Northwest Arkansas Job Market Enters Uncharted Waters

On Oct. 4, 2006, Northwest Arkansas “arrived.”

Sure, it had already drawn plenty of outside recognition and praise for its rapid job growth and the successes of its flagship corporations Wal-Mart Stores Inc., Tyson Foods Inc. and J.B. Hunt Transport Services Inc.

But regions are often measured by their amenities as much as their job opportunities, and up to that point no better example existed of Northwest Arkansas’ rise to prominence than the $84 million Pinnacle Hills Promenade.

With chic new-to-market stores like Sephora and the “outdoor living center” walkable model that is spreading across the nation in a 180-degree turn from the traditional enclosed mall, the Promenade symbolized a bright future in an area that still celebrated events as mundane as a new Olive Garden.

Since then, however, that period looks increasingly like the peak of Northwest Arkansas’ boom rather than merely the continuation of its seemingly endless upward cycle as it was seen at the time.

The Northwest Arkansas economy created nearly 45,000 jobs between 2001 and November 2006. In the 16 months since, the area has actually lost a total of 500 jobs according to U.S. Bureau of Labor Statistics.

After adding 6,000 jobs between March 2004 and March 2007, the transportation, trade and utilities sector shed 800 jobs in the last year.

Professional and business services, which represent many of the third-party companies serving the suppliers to Wal-Mart, Tyson and J.B. Hunt, added 5,200 jobs from 2004-2007. In the last year, the sector has dropped 100 jobs.

“These have been Northwest Arkansas’ bread and butter,” said Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas (see Q&A with Deck here.) “When we talk about job growth, these sectors have led the way. They are big sectors of our economy and have had steady growth for decades.

“When you see statistics like we saw this month, it is scary,” Deck said.

Troublesome Trends

Benton and Washington counties have experienced 27 consecutive months of declining year-over-year home sales measured against the white-hot days of 2004 and 2005, leading to the loss of thousands of jobs in the construction business, a mass exodus from the real estate agent ranks and cracks in the local lending industry capped by the recent failure of ANB Financial.

Fayetteville and Springdale have experienced million-dollar budget shortfalls as sales tax collections decline while more money stays home in Benton County and construction slows. Even the runaway tax receipts in Rogers experienced a blip when they failed to match the opening month of the Promenade a year later.

For the first time in more than a decade, Northwest Arkansas is trending along a similar path as the national economy, shattering a bulletproof sentiment enjoyed by many and developed during the last sustained U.S. downturn from 2001-03.

In August 2002, unemployment in Northwest Arkansas was 2.9 percent. Nationally, it was 5.9 percent. In January 2008, the unemployment rate in Northwest Arkansas was 4.4 percent, not far from the national average of around 5 percent.

At a recent job fair hosted by the Rogers-Lowell Chamber of Commerce, an estimated 1,750 attended. That was up 400 from last spring and 250 from the fall of 2007.

Raymond Burns, president and CEO of the Rogers-Lowell Chamber, said there has definitely been a decline in job growth in the area, but his office still receives a steady stream of calls from companies looking to start a business, expand or relocate.

“We have really seen activity pick up,” Burns said. “It was quiet for the last quarter of 2007, but we’re still getting a lot of inquires. It’s moving out there somewhere.

“That seems to be an indication economy has slowed, but it’s not dead,” Burns said.

Bright Spots

Northwest Arkansas is certainly not “dead,” nor even on life support even though its job creation numbers have flat lined for now. As long as it is home to three Fortune 500 companies which lead their respective industries alongside the rapidly growing University of Arkansas, it is difficult to imagine a set of circumstances that would set the area up for a prolonged slump.

The unemployment rate declined to 3.7 percent in March as some jobs sectors recovered, and areas such as health care and education (see p. 30) remain a strong source of well-paying jobs and will be the core of a quality infrastructure crucial to serve the existing population and meet the needs of future expansion.

With the debut of the Northwest Arkansas Naturals and their pristine Arvest Ballpark in Springdale, the construction of the Crystal Bridges Museum of American Art in Bentonville and a steady diet of convention traffic driven by the retail and trucking communities, tourism, leisure and hospitality will continue to thrive.

