as the economy is stable and growing at any rate. The pool of qualified drivers continues to shrink as drivers are reaching retirement age at a higher rate than the industry is attracting younger individuals to replace them,” she said. 

The shortage, however, is not limited to drivers. Newton said the lack of talent extends to an inadequate number of diesel technicians and also young professionals who are educated in transportation and logistics operations and administration.

Other issues facing the industry include highway congestion, increased government regulation, and the emergence of a patchwork of varied state and local laws that affect with wages and hours guidelines.

Newton said the latter is especially challenging for an industry that is continuously engaged in interstate commerce.

 

HEALTH CARE/INSURANCE

Mercy Northwest Arkansas president Eric Pianalto believes the health industry will see ongoing expansion and added convenience to patients in 2016.

“Northwest Arkansas continues to grow and to become a more diverse population, so locally you will continue to see growth across the sector to accommodate the needs of patients in this region,” he said.

In addition, in 2016 and beyond, the way consumers interface with health care will likely continue to evolve, Pianalto said. “Advances in technology are allowing patients to monitor their own health care in new and different ways, and when there is a change in their health status, they have even more and easier ways to interact with their health care provider.”

Meanwhile, the industry will face challenges.

“The effects of the Affordable Care Act are ongoing and evolving,” said Dr. Chris Smith, Northwest Arkansas regional associate dean at the University of Arkansas for Medical Sciences College of Medicine. “This next year will continue to show what populations are well-cared-for and what others may be vulnerable.”

Health care also faces financial challenges.

Pianalto said there is great uncertainty from year to year, with regard to how services will be paid for and how regulatory changes impact medical service providers’ ability to survive.

“The financing model for health care and the way that it has evolved over the past 50 years is complex and in many ways broken,” he said.

On the insurance side, there is a growing national trend of health insurance company consolidation, and that trend is expected to continue.

“As health care access is changing, the way people purchase health insurance is changing as well,” Pianalto said. “Insurance companies appear to be preparing for a changing market place and are preparing their organizations in a more regionalized and national focus.”

 

RESIDENTIAL REAL ESTATE

By any metric, 2015 was a huge year in residential real estate in Northwest Arkansas, said Doyle Yates, president of the Northwest Arkansas Board of Realtors.

Year to date, from Jan. 1 to Dec. 7, total transactions were up 9 percent over the same time period in 2014, and the average sales price was up 9.6 percent.

In terms of the sales price in relation to the list price, the percentage rose to 98.5 percent and should climb even higher in 2016, creating what Yates calls a seller’s market.

Most importantly, perhaps, new homebuyers are back in the game and currently comprise about 40 percent of the market. Looking forward, that bodes well for everyone, as does the fact that more and more agents are getting their licenses, Yates said.

Citing real estate figures, employment, and population growth, Yates said, “We enjoy numbers that the rest of the state does not.”

Cost of home ownership is still a big advantage for Northwest Arkansas, as it’s lower than that of competing metro areas like Austin-Round Rock, Texas, Durham-Chapel Hill, North Carolina, Des Moines-West Des Moines, Iowa, and Madison, Wisconsin, according to the 2015 State of the Northwest Arkansas Region Report commissioned by the Northwest Arkansas Council.

A telling number is the median sales price of a home. In 2005, considered a great year, it was $134,900. As of October, it was $153,000.

Looking at 2016 and beyond, Yates urges homeowners to visit homeownershipmatters.realtor, a website sponsored by the National Association of Realtors, and sign the petition to protect the mortgage interest deduction.

“Real estate is the backbone of the economy,” Yates said.

 

CONSTRUCTION

Nonresidential construction is booming in Northwest Arkansas, and it doesn’t look like the trend is going to abate anytime soon. From the expansion of Northwest Health System clinics across the region, to widened highways, to new schools, the construction scene remains vigorous.

Marquee projects set to begin in 2016 include the Arkansas Children’s Hospital in Springdale, and the parking lot at Northwest Arkansas Regional Airport in Highfill. Other projects, like the new J.B. Hunt Transport Services Inc. office tower in Lowell, and the Walton Arts Center renovation in Fayetteville, will likely conclude.

“We see nothing but blue skies,” said Greg Fogle, president of Midwest operations for Nabholz Construction Corp. in Rogers. “We think things are on the uptick.”

The market is competitive, but for now and into the foreseeable future, there should be enough work to go around.

“My sense is that the high tide will lift all boats,” Fogle said. “All folks in construction will see an improvement over 2015. There’s room for growth.”

Nationally, construction is a leading jobs creator, and in October and November, about 28,700 nonresidential construction jobs were added, according to the Associated Builders & Contractors. And for October, the association reported that expenditures in nonresidential construction, at $701 billion, had expanded for the third straight month.

Nationally and in this region, a big challenge for all construction companies, Fogle said, is finding qualified personnel. To that end, Nabholz and other firms are speaking to high school students. The message is a simple one — for those who are willing, there are $20 per-hour jobs operating advanced, heavy machinery, and the training is paid for.

Even with the personnel challenges, the industry is in good shape. Fogle talks with competitors, subcontractors and civic leaders. They all seem to say the same basic thing.

“Things are good and getting better,” Fogle said.