The Compass Report: Economic activity moderates in Arkansas metro areas

The fourth quarter of 2025 saw a decline, or moderation, in economic activity in the four Arkansas metro areas covered in The Compass Report. Higher unemployment numbers and less construction activity were common areas of decline in the metros.

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.

DATA NOTE, MODERATION METRICS
Ross said the quarter included combined monthly data because of the federal government shutdown in the fourth quarter.

“Due to a lapse in federal appropriations, labor force data from the Current Population Survey were not collected for the October 2025 reference period and will not be available,” Ross said. “As a result, unemployment rate comparisons for this quarter are based on November and December data only. Establishment survey data for October are published with November data, consistent with federal reporting practices.”

Greg Kaza, an economist and executive director of the Arkansas Policy Foundation, said “moderation was evident in multiple metrics.”

“Three of four Arkansas regional economies recorded ‘C’ grades, which reflects a moderate, no change in economic activity environment,” Kaza noted in his analysis of The Compass Report data. “The outlier was Northwest Arkansas, earning a ‘B’ grade that indicate improvement above the historical average. Northwest Arkansas was paced by strong and sustained gains in non-farm payroll employment, which recorded a 2.1 percent growth rate, more than double the 0.8 state average between October 2024 and December 2025.

“Unemployment rates were at or near full employment with the notable exception of Northwest Arkansas at 3.1 percent. Consumer spending and tax collections showed moderate growth and modest gains. Building permit valuations were also mixed year-over-year.”

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

Central Arkansas
Central Arkansas recorded moderate economic growth in the fourth quarter of 2025, driven by strong gains in non-farm employment and continued expansion in key sectors. Employment increased year-over-year across the quarter, rising from 400,500 in October 2024 to 405,500 in December 2025.

Northwest Arkansas
Northwest Arkansas demonstrated continued economic growth in the fourth quarter of 2025, supported by strong gains in non-farm employment and broad-based sector expansion. Employment increased across the quarter, with total employment reaching approximately 323,700 by December. Growth was evident in manufacturing, construction, and hospitality sectors, all of which posted notable year-over-year increases.

Fort Smith metro
The Fort Smith metro experienced modest economic conditions in the fourth quarter of 2025, supported by steady gains in non-farm employment. Employment increased year-over-year across the quarter, rising from 104,200 in October 2024 to 105,200 in December 2025. Growth was consistent through November and December, reflecting incremental expansion in the regional labor market.

Jonesboro metro
The Jonesboro metro economy experienced modest growth in the fourth quarter of 2025, with steady increases in non-farm employment. Employment rose year-over-year across the quarter, reaching approximately 66,900 by December. Growth was consistent but moderate, reflecting incremental gains in the regional labor market.

DATA AND MORE ANALYSIS
Link here for the fourth 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.