Sector Analysis Report

CENTER

FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

College of Business

UAFS.edu

CBRED Special Report December 2012

A S ector

A nalysis of the F ort S mith

MSA E conomy 2007 & 2010

uafs.edu/cob/cbred

Van Buren Visitors Center

Table of Contents Overview of Sector Contributions in the Fort Smith MSA........................................2 Impact of Top Three MSA Sectors: Manufacturing, Service, and Trade....................6 Breakdown of Government, Construction, and Mining into Subsectors...................14 Sector Analysis of the Counties Comprising the Fort Smith MSA...........................16 Discussion and Commentary............................................................................22

UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS

CENTER

A Sector Analysis of the Fort Smith MSA Economy: 2007 & 2010 The Fort Smith economy has endured significant pressure

the pre-recession (2007) and post-recession (2010) economy.

Whirlpool. While these high profile events garner all the

economy by taking a look at the economic impact of these

in recent years, culminating recently in the departure of

attention, the makeup of the Fort Smith regional economy has been changing for well over a decade. This report examines

some of these changes and discusses some of the implications of this changing structure on our local economy.

Using IMPLAN software and datasets, we examined the 1

structure of the regional economy in 2007 and 2010 (the most recent data available). We first provide an overview of the

economic sector contributions and note what has changed in

We then drill deeper into key sectors that comprise our

sectors, as well as their respective contributions in terms of jobs, compensation, and output/GDP.

We break down the data further to take a brief look at the

respective counties that comprise the Fort Smith Metropolitan Statistical Area (MSA). In addition to the discussion of the results throughout, the report concludes with additional

commentary on observations and implications noted from the analysis.

IMPLAN software was used for this analysis. BLS Covered Employment and Wages (CEW) data, BEA Regional Economic Accounts (REA) data, and County Business Patterns (CBP) data are used in conjunction to create IMPLAN data because no one dataset provides enough information to create a complete IMPLAN database.

1

DR. LATISHA SETTLAGE is an associate professor of economics in the UAFS College of Business and a research associate in the Center for Business Research and Economic Development, also located in the College of Business. She holds a ANALYST Hill Williams Endowed Chair of Business.

Dr. Settlage received her B.S. and M.S. from the University of Arkansas, Fayetteville and her Ph.D. from Purdue University in West Lafayette, Indiana. Her research interests are in the areas of economic impact analysis, government-sponsored credit programs, and economic perceptions among undergraduate students. She teaches courses in macro- and microeconomics as well as banking and finance.

Dr. Settlage is an Arkansas native. She and her husband, Dr. Daniel Settlage, also an economics professor at UAFS, have lived in Fort Smith for nine years and have two daughters, ages 5 and 11.

THE CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT (CBRED) seeks to be the primary source of Fort Smith regional economic information, a catalyst for bold, innovative ideas and strategies for economic development in the area, and an active partner in the execution of sound, integrative solutions for regional prosperity and health.

For more information on CBRED, contact center director, Dr. Kermit W. Kuehn, at:

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT UAFS College of Business 5210 Grand Avenue, BI 218 P.O. Box 3649 Fort Smith, AR 72913-3649 Phone: (479) 788-7938 E-mail: CBRED@uafs.edu Website: uafs.edu/cob/cbred

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

1

Overview of Sector Contributions in the Fort Smith MSA As of 2010 (the most current year of full data), just over

Somewhat surprisingly, the government sector ranked third in

to the 117 individual industries that comprise the Fort

the trade sector was third most important in jobs provided, but

14% of total full-time equivalent positions can be attributed Smith MSA’s manufacturing sector (Table 1). In 2007,

manufacturing jobs accounted for almost 16% of total jobs in the MSA, illustrating the decline in manufacturing in

recent years. Similar to the U.S. economy, the largest share of jobs in the Fort Smith MSA in both 2007 and 2010 was provided by the services sector, with almost 41% in 2007 and just over 42% in 2010.

most jobs provided in 2010 with a share of 13.4%. In 2007, due to slow growth in retail jobs, the sector’s overall share remained constant between 2007 and 2010 at 13.2%, thus

allowing government to ascend to the top three. However, even though retail job growth slowed between 2007 and

2010 due to the recession, we can note that this subsector still comprises the majority of trade sector jobs (as opposed to wholesale subsector).

Table 1. S ector Contributions by Employment, Compensation, and Output – Fort Smith MSA, 2007 and 2010 Employment

Output

2007

2010

2007

2010

2007

2010

Ag, Forestry, Fish & Hunting

3.3%

3.1%

0.4%

0.7%

2.7%

2.5%

Construction

6.2%

5.5%

5.0%

4.3%

5.5%

4.5%

Government

12.3%

13.4%

18.9%

19.8%

5.6%

6.9%

Manufacturing

15.9%

14.1%

23.1%

20.3%

38.6%

37.4%

2.5%

3.1%

4.1%

3.6%

7.1%

4.5%

All Services

40.8%

42.3%

30.7%

33.2%

26.8%

30.2%

Information

1.0%

0.8%

1.4%

1.3%

1.7%

1.5%

Finance & insurance

2.5%

4.1%

2.7%

4.2%

2.8%

5.0%

Real estate & rental

3.1%

2.9%

0.9%

1.0%

5.7%

6.6%

Professional - scientific & tech

5.8%

3.3%

2.4%

2.4%

3.6%

2.5%

Management of companies

1.2%

1.3%

3.2%

3.4%

1.7%

1.7%

Administrative & waste

6.3%

6.4%

3.1%

3.2%

1.5%

1.6%

Mining

Educational

0.4%

0.4%

0.1%

0.2%

0.1%

0.1%

10.2%

11.7%

11.9%

13.4%

5.8%

6.8%

Arts- entertainment & recreation

0.6%

0.7%

0.3%

0.2%

0.2%

0.2%

Accommodation & food services

5.4%

5.8%

2.4%

2.6%

1.9%

2.1%

Other services

4.2%

4.8%

2.3%

3.0%

1.7%

2.2%

13.2%

13.2%

10.4%

10.9%

6.9%

7.3%

Health & social

All Trade Wholesale

2.6%

2.8%

3.9%

4.2%

2.6%

2.9%

10.6%

10.3%

6.5%

6.7%

4.3%

4.4%

Transportation & Warehousing

5.2%

4.7%

6.3%

6.1%

4.9%

4.3%

Utilities

0.5%

0.5%

1.1%

1.2%

2.0%

2.4%

Retail

2

Employee Compensation

Sector

UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS

When examining the services subsectors, we see that health

Agai,n when looking at the subsector detail for the services

jobs in the MSA in 2010 (11.7%) followed by administrative

the largest share of production followed by real estate and

and social services represented the highest proportion of total and waste services (6.4%) and then accommodation and food services (5.8%).

sector, we see health and social services accounting for

rental (driven largely by the imputed service value of home ownership) as well as finance and insurance.

