The Compass Report: Arkansas economy sees ‘balanced growth’ in Q3

Arkansas’ economy in the third quarter of 2024 showed “balanced growth” and continued job gains, but declining sales tax revenue, which is a measure of consumer spending, is a concern, according to The Compass 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. The Compass Report also measures the health of four of the state’s metro areas.

“In summary, Arkansas demonstrated steady progress in nonfarm employment and construction while facing notable challenges in tax collections, manufacturing, and hospitality. The state’s overall performance for Q3 2024 earned it a B grade, reflecting balanced growth with areas of concern requiring further attention,” noted the analysis from Ross and Rodriguez.

The report found that the state’s construction sector continued to be “a bright spot.” Construction jobs increased by 2,800 jobs, rising from 64,300 in September 2023 to 67,100 in September 2024.

Greg Kaza, an economist and director of the Little Rock-based Arkansas Policy Foundation, noted that Arkansas’ construction sector job growth has outpaced nationwide job gains in the sector.

“The stellar growth in Arkansas’ Construction sector noted earlier this year continued in the quarter, with all metro areas reporting growth,” Kaza noted in analysis provided to Talk Business & Politics. “Jobs growth in Arkansas’ Construction sector has outpaced the nation in the ongoing expansion that started in 2Q-2020, expanding 29.2 percent versus the 27.1 U.S. growth rate. Building permits experienced significant growth in most regions, contributing to job gains in Construction.”

The Compass Report also showed a better pace of growth in the Northwest Arkansas and Fort Smith metros.

“Northwest Arkansas and Fort Smith continue to outperform, with Central Arkansas and Jonesboro trailing in Compass Report quarterly metrics. In many respects, commerce along the I-49 corridor is the economic engine leading Arkansas’ economy,” Kaza noted.

Following are other findings from The Compass Report about the Arkansas economy during the third quarter.
• Nonfarm employment in Arkansas expanded steadily during the third quarter of 2024, reflecting continued job growth across the state. Total nonfarm employment rose to 1,372,100 in September 2024, up 8,000 jobs (0.6%) from 1,365,600 in September 2023.

• The unemployment rate rose slightly, increasing to 3.3% in September 2024 from 2.9% in September 2023. While this uptick reflects some challenges in the labor market, it also indicates a growing labor force with uneven participation.

• Gross sales and use tax collections faced challenges during Q3 2024, declining 8.7% year-over-year. Total collections dropped from $359.6 million in September 2023 to $328.2 million in September 2024. The decline reflects caution in consumer spending and broader economic uncertainty.

• The manufacturing sector showed only modest improvement. Employment rose slightly to 163,200 jobs in September 2024, up by 1,000 jobs from 162,200 in September 2023.

• The hospitality sector continued to face difficulties, with employment declining by 4,100 jobs year-over-year. Employment fell from 132,400 in September 2023 to 128,300 in September 2024.