Northwest Arkansas continues to be Arkansas’ economic engine, with Jonesboro also showing good numbers in recent years, according to Mervin Jebaraj, director for the Center of Business & Economic Research at the University of Arkansas. That reality is likely to continue through 2018, he said.
Jebaraj spoke to more than 1,100 business, political and community leaders Friday at the annual UA Economic Forecast Luncheon held in Rogers.
Jebaraj said there are still areas that need improving at the state and regional levels. He said the state is expected to add 11,000 jobs this year, and 6,000 of those will be in Northwest Arkansas. Some of the fastest growing areas of Northwest Arkansas employment continue to be construction, healthcare, hospitality and professional/ business services, which include bankers, accountants, engineers, architects and lawyers.
He said business and professional services are the largest sector of employment in Northwest Arkansas. Combined, financial activities and professional services, the local workforce sector grew by about 4.5% last year.
“Look around the room. Most of you are accountants, lawyers or engineers and bankers. In fact, you can’t reach for your cheesecake without bumping into one of them (bankers),” Jebaraj joked.
He said the retail sector, which is part of the trade, transportation & utilities sector, remains challenged nationally with impacts in the state and region as well. He said last year the state lost 1,800 retail trade jobs.
“We will probably see more job losses in the retail trade sector this year as well. We have not yet found the bottom,” Jebaraj said.
Wal-Mart Stores confirmed this week it’s cutting between 400 and 500 corporate jobs in its Bentonville operations. Sears is closing its stores in Fort Smith and Fayetteville, and Toys R Us stores in Little Rock and Fort Smith also got word this week they are being shuttered. Jebaraj said the retail sector has its challenges nationally, and there will likely be more fallout in the state in 2018.
Jebaraj also said there is plenty of work to do in Arkansas and in the metro areas to keep the economies growing. Statewide, he pointed to more efforts to improve the labor participation rate as there remains a skills gap between job applicants and job openings. Specifically in Northwest Arkansas, he pointed to more support for the entrepreneur community, applauding ventures like Grit Studios and Startup Junkie, but saying more effort is needed. He also said affordable housing in Northwest Arkansas is a concern as land prices continue to escalate.
“We anticipate 90,000 additional housing units will be needed in the region over the next three to five years to account for the growing population. Those need to be built so that various incomes can afford them. We are not talking all single-family homes, but also affordable multifamily options positioned in areas conducive for public transportation,” Jebaraj told Talk Business & Politics after his remarks.
Lastly, he said affordable childcare in the region remains a concern and is holding back workforce participation given that at least parents of young children often have to stay home because child care is unaffordable.
Michael Milken, chairman of the Milken Institute, was the keynote speaker. A friend of the Walton family, Milken, who served two years in prison and was fined $600 million in the early 1990s for racketeering and securities fraud, said Northwest Arkansas has plenty to be proud of, but he remains concerned about its future given the changes happening around the world.
“What keeps me up at night is worrying about where we are going to find jobs for our people. One in six have dropped out of the workforce because they can’t find a job. Many are too old to go back to school and there are lots of families facing issues like a son and dad applying for the same job – the son getting it and the father wishing him well,” Milken said.
He said technology is radically reducing the number of jobs for many. For instance, agriculture and food production are key areas of change. In China, he said crops are being grown in climate controlled warehouses harvesting 24 times a year, instead of one or two, with no pesticides, better air quality and water control. Milken expects that technology will be imported to the U.S. in the next couple of years, perhaps displacing thousands of agri workers in areas like California and south Texas.
He noted that one of the most popular jobs in more than 30 states, according to an NPR report, was truck driving. That is the case in Arkansas.
“Imagine how those families feel reading that autonomous trucks are coming in the near future,” Milken said.
He said manufacturing may be returning to the U.S., but it won’t return the jobs that were lost. He pointed to the steel industry in the 1960s, when it took 1,000 employees to produce 500,000 tons of steel wire annually. A new plant in Austria matches that product using only 14 employees.
Milken also spoke about the importance of capital to keep an economy moving forward. But he said capital alone won’t do the job.
He referred to something Sam Walton told him years ago about there not being scarcity of capital, but rather more often a lack of vision. Milken said cities that have a vision, access to capital, and talent can change their destiny. He referenced Seattle, which in the early 1970s was bemoaning the future loss of its largest company, Boeing. But the vision of people like Bill Gates and Craig McCaw, a pioneer in the cell phone industry, who were native to Seattle, rescued the city when they decided to build their businesses there. The interesting part of the equation is that two non-Seattle businessmen, Jeff Bezos (Amazon) and Howard Schultz (Starbucks) decided to locate to Seattle to start their businesses.
“Boeing did finally move to Chicago, but Seattle didn’t notice because of the visionaries who moved the city forward. The world is different today because of Starbucks and Amazon,” he said.
He told a similar story about how San Diego, with the help of its biggest asset, the University of California San Diego, changed that region’s economy by becoming a bioscience hub. He said there are more than 130 bioscience companies now located in San Diego, about a decade after its four largest businesses went bankrupt.
He said Northwest Arkansas is a region with visionaries from Sam Walton to J.B. Hunt and Don Tyson, and he’s curious to see who might in the future decide to locate here and start a business.
Milken said he was not surprised about the election of Donald Trump as president. He said in talking with business leaders it was clear one of the primary issues was the amount of regulation and government red tape bogging down their operations. Milken said the election of Trump was about trying to get some of the regulation repealed.
Trump’s moves to reduce regulations and the recent tax overhaul signed into law is a catalyst for business expansion. He said companies that spent millions on compliance staff may now put that money to rewarding employees and investing toward future innovations.
“Most business owners are socially responsible. They won’t succeed otherwise today. Getting the government off their backs and lowering corporate taxes is an economic stimulus going forward,” he said.
Milken opened his talk with the question, “What is a meaningful life?” He warned as the world rapidly changes, social capital remains just as important as financial capital. He said companies like Starbucks have figured that out and continue to be rewarded. He said the company’s ability to recruit and retain store labor who feel they are part of the bigger story has been instrumental to the company’s global success.