Analyst sees U.S. recovery sluggish

2% growth rate is best expected

FAYETTEVILLE - One of the state’s top economists said Wednesday that Arkansas and the nation still are on the path to recovery, though it’s going to be a sluggish and slow process.

Kathy Deck, director of the Center for Business and Economic Research at the Sam M. Walton College of Business, told a room of more than 70 people that she had some relatively good news for the state and Northwest Arkansas on the economic front during the Quarterly Business Analysis during a luncheon Thursday at the University of Arkansas at Fayetteville.

Nationally, she said the gross domestic product is expected to continue to grow but at a much lower rate than before the recession. She said 2 percent growth is the best most economists expect in the next few years.

Small-business owners for years have placed lack of demand as their top concern in the National Federation of Independent Business’ survey but now have moved that concern to third in favor of worries about taxation and health-care policies. Despite that uncertainty, the federation’s Small Business Optimism Index is moving up but still falls far short of levels recorded before the recession.

“They just don’t know how to react,” Deck said of small-business owners.

The U.S. manufacturing sector is staged for a comeback, but Deck said if U.S. companies bring operations home they may come with fewer jobs than in the past. Homebuilders are feeling much better, and a general recovery is taking place, even in cities devastated by the housing bubble like Phoenix.

The nation’s labor force continues to cause concern, with only 170,000 to 180,000 jobs being added each month. For August, the U.S. labor force stood at 155.97 million, up 0.46 percent compared to last year.

“This is slow, sluggish, not-good-enough growth,” Deck said.

In Arkansas, the labor force statewide has declined in the past year. The labor force stood at 1.37 million in July, down 2.11 percent compared to the same period last year. In Northwest Arkansas, the labor force grew 1.66 percent to 241,041.

“You can see how much the state is suffering, particularly in rural areas,” Deck said.

The declining workforce shows workers are leaving the state, going back to school to make themselves more marketable or simply giving up, Deck said.

While the state’s unemployment rate is improving at 7.6 percent for July, she expected the rate to edge lower soon.

She said it could take up to six years for the state to return to pre-recession unemployment levels of about 5 percent.

Northwest Arkansas is bucking that trend with an unemployment rate of 5.9 percent in July.

The Fort Smith Metropolitan Statistical Area is beginning to see signs of a recovery, with the Little Rock and Jonesboro areas holding steady and Pine Bluff continuing to trend downward, she said.

Northwest Arkansas’ housing market is coming back, in part due to demand from new workers coming to the area. In the boom times of the mid-2000s, about 1,000 newcomers moved to Benton and Washington counties. Now that rate is more like 750, she said.

According to data released recently as part of the Skyline Report in late August, a semiannual report on Benton and Washington counties sponsored by Fayetteville-based Arvest bank, there were 1,149 residential building permits in Benton and Washington counties for the first six months of the year, an increase of nearly 31 percent from 880 for the same period in 2012.

For the first six months of the year, there were 3,051 houses sold in the two counties, up 14.3 percent from 2,669 sold for the same period in 2012.

Deck said she’s often asked if this growth means a new housing bubble is on the horizon. She said she’s not concerned.

“We’re not anywhere close to the level we were during the boom,” she said.

Business, Pages 25 on 09/13/2013

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