New report shows NWA remains fast-growing, challenges persist

Northwest Arkansas continues to see growth in population, jobs and housing costs, according to a new report on the region. Still, area leaders said more work must be done to ensure homes remain affordable and entrepreneurs receive the support they need to grow their businesses here.

On Thursday (Oct. 24), the Center for Business and Economic Research (CBER) at the Sam M. Walton College of Business at the University of Arkansas and the Northwest Arkansas Council released the annual State of the Northwest Arkansas Region Report during a Fayetteville luncheon. The event included an economic presentation by CBER Director Mervin Jebaraj and a panel discussion on corporate innovation.

Since 2011, the Northwest Arkansas Council has commissioned the report that compares Northwest Arkansas to peer regions such as Austin, Texas; Des Moines, Iowa; Madison, Wis; Durham-Chapel Hill, N.C.; Raleigh-Cary, N.C.; and Provo-Orem, Utah.

Nelson Peacock, president and CEO of the Northwest Arkansas Council, said Northwest Arkansas is compared to those regions because they are some of the highest-performing regions in the United States, and they are “doing it the way that we hope that we’re going to be able to do it: through innovation, through prioritizing quality of life.”

Peacock said the report shows the cost of homeownership has risen. Between 2022 and 2023, the median home price of existing single-family homes rose 5.4% to $346,900 from $329,200. This rate of increase was the second highest among the peer regions.

When considering the cost of housing and transportation, the typical Northwest Arkansas resident spent 49% of their income on housing and transportation, the highest alongside the Durham-Chapel Hill metro area. The typical resident in the other peer regions had lower expenses on housing and transportation.

Peacock said that Northwest Arkansas is doing good on commute times. The report shows that 75.1% of Northwest Arkansas workers spent less than 30 minutes commuting to work in 2023, the second highest among peer regions.

“This is one of the things I think that is going to be something we measure over time and probably one of the hardest things to get around,” Peacock said. “As we grow to 1 million people over the next 20 years, if we continue to sprawl out into our rural areas, (and) we don’t develop some density along our urban corridors, that number is going to continue to go up. And it’s going to continue to impact our quality of life. So, this is a real high priority for us at the council and for all the elected leaders I know as well.”

Peacock also noted the importance of affordable housing for residents of all income levels near their work or downtown areas.

The report shows the percentage of workers in Northwest Arkansas who used alternative modes of transportation to get to work, including biking, walking, and public transit, fell to 1.3% in 2023 from 2.6% in 2021. Every peer region had higher percentages of workers using alternative transportation modes.

“In all, if you look at the report, you’ll see there are areas where we’re doing quite well,” Peacock said. “You’ll see that there are other areas where we are doing not so well. But, one area in particular that we need to double down on: that’s supporting our entrepreneurial ecosystem.”

He cited the recent support of the Arkansas Economic Development Commission, UA and the Walton Family Foundation, but “we still have a lot of work to do if we’re going to be one of the best regions in the nation,” Peacock said. “And that’s ultimately our goal.”

He wants to ensure that area entrepreneurs have the support they need “to build and scale the next great American company right here at home.” He said Northwest Arkansas and other central U.S. metro areas have been losing great entrepreneurs to other regions, such as Austin, Boston and Silicon Valley.

“We need to ensure that that doesn’t happen here any longer,” he said. “So, we’re going to try to work to build the best ecosystem that we can.”

ECONOMIC DATA
“We’ve had a very good 2024 so far,” Jebaraj said. “I’d like to point out that all the people that predicted we will have a recession in 2022 were wrong. They were wrong in 2023, and they’re still wrong in 2024. I’d also like to point out that I said we would not have a recession in 2023 and 2024, and most of you didn’t believe me. But I was right anyway, so you should always listen to my predictions.”

He said consumers have been propping up the economy for years. Consumers and business investment have been “the bedrock of the economy, especially since COVID,” Jebaraj said.

Economic growth started to slow amid a decline in residential investment after the Federal Reserve started raising rates. But the economy continues to grow because of consumer spending. He attributed this to a low unemployment rate, slightly above 4% in the United States. In Northwest Arkansas, the rate was 2.4% in 2023, the second lowest compared to the peer regions. Only the Madison metro area has a lower rate at 2.3%.

“Our labor market is incredibly tight here in Northwest Arkansas,” Jebaraj said. “Those of you that are small business owners, you have a hard time even finding people to put up the ‘help wanted’ sign on the doors.”

He said the unemployment rate rose slightly this year to 2.5% in Northwest Arkansas. In Arkansas, the rate is up narrowly to 3.3%.

