Expanded Region Slips to 8th Place in Milken Rating

Northwest Arkansas’ slip from No. 7 to No. 8 in the Milken Institute’s rating of the nation’s most vibrant economies for 2005 is a cause for celebration rather than concern, state economists say.
In the rankings released February 22, the Fayetteville-Springdale-Rogers Metropolitan Statistical Area (MSA), which includes Bentonville, ranked in the top 10 of the largest 200 cities for the third year in a row. The area made the No. 1 spot in 2003, then dropped to No. 7 in 2004. In 2002, the MSA ranked 23 rd in the top cities list.

The nonprofit Santa Monica, Calif.-based think tank ranks the nation’s metropolitan statistical areas for the best overall economies each year. Researchers base the rankings on several criteria, including job and wage and salary growth over the past five years. The institute helps business and public policy leaders identify and implement innovative ideas for creating broad-based prosperity, according to its Web site.

Lorna Wallace, a Milken Institute research fellow and senior staff member, attributed the drop to No. 8 to the U. S. Census Bureau’s addition of Madison County and McDonald County, Mo., to the MSA. The two counties were not considered in the Milken study last year. The Milken Institute relies on the Census Bureau’s definition of metropolitan statistical areas for its study groupings.

“The Fayetteville-Springdale-Rogers MSA has a robust economy that outshines the rest of the state and most of the country,” Wallace said. “Its job growth rate by far exceeds the national pace.”

Wallace cited Bentonville-based Wal-Mart Stores Inc. ’s heavy influence on the regional economy for both positive and possible future negative factors. She also cited the presence of other national-level employers such as J. B. Hunt Transport Services Inc. and Tyson Foods Inc. and the University of Arkansas, a strong research university, as positives for the area.
The next-highest ranked larger metropolitan area in Arkansas was Little Rock-North Little Rock, ranked No. 94 overall and up from No. 106 in 2004. The city’s lowest sector ranking was in job growth, at No. 168 with 0. 24 percent. Fort Smith also ranked higher this year, moving up to No. 154 from No. 155 in 2004.

Three Arkansas MSAs were included in the Milken listing of the best 179 small cities. Hot Springs was ranked at No. 69. It was not ranked in 2004. Jonesboro ranked No. 99, down from No. 64 in 2004. Pine Bluff was ranked at No. 144, down from No. 94 in 2004.
Mitch Chandler, director of communications for the Arkansas Department of Economic Development, said Northwest Arkansas ’ ranking for the third year shows that the area’s growth is a proven trend. “This shows the phenomenal and consistent growth of the area.” he said.

Job and wage growth are the strongest contributors to the listing, said Jeff Collins, director of the Center for Business and Economic Research at the Sam M. Walton College of Business.
The Walton College is part of the University of Arkansas at Fayetteville. “Job and wage growth is a 15- to 20-year trend, not a one- to two-year trend,” Collins said. “Given that this measures the entire country on the same data, it gives a lot of validation to be listed in the top 10 from year to year.” He predicts that the region will continue to do well with those growth drivers in place. The region scored its highest ranking in the five-year wage and salary growth category, taking the No. 3 spot. It was ranked 14th in one-year wage and salary growth. The five-year job growth ranking was 7th and the one-year job growth was ranked 23 rd.

WEAKEST LINK:
The region’s lowest ranking — No. 154 — was in the area of technology output growth. Collins said the high-tech industry is one in which the state traditionally performs poorly. “Employment opportunities for Arkansas seem to be overly weighted to the lower educated and lower-paying jobs,” he said. And added that even the University of Arkansas ’ efforts to push technology-based business is not enough to push the state out of the lowest levels of technology development. “We still don’t attract a lot of research and development activity, which is the precursor to higher-wage industries,” Collins said. “The UA is still too small in this area. Larger universities can get concentrations of engineers and scientists who can cooperate and collaborate on research.”

HOUSING CONCERNS:
Milken’s Wallace also cited the increased housing values as a growth factor in the region, a positive indicator of the present economy but a possible future concern. “Housing rates and values are near the national level,” she said. “That may pose a risk going forward.” Unless other economic indexes also rise to the national level, increased interest rates or a slowing of the construction rate will influence the affordability of housing in the region. Collins said the housing component is a relatively small sector in the Milken Institute’s ranking data. “But there is some disconnect between supply and demand in housing,” he said. “While I have some concerns about segments in the market, there is still opportunity for growth and profit in housing after careful planning and consideration.” He said the national housing values really don’t contribute much to the local housing market. “The people who are moving in here and buying houses are already paying the national rates,” he said. “This doesn’t affect them.”

Condensed from: NWA News, Arkansas Democrat Gazette, February 23, 2006