Michael Pakko: Economic Recovery Still Slow in Arkansas

While Arkansas weathered the recession a little better than the rest of the nation, it has fallen behind the U.S. in terms of post-recession economic recovery, according to Michael Pakko.

Pakko, chief economist and state economic forecaster for the Institute for Economic Advancement at the University of Arkansas at Little Rock, delivered his annual state economic outlook Wednesday at UALR's 2013 Arkansas Economic Forecast Conference, sponsored by Arkansas Business and held at the Clinton Presidential Center.

Pakko said the state is "on the high side of a slow growth scenario." He predicted a continued slow and bumpy recovery with the state falling behind the nation mostly in labor market indicators, but with home sale trends in the state suggesting reason for optimism.

Home sales in Arkansas grew by 20 percent in August and 18 percent in September, with home prices in Arkansas rising by 9.5 percent since the second quarter of 2011, he said.

Pakko forecast modest real GDP growth in Arkansas and the nation through 2015. His projections for Arkansas include 2.6 percent growth in 2013, 2.7 percent growth in 2014 and 3 percent growth in 2015. For the nation, he sees growth of 1.9 percent, 2.3 percent and 2.8 percent through 2015. 

Personal income growth in the state will rise to 4.5 percent by 2015, dipping from a 2012 rate of 5.3 percent and coming in at 2 percent in 2013 and 4.1 percent in 2014, Pakko said. Factoring in inflation, that 4.5 percent figure in 2015 will amount to 2 to 2.5 percent in real income growth, he noted.

Elsewhere, Pakko forecast:

  • The state unemployment rate, static for the past two years, will dip to below 6 percent at 5.9 by the end of 2015. Pakko noted the U.S. unemployment rate (7.2 percent) slipping below the Arkansas rate (7.4) in August for the first time since the first quarter of 2008.
  • Retail sales will see modest growth, rising from 1.2 percent in 2012 to 2 percent this year, 5.6 percent in 2014 and 4.6 percent in 2015.
  • Home sales in Arkansas will continue to climb this year (13.8 percent) and next (7.2 percent) from a 1.1 percent fall in 2012 before settling in at 0.8 percent in 2015. 

See Pakko's full ecomic forecast at ArkansasEconomist.com

David Altig, executive vice president and director of research for the Federal Reserve Bank of Atlanta, delivered a national outlook. He said economic projections the last few years have been "way too optimistic." 

"If the projections are wrong, why not change the models," he asked. 

Altig believes the recent government shutdown will have little long-term impact on the economy.

"It'll all wash out over a couple of quarters," he said. "But it is another hit to the confidence of private decision makers."

Bert Greenwalt, owner of Greenwalt Company in Hazen and professor of agricultural economics at Arkansas State University, delivered the luncheon address on agribusiness trends and challenges.

He noted technology playing a larger role in agriculture by increasing output, substituting capital for labor and generating economies of scale.

Examples include GPS navigation and positioning; "precision agriculture" such as digital mapping and variable rate application; remote sensing for rainfall, soil moisture and grain storage conditions; and remote control of irrigation and grain drying equipment.

Greenwalt said agricultural technology has resulted in farms are becoming fewer and larger, has produced large volumes of data and has created a growing demand for consultants and advisors who can help turn data into information.

He said intellectual capital is as important as financial capital for farms, and the next generation of farm managers will be required to have a more sophisticated skill set. 

Greenwalt said the 2014 ASU Agribusiness Conference is scheduled for Feb. 12 in Jonesboro. Click here for more information.