While employment growth has slowed, the United States continues adding jobs monthly. He said most economists agree that stable employment growth is between 125,000 and 175,000 jobs per month. The U.S. economy is currently adding 186,000 jobs per month on a three-month average.

Northwest Arkansas has the third-fastest employment growth compared to its peer regions. From 2022 to 2023, the nonfarm employment growth was 2.8%. Austin was first with 4.5%, followed by Raleigh-Cary at 3.5%. Jebaraj said in the most recent year, Northwest Arkansas added about 8,300 jobs, about the same growth level as before the COVID-19 pandemic.

“What we have been doing well is growing,” he said. “Now, we’re growing about 13,000 people each year in Northwest Arkansas.”

The report shows the region’s 2.4% growth rate from 2022 to 2023 was the second fastest compared to the peer regions. Only the Provo-Orem metro had a higher growth rate of 2.6%. Jebaraj said Northwest Arkansas needs to address housing affordability and grow new businesses here to maintain its growth.

“70% of all households in Northwest Arkansas don’t have children living in the household, so really we’re all a bunch of childless cat ladies,” Jebaraj joked.

Wage growth has slowed, but it remains higher than at any time other than just after the pandemic, said Jebaraj, who attributed the increase mainly to low-wage occupations. Though wages continue to rise, home prices have risen at a faster rate in the area and across the United States.

He noted that inflation has declined to about 2.5% and that the Fed’s target rate is 2%. “But what’s a half percent between friends, I say,” Jebaraj joked.

PANEL DISCUSSION
Area executives participated in a discussion about some of the projects their companies are investing in to support entrepreneurs and innovation. The panel included Stuart Scott, chief innovation officer and executive vice president at Lowell-based J.B. Hunt Transport Services, Heidi Soloman, vice president of global strategy at Springdale-based Tyson Foods, and Chris Sultemeier, operating partner at New Road Capital Partners.

“I’ve always been chasing innovation from a career standpoint,” Scott said. “Over time, I’ve found ways to bring innovation from within an organization as well as ways to partner with universities… and also just the startup community itself. I love startups. I love just that passion and energy that they bring. So, it’s about creating an ecosystem… of all those things that really gets me excited.”

Soloman said a top strategic issue that large corporations face is increasing top-line revenue.

“That has to be driven by innovation and really the spark of things that we’re seeing from disruption,” she said. “Without a strong startup community, without a strong entrepreneurial community, the ecosystem here is challenged, I would say. It’s up to all of us to really bring it together and help support growth and top-line growth for our large corporations.”

When he worked for Walmart, Sultemeier said the company looked to bring innovation to the area. He said he learned about Plug and Play on a trip to Silicon Valley. Over the past five years, the Sunnyvale, Calif.-based venture capital firm Plug and Play has focused on supply chain investments and accelerators in Northwest Arkansas. Plug and Play recently launched a health accelerator in Northwest Arkansas.

“Their whole thing was how do you bring Silicon Valley in a box to Northwest Arkansas,” Sultemeier said. “So, that’s what we tried to do with bringing them.”

The effort to bring Plug and Play to the area was a collaboration that included the Northwest Arkansas Council, UA and Walton Family Foundation, he said. “That was all an effort back in ’18 to get innovation going more and more in this area.”

Soloman explained the work Tyson Ventures, the venture capital arm of Tyson Foods, has done to support entrepreneurs. Three years ago, the company started to host Demo Day to allow startups to pitch ideas to the company. This year, the company selected five startups to work with Tyson Foods to solve problems and receive mentorship from the company.

Scott also described J.B. Hunt’s work to support startups and innovation. Most recently, the company announced a collaboration with venture lab UP.Labs to launch up to six startups over the next three years. UP.Labs is a part of UP.Partners, a multi-modal transportation innovation and investment firm.

“We, as J.B. Hunt, will provide seed funding,” Scott said. “UP.Partners, as a venture capital group, will provide that seed funding, but those ideas will be generated from what are some of the pain points that J.B. Hunt has or what are some of the things that represent our industry. So, these are independent companies, will be independently run, but… we will be side-by-side with them going through 100 ideas of what we think we can go start up and solve for our industry.

“We’re doing it because we feel like we can build…$100 million…several hundred million dollar valuation of a company over a few years, using J.B. Hunt as a first early adopter.”

Sultemeier said one of the challenges for large companies working with startups is to be patient and understand that it will take time for the startup to scale. Also, he said startups must invest in large companies and work with other companies “so that you don’t put all of your eggs in that one basket. It’s the same thing for those large companies. You’ve got to always be sensitive to that balance of how much of business you’re representing. So, it’s a little bit of a delicate dance, but the big companies have got to be patient with the startup companies.”