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Arkansas CEOs Feel Economy On Track, but Labor Costs and Hiring Pose Challenges

10 min read

During the past year, Arkansas Business has surveyed our subscribers who are CEOs and executives about their thoughts on current business conditions and their general outlook for the economy.

Arkansas business leaders, on the whole, feel good about where the economy is and the direction it’s heading. Capital investment is up, along with hiring and revenue.

As for concerns, CEOs in the state share worries about the rising costs of labor and, in some sectors, a lack of a qualified workforce.

There is also widespread frustration with the Federal Reserve’s approach to interest rates, which have remained unchanged despite expectations that the nation’s central bank would slash its benchmark rate multiple times in 2024.

Executives are also closely watching the November general election, which could shift control of the White House and Congress, potentially flipping the direction of the country on taxation, regulation, infrastructure investment and a whole host of other policies.

In recent weeks, the Arkansas Business staff interviewed leaders from eight sectors for their midyear outlook.

Gov. Sarah Huckabee Sanders Paints Sunny State Outlook

High interest rates and inflation are pinching businesses and consumers, but Gov. Sarah Huckabee Sanders is bullish on Arkansas’ economy.

She’s not alone. S&P Global Ratings upgraded its outlook on the state from “stable” to “positive,” reaffirming its long-term AA bond rating.

Gov. Sarah Huckabee Sanders (Arkansas Governor’s Office)

“We’ve cut taxes, invested in education, grown tourism, and invited more Arkansans into the workforce,” Sanders told Arkansas Business. “Thanks to those policies, more Arkansans are working than ever before, our state economy has never been larger, and our population has never been higher.”

Sanders expects the state’s economy to grow stronger during the next year, pointing to continued enactment of tax cuts, investments in K-12 and workforce education and a focus on the outdoor economy.

She pledged to continue efforts to limit the growth of state government because “we know that government doesn’t drive economic growth — businesses and families do.”

The Republican governor’s top economic concerns remain overregulation and inflation triggered by “incompetence” in Washington, D.C.

“We have a proven recipe for growing our economy: lower taxes, better schools, and a world-class quality of life,” she said. “That agenda is already having an impact. Companies like Dassault Falcon, Raytheon-Rafael, and Walther Arms announced more than $1 billion in investments last year … .

“We’re breaking tourism records left and right. Here in Little Rock, we’re not taking our foot off the gas anytime soon — and that will continue to help businesses and families in the Natural State thrive.”

Baptist Health CEO Troy Wells Says Labor Costs, Stagnant Reimbursement Strain Hospitals

The challenges facing the hospital industry keep Troy Wells up at night.

The president and CEO of Baptist Health of Little Rock, the largest health care system in Arkansas, has seen an increase in labor costs and pharmaceuticals.

Troy Wells, president & CEO of Baptist Health (Karen E. Segrave | KES Photo)

Nearly 60% of hospitals’ total expense is labor. The five-year average increase for registered nurses’ pay was 6.2% at Baptist Health.

Through the first four months of 2024, Baptist Health has seen its labor costs rise 6.4% compared with 2023. Nationwide, hospitals reported about a 4.6% increase in labor costs in the first four months of 2024.

Pharmaceutical prices have also been climbing. The rising “drug costs are really problematic for us,” Wells said. Baptist Health’s system, which includes 12 hospitals in Arkansas and more than 100 primary and specialty care clinics, expects its pharmacy spending to be up about 10% in 2024 from 2023. Hospitals nationwide have seen about a 9% increase in the first four months of this year.

Another issue is that government payers, such as Medicaid or Medicare, aren’t keeping pace with inflation. “And we don’t have any ability to negotiate those prices with the government,” Wells said.

Baptist Health will spend about half of what it budgeted for capital expenses in 2024. “We’re either delaying some projects that we had planned, or just delaying purchases that we might have already done under better operating conditions,” he said.

“You have the hope of interest rate relief in the next 12 months, perhaps,” Wells said. “And all those things indicate an overall good economy, and we just have some things going on in the health care sector that are particularly challenging that we have to adjust to.”