Despite accounting for only 14% of the jobs in the MSA in

Further evidence of the shift in structure of our local economy

of the region. Between 2007 and 2010, the sector remained

compensation. In contrast to number of jobs or economic

2010, manufacturing contributed 37% of the economic output the largest contributor of economic output, outpacing the

services sector by 7%. However, the percentage of economic output attributable to manufacturing has decreased relative

to 2007 when the sector produced 39% of total output. While being the largest sector in terms of number of employees, the services sector comprised the second largest share of output

(30% in 2010). The trade sector held firm to its third position

in MSA production in 2010 contributing just over 7% of total

can be found in the sector shares comprising total employee output, employment compensation relates the amount of

income that the employees in that sector earned. In 2007,

manufacturing paid 23% of labor income, with this figure

shrinking to 20% in 2010. The government sector now pays the same amount of employee compensation in the MSA as manufacturing with the services sector leading the way at 33%.

output.

Table 2. Sector Analysis, 2007 and 2010, Fort Smith MSA Employment*

Employee Compensation**

Output**

Sector

2007

2010

% Change

2007

2010

% Change

2007

2010

% Change

Ag, Forestry, Fish & Hunting

5,298

4,835

-8.7%

$20.6

$38.9

88.7%

$590.4

$513.6

-13.0%

Construction

10,061

8,465

-15.9%

$250.5

$225.4

-10.0%

$1,188.1

$905.9

-23.8%

Government

19,906

20,671

3.8%

$948.2

$1,045.2

10.2%

$1,207.7

$1,407.5

16.5%

Manufacturing

25,816

21,626

-16.2%

$1,163.8

$1,067.6

-8.3%

$8,391.2

$7,594.1

-9.5%

4,062

4,840

19.1%

$204.8

$187.4

-8.5%

$1,536.3

$912.9

-40.6%

Mining

65,999

64,987

-1.5%

$1,544.2

$1,749.0

13.3%

$5,815.5

$6,134.7

5.5%

Information

1,685

1,281

-24.0%

$71.7

$65.6

-8.5%

$374.7

$296.5

-20.9%

All services

Finance & insurance

3,968

6,273

58.1%

$137.4

$208.8

52.0%

$604.6

$1,022.4

69.1%

Real estate & rental

5,011

4,469

-10.8%

$47.1

$49.3

4.7%

$1,243.0

$1,330.5

7.0%

Professional-scientific/ technical services

9,422

5,131

-45.5%

$118.6

$118.4

-0.2%

$787.5

$500.7

-36.4%

Management of companies

1,937

2,037

5.2%

$159.4

$171.9

7.8%

$376.8

$336.9

-10.6%

10,190

9,842

-3.4%

$153.6

$161.7

5.3%

$320.7

$333.4

3.9%

657

661

0.5%

$6.7

$9.8

46.8%

$19.9

$23.1

16.1%

16,450

17,954

9.1%

$596.2

$674.3

13.1%

$1,254.2

$1,382.5

10.2% -8.6%

Administrative & waste Educational services Health & social services

999

1,045

4.7%

$14.2

$10.6

-25.1%

$45.1

$41.3

Accomm. & food services

8,801

8,912

1.3%

$122.0

$129.4

6.0%

$417.0

$430.5

3.2%

Other services

6,879

7,380

7.3%

$117.4

$149.2

27.1%

$372.1

$437.0

17.5%

21,427

20,226

-5.6%

$523.6

$572.5

9.3%

$1,488.8

$1,472.5

-1.1%

4,241

4,371

3.0%

$196.6

$219.6

11.7%

$563.8

$583.0

3.4%

17,186

15,856

-7.7%

$327.0

$352.9

7.9%

$925.0

$889.4

-3.8%

8,471

7,290

-13.9%

$317.0

$319.3

0.7%

$1,054.0

$868.8

-17.6%

832

829

-0.4%

$57.1

$63.1

10.5%

$439.2

$483.2

10.0%

161,874

153,769

-5.0%

$5,029.7

$5,268.3

4.7%

$21,711.1

$20,293.2

-6.5%

Arts-entertainment/recreation

All trade Wholesale Retail Transportation/Warehousing Utilities Total

* Measured by number of full-time equivalent positions ** MIllions of dollars

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

3

Once again, note that health and social services represented

experienced increases in employee compensation according to

relative to its counterparts within the services sector in both

logging. The percentage increases in employee compensation

a significantly higher proportion of employee compensation 2007 and 2010. This is not surprising, since this subsector

represents industries such as hospitals, offices of doctors and dentists as well as nursing and residential care facilities.

Table 2 presents an analysis by sector of the Fort Smith MSA.

the data with the exception of timber extraction and commercial in the crop-farming industries were significantly higher than the percentage increases in employee compensation for the livestock industries. This may be attributed to higher grain prices resulting in higher incomes to producers.

The number of full-time equivalent positions, employee

The number of full-time positions decreased between

for both 2007 and 2010. Note that while employment and

government. Manufacturing experienced the highest rate

compensation, and economic outputs are examined by sector output fell for the MSA as a whole between 2007 and 2010, employee compensation increased by 4.7%.

2007 and 2010 for all sectors except mining and

of decline (-16.2%) followed by construction (-15.9%)

and transportation & warehousing (-13.9%). Output also decreased for most sectors between the years considered

The agriculture, trade (wholesale and retail), services, and

in the analysis. Only the services and government sectors

government sectors all experienced increases in employee

compensation, with the largest increase being in the agricultural sector (88.7%). Almost all industries within the agricultural sector (crop farming as well as livestock operations)

experienced increasing output levels.

