One year ago, when I considered the Arkansas economic forecast for 2016, the phrase that kept running through my head was, “ladies and gentlemen, we have now reached our cruising altitude.”
The worst effects of the great recession were long past and all indications were that job growth would be modestly positive, workers would continue returning to the labor force, incomes would rise, and unemployment would fall. In short, the economic trends of late 2015 would continue unabated in 2016. Subsequently, the data have borne out these predictions. As the national economy exhibited steady growth, the Arkansas economy added 8,700 jobs from November 2015 to November 2016. Arkansas unemployment rates settled down and hovered around an incredibly low 4%, even as more than 13,000 people joined or returned to the labor force. Per capita personal income for the state reached a record $39,107 as the economy fired on all cylinders.
So, in 2017 will the Arkansas economy be steady as she goes? The most recent data suggest that the state may experience more modest success in the coming year. In the first half of 2016, the performance of the Arkansas economy was red hot, but as the second half of the year arrived growth rates slowed a bit. All of the job growth for the year was contained in service industries; the construction, manufacturing, and mining and logging sectors all had fewer jobs in November 2016 than they did in November 2015 in Arkansas.
One of the fastest growing employment sectors at the end of the year was health services, an industry where there is an enormous amount of regulatory uncertainty as the new year and new administration approach. There was basically zero job growth in both trade, transportation and utilities and in government, and these two sectors employ about 40% of all workers in the state.
Moreover, the beginning of 2016 was characterized by job strong growth statewide, not just in Northwest Arkansas and in Central Arkansas, while at the end of 2016, employment increases had moderated across the state. Roughly three-quarters of the state’s job creation in 2016 occurred in one of the large metro areas, while one quarter of the growth was in rural counties.
In the past, the state’s periods of the highest rates of job growth have been associated with broad-based metro and rural success, rather than dependence on one or two geographies. The most positive economic factor heading into 2017 is the state’s superbly low unemployment rate. In November 2016, the state’s unemployment rate sat at a seasonally adjusted 4%, with only 53,250 people reporting that they were searching for, but not finding work. To put this number in perspective, there have not been so few people unemployed since the year 2000 and the state’s population has grown by 309,660 people since that time. Labor force growth also continues to be positive, along with population growth coming from net births, international in migration and domestic in migration.
The economic data suggest that positive, yet slowing momentum still exists in the Arkansas economy as 2017 starts. Insomuch as the national economy continues in its expansion, there’s no reason to believe that this is the year when we begin our descent in preparation for landing.
Editor’s note: Kathy Deck is the director of the Center for Business & Economic Research with the Sam M. Walton College of Business at the University of Arkansas.