Although local GDP growth has lagged the rest of the nation coming out of the Great Recession, central Arkansas’ economic fortunes are improving as the region’s labor pool emerges out of a long winter swoon that included “a cycle of creative destruction” in the local telecom sector, according to Metroplan’s bi-annual economic review and outlook for the greater Little Rock region released on Wednesday (Jan. 16).
The report, entitled “Building a Competitive Edge,” highlights the fact that “slow growth” in the post-recession years since 2010 has meant a bland mix of strengths and weaknesses and overcoming the challenges of a slow-moving economy. The conclusion, it states, is that tepid economic growth is better than none.
“Slow growth is not no growth. In fact, at a time when the State of Arkansas has been growing population and jobs more slowly than the national average, the Little Rock area has done better than the state average,” the 18-page report states.
Metroplan’s snapshot of the regional economy is not unlike recent GDP reports from other economic indicators that show Northwest and Northeast Arkansas as the clear leaders coming out of the 2007-2009 recession, while the central Arkansas metropolitan area that includes Little Rock, North Little Rock and Conway has remained flat or just above neutral growth.
The 2018 outlook is partly funded by grants from the Federal Highway Administration and Federal Transit Administration within the U.S. Department of Transportation. Metroplan is the federally-designated metropolitan planning organization for the four-county region of Faulkner, Lonoke, Pulaski and Saline counties. It is a voluntary association of local governments that has operated since 1955.
Metroplan’s end-of-the-year forecast follows an earlier demographic survey in August that highlighted population trends and housing patterns since 2010. For instance, the August report showed that the Little Rock-North Little Rock-Conway MSA had a population of about 747,000 in 2018, about one-fourth of the total residents who now live in Arkansas.
The new report lays out the major reasons why the central Arkansas economy has trailed the rest of the nation. First, the report notes that the U.S. economy saw negative job growth through three years in the Great Recession, losing over 4% of all jobs during the bottom years from 2008 to 2009. By comparison, the local region only saw two years of job decline, not exceeding 3% losses even through the worst of it.
Also, when the U.S. economy was growing jobs at nearly 2% annually from 2010 through 2015, the Little Rock region averaged barely over one-half of a percent (0.5%) annually. Lately, as U.S. job growth has slowed, the local region has picked up some. Preliminary 2018 figures suggest about 1.2% growth locally, not far below the national pace around 1.5%.
Concerning local income and job growth, the story is more of the same with local worker pay slightly behind the rest of the U.S. For example, adjusting for inflation, regional per capita income rose about 8% from 2010 to 2016, compared with over 12% growth at the national level.
And like most of Arkansas, unemployment remains the region’s brightest performer through several decades-long, up-and-down cycles. When U.S. unemployment was a painful 9.2% in September 2010, the Little Rock region’s rate was 6.9%, the report states. In September 2018, the Little Rock region had an unemployment rate of just 3%, better than the unusually strong U.S. jobless rate of 3.6%.
“Of course, the local strength implies labor-shortage conditions for local employers, a problem that is particularly acute in high-skill jobs,” the Metroplan report states. “On the other hand, greater demand for workers tends to have an upward impact on pay, implying improving local income growth in the present and near future.”
ALLTEL AND THE CYCLE OF ‘CREATIVE DESTRUCTION’
The most striking highlight of the twice-a-year report was the conclusion that the region experienced a “local cycle of creative destruction” following the long decline of the telecom sector. The report notes that between 2000–2008, the local economy saw a minor boom in population and economic growth in central Arkansas that was boosted by the telecom industry “until reality caught up with the region.”
“In 2006, Alltel spun off its ‘wired’ sector, which became Windstream Communications. Then, Alltel was purchased in 2008, many of its components becoming part of the Verizon Corp.,” the report states. “By early in the 2010 decade, the Little Rock region started losing many jobs in its formerly lucrative telecom sector. Verizon pared back its workforce in central Arkansas, while Windstream struggled in the declining wired telecom sector.
“The region went from having over 5,000 jobs in telecom during 2008 to about 1,300 in 2018. Since many of these jobs had paid above-average wages, the loss also depressed regional income growth. Growth slowed in other sectors like business services, due to linkages,” the Metroplan report concludes.
Although the region has continued to grow since the Alltel sale, it has been at a reduced pace, the report states. In 2018, following the shutdown of the 600-employee Verizon call center in Little Rock and continued layoffs in the sector, telecom jobs in the region have dropped below the national average in terms of jobs for the region’s size.
“Local telecom employment will probably stabilize to a level needed to serve local needs,” the report states. “Declining fortunes in telecommunications have probably exerted a certain economic under-tow, holding back regional growth while a major sector of the local economy was restructuring.”
Other highlights of the report show that the manufacturing sector across the state’s largest metropolitan area has seen a strong comeback, particularly in the steel and metal products industry. “The Central Arkansas regional economy is traditionally oriented toward services, not manufacturing. However, in recent years the region has shown an upward manufacturing trend,” it said.
Other key highlights from the report show the region is experiencing intense demand for workers, making pay raises likely and boosting local income growth. The region’s leading growth sectors at present are business services, education, health and finance.
Metroplan staff also queried selected regional economic leaders for their observations on the state of the region’s economy. The responses were provocative and generally upbeat, it said. The bi-annual report also profiled Gas Pos, a local start firm that graduated from the Venture Center’s 12-week startup bootcamp and mentorship program in Little Rock in July.
In early November, the new fuel business technology platform made local waves after unveiling plans to relocate its headquarters to North Little Rock from Birmingham, Ala., and hire up to 30 workers. Weeks later, Gas Pos announced a $1 million investment by Merus Capital, a Silicon Valley-based early-stage venture capital firm.
To view the Metroplan report, click here.