Northeast Arkansas leads state’s manufacturing rebound

When the state’s manufacturing sector ebbed to its lowest point following the Great Recession, the one bright spot were factories in Northeast Arkansas at or near full production that continued to churn out “soft and hard goods” to keep U.S. consumers satisfied.

At its worst in October 2015, there were only 152,400 manufacturing jobs in the blue-collar focused industry that literally brought generations of poor Arkansans into the middle class. But after peaking at 260,000 payroll jobs in April 1995, the state’s once largest job-producing sector lost nearly 100,000 jobs in just 20 years.

And just over five years ago, Arkansas’ unemployment rate was nearing 8% and nonfarm employment was slowly climbing out of the state post-recession era with nearly 1.2 million workers. However, as other sectors improved, the contraction in the manufacturing sector continued unabated with layoff announcements almost weekly.

But during that time, Northeast Arkansas gained an advantage on weathering economic downturns by finding a niche in nondurable manufacturing, producing so-called “soft goods” consumables like cookies, vegetables and tobacco or items that wear out over a short period of time such as rubber, plastic and paper.

‘SMALLER FLUCTUATIONS’
According to University of Arkansas at Little Rock economist Michael Pakko, the NEA region and the state’s overall gradual transition from greater nondurables does have its advantage over durable or “hard goods” manufacturers, which produce longer-lasting items like cars, appliances, furniture and electronics.

“In particular, both economic theory and the evidence indicates demand for nondurables and services is less variable over the business cycle than the demand for durable goods. [The] idea is that sales of durable goods experience larger swings because they are more like investment spending,” Pakko said.

For example, Pakko said, when a household buys a new appliance, they are purchasing a stream of services over time. The service-life of an appliance can be shortened or lengthened by replacement parts or maintenance so that overall spending on investment and durable consumer goods tend to fall and expand during recessions.

“Over time, Arkansas has come to specialize more in nondurables production rather than durables,” Pakko said. “Although I’d hesitate to say that makes our manufacturing sector recession-proof, it does result in smaller fluctuations in demand, and hence in production and employment.”

The UALR economist said the growth of nondurables manufacturing, particularly in NEA over the past several decades, has helped offset the state’s decline in manufacturing employment overall.

“Since 1990, the share of manufacturing employment in overall employment has fallen from 16% to 8.5% nationwide and has fallen from 24% to 13% here in Arkansas,” Pakko said. “The decline represents the effects of both globalization and automation. This is true for both durables and nondurables, but the employment losses in nondurable manufacturing have been proportionally smaller.”

With Arkansas’ unemployment now at an historic low of 3.5% and 1.25 million nonfarm workers in the state’s civilian labor pool, the biggest economic surprise has been the rebound of the state’s manufacturing sector together with the rapid growth of the state’s professional and business services sector that has added 6,700 jobs in the past year.

In the recent September unemployment report, manufacturing posted a healthy 160,200 jobs, which is up 2,300 from a year ago. Of that total, the nondurable goods factories added 1,500 positions to bring the total number of workers in that sector to 84,500. Durable goods manufacturers have hired 800 new workers year-over-year, bringing the number of workers producing hard goods in Arkansas to 75,700.

FOOD CORRIDOR
Among the food manufacturing and processing industry in the Jonesboro MSA are such well-known brands as Frito-Lay, Nestle USA, Butterball, Post, Riceland Foods and Millard’s Refrigerated Services. Since Jonesboro beat out more than 700 contending cities to land Nestle in 2001, the company’s $165 million, 325,000-square-foot facility has been the main anchor of the region’s “Food Corridor.”

Over the past 15 years, the Swiss food company’s giant prepared foods plant —  that manufactures Stouffer’s and Lean Cuisine brand — has been one of the region’s top job creators, with a workforce that has fluctuated between 600 and 800 employees. Three years ago, Frito-Lay announced a $50 million expansion that added 30 new jobs to the workforce. The company’s sprawling factory on Highway 18 in the region’s largest city now employs more than 450 workers.

Those jobs have more than offset the region’s former position as a major employer in the furniture and clothing manufacturing sector, which is in fast decline due to automated and foreign competition. However, the region has also been able to attract advanced manufacturing jobs in the durable sector to complement the soft goods factors.

For example, Hefei Risever Machinery, a Chinese-based heavy equipment parts manufacturer with plans to hire 130 workers, broke ground on a $20 million facility in Jonesboro in June. Longtime Jonesboro conveyer belt manufacturer Hytrol has continued to grow its 1,200-person workforce with at least nine expansions costing more than $30 million to upgrade its 700,000-square-foot facility.

STEEL CORRIDOR
The region’s manufacturing sector is forecasted to continue leading the state as the area’s population growth continues to outpace the rest of the state, according to the state Department of Workforce Services’ 2014-2024 forecast for Arkansas’ 10 regional workforce services. For the 10-year projection period, employment for the NEA workforce development area is expected to grow 13.7% from 109,906 to nearly 125,000.

Besides Jonesboro, which is the region’s largest city, the Northeast Arkansas workforce area that includes Clay, Craighead, Greene, Lawrence, Mississippi, Poinsett and Randolph counties, has also moved to diversify the region’s economy with key job adds in the durable goods sector and transportation, trade and utilities supersector.

For example, the state’s “Steel Corridor” in Mississippi County continues to see billions of dollars in new investment since Big River Steel first opened its rolled steel factory in 2014 with 500 employees, and this summer doubled that investment and job count to keep up with U.S. demand.

Big River’s main rival, Nucor Corp., also announced plans in early May to expand its sheet cold mill facility in Hickman with a new galvanizing line by the first half of 2021. The $240 million investment will add 100 new jobs to the company’s 1,700-person workforce in Mississippi County, improving Nucor’s annual steel producing capacity by 500,000 tons.