BENTONVILLE -- Northwest Arkansas boasts many of the characteristics needed for economic success, but needs to invest more in building a skilled workforce and supporting entrepreneurship, economic researcher Ross DeVol said Monday at a regional business briefing.
Two economists from the Federal Reserve Bank of St. Louis also addressed the audience of business leaders at Crystal Bridges Museum of American Art.
DeVol is president and chief executive officer of the new Walton family-backed think tank Heartland Forward, which hosted the invitation-only event along with the Little Rock branch of the St. Louis Fed. He said in his presentation that "the most critical source" of a region's competitive edge is a workforce skilled in engineering, the life sciences and computer science. Such a workforce "converts research into viable firms," said DeVol, formerly the chief research officer at the California-based Milken Institute.
Arkansas ranks among the bottom 10 states on DeVol's State Technology and Science Index, along with six other states in the portion of the country that the think tank designates as the nation's heartland. To increase economic growth, DeVol said, the region needs to invest more in education to help workers obtain associate degrees on up to bachelor's and advanced degrees in technological skills.
Universities can also contribute to economic expansion in metropolitan areas by investing in research-related innovation, DeVol said. Spending on research and development helps new companies "spin out" from the university environment, he said.
Northwest Arkansas is fortunate to have the flagship campus of the University of Arkansas, a leading research university, located in Fayetteville, DeVol said. Also, the Fayetteville-Springdale-Rogers Metropolitan Statistical Area, which includes Bentonville and now has a population topping 500,000, is seeing an influx of millennials from the east and west coasts, he said.
This is a reversal of a decadeslong trend of college-educated young people leaving the heartland to seek brighter job prospects. Millennials' return indicates they're now finding a better, more affordable quality of life as well as rewarding job opportunities in Northwest Arkansas, DeVol said, noting the area now has the ninth-highest per-capita income in the nation.
"For the first time ever, more people with bachelor's degrees or higher are coming into the region than leaving, DeVol said. "That's very good news."
But to continue creating high-paying, high-quality jobs for all these newcomers and returnees to the heartland, DeVol said, entrepreneurship and innovation are critical. He said economic development leaders are quick to understand this, but political leaders often need more convincing to see the benefits of increased spending in these areas. The data sets that DeVol and his staff are utilizing provide the evidence that those who control the purse strings want to see, he said.
Heartland Forward grew out of the Walton Family Foundation's Fellows program, and formally opened on Oct. 22. The institute focuses on finding ways to improve economic performance in the central U.S.
Kevin Kliesen, a research officer and business economist with the St. Louis Fed, opened Monday's briefing with an overview of national economic conditions. "The economy is in good shape," he said, "but we do expect to see a bit of a slowdown next year."
The biggest uncertainty, Kliesen said, lies with U.S. trade policy. The prospect of more tariffs on goods imported from China poses the biggest downside risk to the economy, he said. Conversely, if a trade agreement with China can be worked out, he said, the nation's economy could be stronger next year.
Kliesen said other headwinds include a slowing global economy and weak business investment. He said manufacturing continues to struggle. "Clearly, manufacturing is, if not in a recession, it certainly looks and feels like a recession," he said.
Transportation services are sending "mixed signals," Kliesen said. The index of freight movement continues to rise, he said, with the latest figure the highest in years. However, transportation and warehouse employment is dropping off slightly, he said.
Still, unemployment claims remain low and job growth remains healthy, Kliesen said. He expects energy prices to remain steady, with oil at about $60 a barrel, though diesel fuel prices may rise some.
Charles Gascon, a St. Louis Fed regional economist, discussed Arkansas' economy in relation to that of the U.S.
Gascon noted that many metropolitan economies across the country have continued to contract since the 2007 recession, even as the nation's continues to expand. Regional growth in some areas, though, has been faster than national growth, he said. Areas that are booming include San Jose, Calif.; Midland, Texas; and Northwest Arkansas.
Service-job growth is driving economic growth in these metro areas, Gascon said. This is largely because of population density, which has its pros and cons, he said.
"The benefits include increased amenities and a [lower] cost of living," he said. Population growth can become problematic over time as infrastructure struggles to keep up.
Arkansas' birthrate is higher than the national average, Gascon said, "which bodes well for the long term." The other source of growth is migration. In Arkansas, domestic migration is the biggest source of growth, with people arriving from Texas as well as other states. International migration is just equal to the national average, he said.
"This all adds up to 5.3% growth, which is very strong," Gascon said.
Business on 11/05/2019
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