Northwest Arkansas Democrat-Gazette
Arkansas, region post modest economic gains
Arkansas and the Midwest regional economy achieved incremental growth over the summer though trouble spots remain – especially in the banking and hospitality sectors – heading into the final months of the year, according to a report from the Federal Reserve.
Like the rest of the nation, economic activity in Arkansas and surrounding states “increased modestly, but losses sustained during the pandemic have yet to be fully recouped,” the Fed found in its Beige Book report.
The entire state of Arkansas is part of the Fed’s St. Louis region, which also includes portions of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee. Major metropolitan
areas in the region are Little Rock, Louisville, Memphis and St. Louis.
For the remainder of the year, the region should experience “steady economic recovery as businesses and households adapt to the pandemic environment,” Fed economist Charles Gascon said Thursday.
Arkansas should continue to see falling unemployment rates to end the year as workers trickle back into their jobs, Gascon said.
“Assuming new Covid-19 cases decline, people should return to their employers and the unemployment rate should continue its downward trajectory,” he said.
Unemployment in Arkansas has dropped for three consecutive months, falling to 7.1% in July after reaching a high of 10.8% in April as the coronavirus shredded the economy.
On Wednesday, the U.S. Bureau of Labor Statistics released July unemployment rates for metropolitan areas in Arkansas. Unemployment was down in all major areas, though only Northwest Arkansas and Jonesboro recorded rates below the state’s 7.1%. The Fayetteville-Springdale-Rogers corridor had a joblessness rate of 5.4%, while Jonesboro was at 6.4%.
July unemployment was 7.4% in Fort Smith, 9.4% in Hot Springs, 8% in Little Rock and Central Arkansas, 8.6% in Pine Bluff and 7.2% in Texarkana.
There is “sand in the gears” of the economic recovery, Gascon said, noting that disruptions remain in supply chains and some industries still have challenges to regain full capacity.
For example, regional industries that are hiring are finding trouble keeping workers because of health concerns and child care obligations. Even wage increases have not been sufficient to keep workers on the job.
“On net, 15% of contacts reported that wages were up since this time last year — less than half the number who usually report such increases,” the report said, noting that a peach farmer in the Midwest region offered a 10% wage increase but still couldn’t find enough workers to harvest a full crop.
Some economic sectors, notably auto sales and restaurants, showed improvements attributed to pent-up demand, while other industries continued to experience reduced demand. The tourism and hospitality sectors were notable sore points, the Fed report said.
Banking and the financial sector also remain concerns, the Fed said.
“Overall delinquencies have declined primarily in consumer products such as credit cards, mortgages, and auto loans,” the report said. “However, bankers continue to express some concern for loans in the leisure and entertainment industry.”
Economic recovery remains in a precarious position, Gascon said. “We remain in a pandemic so the outlook is highly uncertain and conditions could drastically turn out better or worse,” he said.
On the national level, businesses said they are modestly optimistic while also pointing to some economic weaknesses.
“Continued uncertainty and volatility related to the pandemic, and its negative effect on consumer and business activity, was a theme echoed across the country,” the report said.
The Beige Book outlines economic activity across the U.S. in July and August and is based on anecdotal information provided by contacts in multiple industries.