For the services sector, the increase in output between 2007 and 2010 was led by the finance and insurance subsector

Table 3. Compensation and Output Per Employee, Fort Smith MSA 2010 Industries

Compensation*

Output*

Value Index**

$8,036

$106,224

0.19

Mining

$38,720

$188,626

1.62

Utilities

$76,057

$582,781

9.80

Construction

$26,626

$107,013

0.63

Manufacturing

$49,367

$351,161

3.83

Wholesale Trade

$50,250

$133,404

1.48

Retail trade

$22,258

$56,094

0.28

Transportation & Warehousing

$43,803

$119,181

1.15

Services

$26,913

$94,400

0.56

Information

$51,218

$231,423

2.62

Finance & insurance

$33,288

$162,988

1.20

Real estate & rental

$11,023

$297,684

0.73

Professional, scientific & technical

$23,078

$97,587

0.50

Management of companies

$84,355

$165,365

3.09

Administrative & waste

$16,432

$33,874

0.12

Education

$14,791

$34,949

0.11

Health & social

$37,557

$77,002

0.64

Arts, entertainment & recreation

$10,176

$39,471

0.09

Accommodations & food

$14,517

$48,298

0.16

Other services

$20,212

$59,213

0.26

Government

$50,562

$68,087

0.76

MSA Average

$34,261

$131,972

1.00

Ag, Forestry, Fish & Hunting

*Per full-time equivalent position **Value Index created by multiplying individual sector/ subsector compensation by output, then dividing this product (number) by the product for the MSA Average. MSA Average is benchmark or neutral score.

4

UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS

where the increase in output equaled 69%. The most notable

Compensation per employee was greatest in the utilities

sector where a 40.6% decrease was observed. Construction,

Manufacturing ranked fourth. The sectors with lowest per-

decline in output for the Fort Smith MSA was in the mining

transportation, and agriculture also experienced double-digit declines in output between 2007 and 2010. Construction

output fell 23.8% in the MSA, transportation output decreased by almost 18%, and agricultural output fell by 13%.

SECTOR OUTPUT AND COMPENSATION PER EMPLOYEE

As shown in Table 3, there are wide differences in

compensation and output-per-employee across industries.

In 2010, the utilities sector generated the highest output per

sector in 2010 followed by government and wholesale trade. employee compensation included agriculture, retail trade,

construction, and services. Compensation per employee is a

proxy for annual salary. It should be noted that compensation is measured purely in terms of wages and does not include

proprietor profit. This explains the extremely low value for

agriculture as well as the low ranking for construction. As is

the case with output per employee, there is a wide variability

in compensation per employee across the services sectors with management, information, and health ranking as the highest.

employee followed by manufacturing, and mining. Output

In order to evaluate the relative value of a particular sector

of a sector – it measures the amount of production output

The index seeks to reveal the relative value of each sector

trade, government, and services sectors had the smallest

per employee and comparing that new value with the MSA

sectors do not generate high value output relative to the large

above 1.00) might be categorized as high-value sectors (in

however, that within the services sector, there is disparity in

1.00) as of relatively less value in terms of the combined

For example, information, finance/insurance, real estate, and

metric, mining, utilities, manufacturing, wholesale trade,

employee relative to their counterparts in the sector.

and insurance and management of companies offer the

per employee can be regarded as a proxy for productivity

or subsector to our economy, a Value Index was calculated.

attributable to one full-time equivalent employee. The retail

by combining the value of the compensation and output

output per employee. This is due to the fact that these

average value. Values above the MSA average (index score

numbers of individuals they employ. It should be noted,

green) and those below the MSA average (index score below

outputs per employee among the various services categories.

impact of compensation and output (in red). Based on this

management all generate a much higher value of outputs per

transportation and warehousing, information services, finance strongest value in terms of joint value of compensation paid and estimated output for the sector.

Downtown Van Buren

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

5

Impact of Top Three MSA Sectors: Manufacturing, Service, and Trade Clearly, the sectors of manufacturing, services, and trade

operates independently in the economy. However, within the

in previous analysis, these sectors represent the three largest

local companies purchase inputs from one another and as

are the most significant to the Fort Smith MSA. As shown

regional economy, there are linkages between the sectors as

shares of total regional output. Altogether, in 2010, they

employees spend paychecks. To define the true importance

account for three-quarters of total MSA output. Services and

of a sector and its significance to the regional economy, all

manufacturing also rank as the top two sectors providing

linkages that sector has with others in the economy must be

jobs for the MSA, with trade tying government for the third

spot. Trade also tied the government sector for providing the

examined. These connections are known as multiplier effects

second largest number of jobs to the economy. As a group, the three provided almost 70% of jobs to the MSA in 2010 and about 65% of employee compensation.

The sector analysis previously reported in Tables 1 and 2 addresses the direct economic impacts of each sector

in the Fort Smith regional economy. That is, how many

jobs, how much employee compensation, and how much

total output is attributable to each sector, as if each sector

and must be added to the direct economic activity to gain an estimate of the true importance of a sector to the MSA.

