The ninth annual "State of the Northwest Arkansas Region" economic forecast conference certainly had less flair and good news than in previous years.
The same COVID-19 pandemic that made the meeting virtual also made the report by economist Mervin Jebaraj less rosy than northwest Arkansas business leaders are used to.
Jebaraj, the executive director of the Center for Business and Economic Research at the University of Arkansas' Walton College of Business, said the pandemic has made every financial barometer worse in October 2020 compared any time in the previous year.
"Unfortunately, this year is different than every other year," Jebaraj said. "That is to be expected with the recession we are currently in."
One housekeeping item Jebaraj had to clear up was the 15,000-person decline in population in northwest Arkansas. The area is still growing, Jebaraj said, but the formula used to measure northwest Arkansas' metropolitan statistical area no longer includes McDonald County in Missouri; northwest Arkansas is now considered solely Washington, Benton and Madison counties.
More: See Jebaraj's slide deck here.
A few years ago, northwest Arkansas decided to compare itself to some of the country's most robust economic MSAs such as Austin, Texas; Provo, Utah; and Madison, Wisconsin. Because of that competition, northwest Arkansas' Real GDP growth of 2.4% from 2017 to 2018 trails most of its peers, but outpaced the rest of the state, which clocked in at 1.7%.
That was pre-pandemic, of course. Jebaraj said the one silver lining of the pandemic is that economic statistics are now available weekly rather than quarterly as the freshness of that information becomes important.
When the pandemic hit Arkansas, the result was a nearly 10% drop in GDP from the first quarter to the second quarter. Northwest Arkansas' GDP growth had been slowing during the last five-year cycle — but a slowdown is nothing compared to a cliff dive.
"That is still very significant and is the largest decline we've seen in a very long time," Jebaraj said.
The cause of the recession — an airborne virus that causes consumers to quarantine and businesses to close — resulted in unusual economic indicators. Jebaraj said business investments dropped as expected during a recession, but consumer spending dropped dramatically.
"Consumers make up about 70% of the economy," Jebaraj said. "In fact, consumer spending has shrunk so much that I believe right now we are at 68% of the economy. That's really where we are seeing huge negative impacts; that's really what is driving the decline in GDP for the country and that is really what is driving the decline in our economy."
Jebaraj said federal government aid packages that gave taxpayers $1,200 stimulus checks and added $600 to unemployment insurance payments were keys in helping the economy struggle along during the early months of the pandemic. That aid money has since run out and political dickering has not resulted in a second aid bill.
The original aid helped spur consumer spending on durable goods, something rarely seen during recessions, Jebaraj said. Spending on services — restaurants, entertainment facilities and the like — got hammered because the pandemic made people much more wary of public areas.
Consumer spending dropped 1.3% in Arkansas compared to 3.8% in the country in September compared to the first two months of 2020. January and February aren't strong spending months anyway, but nearly all the statistics show a steep decline in March when the pandemic closed Arkansas schools, followed by an uptick in April and May when stimulus checks were received.
"This goes to show that the stimulus money that the federal government provided with the $1,200 checks — but in particular the $600 unemployment benefits boost — that really helped keep up consumer spending in Arkansas," Jebaraj said. "Since that has gone away, consumer spending has dropped.
"Unfortunately it doesn't look like Congress and the president can agree on any new stimulus measures, which are very very badly needed here. The $600 unemployment boost went a really long way to muting some of the effects of the pandemic and the recession it caused. Since it has gone away, we are now starting to deal with those issues all over again."
Consumer spending is down 18% in restaurants, many of which have reopened with reduced capacity, and is down more than 36% in entertainment venues.
"Those are the sectors I am concerned about, that we should all be concerned about," Jebaraj said. "These are the sectors that really need the government to step up and provide additional stimulus."
The other presenter at the virtual meeting was Mike Harvey, the COO of the Northwest Arkansas Council. Harvey oversees the council's Finding NWA program, which tries to identify and recruit quality employees to the region.
"The focus of our efforts is really around tech, entrepreneurs and creatives," Harvey said. "We recently added remote workers because COVID has laid bare that work can be done remotely."
Harvey said he and his team use analytic tools and legwork to identify potential employees through websites. He said the team reads and documents social media profiles and postings and then tries to tailor sales pitches to specific targets.
"I tell people this is one part creepy, one part cool," Harvey said. "It helps us focus in on the talent we are looking for. Not only where they are but what they are doing, who they work for, their skillset and where they went to school. We better understand their psychographics and what they are interested in."
