Arkansas' Diversification Blunts Effects of U.S. Recession

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

The Natural State has many industries that will struggle as the recession deepens. Trucking is a strong sector in Arkansas, DeVol said. As manufacturing, exports and imports decline nationwide, fewer rigs will need to ship goods from place to place, which could affect Arkansas companies like J.B. Hunt Transportation Services Inc. and USA Truck Inc.

Arkansas' manufacturing sector, even the makers of basic goods, might also feel the economy's downturn soon, said John Shelnutt, an economist at the Arkansas Department of Finance & Administration.

"Manufacturing and goods-producing sectors tend to be more volatile than others – or, to say it a different way, more volatile than service sectors," he said.

As consumers spend less money, Arkansas' manufacturers might begin to slow production, affecting workers' hours, he said.

The state might be better placed than others to rebound from a slowdown, though, Shelnutt said. Construction in Arkansas, as a whole, never experienced the growth of other states, meaning Arkansas does not have as much excess housing and commercial real estate. Northwest Arkansas is an exception to that general rule, because it did experience a boomtown surge in construction in the first half of the decade.

DeVol, of the Milken Institute, said the state's construction sector accounted for only about 4.7 percent of the state's total employment during recent years. In Florida, a state straining under the housing bust, construction grew to about 11 percent of total employment, he said.

New economic development announcements have also brought better-paying jobs to the state. The jobs could position Arkansas to take better advantage of an economic recovery, Shelnutt said.

The Current Transition

The state's current emphasis on cultivating a "knowledge-based economy" comes with its own risks, however, Hamilton said. Such an economy will put Arkansas more in line with the national economy, whereas the state has remained relatively self-sufficient since World War II, he said.

"If we become more involved in the national economy, that would lead to more specialization, which would cause more specific industry risk," Hamilton said.

Arkansas is developing previously underrepresented sectors, Deck said. Big-ticket attractions like the William J. Clinton Presidential Library in Little Rock and Crystal Bridges Museum of American Art in Bentonville, scheduled to open next year, are helping grow the state's leisure and hospitality sector at the same time that sector has contracted nationally.

Lagging behind the country has its pluses, too, Deck said. Investment here and there can spur rapid growth in Arkansas compared with similar investments in other, more developed regions of the country. Investing in improving work force education can help bring education levels to the national average, attracting jobs to the state.

 

 

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