Arkansas' economy should continue its slow but positive growth in the near future, a state economist predicted Thursday.
"The growth rate will be in the range of 2 to 2.5 percent, which could be considered a trend," said Michael Pakko, chief economist at the Institute for Economic Advancement at the University of Arkansas at Little Rock.
Pakko spoke at the annual Little Rock Regional Economic Briefing at the Statehouse Convention Center.
Job growth in the state will continue to be primarily in the service sectors, particularly the professional and business services sector, Pakko said. There also should be growth in the goods-producing sectors -- manufacturing and construction, Pakko said.
The U.S. Bureau of Labor Statistics is likely to revise Arkansas' nonfarm jobs downward by as many as 7,000 jobs when it makes its annual revisions in March, Pakko said. Through September, the bureau said there were 20,300 nonfarm jobs added to the state's economy in the previous 12 months.
The bureau revises employment statistics every year in March using more complete data than it uses throughout the year. Pakko has studied that underlying data to make his prediction on the expected change in employment.
The 7,000 jobs account for less than 1 percent of the total employment in the state, Pakko said.
The current number of jobs is an indication the state recovered to a prerecession employment level in April, Pakko said. The national average for recovery to that level was April 2014, Pakko said.
Pakko said he expects construction and manufacturing jobs will be revised upward and that the leisure and hospitality sector will be revised downward by more than 4,000 jobs.
Nonfarm employment should increase by 15,600 jobs this year, after the revisions, and by by 13,700 jobs in 2016, Pakko said.
Pakko projects that real personal income in Arkansas should increase 2.7 percent this year, 1.2 percent in 2016 and 2.2 percent in 2017.
Home sales in Arkansas are expected to improve 8.7 percent this year, 11.5 percent in 2016 and drop 3.7 percent in 2017, Pakko said.
Pakko said he expects the state's unemployment rate to be 5.2 percent at the end of this year, 5.1 percent at the end of next year and 4.8 percent for December 2017.
The biggest risk factor for the Arkansas economy is what may happen in China's economy and what happens with oil prices, Pakko said.
The national economy also should continue to register modest growth in the future, said Kevin Kliesen, a business economist with the St. Louis Federal Reserve Bank.
"The growth may be a little stronger next year," Kliesen said. "The consumer is doing quite well. Auto sales are very strong and housing looks pretty good. If you think about the biggest part of the economy -- and that is consumer spending -- if that continues to be strong then the top-line growth should be strong as well."
Inflation should remain low, Kliesen said.
Nationally, sources of strength include consumers, labor markets, housing, and state and local governments, he said.
Areas of concern include the manufacturing, energy and farming sectors as well as increased economic uncertainty, Kliesen said.
Healthy job growth and a falling unemployment rate indicate solid labor market conditions, Kliesen said.
Responding to a question about how the state's utility rates will be affected by the change in energy generation from coal plants to other sources, UALR economist Gregory Hamilton said utility rates will rise. Half of the electricity generated in the state is generated by coal, Hamilton said.
"You can expect the price to go up inevitably," Hamilton said. "One substitute [for coal] is natural gas. But you have to convert the plants to natural gas. The cost of energy is going to rise, and that will make us a less attractive state to [major] energy users [such as large manufacturers]."
Responding to a question about how the economists would vote if they could next month when the Federal Open Market Committee considers whether to raise interest rates, Pakko said he would raise rates in December and would already have raised rates two years ago.
Kliesen deferred to comments made by James Bullard, president of the St. Louis Fed.
"He was certainly on record as saying he would have voted for an increase in September," Kliesen said. "So I can't disagree with my boss."
Business on 11/06/2015