MANUFACTURING

Manufacturing is a diverse sector represented by over one hundred industries in the Fort Smith MSA. Table 4 lists

the top industries ranked in order of providing jobs. These

are the industries that employ the most full-time equivalent

positions to our region. Poultry processing ranks as not only the most important source of manufacturing jobs to the Fort

Table 4. Top Manufacturing Subsectors in the Fort Smith MSA, 2010 Employment*

Employee Compensation**

Output**

Poultry processing

6,003

$204.6

$1,399.3

Household refrigerator/home freezer manufacturing

1,995

$114.0

$808.5

Motor and generator manufacturing

1,936

$132.7

$623.0

Air conditioning, refrigeration, and warm air heating

1,598

$88.7

$514.1

Paperboard container manufacturing

Industry

1,222

$68.0

$432.0

Fruit and vegetable canning, pickling, and drying

813

$48.1

$426.1

Cookie, cracker, and pasta manufacturing

647

$26.5

$281.0

Other plastics (not packaging, bottles, pipes or fittings)

533

$22.4

$113.9

Printing

523

$23.2

$77.2

Iron and steel mills and ferroalloy manufacturing

452

$45.8

$319.2

Ready-mix concrete manufacturing

325

$17.7

$82.1

Animal food manufacturing

306

$16.5

$364.3

Plate work and fabricated structural product mfg

247

$10.7

$55.6

Motor vehicle parts manufacturing

243

$11.2

$83.8

Snack food manufacturing

196

$11.2

$139.8

48

$3.9

$542.5

Petroleum refineries * Measured by number of full-time equivalent positions ** MIllions of dollars

6

UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS

Employment* Sector

Employee Compensation**

Output**

2007

2010

% Change

2007

2010

% Change

2007

2010

% Change

Direct Effect

25,816

21,626

-16.2%

$1,183.2

$1,079.3

-8.8%

$8,391.2

$7,594.1

-9.5%

Indirect Effect

13,569

10,117

-25.4%

$534.4

$453.9

-15.1%

$1,625.0

$1,238.3

-23.8%

Induced Effect

8,972

9,395

4.7%

$252.6

$292.3

15.7%

$785.8

$893.8

13.8%

48,356

41,138

-14.9%

$1,970.2

$1,825.6

-7.3%

$10,802.0

$9,726.2

-10.0%

Total Effect

* Measured by number of full-time equivalent positions ** MIllions of dollars

Smith MSA but also as the top output producer. While this

firms source inputs), and there are jobs that are supported by

this is due largely to its large number of employees (see per-

manufacturing firms and the supply-chain firms. The supply-

industry also ranks at the top for employee compensation,

employee data in Table 3). Other manufacturing industries

playing significant roles in Fort Smith MSA’s labor market

include household refrigerator/freezer, motor/generator, air

conditioner/refrigeration/warm air heating, and paperboard

container. Petroleum refineries are also important in providing manufacturing output.

Using IMPlan – economic impact modeling software – the full economic impact of manufacturing on the Fort Smith MSA

is listed in Table 5. The manufacturing sector supported more than 41,000 jobs and $9.7 billion in output in our regional

economy in 2010. In addition to the jobs directly affected by

the sector (those that are in the manufacturing industry itself), there are jobs that are supported in this industry’s supply

chain (the firms in the region from which the manufacturing

the spending of income by the people who work both for the

chain effect is known as the indirect effect in economic impact

CONSUMER SENTIMENT

Table 5. Economic Impact of Manufacturing Sector on Fort Smith MSA, 2007 and 2010

terms, and the spending effect is known as the induced effect.

Because the number of jobs in manufacturing declined

between 2007 and 2010, the overall economic impact for

the MSA declined as well. However, part of the decline was

offset by a slight increase in economic impact stemming from a positive-induced economic impact in the economy. This is likely due to the 4.7% increase in employee compensation

experienced throughout all sectors of the region between 2007 and 2010.

Table 6 presents the economic impact of manufacturing

on other sectors aggregated by sector. Note manufacturing is not included in this table because the only impact of

manufacturing is of a direct nature, that being the initial

Garrison Pointe Market and Cafe in Fort Smith, AR

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

7

Table 6. Sectors Most Impacted by Manufacturing on Fort Smith MSA Employment* Sector

Output**

2007

2010

% Change

2007

2010

% Change

Ag, Forestry, Fish & Hunting

765

770

0.7%

$111.2

$85.5

-23.1%

Construction

588

497

-15.5%

$50.4

$46.4

-7.9%

Government

357

296

-17.1%

$48.9

$54.6

11.7%

Mining

143

241

68.9%

$37.8

$42.4

12.2%

All Services

13,953

11,841

-15.1%

$1,378.9

$1,221.7

-11.4%

Information

466

303

-35.1%

$98.2

$66.9

-31.9%

Finance & insurance

834

1,331

59.5%

$134.3

$214.2

59.5%

Real estate & rental

1,123

835

-25.7%

$241.8

$243.4

0.7%

Professional- scientific & tech services

2,425

1,068

-56.0%

$219.1

$106.9

-51.2%

Management of companies

1,310

1,038

-20.8%

$254.8

$171.6

-32.7%

Administrative & waste services

2,030

1,556

-23.3%

$78.2

$61.3

-21.6%

113

118

4.8%

$3.4

$4.1

20.6%

2,082

2,319

11.3%

$161.2

$181.7

12.7% -8.0%

Educational services Health & social services Arts- entertainment & recreation

202

205

1.9%

$8.7

$8.0

Accommodation & food services

1,770

1,660

-6.2%

$82.9

$78.3

-5.5%

Other services

1,599

1,408

-11.9%

$96.2

$85.2

-11.4%

4,701

3,901

-17.0%

$419.7

$349.8

-16.7%

Wholesale

2,125

1,700

-20.0%

$282.4

$226.8

-19.7%

Retail

2,576

2,201

-14.6%

$137.3

$123.0

-10.4%

1,779

1,757

-1.3%

$227.6

$211.6

-7.0%

255

209

-18.0%

$136.3

$120.1

-11.9%

All Trade

Transportation & Warehousing Utilities

* Measured by number of full-time equivalent positions ** MIllions of dollars

number of jobs and output presented in Table 5. Table 6 shows

the corresponding totals for employee compensation

of manufacturing, as well as the interconnections between

difference in wages between the two sectors as well as value

which sectors in the MSA are most impacted by the presence industries in the economy, i.e., the indirect and induced effects.

Sectors most negatively impacted by the departure of

manufacturing jobs in recent years include professional services, information, real estate, administration, and wholesale trade.

SERVICE

8

and output are not as great, which reflects the significant of production.

As Table 7 shows, the most important services industries to

the Fort Smith MSA are food/beverage service, employment services, hospitals, physician/dentists’ practices, nursing/

residential care facilities, and real estate. The management and banking industries are also important contributors to services output and employee compensation.

