Northwest Arkansas consistently ranks well against peer cities as one of five best places to live in the U.S. thanks to being the fifth-fastest growing economy nationwide. Since 2011, the Northwest Arkansas Council has worked with the University of Arkansas to track the local metro area against five top performing metros in the country dubbed “peer regions.”
“We are comparing ourselves among the best of the best metros in the country. We consistently ranked in the top two of the five in many areas so we added Provo, Utah, this year because we see many similarities between the two areas,” said Mervin Jebaraj, director for the Center for Business & Economic Research at the University of Arkansas.
He said with the addition of Provo, now Northwest Arkansas is likely to rank in the middle of the pack more often than in the top two.
“This gives us an opportunity to work harder at areas that will help sustain regional growth in the years to come,” he added.
Jebaraj was one of the speakers unveiling the latest State of the Region report at the annual luncheon held Tuesday (Sept. 25) in Lowell. He painted a rosy picture for the regional economy based on the most recent economic data against the peer cities of Austin, Texas; Des Moines, Iowa; Durham-Chapel Hill, N.C.; Madison, Wisc.; Provo, Utah and Raleigh, N.C.
Northwest Arkansas’ population rose 2.33% to 537,463 during the past year. That was better than the 1.75% population growth in Des Moines (645,911) and the 0.71% population growth in Madison, Wisc. (654,230). The Durham-Chapel Hill population was (567,428), up 1.5%, and the Raleigh population was (1,335,079), up 2.13%
Austin and Provo had the highest population growth rates, with Provo (617,675) up 2.69% and Austin (2,115,827) up 2.68%.
Ross DeVol, chief research officer for the Walton Family Foundation, said having studied the Provo metro along with other metros in Utah during his years with the Milken Institute, he believes there is much Northwest Arkansas can learn.
“Provo was not always in the top economic rankings, but state government working closely with the University of Utah invested more heavily into engineering education at the recommendation of Adobe Systems co-founder John Warnock,” DeVol told the crowd Tuesday.
DeVol said Utah moved up in the Milken Institute’s state rankings from 23rd to 11th place in a short period of time when the area became serious about building a tech economy. Warnock told the governor the state must do more with engineering education. DeVol said the state then gave money directly to the University of Utah for engineering because funding did not go toward a general budget but for specific disciplines with rigorous checks and balances in place to ensure accountability. Last year, Utah led the country in high tech talent job creation, DeVol said.
“Utah and Arkansas have roughly the same population, and each has research universities which can be a backbone for growing a sustainable tech economy,” DeVol said,
He said metros that can add one year of college to the region’s workforce will see an average GDP jump of 17.4%. DeVol said universities are crucial to the main factors for building an entrepreneurial ecosystem. Specifically, the human capital and patents that can be transferred to use in the regional economy. DeVol said the University of Utah has figured this out, but the University of Arkansas has work to do. He said indigenous innovation is a springboard for clustering and building an ecosystem that can support industry.
“The UA needs to acquire more research funding and there needs to be a targeted outreach effort with Washington, D.C. and elsewhere to drive more private and public investment,” he added.
The report showed the UA has more than $145 million in research and development expenditures in 2016, up 8.5% year-over-year. That ranked the UA at 130 against all universities in the country. Peer regions of Austin ranked better with $621.69 million in research and development funding. The University of Wisconsin in Madison had the highest ranking among the peers at $1.157 billion. The University of North Carolina and Duke University also each had more than $1 billion in research and development expenditures.
Jebaraj said Northwest Arkansas increased its GDP to $25.3 billion between 2016 and 2017, a 3.5% increase. The regional economy grew at 4.9% during the past five years, slightly higher than the average for the peer regions. He said growth was more than double that for the nation and four times higher than the state average.
“We know this region outperforms the state on average,” he said. “That’s why we compare with other top performing regions across the country. In employment growth Northwest Arkansas ranked better than all but two of the peers. Employment grew at an average rate of 3.9% between 2012 to 2017. Last year employment growth slowed to 3.1% locally.”
Austin grew employment at 3.2% last year, while Provo led the pack with 4.3% growth. All the other peer metros grew jobs at a slower rate than Northwest Arkansas. One area where Northwest Arkansas needs more work is in new business growth. Business establishment growth in the region during 2017 was up 3.1% from the 2016. Austin’s growth was 4.6%, Madison was 3.3% and Provo led the group at 5.4%. The other peer metros were lower than Northwest Arkansas.
Median household income in Northwest Arkansas grew 8.1% last year to $56,038. While there have gains in recent years, the report found the region’s household median income was 80.5% of the peer region median and 92.9% of the national median. Austin had the highest household income at $73,800. The other peer regions reported the following household median income: Des Moines – $68.649; Durham – $61,271; Madison – $71,301; Provo – $70,196; and Raleigh – $72,576.
Cost of home ownership as a percentage of monthly household income was lower in the local region than in all of the peer metros. Homeownership costs were 15.2% of the household income last year, down a fraction from the prior year. Austin and Madison have the highest household costs among the seven peer regions at 18.7% of income and 18.4% of income, respectively.
Following are other regional metrics included in the report which showed year-over-year improvement.
• Poverty rate: 12.1%, down 1.1%
• Average unemployment rate: 2.8%, down 0.1%
• Average annual wages: $45,830, up 1.9%
• Research and Development expenditures: $145 million, up 8.5%
The only metric which didn’t improve year-over-year was the average domestic airfare cost out of Northwest Arkansas Regional Airport. The average domestic fare was $538 last year, up 5.8% from 2016. Fares locally were 39.9% higher than the peer regions and 54.6% higher than the national average.
“No lie. I bought a ticket to Paris, France, out of XNA for less than it cost me to fly to Dallas. The problem is trying to convince your boss you are going to Dallas by way of Paris,” Jebaraj told the crowd of business professionals.
Nelson Peacock, CEO of the North Arkansas Council, said the higher cost of local airfare continues to be a priority for the Council and it’s not giving up on trying to recruit a discount carrier to the region.