Continued gains in employment and sales tax collections helped the Northwest Arkansas economy finish 2013 with a strong fourth quarter, according to The Compass Report.
The fourth quarter 2013 grade of B+ was unchanged compared to the third quarter and was an improvement over the fourth quarter of 2012.
The quarterly Compass Report for Northwest Arkansas is managed by The City Wire. The report is the only independent analysis of economic conditions in the metro area.
Economist Jeff Collins, who conducts the data collection and analysis for The Compass Report, said the regional economy “continues to grow at a rapid pace,” and he sees no reason it will slow in the near term.
“Despite (Northwest Arkansas) being roughly two-thirds the size of the Central Arkansas economy, nonfarm employment grew at at four times the rate of the state’s largest MSA,” Collins noted.
Continuing, he wrote: “The unemployment rate in Northwest Arkansas was the lowest in the state amongst all MSAs in December (4.9%). It was more than a full percentage point lower than that for the Little Rock/North Little Rock/Conway MSA (6.2%). The highest rate in the state was the Pine Bluff MSA at 9.8%. To add perspective, of the 372 MSAs in the country, only 22 posted rates above 10% in December and only 78 had rates below 5%.”
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 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.
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.
OVERALL GRADES — Northwest Arkansas regional economy (per quarter)
4Q 2013: B+
3Q 2013: B+
2Q 2013: B
1Q 2013: B
4Q 2012: C
3Q 2012: B+
2Q 2012: B-
1Q 2012: B-
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.
Non-farm employment — A-
Non-farm employment is well ahead of 2012 figures, with employment in the metro area at 224,400 in December compared to 215,500 in December 2012.
Goods-producing employment — B
The decrease in manufacturing jobs as a percentage of the overall workforce helps diversify almost any metro economy. The percentage of manufacturing jobs in the workforce was 16% in December 2013, down from the 16.2% in December 2012.
This measure speaks to the risk in a local economy from being heavily weighted toward sectors that have been under economic pressure. One of the fundamental principles of reducing risk is diversification.
Metro area Unemployment rate — B
The area unemployment rate, an important gauge in the health of the metro labor market, improved overall during the quarter. Unemployment in December was estimated at 4.9%, compared to 5.6% in December 2012.
Sales and Use tax collections — C+
Sales tax collections in the region have shown steady gains since 2010. The tax collections, which are good indicators of regional consumer confidence, were up in Benton, Madison and Washington counties to $6.489 million during November 2013 — compared to $6.254 million in November 2012. Overall, collections were up for the quarter.
Building Permit (housing) valuation — A-
The total value of permits issued in the fourth quarter of 2013 (measured in a three-month rolling average) were higher than those in the fourth quarter of 2012. However, the rolling average in December was $24.012 million, behind the $38.238 million in December 2012.
Residential building is an indicator of current and expected population growth. 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 in Northwest Arkansas has trended positive for several quarters. December 2013 saw 21,400 jobs in the regional hospitality sector, up from the 20,400 jobs in December 2012.
Growth in the hospitality and leisure sector as measured by growth in employment is included because of the emphasis on creating quality of place in local economic development initiatives.
Unlike enplanements/deplanements, which may or may not be tied to activity in restaurants, hotels, and cultural venues, hospitality and leisure employment most certainly are influenced by growth of these activities. Another possible measure is hospitality-related tax collections.
Manufacturing employment — C+
Manufacturing employment in the region grew somewhat during the quarter. Sector employment in December 2013 was 27,000, up over the 26,800 in December 2012.
Construction employment — B
This sector, which includes mining/natural resources employment, saw gains in employment compared to the fourth quarter of 2012, ending December with 8,900 jobs, up over the 8,200 jobs 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.