Northwest Arkansas needs cheaper airfare, more research funds, lower childcare costs

Northwest Arkansas has long been a shining star in the Natural State, garnering national attention for its fast growing population, job growth and entrepreneurial energy. But it’s not enough to compare the region to the rest of the state, said Mervin Jebaraj, interim director of the Center for Business & Economic Research at the University of Arkansas.

That was the basis for the Northwest Arkansas Council’s annual report known as the State of Northwest Arkansas, which compares the metro to four top-performing peer cities around the country. The Council, in cooperation with the University of Arkansas, presented this year’s data to the local business community on Tuesday (Oct. 3) at a noon luncheon in Lowell. Jebaraj and Nelson Peacock, CEO of the Northwest Arkansas Council, spoke about the positive metrics and highlighted areas for improvement.

“We want people to make a home here, not just advance their careers and move on,” Peacock said.

While economic metrics for the region last year were strong overall, Peacock said the Council is focusing on a few areas of opportunities to move the metro forward in the areas of lower airfare costs, increased research and development funds, and more networking opportunities for Millennials upon graduation. Other areas where focus is needed include risks for opioid use among the workforce and lower childcare costs for Millennial moms not in the workforce, Jebaraj said.

DISCOUNT AIRFARE, R&D
Peacock, who recently relocated his family to Northwest Arkansas from California, said he experienced sticker shock when trying to plan a four-day trip back to California. He said lack of a discount carrier and full flights push fares 45.2% higher out of XNA than other airports around the country. The average round trip fare out of XNA is $509, compared to $350 nationally. Amid the four peer cities in the State of the Northwest Report, the cost of flights was 28.1% cheaper than at XNA.

Peacock said Northwest Arkansas is the only region of its size in the country without a discount airline carrier and the Council continues to talk with carriers about the need. He said on an aggregate basis it costs consumers between $50 million and $100 million more each year to fly out of XNA than competing airports in Tulsa and Dallas.

“I saved $600 when booking my next trip to California out of Tulsa and that’s why people will drive as far as Dallas when they are planning a trip by air,” Peacock said.

Jebaraj said in the past few years XNA expanded the number of direct flights which is a step in the right direction. He said between 2012 and 2016, average fares at XNA have dropped 3.3%, but they are still considerably higher than the peer cities and competing airports.

One other area of opportunity highlighted by Peacock was the relatively low amount of federal research and development dollars for the University of Arkansas. UA ranked No.131 among research universities for the funding received. The University of Texas ranked No. 30 with $650.6 million and University of Wisconsin, Duke and University of North Carolina all had nearly $1 billion or more in R&D funds.

Matt Waller, dean of the Sam M. Walton College of Business, said the college is making progress in that area. He said the New Venture course taught at the business college has helped to start more than 23 businesses this year alone, and has raised more than $10 million in funds.

“I am bullish on Northwest Arkansas for numerous reasons. I glean tremendous insight from our alumni, local employers and students and there are many positive aspects about the local region,” Waller said.

He said the Walton College has an 88% placement rate for its graduates, which has improved from 75% about a decade ago. Waller said when he moved to the region 23 years ago there were about 100 people working for Wal-Mart vendors, and that number now is roughly 9,000. Waller also said 600 new service companies have been created to serve the region’s supplier base.

WAGE GROWTH, CHILDCARE, OPIOIDS
Jebaraj said average income in Northwest Arkansas rose 3.2% to $44,980 in 2016, but despite having a lower unemployment rate the region still lags behind the wage growth of peer cities. Austin’s (Texas) average income rose to 5.5% last year to $50,830 and the peer average was higher $51,868, up 5.6%. He said housing costs are lower in Northwest Arkansas than some of the peer cities but given the sustained low unemployment locally wages should be moving higher with the solid GDP growth rate of 3.9% last year.

He said the cost of home ownership was 15.3% of the median income last year in Northwest Arkansas. He said home prices are not rising faster than incomes in Northwest and that makes owning homes affordable even for Millennials carrying student loan debt. However, Jebaraj said home ownership rates continue to decline slightly across the majority age demographics which is part of a larger national trend.

“Home ownership does drive the economy. It’s hard to grow without it. This year 23% of the homes sold in Northwest Arkansas have been new construction, the highest level on record,” he said. Multifamily development is also on the rise, as the region will see 6,500 new units coming online in the next two years. Most of that, he said, will be in Benton County.

Jebaraj said about 11,000 people a year are still moving to Northwest Arkansas, growing the population to 525,032 as of late 2016. But the labor force remains tight despite growing about 2% over the past year as of July. The 2.8% unemployment rate in August takes into account a growing labor force. He said low employment rates could choke the region’s growth if labor force gains slow.

A concern amid the local labor force is women not working because they have children at home. He this demographic has just a 61.3% labor participation rate, compared to 68.4% of overall female labor participation rates in the region. Against the four peer cities Northwest Arkansas has a lower female labor participation rate if they have young children. Jebaraj said this is a demographic that reduces the region’s workforce numbers which has organizations studying the impact. He said the Helen Walton Children’s Center is one of the providers studying this to improve options.

Jebaraj also spoke on the rise of opioid usage and the impact that could have on already tight workforce numbers. Arkansas, and specifically Northwest Arkansas, has a high opioid prescription rate which is an area Jebaraj said needs more study and research. When asked about the medical marijuana business and that impact on the state’s economy, he said it will be a growth industry providing opportunities for legal, cash handling, agricultural and security-related job growth.