Jobless rate forecast to stay below 4%

The unemployment rate in Arkansas, which has hit the lowest level in recorded history, is likely to remain below 4 percent through 2020, Michael Pakko said Friday at the annual Little Rock Regional Economic Briefing.

Based on quarterly averages, the state’s unemployment rate will be 3.6 percent this year, 3.7 percent in 2019 and 3.8 percent in 2020, Pakko, chief economist at the Arkansas Economic Development Institute at the University of Arkansas at Little Rock, told a crowd of more than 100 at the Clinton Presidential Center.

Pakko expects Arkansas’ nonfarm payroll employment will increase 1.1 percent this year, 1.2 percent in 2019 and 1 percent in 2020.

“That’s a pretty positive outlook,” Pakko said. “When we look at where the job growth is going to come from, it’s pretty broad-based.”

That would include about 12,000 jobs in professional and business services and almost 7,000 in leisure and hospitality services.

The total number of new jobs from the remainder of 2018 through 2020 is 31,000, Pakko said.

“That’s a pace of 1 [percent] to 1.2 percent,” Pakko said.

There has been a longterm decline in manufacturing employment both in the U.S. and Arkansas. “That’s partly due to globalization and trade issues, but has more to do with technology and efficiencies,” Pakko said.

Thirty-four of the state’s 75 counties had an increase in employment from 2010 to 2017, meaning employment decreased in 41 counties, Pakko said.

“Those areas of the state that used to rely on smallscale manufacturing, those jobs have pretty much disappeared,” Pakko said. “People who worked those jobs, many have dropped out of the labor force.”

Although there are some trouble spots, the country is in no serious risk of a big economic downturn in the near

future, Pakko said.

In his economic forecast, Pakko said:

The state’s population will increase by about a half-percent in annual increments through 2021.

Arkansas’ gross state product will increase 1.6 percent this year, 2.4 percent in 2019 and 1.8 percent in 2020.

The state’s personal consumption expenditures will grow 4.7 percent this year, 4.5 percent next year and 4.6 percent in 2020.

Arkansas’ home sales will increase 1.8 percent this year, 1.5 percent next year and 3.3 percent

in 2020.

From a national perspective, Chris Varvares, vice president and co-head of U.S. Economics IHS Markit, said the country is in “an unusual period of stability.”

“Obviously the economy has been doing pretty well,” Varvares said.

U.S. growth remains on solid footing for another year or two, Varvares said.

Global growth has been pretty strong, although China is undergoing a more pronounced slowdown, Varvares said.

“Most of us, while rooting for a soft landing and certainly not a hard landing, [realize] that is one of the risks this economy faces,” Varvares said.

Global economic growth is gradually eroding and is expected to slow from 3.3 percent in 2017 to 3.2 percent this year to 3.1 percent in 2019 and 2.9 percent in 2020, Varvares said.

Initial conditions for the U.S. economy are unsustainable over the medium term, he said.

The country’s growth will peak this year and slow markedly over the next two years, he said. The unemployment rate will rise.

And recession risks will rise as the country approaches 2020 and beyond, he said

“And current law is for those personal tax cuts to expire in 2020, in which case there will be a period of fiscal drag,” he said. “So that is a concern and a risk for now.”