Table 7 supplies a listing of the top industries providing jobs

Table 8 shows the change in economic impact of the services

are fewer specific industries in the services sector, relative

Recall, services jobs comprised a slightly larger proportion

proportion of employment for our MSA (as compared to

as compared to 2007. The result of services jobs becoming

has a much larger number of employees than its counterpart

direct economic impacts for the sector across employment

in the services sector for the Fort Smith MSA. Since there

sector on the Fort Smith MSA between 2007 and 2010.

to manufacturing, and since this sector comprises the largest

of employment, employee compensation, and output in 2010

manufacturing), each industry represented in the services list

a larger part of our economy can be seen as increases in

ranking in the top industries list for manufacturing. However,

and employee compensation as well as output, with the

highest percentage increase being observed in employee

UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS

Table 7. Top Services Industries in the Fort Smith MSA, 2010 Employment*

Employee Compensation**

Output**

Food services and drinking places

8,330

$120.1

$392.1

Employment services

6,805

$99.7

$160.1

Private hospitals

4,285

$197.0

$459.2

Offices of physicians, dentists, and other

3,964

$235.8

$464.1

Nursing and residential care facilities

3,735

$102.6

$185.9

Real estate establishments

3,666

$18.2

$323.5

Home health care services

2,390

$50.1

$104.1

Nondepository credit intermediation and related

2,301

$93.9

$227.7

Civic, social, professional, and similar orgs.

2,217

$65.6

$162.0

Management of companies and enterprises

2,037

$171.9

$336.9

Monetary authorities & depository credit intermed.

1,905

$69.4

$535.4

Individual and family services

1,805

$43.3

$62.7

Private household operations

1,202

$8.1

$8.1

Industry

* Measured by number of full-time equivalent positions ** MIllions of dollars

Table 8. Economic Impact of Services Sector on Fort Smith MSA, 2007 and 2010 Employment* Sector

Employee Compensation**

2007

2010

% Change

2007

2010

Output**

% Change

2007

2010

% Change

65,999

64,987

-1.5%

$1,983.2

$2,175.0

9.7%

$5,815.5

$6,134.7

5.5%

Indirect Effect

1,610

1,528

-5.0%

$73.2

$69.3

-5.4%

$224.9

$207.2

-7.9%

Induced Effect

3,093

3,430

10.9%

$86.8

$106.2

22.3%

$249.1

$307.8

23.6%

70,702

69,945

-1.1%

$2,143.2

$2,350.5

9.7%

$6,289.5

$6,649.7

5.7%

Direct Effect

Total Effect

* Measured by number of full-time equivalent positions ** MIllions of dollars

14 Flags Museum in Sallisaw, OK

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

9

Table 9. Sectors Most Impacted by Services Sector in Fort Smith MSA Employment* Sector

Employee Compensation**

2007

2010

% Change

2007

2010

% Change

41

65

59.8%

$3.1

$3.0

-4.5%

Construction

283

468

65.5%

$46.3

$38.9

-15.9%

Government

378

333

-11.8%

$47.3

$52.9

12.0%

Manufacturing

211

202

-4.5%

$82.4

$90.5

9.8%

25

30

21.9%

$8.1

$5.2

-36.1%

3,183

3,291

3.4%

$230.9

$225.3

-2.4%

Ag, Forestry, Fish & Hunting

Mining All Trade

512

538

5.1%

$69.9

$71.7

2.6%

2,672

2,754

3.1%

$161.0

$153.6

-4.6%

Transportation & Warehousing

473

469

-0.9%

$54.2

$49.5

-8.5%

Utilities

109

100

-8.0%

$48.7

$49.7

2.1%

Wholesale Retail

* Measured by number of full-time equivalent positions ** MIllions of dollars

compensation. In 2010, the services sector supported almost

Table 9 presents the economic impact of services on other

the indirect and induced economic impacts. However, as the

included in the table because the only economic impacts

70,000 jobs in the MSA with 5,000 of those stemming from

proportion of services jobs in the MSA has increased, this has

not carried a positive change for indirect economic impact for employee compensation and output. Recall, indirect impacts stem from business-to-business transactions. The services

sector is different from manufacturing, which typically has

a fair number of supplier relationships that develop between companies that represent the various industries within the manufacturing sector.

As manufacturing jobs comprise a smaller

proportion of jobs in the MSA and services jobs

comprise a larger share,

it is not surprising to see a trend of diminishing

indirect effect emerge. A

positive trend to note for the

economic impact of services on the Fort Smith MSA is

are the direct effects which are identical to the employment and output figures in Table 8. Table 9 shows that changes in the number of jobs in the services sector has had the

greatest economic impact on job numbers in the agriculture, construction, and mining sectors. However, output in the

mining, construction, and government sectors has seen the

most impact. These changes demonstrate the interrelationships

“In 2010, the service sector supported almost 70,000 jobs in the MSA with 5,000 of those stemming from the indirect and induced economic impacts.�

the significant increase in

10

sectors aggregated by sector. The services sector is not

present in our local economy.

The services sector depends heavily on production of food and fiber as well as

production of natural resources to operate.

In addition, spending by those employed in this sector support jobs in construction and

government (primarily in public education).

RETAIL TRADE

While trade accounts for 13% of total

jobs in the Fort Smith MSA, it is the retail portion that accounts for almost 80% of

that sector. Table 10 presents the economic

induced effect between 2007 and 2010. The induced effect

impact of retail trade for both 2007 and 2010. Note that for

by workers in the services sector as well as any workers in

than the percentage decline in jobs in this sector. This helps

increase in spending, the model estimates the corresponding

sector had on the MSA between 2007 and 2010. Another

traces spending throughout the economy that is performed

the direct effect, the percentage decline in output is smaller

industries that supply services sector companies. From this

to explain the increase in total economic impact that the retail

number of jobs necessary to support this economic activity.

explanation for the increase in economic impact (even in the

UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS

Table 10. Economic Impact of Retail Trade Sector on Fort Smith MSA, 2007 and 2010 Employment* Sector