To sustain its economy with a “fourth ring” of growth, Northwest Arkansas is banking on Wal-Mart’s sustainability drives to not only follow its history of home-growing business success, but to continue to attract the high-paying jobs that continually landed the region on various top 10 lists.

Cameron Smith, recruiter extraordinaire and owner of Cameron Smith Associates, said he has considered adding a position just to recruit sustainability professionals to the supplier companies serving Wal-Mart.

San Francisco-based Del Monte has a dedicated sustainability staffer in Northwest Arkansas, specifically to take advantage of the many conferences on the subject. PepsiCo, which built a new, LEED-certified office in Rogers, also has a sustainability pro.

Those suppliers that haven’t taken Wal-Mart’s commitment to sustainability seriously will be sorry, Smith said.

“When a supplier starts seeing that Wal-Mart starts awarding better shelf space to suppliers embracing sustainability, that’s when the Johnny-come-lately will finally get it,” he said. “Companies that haven’t embraced this are way behind.

“It’s the sexy new job right now.”

The UA is a key player in the sustainability, retail and supply chain industries thanks to the support of its corporate benefactors like Wal-Mart. The UA’s Center for Retailing Excellence, Applied Sustainability Center and its state-of-the-art Radio Frequency Identification lab are a combination of intellectual capital and infrastructure unmatched in the world.

Supplier Strength

Smith estimates there are around 1,232 supplier companies serving Wal-Mart, and employing around 6,000. That’s up around 14 companies from his last estimate, but he also said there has been the unprecedented occurrence of some supplier teams shutting their doors.

“We had two shut down in one day,” Smith said. “That’s the first time I’d seen that. Wal-Mart doing well doesn’t mean they are doing well. But there are still companies moving here.”

There was also the rare move of Wal-Mart laying off a couple hundred people after shifting its apparel division to New York City, flooding the market with qualified candidates who had the equally rare blessing from Wal-Mart to hook up with supplier companies.

The company is doing its part to boost the Northwest Arkansas economy. In February Wal-Mart said it would add “hundreds” of information technology jobs at its home office.

Smith, who re-launched his company’s Web site in late April with more job listings, a newsletter and blogs featuring tips on interviewing and resumes, said he saw a 35 percent drop in his business nearly overnight following the Wal-Mart layoffs.

“That’s the only explanation that makes sense to me,” he said.

Marvelyn Stout, of Stout Executive Search in Springdale, said she sees marketing jobs and shopper insight jobs being a source of growth in the supplier “second ring.”

“Wal-Mart wants to understand why consumers buy what they buy, shopping patterns and all that,” Stout said. “More and more companies are bringing in marketing people that have been at corporate headquarters to be part of their local team with category management and supplier teams working together.”

Stout added that graphic designers and packaging professionals also fit into Wal-Mart’s emphasis on marketing and reduced packaging, and that third-party companies are getting into the field “pretty heavily.”

Even while the national economy slides, Northwest Arkansas isn’t as likely to see corporate layoffs in the supplier world thanks to the importance of Wal-Mart as a client.

“This should be the last place they cut anybody,” Stout said.

In the long term, all the retail infrastructure in Northwest Arkansas may even lure another company to take advantage of the number of consumer goods companies in one locale.

Smith said he’s heard whispers of smaller retailers exploring the possibility of moving to NWA, and Burns of the Rogers-Lowell Chamber has as well. Smith, who has “vendorville” recruiting firms across the country, noted that Minneapolis is home to Best Buy, Target and the SuperValu grocery chain.

“It’s vendor heaven,” he said of Minneapolis. “If one retailer moved here, five more would come. This could be the Silicon Valley of retail.”

That would make Northwest Arkansas a “green” valley in more ways than one.

“The entrepreneurial sprit is amazing here,” said Northwest Arkansas Council executive director Mike Malone. “So many companies have grown up and succeeded in spite of difficult odds. Think about infrastructure. Our trucking firms have succeeded even when we didn’t have four-lane highways to destinations from here.

“Companies large and small in Northwest Arkansas are why this place has been so strong and why it will continue to be.”