Economist to NWA: Plan for influx

FAYETTEVILLE — Northwest Arkansas is well-positioned economically to weather another recession, but needs to start preparing now for the hundreds of thousands of people who’ll move to the area in the next 10 to 20 years, University of Arkansas economist Mervin Jebaraj said Thursday.

The 2020 recession was “less worse” in Northwest Arkansas than in other parts of the state and US, Jebaraj said at the annual State of the Region meeting presented by the Northwest Arkansas Council.

Jebaraj, the director of the university’s Center for Business and Economic Research in the Walton School of Business, said the recession ended in Northwest Arkansas in the spring of 2021, while it varies in other parts of the state.

One reason for that, he said, is that job creation in the region continues and it has the lowest unemployment rate in the state.

On the other hand, the biggest negative in Northwest Arkansas is a drop in homebuying because of higher prices for both new and existing homes, Jebaraj said.

Nationally, speculation about another recession looms large, and Jebaraj had both good news and bad news about that possibility.

The gross domestic product numbers for the third quarter released early on Thursday showed the US economy grew 2.6% in the quarter after two quarters of negative growth earlier in the year.

Still, the fourth quarter will likely go back to negative growth, he said.

“So I took good news and made it bad,” Jebaraj quipped.

While he thinks it’s unlikely the nation will go into a recession this year, Jebaraj said it will probably do so in the first half of 2023 if the Federal Reserve raises interest rates to 7.5%.

But Northwest Arkansas economic indicators are likely to gain strength over the next few years as more highly educated professionals move into the area and more high-paying jobs, mostly in the tech sector, are created.

Jebaraj compared the Fayetteville-Springdale-Rogers Metropolitan Statistical Area’s economy to six similar “peer” regions of Austin, Texas; Des Moines, Iowa; Madison, Wis.; Durham-Chapel Hill, NC; Raleigh, NC; and Provo-Orem, Utah. He analyzed economic indicators in the various regions such as gross domestic product, employment, household income, wages, educational attainment and housing prices.

Northwest Arkansas’ population grew 4.8% between 2019 and 2021, following only Provo-Orem and Austin.

Median household income in Northwest Arkansas last year was $71,767 — the second-to-last, just ahead of Durham-Chapel Hill.

And the average annual wage of $51,590 in 2021 ranked lowest compared to the other regions.

Jebaraj said these statistics are among the most likely to improve with more people and jobs coming to the region.

To prepare for this influx, anticipated to nearly double Northwest Arkansas’ population to 1 million by 2045, much more planning for multifamily and single-family housing is needed, he said.

Not including student housing, Jebaraj said, the current vacancy rate for housing is 1.1%.

That’s not enough to meet current needs, much less those that are coming, he said.

The lack of available housing nationally has driven rents and home prices up over the past year, contributing to inflation. But Jebaraj said those are already coming down.

Home prices in Northwest Arkansas rank about in the middle compared with the six peer regions, he said.

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