Arkansas economist Michael Pakko told Arkansas Business on Friday that the state could see a return to pre-pandemic employment figures by the end of 2022 — an outlook that could be affected by the release of a vaccine, more stimulus payments and new shutdowns.
But income and consumer spending will likely see more rapid growth, and the state has fared better economically than the rest of the country, he said.
All were points Pakko made during a presentation Thursday at a virtual Little Rock Regional Economic Briefing. The event was hosted by the Little Rock Branch of the Federal Reserve Bank of St. Louis and Pakko’s employer, the Arkansas Economic Development Institute at the University of Arkansas at Little Rock.
“The bottom line is that outlook, just like the current circumstances, really depends on the course of the virus and efforts to control it by means of shutting down economic activity and also compensating people for their losses. Those are both part of the whole evolution of the economy,” Pakko said on Friday. “Right now, everything's happening faster than we expected. It was one of my first points, that at every stage along the way we've been surprised at how rapidly things have happened, how quickly the economy collapsed, how quickly it bounced back — and we'll see. We're expecting really more of a convergence path over the next couple years to get back to the new normal.”
The 2022 outlook no longer includes the assumption that Congress will approve another stimulus, and it’s based on a traditional economic cycle. But Pakko said economists may be surprised again by a faster-than-expected recovery.
“Arkansas has fared relatively well throughout this COVID pandemic, and that's due to a number of characteristics of our economy and the course of the COVID-19 itself,” he said. “We weren’t as hard hit in the early stages, certainly not like Northeastern states — New York, Connecticut, New Jersey. So our government officials basically took a measured approach to shutting down the economy. We were one of the few states that never really had any sort of mandated stay-at-home order. We had the opportunity to keep our economy a little bit more functional than some other places. And then, top it off with the stimulus payments that came primarily from the federal government both to consumers and employers.”
Pakko said the stimulus payments here were more impactful here than in other states because of Arkansas’ lower cost-of-living. The resulting surge in consumer spending helped boost the state’s economic rebound, he said.
There were winners and losers in the economic upheaval. For example, online retailers have done well.
In Arkansas, more people are employed in retail than were before the outbreak, but fewer are employed in the restaurant and hotel sectors, Pakko said.
He also expects some trends the pandemic accelerated to be part of the post-pandemic normal, including the popularity of online shopping and working from home.
