Northwest Arkansas’ economic growth is amazing. But it’s not without problems. For example, the region is growing jobs faster than the workforce is expanding. And a 2.8% unemployment rate is problematic when the regional healthcare sector alone is slated to add 1,500 new jobs in the next two years.
Mike Harvey, chief operating officer of the Northwest Arkansas Council, said roughly a half billion dollars in investment and 1,500 new jobs in the healthcare sector of Northwest Arkansas have been announced and there is not one single health care position in the market now that is already fully staffed. He said the council continues to work on systems that will help fill the workforce gaps which are going to widen in the near-future when Arkansas Children’s Hospital opens and the expansion of Mercy and Northwest Health are completed.
Dr. Pearl McElfish, associate vice chancellor for the University of Arkansas Medical Sciences in Northwest Arkansas, has taken on this issue for the council. She said in the coming weeks there will be three working groups formed to examine the areas of economic development relative to healthcare, workforce development and community health. McElfish said business leaders will be called to take part in the working groups and help craft solutions that can help elevate Northwest Arkansas into a healthcare destination.
Harvey and McElfish spoke at the State of Region luncheon on Friday (Sept. 30) at the Board of Realtors offices in Lowell. Kathy Deck, director for the Center for Business & Research at the University of Arkansas, was the keynote speaker and provided a look back at how the region has compared against peer cities by examining economic data from 2010 to 2015.
Deck said there are many things going right in Benton and Washington counties when comparing against peer cities of Austin, Texas, Raleigh, N.C., Madison, Wisc., Des Moines, Iowa and Durham-Chapel Hill, N.C. The peer cities were chosen by the Northwest Arkansas Council in their 2015 Regional Agenda. Deck said the cities are where Northwest Arkansas would like to be in terms of economic output. While Northwest Arkansas has a smaller population than the peer regions, the economy outperforms on some metrics.
The Gross Domestic Product for Northwest Arkansas between 2014 and 2015 grew at a 4.4% annualized rate, below the 5% in Austin and 7% in Raleigh, but better than the 3.4% reported for Madison, 0.2% in Durham and 3% in Des Moines. Statewide GDP growth was 1.5%, well below the national rate of 2.4%
Since 2015 GDP at the national level has been well below the 2% range which is deemed a benchmark economists expect the nation to perform. Deck said the lull in GDP growth is projected to abate in 2017 returning to a more normal level of 2% to 2.5%. National economists with Wells Fargo said Friday although economic activity in the second quarter was lackluster, recently released monthly indicators suggest third quarter real GDP growth will be solid on the back of consumer spending and positive contribution from inventories after five quarters of weakness.
Talk Business & Politics asked Deck to elaborate on improved consumer confidence in September, but lower-than-expected consumer spending. Deck said consumer spending has pulled back in part because there has been a lull in income growth, and while fuel and food prices have remained low, the cost of services, health care, education and utilities have increased.
“Consumers have also paid down some of their debt and they have saved a little more. We are about to release our next Consumer Sentiment report for the local region and I can tell you consumers in Arkansas are feeling better about the economy than they have in the past,” Deck said.
Deck said job growth over the past several years is outpacing the local workforce capacity. She said one regional group that is underemployed are young women with children at home. She said this highlights perhaps a need for more early childhood education and childcare intervention programs that are lacking in the region.
“Our labor participation rate is well below that of our peer regions and its young women who have left the workforce most often. Employment growth increased 4.9% between 2014 and 2015. At this level job growth is taxing to our infrastructure,” Deck said.
The peer cities averaged job growth rates of 3.2%. The U.S. rate was 2.1% and statewide the jobs growth number was a mere 1.8%
Summing up the local economy, Deck said there really isn’t anything standing in the way of continued growth so long as the national economy can achieve a 2% to 2.5% annual growth rate. She said the workforce shortage is problematic and is the one thing that could dampen regional economic growth.
HOUSING AND INCOME
Deck said the construction sector is booming and there hasn’t been this much building activity since the recession ended.
“This is not bubble territory by any means, but it’s sustainably higher. We are seeing building permits outpace the population growth which is likely to mean we see a little build up in inventory levels and slight surplus on the horizon ahead of the growth rate. This could provide some breaks on the price appreciations we are seeing in home prices and housing costs,” Deck said.
The median household income rose to $50,788 to start 2015, up from $47,905 and better than the $41,995 reported statewide. That said median household income still lagged the national average of $55,775. Local incomes were well below the peer average of $62,666. But above the state average of $41,995.
Deck said housing remains a value in the region, despite the price appreciation in real estate prices. The cost of homeownership as a percent of income was 15.6% in Northwest Arkansas in 2015, down from 16.2% in 2013 and 17.9% in 2011. Deck said income growth over that period outpaced the price appreciation for the region.
However, Benton County home prices have continued to escalate above those in Washington County since the recession ended in 2009. Through August the median home sales price in Benton County was $167,350, rising 11.5% over the past two years. In Washington County the median home sales price was $165,000, up 10% since 2014.
POVERTY, AIRFARE ISSUES
Areas of concern for the region include a poverty rate of 14.3% compared to 11.7% in Austin, Texas and 14.7% nationally.
The annual cost of airfare is also higher in Northwest Arkansas which is a burden for business professionals require to travel. Deck said the cost per flight averages $509 locally compared to $416 in peer cities. This is why the Northwest Arkansas Council continues to recruit a low-fare carrier to the Northwest Arkansas Regional Airport.
“We are aware we can fly many places from Northwest Arkansas but the cost is high and we have been paying it for a long, long time. It’s a challenge for those professionals who must travel for their jobs,” Deck said.