Economic conditions remained positive in Northwest Arkansas during the second quarter of 2013, and are stronger than the second quarter of 2012 thanks to continued gains in employment and building permit values.
The second quarter 2013 grade of B was unchanged compared to the first quarter and an improvement over the B- during the second quarter of 2012.
The unemployment rate in Northwest Arkansas was the lowest in the state amongst all MSAs in June (5.7%), and better than the 5.9% in the region during June 2012.
Economist Jeff Collins, who conducts the data collection and analysis for The Compass Report, said the strength of the regional economy continues to impress.
“There is no reason to think that Northwest Arkansas won’t continue to outperform its peers. The core growth drivers remain strong with added retail and cultural amenities reinforcing the regions attractiveness to employers and employees,” Collins said.
Collins said economic trends also show that Northwest Arkansas continues to outperform the central Arkansas region – the state’s largest metro economy.
“Despite an economy that is roughly two-thirds of the Central Arkansas economy, nonfarm employment data indicate that the Northwest Arkansas economy added 1,200 more jobs June-on-June,” Collins said.
Also, more than two decades of growth in Northwest Arkansas has has a clear statistical impact.
“The implications of the differential growth rates can be seen in the long-term statistics. In 1993, the Northwest Arkansas economy, as measured by nonfarm employment, was 44 percent as large as the Central Arkansas economy. Comparing June data, the Northwest Arkansas economy was just over 62 percent as large,” according to Collins.
Data collected for The Compass Report also suggest that Arkansas’ economic trends are improving compared to national economic trends, Collins said. Momentum during the second quarter is a good sign for Arkansas’ economy in the second half of 2013.
“The Central Arkansas economy should continue to reflect national growth — slow and steady. For the Northwest Arkansas economy, there is absolutely no reason to believe that current growth rates are unsustainable over the next 18-24 months. And finally, despite continued erosion of manufacturing, the Fort Smith regional economy has been amazingly resilient. Overall, the local economies should perform well during the last half of the year,” Collins said.
The 2013 second quarter economy in the central Arkansas area received a grade of C- meaning that economic conditions declined slightly compared to the second quarter of 2012 but were unchanged the first quarter of 2013.
In the Fort Smith region, a second quarter 2013 grade of C was up compared to the first quarter of 2013 and an improvement over the C- in the second quarter of 2012.
NORTHWEST ARKANSAS
OVERALL GRADES — Northwest Arkansas regional economy (per quarter)
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.
SECTOR DATA
CURRENT INDICATORS
Non-farm employment — A
Non-farm employment is well ahead of 2012 figures, with employment in the metro area at 218,700 in June compared to 209,900 in June 2012.
Goods-producing employment — C+
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 overall workforce was 16.3% in June 2013, down from the 16.6% in June 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 — C
The area unemployment rate, an important gauge in the health of the metro labor market, improved in the first quarter. Unemployment in June was estimated at 5.7%, compared to 5.9% in June 2012.
Sales and Use tax collections — B-
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 $6.804 million during May 2013 — compared to $6.399 million in May 2012. Overall, collections were up for the quarter.
LEADING INDICATORS
Building Permit (housing) valuation — A
The total value of permits issued in the second quarter of 2013 (measured in a three-month rolling average) were higher than those in the first quarter of 2012. The rolling average in June was $37.54 million, ahead of the $28.335 million in June 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. June 2013 saw 22,100 jobs in the regional hospitality sector, up from the 21,200 jobs in June 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 showed signs of stability during the quarter. Sector employment in June 2013 was 26,900, up from the 26,700 during June 2012. However, the monthly employment average in the sector was 100 jobs fewer in the second quarter compared to the second quarter of 2012.
Construction employment — C+
This sector, which includes mining/natural resources employment, saw gains in employment compared to the second quarter of 2012, ending June with 8,800 jobs, up over the 8,200 jobs in June 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.