Business Forecast '06

On Friday, January 27, the 12th annual Business Forecast '06 luncheon was held at the Springdale Convention Center. Over 1000 local business people attended. Speakers addressed economic issues affecting not only NW Arkansas, but also the nation and the world.

Sponsored by the Center for Business and Economic Research of the Sam Walton College of Business at the University of Arkansas, the speakers included Dan Worrell, Dean of the Walton College of Business; Thomas "Mack" McLarty (former chief of staff for President Clinton), who introduced the panelists and served as moderator; Ellen Hughes-Cromwick, Chief Economist for Ford Motor Company; James Glassman, Managing Director and Senior Policy Strategist for JPMorgan Chase & Company; and Jeff Collins, Director of the Center for Business and Economic Research.

The general consensus among the panelists with regard to the economic forecast for the coming year was one of "cautious optimism." Ellen Hughes-Cromwick spoke on international trends, James Glassman on the US economy, and Jeff Collins on the state of Arkansas and the northwest region in particular. In response to a question from the audience on "what worries you?" each responded in turn: Hughes-Cromwick--energy markets and political instability in oil producing areas, Glass--the danger of protectionist policies which might be implemented by the US, and Collins--the eroding commitment to US innovation, research and development, which (in the past) has led to wealth creation.

With regard to the state of Arkansas as a whole, Jeff Collins discussed growth in different areas of the state, most of which is occuring in the Little Rock/Central Arkansas area and in NW Arkansas. However, the state is losing manufacturing jobs, which in the past have provided high pay, due to globalization. Although new jobs are being created at a steady pace, the majority of these are low-paying, low-skill jobs. Collins expressed the need for an educated work force which would allow for the creation of high-wage, high-skill jobs. 80% of the new jobs in the state during the past 10 years have been created in Northwest Arkansas and Little Rock--62% in NW Arkansas and 18% in central Arkansas.

Underlying economic trends in NW Arkansas and the central part of the state is increased urbanization, as well as a remarkable rate of population and employment growth. About 1000 people per month are moving to NW Arkansas while about 560 jobs are being created each month. The largest sector for job growth is natural resources, mining and construction.

As a side observation with regard to home construction, he noted that in NW Arkansas in the 2nd quarter of 2005, there were 13,000 lots actively being built upon with 12,000 more platted but not yet active. By the 3rd quarter of the year, there were 16,000 lots being built upon with 15,000 more platted but not yet active. This represents a gain of 5000 lots in only 3 months.

Collins observed that the state economy is dominated by low-wage, low-skill employment, making the current workforce in much of the state ill-equipped to compete in the global marketplace for high-wage, high-skill jobs. The initiative to bring an auto manufacturing plant to Arkansas, which is being discussed in the media, will temporarily forestall the erosion in manufacturing jobs, but he suggested that the auto plant would be like adding a bucket of water to a bathtub with a slow leak.

In summary, Collins stated that the challenge to Northwest Arkansas is to provide state leadership commensurate with the economic power held in the area. Increasingly the whole state depends on the economic development here. But there are obstacles to continued growth--in particular, lack of infrastructure (especially roads, water supply and wastewater treatment). The area must respond with cooperation across governmental organizational boundaries and a unified vision for the future of the area.