The Compass Report: Trends positive for Arkansas’ economy during second quarter

by Talk Business & Politics staff (staff2@talkbusiness.net) 457 views 

Editor’s note: Because of circumstances beyond our control, we did not produce The Compass Report for the first quarter of 2017. We apologize for any inconvenience.
–––––––––––––––––––
Arkansas’ economy remained on a positive path during the second quarter of 2017, with three of the state’s four metro areas measured by The Compass Report posting year-over-year job gains.

The central Arkansas economy added 2,600 jobs, up 0.7%, between June 2016 and June 2017. The Northwest Arkansas regional economy grew 4.1% , adding 10,100 jobs. The Jonesboro metro area grew at the rate of 2.5% and added 1,400 jobs. The Fort Smith regional economy lost roughly 800 jobs, down 0.7% during the same period.

The quarterly Compass Report is managed by Talk Business & Politics, and is sponsored by Lowell-based Zero Mountain Logistics, a subsidiary of Fort Smith-based Zero Mountain Inc. The report is the only independent analysis of economic conditions in four Arkansas metro areas – Central Arkansas, Northwest Arkansas, Fort Smith metro, and the Jonesboro metro.

To underscore the impact of the four largest metro areas, for June the unemployment rate for the state excluding the 4 largest metro areas was 3.9%. The statewide unemployment rate with the three largest metros added back in was 3.7%. The gap had been much greater but much of the state, at least in terms of unemployment rate, has improved. For example, the Pine Bluff Metro area unemployment rate (typically the highest in the state) was 5% in June.

Jeff Collins, the economist for Talk Business & Politics who gathers data used in The Compass Report, said the state’s economy reflects the health of the national economy.

“The national economy grew at an annualized rate of 3.1% in the second quarter. This followed relatively sluggish growth in the first quarter of 1.2%. While experts had anticipated improved growth in the second quarter, the estimate was slightly better than forecast. Growth is projected to be roughly 2.4% to 2.6% through 2017 and into 2018,” Collins noted.

Collins said efforts by Congress to alter the tax structure will likely lead to long-term deficits, but that many proponents say the plan will boost the economy.

“Still observers believe proposed increased spending on infrastructure coupled with proposed reductions in personal income tax rates and corporate tax rates will lead to significant fiscal stimulus. The counter-balancing force to fiscal stimulus is likely to be upward pressure on interest rates,” Collins said.

He also noted that some business investments likely to emerge from a lower corporate tax rates may not result in more jobs – especially in the manufacturing sector.

“It is important to note that, while policies coming out of Washington may increase manufacturing activity in the U.S., growth in output is unlikely to be correlated with significant increases in sector employment. The underlying trend of investment in technologies that reduce the reliance on labor will continue to impact manufacturing employment,” Collins said.

FORT SMITH REGION
The Compass Report for the Fort Smith area posted a C- grade for the second quarter, unchanged compared to the same quarter of 2016.

A slight decline in job growth and a decline in building activity were the primary reasons for the low grade. However, regional sales tax collections showed improvements, a good sign in terms of consumer confidence.

Collins said the Fort Smith regional economy still struggles to gain any meaningful momentum.

“Throughout 2016 the economic data indicated the regional economy had reached a floor from which it could return to growth as the state and national economies gained momentum. Unfortunately, the data for the first half of 2017 paint a different picture. The regional economy appears to be continuing a slow decline. The likely scenario is that employment numbers will stabilize later this year. Certainly the sales and use tax collection data indicate that whatever the employment situation might be, there is sufficient income and consumer confidence to warrant optimism for the region.”

NORTHWEST ARKANSAS
The Northwest Arkansas area posted an A grade for the second quarter, better than the A- in the same quarter of 2016. The improvement is a reflection of sizeable gains in job growth and sales tax revenue.

The number of jobs totaled 253,800 in June, well ahead of the 243,700 in June 2016. The region’s tourism industry posted employment at 26,200 in June, better than the 25,000 in June 2016.

Northwest Arkansas’ economy is maturing and not likely to cool down in the foreseeable future, according to Collins.

“The regional economy has become more diversified over time. This coupled with relatively low cost of living and continued growth in the core consumer package goods sector implies it is unlikely the economy will slow anytime soon. This is good news for the state, which continues to see sluggish growth in local economies dominated by manufacturing.”

CENTRAL ARKANSAS
In the second quarter of 2017, the state’s largest metro area posted a C, unchanged compared to the same quarter of 2016. Slower job growth in the region’s manufacturing and tourism sectors helped keep the grade from improving.

