Northwest Arkansas isn’t going to run out of employees for its growing economy.
The Arkansas Department of Workforce Services released a report in July that showed Arkansas’ seasonally adjusted unemployment rate was 3.8 percent in June 2016. The U.S. Bureau of Labor Statistics reported unadjusted unemployment rates of 3.1 percent for northwest Arkansas and 4.2 percent for Arkansas.
That good news is coupled with the fact that the labor force in northwest Arkansas continues to grow, recently surpassing 500,000. Job employment growth rate has consistently been between 5,000 and 10,000 annually in recent years.
“We would worry in particular if the labor force was not growing,” said Kathy Deck, director of the Center for Business & Economic Research in the Sam M. Walton College of Business at the University of Arkansas in Fayetteville. “We could have a very low unemployment rate with a labor force that was stagnant, but of course that is not where we are. We have a very low unemployment rate and we see the labor force continue to increase and, in fact, increasing by rates we haven’t seen since the last boom.
“Should we worry about too low unemployment rate? Not as long as we can continue to attract new folks to the area. Part of what a dynamic region is is a place that can attract new people.”
Deck said the job situation was good in northwest Arkansas but would be better if more companies were creating jobs. A regional report released by the Northwest Arkansas Council in October 2015 showed stagnant growth in the number of new businesses created; fortunately northwest Arkansas has plenty of existing companies that drive the economy.
Attracting new businesses is a key to economic growth, and factors beyond low unemployment are holding northwest Arkansas back.
Real Estate Problems
Mike Harvey, the chief operating officer of the Northwest Arkansas Council, said companies looking to move into northwest Arkansas are usually concerned about two things: available real estate to build, rent or buy and an available, qualified workforce.
“We don’t get a lot of activity up here because we don’t have a lot of real estate options,” Harvey said. “That is limiting our ability to submit on these projects. About three-quarters of the prospects who inquired through (the Arkansas Economic Development Commission) were looking for existing buildings. We are at such a low vacancy rate; it’s a real challenge for us to actually submit on a project.”
For companies, northwest Arkansas’ real estate market puts them in a tight spot. Quality developed space is limited, so while there is plenty of land that could accommodate a 200,000-SF manufacturing plant, buying, developing and building one takes time.
For northwest Arkansas, it’s a tricky dilemma. Do you build a 200,000-SF facility and then cross your fingers that it will attract new business? The real estate crash less than a decade ago certainly taught hard lessons on the dangers of speculative building.
Harvey said the council is working to put together a group of city officials, developers and business leaders to help figure out how to solve the real estate challenge.
“I’m trying to get local developers adding some spec building space,” Harvey said. “It’s hard to when you have a residential market that is on fire, when you have a commercial market that is on fire and you have an office market. This is a kind of stepchild as far as ROI.
“How can we incentivize prospectors to step in here? It’s the chicken and the egg right now.”
Harvey said his recruitment pitches have been turned down a couple of times because a company was not confident northwest Arkansas could supply the required number of skilled workers. He said prepared food companies are always trying to figure out a way into northwest Arkansas.
“I’m still surprised by the food projects that we get based on our unemployment rate,” Harvey said. “They still want to look here. Because of real estate, we don’t even get to prove we have the labor they’re wanting.”
Creating New Skilled Labor
The doughnut hole in northwest Arkansas’ workforce is skilled trade laborers, Harvey said.
Finding unskilled labor to do work that requires little more than on-the-job training isn’t an obstacle for most companies. Finding employees with four-year degrees takes a combination of local, regional and national recruiting.
The jobs in between are where Harvey wants to see the region go to work. Mechanics, machinists, welders — with skills that are learned through training but not necessarily in a four-year college program — are most in demand in the northwest Arkansas labor force.
“They can’t find them right now,” Harvey said. “We can’t keep up [with demand] for one. And, two, there has been a lack of interest for a long time in these trades. I think it has been discouraged by everyone from parents to educators. We need to make an effort to change that.
“About 35 percent of the jobs in northwest Arkansas are in that middle skill level. There are a ton of those jobs out there, and they’re not necessarily dirty jobs, either.”
The solution requires cooperation and flexibility from the business and educational communities, which Deck and Harvey said is happening. Some examples are the UA Global Campus in Rogers creating an IT Readiness program to go along with its truck-driving course, and Northwest Arkansas Community College’s construction technology program.
“Let’s try to work and build some programs that bring kids into the funnel and move them through,” Harvey said. “We’ve only been at this for over a year now, and that is something that plays out over time. The immediate impact is obviously going to be a little bit slower.”
Local school districts are also promoting non-college paths to skilled labor fields. A college degree may provide long-term financial benefits, but someone with a welding or plumbing license can also have a lucrative, in-demand career.
“The answer is not everyone needs to go to college,” Deck said. “The answer is we need to have a variety of paths that set people up for economic success in their careers. It’s so important there is constant communication between the business community and academic institutions. That’s the secret sauce.”