Employee Compensation**

Output**

2007

2010

% Change

2007

2010

% Change

2007

2010

% Change

17,186

15,856

-7.7%

$399.8

$400.1

0.1%

$925.0

$889.4

-3.8%

Indirect Effect

1,920

1,868

-2.7%

$59.6

$65.6

10.0%

$177.2

$187.3

5.7%

Induced Effect

1,739

2,135

22.8%

$52.5

$70.6

34.5%

$180.1

$237.4

31.8%

20,846

19,859

-4.7%

$511.9

$536.3

4.8%

$1,282.3

$1,314.0

2.5%

Direct Effect

Total Effect

* Measured by number of full-time equivalent positions ** MIllions of dollars

Table 11. Sectors Most Impacted by Retail Trade in Fort Smith MSA Employment* Sector Ag, Forestry, Fish & Hunting

Employee Compensation**

2007

2010

% Change

2007

2010

% Change

8

13

66.1%

$0.5

$0.6

9.9%

Construction

61

78

27.9%

$5.7

$7.1

24.2%

Government

114

108

-5.0%

$13.9

$16.9

21.4%

60

67

11.0%

$14.6

$21.1

44.6%

5

7

39.2%

$1.7

$1.3

-26.1%

All Services

3,060

3,280

7.2%

275

319

16.3%

Information

137

127

-6.9%

$27.5

$25.0

-9.1%

Finance & insurance

198

406

104.6%

$31.9

$64.4

102.1%

Real estate & rental

449

408

-9.1%

$72.4

$83.4

15.1%

Professional - scientific & tech services

405

240

-40.6%

$35.6

$23.6

-33.7%

43

43

-0.9%

$8.4

$7.1

-15.8%

501

480

-4.2%

$18.4

$17.5

-5.1%

Manufacturing Mining

Management of companies Administrative & waste services

34

40

16.8%

$1.1

$1.4

29.7%

546

679

24.4%

$42.2

$53.2

25.8%

Arts - entertainment & recreation

52

64

23.7%

$2.3

$2.5

11.9%

Accommodation & food services

394

445

13.0%

$18.5

$21.0

13.8%

Other services

302

347

15.0%

$16.3

$20.2

24.1%

Wholesale Trade

107

121

13.3%

$14.2

$16.1

13.7%

Transportation & Warehousing

215

301

39.9%

$19.9

$28.1

41.3%

29

29

-1.5%

$12.2

$14.2

16.7%

Educational services Health & social services

Utilities

* Measured by number of full-time equivalent positions ** MIllions of dollars

presence of decreasing jobs and economic output in this sector) is the slight increase in employee compensation. Even a slight

increase in employee compensation has a significant impact on the induced effect in this multiplier model.

Table 11 presents the economic impact of retail trade on other sectors aggregated by sector. The retail trade sector is not

included in the table because the only economic impacts are the direct effects which are identical to the employment and

output figures in Table 10. Table 11 shows that the retail trade

sector has the most significant impact on services job numbers

in the health, administrative, and accommodations/food services

Fort Chaffee Barbershop Museum in Fort Smith, AR

subsectors. There also appear to be significant economic

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

11

Table 12. Economic Impact of Health Care on Fort Smith MSA, 2007 and 2010 Employment* Sector

Employee Compensation**

Output**

2007

2010

% Change

2007

2010

% Change

2007

2010

% Change

14,220

14,892

4.7%

$616.2

$704.8

14.4%

$1,154.2

$1,275.6

10.5%

Indirect Effect

2,711

2,975

9.7%

$73.3

$88.8

21.1%

$210.9

$243.9

15.6%

Induced Effect

2,815

3,552

26.2%

$69.3

$96.1

38.7%

$263.2

$364.9

38.6%

19,746

21,419

8.5%

$758.8

$889.7

17.3%

$1,628.3

$1,884.4

15.7%

Direct Effect

Total Effect

* Measured by number of full-time equivalent positions ** MIllions of dollars

interrelationships between retail trade and finance/insurance, as well as real estate.

A CLOSER LOOK AT HEALTH CARE

Previously, the sectors of manufacturing, services, and trade were identified as the most significant to the Fort Smith

MSA in terms of employment and output. Altogether in

2010, they account for three-quarters of MSA output, 70% of jobs, and 65% of employee

compensation. In addition to the direct amount of output

they produce for the regional economy, they also generate significant additional output in the region through their

supplier relationships as well as the spending that is carried out by their employees.

In 2010, the health care industry in the Fort Smith MSA

supported over 21,000 jobs and $1.8 billion in output. In

addition to the jobs directly affected by the sector (those that are in the health care industry itself), there are jobs that are

supported in this industry’s supply chain (the firms in the region from which the health firms source inputs), and there are jobs

that are supported by the spending of income by the people who work both for the health-care firms and the supply-chain firms.

“[F]irms in health industries are increasing both the number and volume of input-supply transactions with[in]… the MSA.”

One of the largest subsectors in the Fort Smith MSA is health.

This services subsector—comprised of multiple industries

including provider offices, hospitals, home-health care services, nursing/residential care facilities, and medical/diagnostic

laboratories—contributed more jobs and output to the Fort

Smith region in 2010 than the major sectors of agriculture,

construction, mining, transportation, and utilities. Given the

sector’s significance to the MSA, an economic impact analysis was conducted to understand its full economic impact on the

The supply-chain effect is shown as the

indirect effect, while the spending effect is shown as the induced effect.

Note, the induced (spending) effect

increased by a much greater percentage between 2007 and 2010 than did the

direct or indirect effects. This is due to the increase in compensation paid to healthindustry workers in the MSA between 2007 and 2010. It is also important to

note the significant percentage increase in

indirect effects for employment, employee compensation, and

output. This means that firms in health industries are increasing both the number and volume of input-supply transactions with firms located in the MSA. This may be an opportunity for

future job growth in the region. Clearly, health care represents

a set of growing industries. By understanding both future labor

as well as input needs, it will be possible to sustain and perhaps increase this job and output growth.

region. The results of this analysis are presented in Table 12.

12

UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS

Stanley Tubbs Memorial Library in Sallisaw, OK

13

Breakdown of Government, Construction, and Mining into Subsectors In this section we break down key sectors into subsector detail in order to better understand the underlying contributions

within each sector. We will look at government, construction,

went up in both subsectors accounting for the 16.5% overall increase for the government sector.

