Market falters : Region not recession-proof : Once rapid job growth down
Posted on Sunday, June 29, 2008
The rapid job growth that prompted thousands of families to move to Northwest Arkansas during the past several years has slowed significantly during the past year.
Annual job growth in Benton and Washington counties peaked at 6. 3 percent in September 2005. This growth slowed to a crawl at. 1 percent in March compared to last year.
This weaker job market makes it harder for people looking for a new or better job. It also makes it harder to sell homes in an already weak real estate market because fewer families are moving to Northwest Arkansas and buying homes.
The job growth numbers have edged up in recent months, but local economists do not expect a quick turnaround.
"We've seen the job growth decline in 2007, and this is expected to continue in 2008," Kathy Deck, director of the Center for Business and Economic Research at the Sam Walton College of Business at the University of Arkansas, said.
Deck prepares Ar vest Bank's Skyline Report to help the bank and its customers understand the real estate market in Benton and Washington counties. The bank and its customer can make better decisions if they have better information, Deck said.
Deck warned during 2005 and 2006 that the inventory of news houses and lots available in subdivisions in Northwest Arkansas was too high. She was able then to point to the strong job growth and demand as a bright sign.
Since then, builders and bankers have put the brakes on building new houses and the glut of new inventory has fallen accordingly. Still, demand for houses is weaker than in recent years, in part, because fewer people are moving here to take new jobs.
Not recession-proof The once widely held belief that Northwest Arkansas is recession-proof is proving flawed as the local economy mirrors the national economy - slowing job growth, weak housing market and increasing foreclosures. "We used to talk about how Northwest Arkansas was recession-proof or insulated from what happened nationally," Jeff Collins of Streetsmart Data Services said. "It's just obviously not the case.
"The rate of job creation has definitely slowed. We are being affected by what's happening nationally."
Before the job growth numbers in Northwest Arkansas can get back on track where they once were, the national economy must improve, he said.
Collins held Deck's job before moving into the private sector to provide clients information similar to the Skyline Report. When Collins and Deck were working together to deliver the news of the slowing housing market, some people wanted to blame the messenger, he said.
"Back in 2004 and 2005, we were noticing the disparity between supply and the number of houses that could be absorbed that could reasonably be absorbed," Collins said. "Some folks argued that the reason (for the region's housing woes ) was because we were spreading bad news."
Collins said the region's slowing job market has been impacted by the loss of construction jobs that resulted from the slowdown in the real estate market. The slowing growth in business and professional services jobs is a bigger issues because these have higher wages, he said.
Companies cautious Not only are companies creating fewer new jobs, but hiring managers are thinking twice before filling vacancies when people leave or retire. Don Marr, president of Bentonville-based HR Factor, said he has noticed that fewer companies are hiring or replacing middle- and upper-management positions. "People are evaluating every position when it comes open. Do we need this position ? Can this be done by anyone else ? "he said. "When an economy gets tighter, companies look at every position to decide whether to refill. "He said construction management used to be a thriving market for new management jobs, but since the slowdown those jobs have dried up. He's also noticed a contraction in the middle management area.
He said its getting harder to fill spots that do come open because candidates are less willing to move or job hop, especially if they have doubts about a company's financial condition.
"A bird in the hand is worth two in the bush," Marr said. "(Candidates for new jobs ) are taking less risks with start-ups and smaller organizations and asking more questions."
He agrees that the local economy is not recession proof but also said that its better here than in many other parts of the country. Cities, utilities affected Businesses are not the only employers taking a long, hard look before filling vacancies. Government and publicly owned utilities are scrutinizing openings before filling them because of tight budgets and shrinking revenues. The city of Fayetteville implemented a hiring freeze this year for all of its general fund positions. All employees are affected except the city's water, sewer, transportation and solid waste employees.
When someone leaves or retires, managers must go before the City Council, justify why this position must be filled and get approval before they can hire a replacement, Missy Leflar, city human resources manager, said.
"They are trying to be accountable to the taxpayers," she said.
Leflar said a part-time human resources employee left in the fall and they "decided to reallocate her position and save some money."
The Washington Water Authority recently left its second-highest paying position vacant after an assistant manager making about $ 50, 000 annually took another job. Josh Moore, Authority manager, said the utility is contracting with a company to take over most of that position's accounting duties at a big saving to the utility. He's not sure when or if they will fill the spot. "We are going to access it and see. We are not just jumping in and filling that position," Moore said.
Health care hiring Health care is one industry that's still creating new jobs. The education and health care services sector in Northwest Arkansas saw the largest increase during the past year - more than 4 percent - according to Bureau of Labor Statistics.
Bill Bradley, Washington Regional Medical Center chief executive officer, said he sees a good, growing job market in health care in both the region and the nation. Washington Regional has about 2, 200 employees, he said.
"I can't think of anything off hand that has as many opportunities as health care," Bradley said.
As the Northwest Arkansas population increases and grows older, the hospital and other health care providers will continue to add new jobs, he said.
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