Housing Slump Slows US Economy, but NW Arkansas Still Strong

According to the Commerce Department, the U.S. gross domestic product (the sum of the value of all goods and services produced) grew at only 1.6% in the third quarter of this year, down from 2.6% in the second quarter and a phenomenal 5.6% in the first quarter. One of the key factors in the sluggish growth was a major slowdown in the national housing market (in both construction and sales).

In Northwest Arkansas, there is an adjustment occurring in the housing market as well. But some of the other economic indicators (which are weak nationally) are positive here, according to Jeff Collins, Director of the Center for Economic and Business Research at the University of Arkansas’ Sam Walton School of Business.

In a keynote address at the Bentonville Development Conference, held Friday (October 27) for builders, developers, and others, Collins outlined several factors which still make NW Arkansas a good place to live and do business and which bode well for a continuing strong economy here.

First, although there is an oversupply of homes available, particularly in Benton County, there are still approximately 1200 people per month moving to NW Arkansas. This will help in the absorption of current inventory. The current buyer’s market and a leveling of home prices, as well as continuing low interest rates, make this a good time to purchase a home.

Second, job creation in the area continues at over 600 jobs created each month. He noted that from 1996 to 2006, 49% of all new jobs in Arkansas were created in NW Arkansas. People who move to NW Arkansas (except for retirees), do so for employment reasons.

Collins did note a couple of warning signals, however, and stressed the need for creating high wage, high skill jobs. In the past these jobs were in manufacturing, but those are disappearing and being replaced with service sector positions. Service sector employment does not necessarily mean low wage positions but also can include professionals such as doctors, lawyers and others. The key to creating such high wage, high skill jobs is growth in education which will result in knowledge-based employment and higher-wage positions. At present, although NW Arkansas is one of the most affluent areas in the state, per capita personal income (PCPI) is only 80% of the national average. The rest of Arkansas is “poorer”.

Another challenge for the area is to manage the infrastructure required for the continuing growth. The trend in all of Arkansas is towards increasing urbanization in Little Rock and NW Arkansas, while other areas are actually losing population. But public resources are lagging, and must be brought up to speed.

All in all though, Collins seemed optimistic about the area’s ability to weather these challenges and about the current positive outlook for economic activity in NW Arkansas.

For more information about the Commerce Department report:

http://www.washingtonpost.com/wp-dyn/content/article/2006/10/27/AR2006102700408.html