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State economy compresses, contradicts Thursday, Dec 7, 2006 By John Brummett Yet another monthly report of state government tax collections shows robust growth, even higher than rosily projected. The surplus mounts. Legislators scan their pork menus and rub their hands in glee. But there's concurrent sad news, as if to defy what the state Finance and Administration Department keeps telling us. The forest products industry scales back across South Arkansas, partly for seasonal reasons, partly because of the decline in housing construction and partly because the entire industry is easing overseas. Whirlpool ever reduces at Fort Smith. Now Sanyo lays off 350 at Forrest City. Are we flush or are we in trouble? Yes. You can tell I've been talking with economists. Let me synopsize what I have gleaned: These layoffs, while ominous for manufacturing and the state's rural economy, are part of a pre-existing process by which Arkansas' jobs, like those of the nation as a whole, are being transformed from predominately manufacturing to service. Arkansas' economy has thus far withstood any weakening effects during this transformation because, at least until lately, most of the manufacturing losses were entry-level and lower-wage. Meanwhile, general business activity and the service sector employment it sustains - in such fields as finance, insurance, telecommunications, wholesale trade and retail trade - have boomed. For the manufacturing jobs remaining and the service sector jobs that are increasing, overall wages and salaries have risen remarkably of late in Arkansas, at a rate of 7.5 percent over the first six months of this calendar year. That's because the demand has grown for skilled labor, providing a skilled workers' market. Now I'm getting ready to predict what economists have been predicting for Arkansas for two years. That would be a slowdown. We have fresh signals that the manufacturing losses are reaching higher-paying levels. The rate of growth in service sector employment is slowing. Higher interest rates are beginning to harm the housing market in Arkansas. That likely will effect consumer spending, particularly that based on home equity debt and for new automobiles. Economists talk of a soft landing. That means the bottom won't fall out. It means we'll probably look up over the next year or two and see robust growth replaced with baby steps. It won't be the end of the world. We can hope that a soft landing means that Arkansas' economy is diversifying. We also can hope it means state government will get out of the surplus business. Frankly, we get more fiscally responsible government when we take away legislators' pork menus and hand them bologna sandwiches. It is simply not safe to mix state legislators and unencumbered revenue. Speaking of politics: Mike Beebe and the state's predominantly Democratic congressmen owe their elections to insurmountable majorities in the southern and eastern sections, which happen to be the rural ones left out of the aforementioned transformation. There aren't any shoe plants or shirt plants left out there. Meantime, the great bulk of the state's new service economy compresses to the places with large concentrations of people who will avail themselves of the services, meaning cities and suburbs. How farmers fare year-to-year affects eastern Arkansas, of course. This mad rush to drill for natural gas across north-central and east-central Arkansas offers hopeful news. But those enterprises tend to affect individuals, not regions, and a lucky or unlucky few, not an overall economy. We need for our rural-elected and rural-beholden Democratic politicians to adopt a sense of urgency about what to do in the countryside. State legislators coming home with pork won't be enough, particularly if state government gets forced out of the surplus business. Rural Arkansas cannot long live by high school football alone, though, frankly, the big state championship tussle between Nashville and Warren has piqued my interest. ------- John Brummett is a columnist for the Arkansas News Bureau in Little Rock. His e-mail address is jbrummett@arkansasnews.com; his telephone number is (501) 374-0699. |
