Economist: Farm income contributing to volatility in state GDP

University of Arkansas’ Walton College economist Mervin Jebaraj said that fluctuating commodity prices and volatility in the agricultural sector are the biggest reasons why Arkansas’ GDP (gross domestic product) has seen big quarterly swings.

Appearing on this week’s edition of Talk Business & Politics, Jebaraj noted that third quarter 2017 state GDP declined 1.9%, while the state’s fourth quarter 2017 GDP reading was up 2.5% over the previous year.

“In general, the [Arkansas] economy is doing pretty well. But states where there is a large portion of the economy that is dependent on agriculture tend to have more volatile GDP numbers because the movement of those commodity prices really does affect the GDP going from month to month,” Jebaraj said. “The swings can be attributed in part to the wild swings in agricultural revenues and production from a quarter-to-quarter basis.”

In his interview, Jebaraj also commented on a new Census report that shows that two-thirds of Arkansas counties lost population in the past five years. Most of those counties were in the Arkansas Delta.

Without a reversal of this trend, Jebaraj said the gulf between the have’s and have not’s will only widen.

“If you think about all the things that population is important for, the bigger population base, the better a city or a county is able to afford a lot of different things, all the things that you think about that the city government funds through sales taxes or property taxes, the schools, infrastructure, and when population losses like this occur, it becomes harder and harder to fund all of those things that are important,” he said.

“If you think about the places that are doing well — up here in Northwest Arkansas, parts of central Arkansas, and in Northeast Arkansas around Jonesboro — these are places with strong, booming economies, with diverse set of industries for their economies, and all of these regions are at various levels of working on different things associated with placemaking; that is, trying to make their cities and regions more attractive with a lot of amenities to convince people to live there,” Jebaraj added.

He highlighted El Dorado’s nearly decade-long effort to stem population loss. Thanks to an investment from publicly-traded Murphy Oil, the El Dorado Promise scholarship program has led to stronger regional recruiting to the high school. More recently, millions of dollars of investments have been made in the Murphy Arts District, an entertainment district capitalizing on El Dorado’s appealing town square.

“It’s a small city that is trying to stem the loss in population, and they are having relative success with that compared to the county that they’re in and compared to some of the surrounding cities,” Jebaraj said. “So, other cities around the state, especially in more rural areas, need to look into what their competitive advantage is… and then work to build these quality-of-life amenities, support entrepreneurs, particularly with risk capital.”

Watch Jebaraj’s full interview below.