Entergy Arkansas CEO Laura Landreaux Focuses on the ‘Art of the Possible’

The electric power industry’s greatest challenge is managing the grid reliably and affordably despite an aging infrastructure and frequent extreme weather. So says Entergy Arkansas CEO Laura Landreaux

Against the backdrop of an ever-increasing demand for power fed by increased cross-industry electrification and Entergy’s mission of decarbonization, “extreme heat and cold are becoming the new normal,” she said. “We’re having to plan for that with standards that withstand these extremes.”

Laura Landreaux, CEO of Entergy Arkansas (Kerry Prichard)

Worker safety keeps Landreaux up at night. “We are in a very high-risk industry, and safety is really the No. 1 thing that matters to us — giving our employees the tools and training they need to return safely to their families.”

Opportunities fuel a different kind of sleeplessness. “You can be kept up by the spinning wheels, the art of the possible, and thinking about how we’re going to capture all the opportunity that Arkansas is capable of achieving.” Transmission grid and expansion and attracting new industries rank among those possibilities, she said.

Landreaux sees good economics coming in the next 12 months. Unemployment is low and interest rates and inflation are retreating, she said. “All of that is sort of building up some positive momentum. … We’re seeing expansions of existing customers.”

Entergy stands ready to take advantage of federal grants, loans and tax credits through the Inflation Reduction Act, the Bipartisan Infrastructure Law and similar legislation. “We do it in a way that we are able to calculate the benefits to the customer with each of our capital investments,” she said. “We are seeking an all-of-the-above strategy when it comes to that opportunity.”

Westrock Coffee CEO Scott Ford Plans to ‘Keep Leaning Forward’

Scott Ford, CEO of Westrock Coffee Co. in Little Rock, said his industry’s biggest challenges are twofold: a fairly rapidly shifting consumer desire profile in and among the products that Westrock makes for people, alongside food and fuel inflation. That, Ford said, has dried up the available spending cash that half of the people in America have.

Westrock Coffee CEO Scott Ford (Photo provided by Westrock Coffee)

In a market where consumers are less likely to buy a second cup of coffee or make a cup themselves at home or in the office, Westrock is continuing to invest in its product. “There will always be issues, there will always be challenges, and there will always be disappointments,” Ford said. “You have got to keep leaning forward and keep expecting the best out of people.”

The company has spent roughly two-thirds of the $350 million allocated for its new factory in Conway, with plans to spend the final portion during the next 12 months to prepare more ready-to-drink coffees than before.

Additionally, depending on how the market fares during the next year, there have been discussions within Westrock about opening another $100 million-plus factory focused on making dry coffee products.

Ford said he is confident about the free market. “If they know what the rules are, the free market is pretty good at figuring it out and adapting into it,” Ford said. “So by nature, I’m an optimist because I’ve watched them overcome one crazy regulation or policy after another for 40 years now.”

Flyway Brewing C0-Founder Matt Foster Sees Connection, Innovation as Keys to Success

Matt Foster believes in people. That’s why he’s optimistic about the economy.

Matt Foster, co-founder and co-owner of Flyway Brewing (Photo provided by Flyway brewing)

The co-founder and co-owner of North Little Rock’s Flyway Brewing said if he were to forecast the next year, or the next “5,000 months,” he’d say companies that “continue to innovate and foster connections” will succeed, because people are “thirsty” for a sense of community.

And though nothing keeps him up at night, Foster is worried about two things. The first is the persistent problem of limited shelf and bar space. It’s difficult to win a tap handle in a bar or restaurant, but even harder to keep one, Foster said. Slots on the shelf will always be limited, especially ones in the “cold box,” which is where all the craft beers want to be. And with more craft breweries popping up across the country, Foster sees the industry growing more competitive.

His other worry? Doing things the right way. Outside of adhering to strict alcohol regulations, Foster wants to make good beer.

He likes to brew “where the people are,” which means Flyway also has brewing operations at its Fayetteville and Memphis locations, rather than shipping from the North Little Rock headquarters. That model keeps the beer fresh and allows Flyway to sell “50% out of the front door,” Foster explained.

Foster’s optimism about the economy stems from Flyway’s community, which will soon extend to Little Rock’s Breckenridge Village and West Point, Mississippi.

“We operate, work and live in a great community in Arkansas, and a great region of the country in the Southeast,” Foster said. “That is why I’m optimistic.”

