The Compass Report: ‘Continued resilience’ noted in Arkansas economy

The Arkansas economy “demonstrated continued resilience and solid growth” in the fourth quarter of 2024 thanks to overall job gains and “vigorous” construction sector activity, according to The Compass Report.

“Overall, the Arkansas economy earned a C+ grade for Q4 2024, highlighting robust employment growth and significant construction momentum tempered by limited consumer spending growth and modest improvements in the unemployment rate,” noted the report.

The Compass Report is a partnership between the University of Arkansas at Fort Smith (UAFS) and Talk Business & Politics. First National Bank of Fort Smith is a sponsor of the statewide report. Kendall Ross, UAFS associate vice chancellor of Economic and Workforce Development, and Troy Rodriguez, a data analyst in the UAFS Center for Economic Development who helps compile, manage and review the data, are responsible for data collection and written analysis for the report.

A key factor in understanding the report is in understanding the “grading” approach used to measure the current and leading economic indicators. For example, a grade of “C” reflects no change in economic activity. The grades “B” or “A” indicate improvement above the historical average, and “D” and “F” indicate a decline in economic activity compared to the historical average.

Greg Kaza, executive director of the Arkansas Policy Foundation, said the state’s construction sector outperformed the national sector on a percentage basis.

“The remarkable growth in Arkansas’ Construction sector, first noted in mid-2024 was vigorous in the quarter, contributing to increased building permit valuations in several metro areas,” Kaza wrote in his analysis of The Compass Report. “Arkansas Construction employment expanded 2.9% in 2024, exceeding the U.S. average (2.3%), U.S. Bureau of Labor Statistics records show.”

Following are key findings from Ross and Rodriguez in The Compass Report.

• Nonfarm employment across the state grew notably, rising from approximately 1.36 million jobs in December 2023 to 1.38 million jobs in December 2024, representing a gain of roughly 17,000 positions or about 1.2% growth. This robust employment increase earned the state an A+ grade for nonfarm employment performance.
• The statewide unemployment rate improved slightly over the year, decreasing from 3.7% in December 2023 to 3.6% in December 2024. Although this improvement was marginal, it indicates a healthy labor market that is effectively absorbing new entrants. This modest decrease resulted in a C+ grade, reflecting ongoing challenges as the labor force continues to expand.
• Gross sales and use tax collections remained essentially flat year-over-year, totaling approximately $389 million in both December 2023 and December 2024. This unchanged figure suggests consumer spending stability, though it signals cautious retail and discretionary expenditures, earning the state a C grade in this category.
• Building permits experienced substantial growth, underscoring confidence within the construction sector. Valuations rose dramatically from $265.55 million in October 2023 to $346.36 million in October 2024, reflecting strong demand for both residential and commercial development and earning an A+ grade.

The Compass Report also noted ongoing economic growth in four state metro areas, but with some moderation compared to previous quarters. In the fourth quarter 2024 (October-December) report, Central Arkansas received an “C+” grade, the Fort Smith metro had a “B-” grade, the Jonesboro area received a “C+” grade, and Northwest Arkansas had a “B+” grade.