The number of jobs totaled 356,300 in June, just above the 353,700 in June 2016. The region’s tourism industry posted employment at 35,300 in June, better than the 34,600 in June 2016.

Consumer spending the state’s largest metro was healthy during the quarter.

“Comparing the fourth quarter to the same period for the previous year, sales and use tax data indicates that retail activity increased for the metro area by approximately 5.2%. All of the smaller counties which comprise the Central Arkansas metro saw growth in quarterly collections. Faulkner County had the fastest growth rate (11.5%). Pulaski County grew 4.4%. Collections were down quarter-on-quarter in in North Little Rock (-1.7%) but up in Little Rock (4.6%), and significantly in Conway (9.6%),” Collins noted in his analysis.

JONESBORO METRO
The region posted a second quarter grade of A-, unchanged compared to the same quarter of 2016. The Jonesboro metro began its first quarter in The Compass Report with a B+ in the first quarter of 2016.

Nonfarm employment grew in the second quarter. Non-farm jobs totaled 56,900 in June, up from 55,500 in June 2016.

Like Northwest Arkansas, Collins said the northeast sector of the state, centered around Jonesboro, has a growing economy and good prospects for continued growth.

“Employment conditions in the metro are very good relative to the state and most other metro areas and the region is likely to outperform for the foreseeable future,” he said. “The employment data are particularly encouraging given the erosion of manufacturing employment prevalent across many metros.”

DATA AND REPORT DOCUMENTS
Link here for the raw data used to prepare The Compass Report for the four metro areas.

Link here for more narrative about regional and national economic conditions.

UNDERSTANDING THE COMPASS REPORT GRADES
A key factor in understanding The Compass Report is in understanding the “grading” approach used to measure the current and leading economic indicators.

The strategy is to place the most recent data in historical context. Average values for the percent change over the referenced time period were calculated, as were standard deviations for each measure.

The more similar current values are to historic averages the more likely the indicator grade is to be a “C.”

The farther away the observed value, as measured by the standard deviation of the data, the more divergent the grade from “C.” In other words, “C” reflects no change in economic activity. The grades “B” or “A” indicate improvement above the historical average, and “D” and “F” indicate a decline in economic activity compared to the historical average.

REGIONAL GRADE HISTORY
FORT SMITH REGION – Fort Smith regional economy
2Q 2017: C-
1Q 2017: NA
4Q 2016: C+
3Q 2016: C
2Q 2016: C-
1Q 2016: C
4Q 2015: C
3Q 2015: C-
2Q 2015: C-
1Q 2015: B
4Q 2014: C+
3Q 2014: C+
2Q 2014: C
1Q 2014: C
4Q 2013: C+
3Q 2013: C+
2Q 2013: C
1Q 2013: C-
4Q 2012: C
3Q 2012: C-
2Q 2012: C-
1Q 2012: C-
4Q 2011: C-
3Q 2011: C
2Q 2011: C
1Q 2011: C-
4Q 2010: C-/D+
3Q 2010: C-
2Q 2010: C-
1Q 2010: C-
4Q 2009: D
3Q 2009: D
2Q 2009: D-
1Q 2009: D+

NORTHWEST ARKANSAS – Northwest Arkansas regional economy
2Q 2017: A
1Q 2017: NA
4Q 2016: A-
3Q 2016: B
2Q 2016: A-
1Q 2016: A-
4Q 2015: A
3Q 2015: B+
2Q 2015: B+
1Q 2015: B
4Q 2014: B
3Q 2014: B+
2Q 2014: B
1Q 2014: B-
4Q 2013: B+
3Q 2013: B+
2Q 2013: B
1Q 2013: B
4Q 2012: C
3Q 2012: B+
2Q 2012: B-
1Q 2012: B-

CENTRAL ARKANSAS – Central Arkansas regional economy
2Q 2017: C
1Q 2017: NA
4Q 2016: C-
3Q 2016: C
2Q 2016: C
1Q 2016: C+
4Q 2015: B-
3Q 2015: C+
2Q 2015: C+
1Q 2015: C+
4Q 2014: C+
3Q 2014: C
2Q 2014: C
1Q 2014: C-
4Q 2013: C-
3Q 2013: C-
2Q 2013: C-
1Q 2013: C-
4Q 2012: B-
3Q 2012: C-
2Q 2012: C+
1Q 2012: C-

JONESBORO METRO – Northeast Arkansas regional economy
2Q 2017: A-
1Q 2017: NA
4Q 2016: B-
3Q 2016: A-
2Q 2016: A-
1Q 2016: B+

Comments

comments