Note that both federal and state/local government experienced

and mining sectors.

increases in compensation as well as output between 2007 and

GOVERNMENT

2010, but state and local employees saw their pay increase

employee compensation, and output between 2007 and

also much greater for the state/local subsector. One large

The government sector also experienced gains in employment,

at a much greater rate. The contribution to total output was

2010. This is not surprising with spending on government

contributor to this subsector is public education.

programs on the rise during this period in hopes of stimulating

consumer spending during the economic recovery from the recession. The government

sector accounts for spending

on federal as well as state and local programs.

As shown in Table 13,

employment in the government sector rose by 3.8% between 2007 and 2010 in the Fort

Smith MSA with employment

in the state and local subsector

“[C]onstruction was particularly hard hit by the recession.

Employment fell by nearly 16%, employee compensation declined by 10%, and output dropped by almost 24%.�

accounting for the entire

increase. Federal government employment actually fell

during the period, perhaps due to cutbacks in programs such as defense. Employee compensation increased by 10.2% at

CONSTRUCTION

While most sectors in the Fort Smith

MSA suffered declines in employment from 2007 to 2010, construction was

particularly hard hit by the recession.

Employment fell by nearly 16%,

employee compensation declined by 10%, and output dropped by almost

24%. Table 14 shows that between the

two industry sub-groups comprising this sector, residential and commercial, it

was the residential construction industry that suffered the majority of losses

in terms of employment, employee

compensation, and output. Employee

compensation and output in the commercial construction subsector actually rose slightly between 2007 and 2010.

the federal level, as well as state and local levels. Output also

Table 13. Breakdown of Government Sector Employment* Sector State & Local Federal All Government

Employee Compensation**

Output**

2007

2010

% Change

2007

2010

% Change

2007

2010

% Change

16,201

17,101

5.6%

$699.0

$791.2

13.2%

$878.3

$1,055.4

20.2%

3,706

3,570

-3.7%

$249.2

$254.0

1.9%

$329.4

$352.0

6.9%

19,906

20,671

3.8%

$948.2

$1,045.2

10.2%

$1,207.7

$1,407.5

16.5%

* Measured by number of full-time equivalent positions ** MIllions of dollars

14

UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS

Employment*

Employee Compensation**

Sector

2007

2010

% Change

Residential

2,991

1,765

-41.0%

Commercial

7,070

6,700

-5.2%

10,061

8,465

-15.9%

$250.5

All Construction

2007

Output**

2010

% Change

2007

2010

% Change

$74.0

$38.0

-48.6%

$507.5

$208.8

-58.9%

$176.5

$187.4

6.2%

$680.6

$697.1

2.4%

$225.4

-10.0%

$1,188.1

$905.9

-23.8%

* Measured by number of full-time equivalent positions ** MIllions of dollars

Table 15. Breakdown of Mining Sector Employment* Sector

2007

2010

Oil and Natural Gas

3,525 335

Quarrying Coal and Other All Mining

Employee Compensation**

% Change

2007

2010

4,470

26.8%

$178.7

192

-42.9%

$11.7

202

178

-11.8%

4,062

4,840

19.1%

Output**

% Change

2007

2010

% Change

$168.1

-5.9%

$1,429.4

$821.2

-42.5%

$9.1

-22.1%

$47.4

$40.6

-14.3%

$14.4

$10.2

-29.1%

$59.6

$51.1

-14.3%

$204.8

$187.4

-8.5%

$1,536.3

$912.9

-40.6%

CONSUMER SENTIMENT

Table 14. Breakdown of Construction Sector

* Measured by number of full-time equivalent positions ** MIllions of dollars

While residential construction dropped sharply during the

When deconstructing the increase in employment,

in nature and funding, continued to push projects through

it is noted that the subsector having the greatest increase in

period, commercial projects, which tend to be longer-term to completion. These performance differences between the residential and commercial side of the sector suggests the severity of impact on the consumer during this period.

MINING

Some interesting trends can also be noted for the mining

sector, which is comprised of the following subsectors: oil and natural gas, quarrying, and coal and other mining (Table 15).

While this sector emerged as having the highest percentage change in employment between 2007 and 2010, it was also

shown to have the largest percentage drop in output over the same time period.

compensation, and output for each subsector in Table 15,

employment between 2007 and 2010 was oil and natural gas.

This sector also experienced the greatest decrease in output.

While the exact reasons for these two opposing trends are

not known with certainty, it could point to an investment in human capital that will later translate into increased output

for this sector. A more likely explanation rests on the volatile nature of the energy sector and its pricing structure over

time. The value of oil and gas sector outputs is determined by national and global factors, both cyclical and eventdriven forces.

Figure 1 summarizes results of the analysis of the top sectors in the Fort Smith MSA.

Figure 1. Summary of MSA Top Sector Performance: 2007 & 2010

Arkansas Best Corporation Performing Arts Center in Fort Smith, AR

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

15

Sector Analysis of the Counties Comprising the Fort Smith MSA In order to further understand the sector changes occurring in the Fort Smith MSA, the same breakdown of employment, employee compensation and output is performed for each

of the five counties comprising the overall MSA: Crawford, Franklin, Le Flore, Sebastian, and Sequoyah. Tables 16-20 summarize the sector analyses for these counties.

CRAWFORD COUNTY

For the agricultural and services sectors, Crawford County fared better than the MSA with respect to changes in job numbers and production (Table 16). The overall MSA’s

services sector experienced a decline in jobs between 2007 and 2010 of 1.5%. However, services jobs in Crawford

Caution must be exercised when interpreting these data,

as estimates will be less reliable due to the small numbers involved, particularly at sector and subsector levels.

County increased by nearly 40%, based on the IMPLAN data.

