Arkansas' unemployment rate will remain below 4.5 percent for the next two years, Michael Pakko, chief economist at the Institute for Economic Advancement at the University of Arkansas at Little Rock, said Wednesday.
Pakko addressed a crowd of about 120 at the annual Arkansas economic forecast conference at the Clinton Presidential Center.
Pakko projected that the unemployment rate will be 4.3 percent next year and 4.4 percent in 2018.
Arkansas' unemployment rate was 4 percent in September and Pakko expects the state to have an unemployment rate of 4.1 percent for 2016.
The rate dipped below 4 percent from April through August, hitting 3.8 percent in May, the lowest unemployment rate ever for the state.
But Pakko believes that the U.S. Bureau of Labor Statistics "probably will revise away" at least some of those unemployment rates below 4 percent when it releases its annual revisions in March.
One reason Pakko is expecting those unemployment rates to be revised upward is that from January to March, the bureau estimated that Arkansas added an average of 10,000 jobs a month.
Going back to 1976, there was never a single month in Arkansas where employment grew by more than 10,000 jobs, he said.
"So that leads me to believe that there is some sort of anomaly going on," Pakko said. "I think we did see strong growth in employment early in the year, but perhaps the statistics are overstating that."
Other economic indicators are likely to continue along existing trends, Pakko said.
"It will be pretty much more of the same: slow with steady growth going forward," Pakko said.
Arkansas' gross domestic product -- the total value of all goods and services produced in a year -- grew by 9.5 percent since 2007, which is slightly above the national growth of 9.3 percent, Pakko said.
Since 2007, before the recession began, the gross domestic product grew in all metropolitan areas in the state except Texarkana and Pine Bluff, Pakko said. The Fayetteville metropolitan area grew by 28.5 percent over the same period, he said.
Wages and salaries are up by an annualized 3.6 percent since 2010, Pakko said. Including dividends, interest and rents, Arkansans' personal income rose 4.2 percent, Pakko said.
Arkansas home sales grew by an average of more than 9 percent a year from 2013 through 2015, Pakko said. This year is on track to have the highest home sales volume since before the market collapsed in 2007, Pakko said. There were almost 26,000 homes sold in Arkansas through the first nine months of the year.
The growth rate of more than 9 percent a year will continue at least through 2017, Pakko said.
Nationally, the economy is likely to see above-trend growth -- well above 2 percent -- for the second half of this year, said Kevin Kliesen, an economist with the Federal Reserve Bank of St. Louis.
The country's labor market is healthy, long-term interest rates have popped somewhat and inflation expectations are rising, Kliesen said.
With the unemployment rate below 5 percent, the country is at full employment -- the point at which virtually everyone who is able and willing to work is employed, Kliesen said.
Unemployment peaked at 10 percent nationally in October 2009, Kliesen said.
Job gains nationally have averaged about 181,000 a month.
Even with low unemployment, during this expansion since the recession ended in June 2009, the country's gross domestic product has averaged about 2 percent growth a year, the weakest level since the 1930s, Kliesen said.
Before the recession, the gross domestic product averaged annual growth of 3 percent, he said.
The reason the gross domestic product has slowed is because the country's labor productivity is weak, Kliesen said. Labor productivity is the value of output produced from goods and services divided by the hours worked.
Market expectations are very high that the Federal Open Market Committee will raise interest rates next month, Kliesen said.
"But monetary policy likely will remain very accommodative for the foreseeable future," he said.
Business on 11/17/2016