State’s job growth seen as slowing

FAYETTEVILLE -- Labor-force growth in Northwest Arkansas and the rest of the state slowed somewhat, while federal tax cuts and the threat of tariffs haven't offered many benefits so far, a University of Arkansas economist said Thursday.

Northwest Arkansas has reached about 260,000 nonfarm jobs, a new peak after several years of "spectacular" growth, said Mervin Jebaraj, director of the Center for Business and Economic Research in Fayetteville, during the center's quarterly business analysis luncheon.

But that number's pace of growth has been falling since 2015. Arkansas' labor force has actually dipped slightly this year after reaching a record 1.33 million employed in mid-2017, according to the federal Bureau of Labor Statistics. The state's unemployment rate remains low at 3.8 percent.

The slowing could be returning to a more normal level, Jebaraj said, or could be a sign of a slowing economy. The state also has one of the lowest rates of adult workers.

"We're not sure why this is yet," he said of the downward trends, adding it'll take more time to get a clearer idea of what's going on.

Many industries are still doing well, with job growth in Northwest Arkansas dominated by leisure and hospitality, construction and manufacturing. Schools are hiring more employees to serve a population growing by 1,000 people a month, as are hospitals like Arkansas Children's Northwest in Springdale.

The state's relatively high rate of health insurance coverage, helped along by the federal law known as the Patient Protection and Affordable Care Act and the state's Arkansas Works program, have buoyed the health care industry and likely helped rural health care providers stay open, Jebaraj said.

Other federal changes have been less helpful, at least so far.

Republican cuts to income taxes late last year, for example, haven't been as effective as expected, Jebaraj said, with most businesses around the country keeping their capital investment roughly the same. He said this inaction is most pronounced in smaller businesses, which might be waiting for the Internal Revenue Service to release the rules explaining how the tax cuts will be put into practice.

Some of Northwest Arkansas' largest employers have reported hundreds of millions of dollars in benefits from the tax changes. Tyson Foods and Walmart Inc. early this year said some of that money would go toward bonuses of hundreds of dollars for workers, for instance.

University of Arkansas, Fayetteville, spokesman Steve Voorhies said Thursday that it's still unclear whether changes to tax deductions will mean fewer donations to the school. Income-tax withholdings for university employees are about the same as they were last year, he added.

President Donald Trump's recent tariffs on imported steel and aluminum from some countries also could lead to retaliation that could hurt Arkansas, which exports billions of dollars worth of food, equipment and other goods, Jebaraj said.

"Every sector that isn't steel and aluminum is worried about tariffs," he said.

Jebaraj then turned to a local focus on affordable housing. Home prices in Benton and Washington counties have risen roughly $50,000 in five years to more than $220,000 on average. Jebaraj said that's good for homeowners but the price is tens of thousands of dollars higher than what's typically considered attainable for median-income earners in the area.

Northwest Arkansas has lots of apartments, but rents are rising as quickly as home prices, Jebaraj went on. And while Northwest Arkansas is still very affordable compared with bigger, pricey cities around the country, many of the people moving into the area come from the rest of Arkansas and nearby states instead.

"When looking at what's affordable, you have to ask what's affordable to who," he said. "All of those people need someplace to live."

Jebaraj repeated his frequent call for cities to allow denser development in their cores. Local governments can't influence construction material prices and immigrant labor availability, but they can decide what happens with their land, he said.

Business on 05/25/2018

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