Error message

  • Warning: preg_match() [function.preg-match]: Unknown modifier '2' in getOS() (line 1183 of /home/citywire/public_html/sites/all/themes/tcw/template.php).
  • Warning: preg_match() [function.preg-match]: Unknown modifier 'c' in getOS() (line 1183 of /home/citywire/public_html/sites/all/themes/tcw/template.php).

The Compass Report: Fort Smith area economy improves in 2013

The Compass Report for the fourth quarter of 2013 shows that small but broad based gains in key metrics has resulted in the Fort Smith regional economy finishing out 2013 with two consecutive positive quarters.

A fourth quarter 2013 grade of C+ was unchanged compared to the third quarter and better than the C grade in the fourth quarter of 2012.

The quarterly Compass Report is managed by The City Wire and presented by Fort Smith-based Benefit Bank. The report is the only independent analysis of economic conditions in the metro area.

Joe Edwards, president of Benefit Bank, said he is not surprised by findings from The Compass Report.

“We have heard several good announcements over the last quarter for our area, so this information reflects some encouraging trends,” Edwards said. “There is do doubt we still need to press on, but it is encouraging.”

Edwards said anecdotal evidence through bank customer conversations also point to an improving economy.

“I’m sure there are areas that, selectively, are still feeling some of the impact, but I think overall it is improving. That’s what we are hearing,” he said.

Economist Jeff Collins, who conducts the data collection and analysis for The Compass Report, said federal data show 12 straight months of positive employment growth in the region.

“Nonfarm employment was up a solid 2.9% year-on-year (3,400 new jobs), with total nonfarm employment of 120,300 jobs in December. This marks twelve straight month of positive employment growth. The statistical evidence suggests that the local labor market has stabilized and is returning to trend,” Collins noted.

He added that the fourth quarter numbers also indicate a “clear trend.”

“Data for the fourth quarter was very encouraging. Data for the Fort Smith regional economy had been mixed for some time but now a clear trend indicates the local economy has stabilized,” he explained.

The clear trends will have to continue if the region is to return to workforce levels prior to the national recession. In December, the total number of employed in the Fort Smith metro area was an estimated 122,460, more than 8,000 jobs fewer than December 2006 – prior to the recession – when employment was 130,702.

Economic conditions in the area might be better if not for ongoing losses in the manufacturing sector, Collins said.

“Strong overall non-farm employment growth did not carry over to the manufacturing sector. December-to-December the sector lost 500 jobs or (down) roughly 2.6%,” Collins wrote. “Given the continual erosion of the manufacturing sector, overall performance of the Fort Smith metro was that much more remarkable.”

METRO COMPARISONS, IMPACT
The 2013 fourth quarter economy in the central Arkansas area received a grade of C- meaning that economic conditions declined slightly compared to the fourth quarter of 2012, and were unchanged compared to the third quarter of 2013.

The fourth quarter 2013 grade of B+ in Northwest Arkansas was unchanged compared to the third quarter of 2013, but an improvement over the fourth quarter of 2013.

Collins said the relative poor performance of the central Arkansas economy is not a positive indicator of the overall Arkansas economy.

“The Central Arkansas regional economy is the most diverse in the state and arguably the representative of overall statewide economic performance. Given this relationship, recent data indicates the statewide economic outlook remains subdued,” Collins said.

He also said the three metro areas – especially Northwest Arkansas – continue to be key job generators for the state.

“To underscore the impact of the three largest metro areas, for December of this year the unemployment rate for the rest of the state was 8.5%, up 0.3% from December 2012 to December 2013. The statewide unemployment rate with the three largest metros added back in was 7.2%, up 0.1% December-on-December,” Collins said.

FORT SMITH REGION
OVERALL GRADES — Fort Smith regional economy (per quarter)
4Q 2013: C+
3Q 2013: C+
2Q 2013: C
1Q 2013: C-
4Q 2012: C
3Q 2012: C-
2Q 2012: C-
1Q 2012: C-
4Q 2011: C-
3Q 2011: C
2Q 2011: C
1Q 2011: C-
4Q 2010: C-/D+
3Q 2010: C-
2Q 2010: C-
1Q 2010: C-
4Q 2009: D
3Q 2009: D
2Q 2009: D-
1Q 2009: D+

DATA AND REPORT DOCUMENTS
Link here for the raw data used to prepare The Compass Report for the Fort Smith area, Northwest Arkansas and central Arkansas.

Link here for more narrative about regional and national economic conditions.

SECTOR DATA
CURRENT INDICATORS
Non-farm employment — C+
Non-farm employment in the area has stabilized, with employment in the metro area at 120,300 in December compared to 116,900 in December 2012.

Goods-producing employment — C
The decrease in manufacturing jobs as a percentage of the overall workforce helps diversify the economy. The percentage of manufacturing jobs in the overall workforce was 21% in December 2013, down from the 21.7% in December 2012.

This measure tells us about the risk to the local economy from being heavily weighted toward sectors that have been under economic pressure.

One of the fundamental principles of reducing risk is diversification. The Fort Smith economy has been based on manufacturing for decades, but this heavy reliance on one sector for employment and wealth creation has left the region vulnerable. For several years the manufacturing sector in the U.S. has shed employment as technology and international trade have redefined the production process.

As the economy of Fort Smith becomes more diversified the risk of a downturn in any one sector causing a catastrophic loss of employment diminishes.

Metro area Unemployment rate — C-
The area unemployment rate, an important gauge in the health of the metro labor market, posted a decline to end the third quarter. Unemployment in December was estimated at 7.6%, compared to 7.7% in December 2012.

Sales and Use tax collections — C
Sales tax collections in the region and the city of Fort Smith began to show weakness in the fourth quarter of 2009. That weakness began to improve in the fourth quarter of 2010, was on a stable pace, but began to cool in the third half of 2012 and has been inconsistent during 2013. The tax collections, which are good indicators of regional consumer confidence, were up in Crawford, Franklin, Logan and Sebastian counties to $3.305 million during November 2013 — compared to $3.284 million in November 2012. During the September 2013 to November 2013 period, overall collections in the counties were up 3.07% compared to the same period in the previous year.

LEADING INDICATORS
Building Permit (housing) valuation — D+
The total value of permits issued in the fourth quarter (measured in a three-month rolling average) were down 37.69% compared to the fourth quarter of 2012.

Advertisement:

As new households are created they induce growth in retail, education services, health care services and other types of businesses that provide goods and services to households. Also, new construction provides employment and tax revenues.

Hospitality employment — B-
Hospitality employment, which began trending downward in the third quarter of 2012, leveled off during the fourth quarter of 2012 and improved during the first quarter of 2013. December 2013 saw 9,000 jobs in the regional hospitality sector, up 300 jobs from December 2012.

Manufacturing employment — C-
Manufacturing employment in the Fort Smith region showed signs of stability in 2012, but began to dip again during the first quarter of 2013. Sector employment in December 2013 was 18,400, down an estimated 500 jobs from December 2012 employment.

For better or worse, Fort Smith remains a manufacturing town. That implies the near-term economy rises and falls on the performance of the sector. Growth in employment or even stable employment in the sector bodes well for the near-term outlook for the local economy.

Construction employment — B
This sector, which includes mining/natural resources employment, saw employment reach 6,900 in December, up from 6,500 in December 2012.

The rationale for including construction employment is similar to that for building permits. The employment measure is influenced by changes in both the residential and commercial real estate markets.

Obviously, new space implies new residents and new businesses.

Five Star Votes: 
Average: 5 (3 votes)

Like This Article? Share It!