Michael Pakko
Michael R. Pakko took on the job of chief economist and state economic forecaster position at the Institute for Economic Advancement at UALR in August 2009.
Before coming to UALR, Michael Pakko had been a research economist at the Federal Reserve Bank of St. Louis from 1993 to 2009. At the St. Louis Fed, he published research on a variety of topics, including international trade, economic growth, monetary economics and public policy.
Pakko earned a bachelor’s degree in economics from Michigan State University and his master’s and doctorate in economics from the University of Rochester.
There’s been much written about the decline in the U.S. labor force. What do you think the reasons are behind this decrease?
There are multiple factors at play. In part, the decline is attributable to changing demographics as the baby boom generation ages and moves into retirement. But the severity of the last recession and the slow pace of recovery have also played a role in driving people out of the labor force.
Of particular concern is the decline in the participation rate among prime working-age males. Labor force participation rates are lower in Arkansas than in the rest of the nation and have been falling more rapidly. Our state has a higher proportion of retirement-aged people than the rest of the country. But weakness in the manufacturing and construction sectors in Arkansas has likely been a factor in driving a “discouraged worker” effect on labor force participation.
How do you think the financial crisis in Greece will impact Arkansas?
Unless the Greek crisis precipitates a worldwide financial crisis, I don’t see it having any significant impact on the Arkansas economy.
What concerns you about Arkansas’ current economy?
Two sectors have continued to languish in terms of job growth: manufacturing and construction. Construction employment has shown signs of picking up in the first part of 2015 and should continue to expand as investment in residential and nonresidential structures recovers. However, cancellations and delays in highway projects will put a damper on net growth.
As for manufacturing, Arkansas has experienced little if any rebound since the recession. While there is still room for improvement, we cannot really expect the manufacturing sector to be the engine of job growth for the state that it once was.
Another imbalance in the state’s economy is regional: We’re seeing robust growth in the northwest and northeast corners of the state. Central Arkansas’ economy is growing, but more slowly. In other metro areas and in the nonmetropolitan parts of the state, local economies are still stagnant or even remain in decline.
What sectors do you see the most growth in Arkansas for the second half of the year?
In addition to renewed strength in construction, we should continue to see growth in service-providing sectors. In particular, leisure and hospitality and professional and business services have been expanding recently and should continue to add jobs. Health care also continues to be a growth sector, and has even shown signs of accelerating in recent months.
What could the state of Arkansas do to help nourish small and family-owned businesses?
Small businesses are crucial to the economy. There are many programs in Arkansas that are designed to help small businesses finance their operations and grow, but the refrain I hear from business owners around the state is a complaint about bureaucratic red tape. Many of the regulatory burdens are federal, rather than state, but whatever can be done to reduce compliance costs on small businesses would be helpful.
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