UA Economist Gives Tepid Forecast for Arkansas

Mervin Jebaraj, director of the Center for Business and Economic Research at the University of Arkansas

Arkansas added 27,000 jobs in 2021, a respected number that the state has not seen in years.

That number doesn’t quite come with an asterisk, but University of Arkansas economist Mervin Jebaraj pointed out that those big job gains still left the state in the red after the job losses of the previous year because of the COVID-19 pandemic. Jebaraj was one of three economists who gave presentations to a crowd of approximately 1,000 at the 28th annual Business Forecast Luncheon on Friday at the Rogers Convention Center. Walmart Inc. CFO Brett Biggs was the moderator of the luncheon.

The event is held by the Center for Business and Economic Research at the University of Arkansas’ Walton College of Business. Jebaraj is the director of the CBER and gave the state’s presentation.

“That is not a number we have hit in a long time,” Jebaraj said. “That piece of good news is a little bit — well not a little bit, but is pretty well out of context.”

Jebaraj said northwest Arkansas is the only metropolitan area in the state that has more employees currently than before the pandemic first brought chaos and disruption in March 2020. Northwest Arkansas added 13,000 jobs in the past year and is up 11,000 since 2019.

Central Arkansas, the state’s most populous metro area anchored by Little Rock, added 4,300 jobs in 2021 but is still down 13,000 since 2019. Jonesboro added 1,500 jobs but is still 400 from three years ago, while Fort Smith added 2,300 jobs but is still 2,000 short.

Jebaraj said predictions were the state would add 20,000 overall in 2020 and 2021 but, instead, lost 11,000; that is a hole the state will continue to have to claw out of. Jebaraj predicted the state would add 20,000 new jobs in 2022.

“My forecast is generally positive, maybe a little bit tepid,” Jebaraj said. “Does that get us above where we were in 2019? Yes, but not a whole lot more than where we were.”

Jebaraj said the reasons for his moderate projection are his belief that several important job industries, such as health care and leisure and hospitality, will have a difficult time reaching pre-pandemic levels and because federal stimulus money, which was pumped into the economy the past two years, is no longer available.

“I don’t think the pandemic will be completely gone in 2022,” Jebaraj said. “I think we will be dealing with this in some form or the other throughout this calendar year.”

While Jebaraj’s presentation wasn’t glitter and rainbows, he and his fellow presenters drew several laughs from the audience. Jebaraj said leisure and hospitality saw big job increases in 2021 as people began to return to social activities, but the industry was still well short of previous levels.

“The leisure and hospitality sector in northwest Arkansas had a rough two years,” Jebaraj said. “2020 is obvious to everybody; it was the pandemic. But 2019 in northwest Arkansas was pretty rough for leisure and hospitality and that was largely because of Chad Morris.”

Morris, of course, is the former Razorbacks football coach, whose tenure is a sore spot for fans after a 4-18 record in 2018 and 2019.

The forecast luncheon was held virtually a year ago because of the pandemic and when national forecaster David Altig greeted the crowd he thanked Jebaraj for giving him a reason to get out of the house.

“This is the first time in two years I’ve put on a tie,” said Altig, the director of research for the Federal Reserve Bank of Atlanta. “It is about how I remember it but well worth it.”

After saying that Jebaraj had described him as a forecaster, Altig jokingly took issue with that.

“I usually think of myself as a traveling purveyor of woe,” Altig said. “Forecaster is a little bit ambitious for the current times.”

A major economic issue as the country tries to emerge from the pandemic is the rising rate of inflation. Altig said economists had worried for the past decade that inflation was too low, a problem, he said, that has corrected itself this year.

Altig said he believes that inflation will eventually moderate back to the preferred rate of 2% this year. But the current short-term inflation trend is not as rosy.

“We just got a new report on it this morning,” Altig said. “If you haven’t seen it, I will give you the short version of it: Blech.”

Altig said the rates of personal consumption expenditures are the highest since the early 1980s. He said 70% of consumer goods are rising at a 3% rate and 50% of them are rising at 5%, figures not seen since the 1970s.

“This is not narrow, it’s not a few items we can explain away,” Altig said. “These price increases are actually quite broad based. It is actually quite startling.”

Altig said the job market showed that there were 4.5 million more vacancies than new hires in 2021. By comparison, there were 1.5 million more hires than vacancies in 2010.

The 2021 numbers are not as necessarily as dire as they may seem. Altig said while there is a 4.5-million job gap, some of it is due to aging workers retiring and a decrease in immigrant workers, who can’t get work visas because the pandemic has closed embassies.

Also a concern is the pandemic’s hard effects on parents, primarily women, with children under the age of 6. The pandemic disrupted work hours and shut down child care facilities, forcing many parents to leave work to care for their children; single mothers have been the slowest to recover from the pandemic’s job market effects.

Altig said his personal predictions are for gross domestic product growth of between 2% and 3% and a return of inflation closer to 2%. Wages that have not kept up with inflation is a concern, though.

“There is a real issue with wages,” Altig said. “Wages are not growing and have not been growing. As wages catch up, what is that going to do to the inflation outlook? That is a real wild card.”