Legacy Capital Wealth President Matt Jones Takes the Long View

As a wealth manager, Matt Jones’ clients comprise leaders from numerous industries. “Pretty much across the board our clients are doing very well,” he said. “From the things I look at in terms of the economy, things are looking great.”

Matt Jones, president and CEO of Legacy Capital Wealth Partners (Karen E. Segrave | KES Photo)

Jones, whose firm has more than $1.2 billion in assets under management, noted that there still will be fluctuations in the stock market, which can get disconnected from the broader economy in the short term.

But his firm — and many of his clients’ businesses — are making capital investments. Legacy Capital is bucking a national trend of private equity acquiring local wealth management firms, looking instead at several acquisitions itself.

“Most of the people I’m talking to, including us, are in growth mode,” Jones said.

In the wealth management space, Jones said a major challenge is recruiting young talent, and cybersecurity is an ever-present issue. Entrusted with life insurance and financial information of some of the state’s wealthiest families, Legacy must remain vigilant as bad actors and scams become more sophisticated.

From a national perspective, Jones also noted that members of both political parties must soon get serious about addressing the national debt.

Overall, though, optimism abounds. “We like to focus on the negative things in our country, but if you look around the world, if you’re wealthy, I don’t care where you live, you have U.S. dollar-denominated assets,” Jones said. “Why? It’s because it’s the safest place in the world, and we operate the best free market economy in the world.”

Crafton Tull CEO Matt Crafton Faces Recruiting Challenges

It’s a good but challenging time in the engineering industry.

Matt Crafton, president and CEO of Crafton Tull (Photo provided by Crafton Tull)

Matt Crafton, the president and CEO of the engineering and architectural firm Crafton Tull in Rogers, said there is plenty of work for companies like his, which also provides landscape architecture and survey services. The company has about 300 employees with eight offices in Arkansas and one in Oklahoma.

Crafton said his biggest concern is keeping the workforce pipeline flowing.

“The biggest challenge facing the engineering, architecture and surveying industry is attracting new young people to the industry,” Crafton said. “Firms in our industry are busy with lots of work, so there are incredible career opportunities for young people, if we can get them to join us. We need to start the recruiting effort in the junior high and high school levels to get kids thinking about becoming engineers, architects, surveyors, planners, designers, environmental scientists.”

Crafton is also the chairman of the board of the company co-founded by his father, Bob, and Lem Tull in 1963. In 2019, it became an employee-owned company.

“In our industry, balancing the right mix of people versus how much work we have is always the biggest trick to manage,” Crafton said. “To maintain strong profitability, we have to keep everyone busy on projects without burning people out.”

Crafton worries about the continuing rise in labor and equipment costs, but he also understands that the robust growth in northwest Arkansas is a strong reason for optimism.

“For our industry, recent federal, state and local investments in infrastructure and quality of life improvements have fueled lots of growth,” Crafton said.

Eagle Bank CEO Jeff Lynch Optimistic as Inflation Falls

Jeff Lynch, the president and CEO of Eagle Bank & Trust in Little Rock, said he is optimistic about the economy because the inflation rate is down significantly from its peak in 2022.

Jeff Lynch, president & CEO of Eagle Bank & Trust (Photo provided by Eagle Bank & Trust)

He said that as long as it stays on that track, as the Federal Reserve is targeting, 2024 will be a strong year financially.

“With the lower inflation rates heading back towards 2%, which we know the Fed is committed to doing, they’re going to force our economy to slow down and get us back to an inflation rate of somewhere close to 2%,” Lynch said. “By doing that, that’s going to allow our economy to begin growing and expanding again. When the economy does well, so does our bank.”

Lynch said that though the inflation rate is on a good pace, he is hearing from some customers that their businesses are slowing. One of the primary reasons is that the cost of borrowing money to expand is high at today’s interest rates. They also struggle to afford the rising costs of the products that they’re purchasing to produce what they’re selling and still make a profit.

Even through this, Lynch said, he is seeing positives and remaining optimistic.

“So overall, I feel pretty good about the next 12 months,” Lynch said. “Because inflation is coming down, it makes people feel better about where we’re headed and that maybe in the next 12 months, the next 24 months, that borrowing costs will come back down and allow them to expand their businesses.”

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