The Compass Report: Growth continues, but ‘cautious consumer’ trends seen

The four Arkansas metro areas measured by The Compass Report continue to show economic growth, with moderation seen in employment and consumer spending during the first quarter of 2025.

In the first quarter of 2025 (January – March) report, Central Arkansas received an “B-” grade, the Fort Smith metro had a “B” grade, the Jonesboro area received a “C” grade, and Northwest Arkansas had a “B” grade.

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 Kaitlyn Cavaness, an intern 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.

The report measures four leading and four current economic indicators to provide a grade for a regional economy. The eight categories measured to determine The Compass Report grade in the Central Arkansas, Fort Smith and Northwest Arkansas areas are total nonfarm jobs, unemployment rate, building permits, sales tax revenue, manufacturing jobs, service sector jobs, construction jobs, tourism jobs and concentration of manufacturing jobs. Because the data is not available, construction and tourism jobs are not included in the Jonesboro metro grade.

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, an economist and executive director of the Arkansas Policy Foundation, said the report is another signal of less spending by cautious consumers.

“The ‘Yes But’ economic expansion continued in 1Q-2025,” Kaza noted in his analysis of the report. “Yes, all four Arkansas regions recorded more jobs including growth in sectors such as construction and manufacturing. All four recorded greater building permit valuations. The unemployment rate increased in all four but remains less than four percent (4.0%), considered full employment by economists. But the consumer, key to spending, is more cautious about economic conditions. This is not a surprise, given ongoing uncertainty around the direction of government economic policies and pro-growth inflation that threatens to emerge as anti-growth 1970s-era ‘stagflation.’”

TOP TAKEAWAYS
Following are some of the key takeaways from Ross in The Compass Report.

• Central Arkansas
Central Arkansas experienced robust economic performance during the first quarter of 2025, highlighted by notable growth in nonfarm employment. The region added approximately 5,700 jobs compared to March 2024, increasing total employment from 394,100 to 399,800, representing a 1.4% gain. Significant job creation was evident particularly within manufacturing, which saw employment rise by approximately 900 jobs, indicating continued industrial strength and substantial demand for manufactured goods.

• Northwest Arkansas
Northwest Arkansas continued to showcase economic resilience during the first quarter of 2025, supported by steady employment growth and significant construction sector expansion. The region added around 1,800 jobs year-over-year, increasing from 311,800 in March 2024 to 313,600 in March 2025. This increase was particularly notable in manufacturing and construction, demonstrating robust demand for goods production and infrastructure improvements.

• Fort Smith metro
The Fort Smith metro exhibited steady economic strength in Q1 2025, with significant growth in nonfarm employment and construction activity. The region added approximately 1,900 jobs from March 2024 to March 2025, reaching 103,800 total jobs. This employment growth was driven primarily by gains in manufacturing and construction sectors, with manufacturing employment alone increasing modestly from 17,800 to 18,000 jobs.

• Jonesboro metro
Jonesboro metro’s economy experienced mixed conditions during Q1 2025, characterized by modest employment growth but notable increases in unemployment. Nonfarm employment rose slightly, with about 600 jobs added year-over-year, increasing from 64,700 in March 2024 to 65,300 in March 2025. Growth primarily came from stable sectors such as healthcare, education, and construction, indicating resilience and foundational economic strength.

DATA AND MORE ANALYSIS
Link here for the first quarter 2025 raw data gathered by the University of Arkansas at Fort Smith Center for Economic Development.

Link here for the quarterly narrative. Also, link here for the previous reports.