Arkansas' Diversification Blunts Effects of U.S. Recession

by Mark Hengel  on Monday, Jan. 19, 2009 12:00 am  

(To see a pie chart comparing Arkansas' employment numbers to the nation's, click here.)

Throughout the current recession, Arkansas business and government leaders and economists have repeated what has become a mantra. The state's economy isn't suffering as badly as those of other states because, while Arkansas doesn't fully experience nationwide economic highs, neither does it fully experience the lows.

But why is that?

There are several reasons, but they can probably be boiled down to two.

One, the state learned a hard lesson during the Great Depression, when its almost complete reliance on an agriculture-based economy caused intense economic suffering. That lesson was to diversify.

Second, when most economic indicators consistently put you near the bottom, you don't have as far to fall.

"During the boom times we talk about why we underperform, but during the bad times we turn to the story 2.0: We're not as bad as our neighbors," said Kathy Deck, an economist at the University of Arkansas.

Labor Diversity

Arkansas is still an agricultural powerhouse, although only about 3.5 percent of its jobs are in that sector, according to 2007 U.S. Bureau of Economic Analysis data, the latest available. Arkansas, however, also has a greater concentration of manufacturing jobs compared with the nation, said Ross DeVol, an economist with the Milken Institute in Santa Monica, Calif.

Manufacturing accounted for about 15 percent of Arkansas' non-farm jobs in November 2008, compared with about 10 percent nationally, according to U.S. Bureau of Labor Statistics data.

But the manufacturing done in Arkansas is not concentrated in heavy machinery, automobiles or other "durable goods," he said. Durable goods accounted for about 52 percent of Arkansas' manufacturing jobs in November 2008, compared with about 63 percent nationally, according to the BLS. And that can actually be a good thing in times like these.

Durable goods "are very tied into business investment, so as companies are cutting back in investments, those sectors tend to be very volatile," DeVol said.



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