Unfortunately, Crawford County’s performance in the

construction and transportation sectors was worse than the

overall MSA. In construction, the MSA experienced a 16%

Table 16. Sector Analysis, 2007 and 2010, Crawford County Employment* Sector

Employee Compensation**

Output**

2007

2010

% Change

2007

2010

% Change

2007

2010

622

682

9.7%

$3.8

$5.6

49.7%

$77.2

$88.6

14.8%

Construction

3,286

2,179

-33.7%

$64.8

$56.2

-13.3%

$372.6

$234.0

-37.2%

Government

2,614

2,697

3.2%

$118.9

$131.2

10.3%

$151.9

$183.1

20.5%

Manufacturing

3,914

4,192

7.1%

$149.0

$158.0

6.0%

$1,140.7

$1,222.5

7.2%

467

479

2.6%

$29.5

$17.7

-39.9%

$121.1

$67.4

-44.4%

Ag, Forestry, Fish & Hunting

Mining

% Change

7,148

9,940

39.1%

$156.0

$199.6

28.0%

$678.2

$862.2

27.1%

Information

170

118

-30.5%

$5.9

$5.1

-13.7%

$43.5

$33.8

-22.4%

All services

Finance & insurance

566

970

71.5%

$15.2

$27.3

79.7%

$87.7

$151.1

72.3%

Real estate & rental

338

729

115.7%

$3.9

$5.2

34.7%

$182.1

$236.2

29.8%

rofessional - scientific & P tech services

760

1,435

88.9%

$23.7

$16.8

-29.1%

$70.2

$78.3

11.5%

Management of companies

1

59

5824.6%

$0.0

$1.1

4399.0%

$0.1

$5.2

4937.7%

962

1,501

56.1%

$17.0

$27.5

62.2%

$45.9

$57.0

24.1%

51

69

34.9%

$0.3

$0.7

114.8%

$1.5

$2.3

53.2%

1,449

1,914

32.1%

$47.9

$61.3

28.1%

$99.4

$125.1

25.9%

169

158

-6.4%

$1.2

$1.3

8.7%

$5.7

$6.1

5.2%

Accomm. & food services

1,548

1,533

-0.9%

$20.3

$21.4

5.4%

$71.5

$73.0

2.1%

Other services

1,135

1,453

28.0%

$20.6

$31.8

54.3%

$70.6

$94.2

33.5%

3,143

3,335

6.1%

$80.8

$92.1

14.0%

$218.1

$240.9

10.4%

dministrative & waste A services Educational services Health & social services rts - entertainment & A recreation

All trade Wholesale Retail Transportation & Warehousing Utilities Total

741

804

8.6%

$33.2

$39.1

17.6%

$93.5

$106.4

13.8%

2,403

2,531

5.3%

$47.5

$53.0

11.4%

$124.6

$134.4

7.9%

4,744

3,775

-20.4%

$186.1

$157.6

-15.3%

$582.7

$410.0

-29.6%

24

30

26.8%

$0.7

$1.0

40.8%

$3.0

$3.9

29.6%

25,962

27,310

5.2%

$789.7

$819.1

3.7%

$3,345.6

$3,312.6

-1.0%

* Measured by number of full-time equivalent positions ** MIllions of dollars

16

UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS

relative to 2007. This is due to the agricultural, services, and

the overall MSA (37% for Crawford versus 24% for the MSA).

sector performed worse. Similar to the previously discussed

resulted in a percentage decline in output that was greater than For transportation, the percentage decline in jobs was just

over 20% compared to a 14% decline for the MSA. This 6%

differential in job loss resulted in a loss of output for Crawford County that was 13% greater than the MSA’s output loss.

Sectors estimated to have experienced the largest gains in jobs were manufacturing, services, and trade. Specific services

subsectors with notable increases included professional and technical, administrative, and health services.

transportation sectors performing better, while its construction situation in Crawford County, Franklin County experienced

a decline of almost 30% in construction jobs compared to the overall MSA’s decrease in this sector of 16%.

Compared to the decline in agricultural jobs for the MSA of

8.7%, Franklin County experienced an increase of 9.8%. The mining sector added jobs during the period as well. While the overall MSA saw a decline in services jobs of 1.5%,

Franklin County experienced an increase of almost 50%.

This large increase was fueled by significant job growth in

FRANKLIN COUNTY

Table 17 presents the sector analysis for Franklin County. As compared to the overall Fort Smith MSA, Franklin County’s employment situation was better than the MSA in 2010

the finance and insurance and health care subsectors. As for

transportation, the MSA experienced a decline of almost 14% in jobs, yet the county experienced a slight increase in this sector of about 9%.

Table 17. Sector Analysis, 2007 and 2010, Franklin County Employment* Sector Ag, Forestry, Fish & Hunting

Employee Compensation**

Output**

2007

2010

% Change

2007

2010

% Change

2007

2010

% Change

448

492

9.8%

$2.2

$11.6

418.1%

$131.7

$111.0

-15.7%

Construction

514

365

-28.9%

$10.7

$5.1

-52.5%

$58.4

$35.1

-39.9%

Government

1270

1239

-2.4%

$73.0

$69.0

-5.5%

$97.2

$92.1

-5.3%

961

841

-12.5%

$41.4

$41.3

-0.1%

$251.4

$247.2

-1.7%

Manufacturing

84

300

257.7%

$3.5

$10.0

183.6%

$16.5

$47.1

185.4%

1375

2052

49.2%

$34.1

$48.4

42.0%

$152.9

$237.2

55.1%

43

34

-21.0%

$1.2

$1.0

-18.3%

$6.9

$6.3

-8.8%

Finance & insurance

220

431

96.0%

$5.9

$12.5

110.7%

$26.2

$73.1

178.8%

Real estate & rental

87

150

71.7%

$1.1

$0.8

-20.2%

$53.1

$68.1

28.4%

rofessional - scientific & P tech services

92

160

73.1%

$2.6

$3.2

22.8%

$7.0

$9.5

35.6%

Management of companies

0

3

$0.0

$0.3

$0.0

$0.5

122

192

56.9%

$0.9

$1.2

29.9%

$3.0

$5.7

92.2%

Mining All services Information

dministrative & waste A services

22

53

143.5%

$0.3

$0.9

227.5%

$0.7

$2.0

173.4%

453

636

40.5%

$13.7

$18.8

37.4%

$25.5

$36.0

41.3%

31

53

71.6%

$0.2

$0.2

14.0%

$1.7

$1.7

2.7%

Accomm. & food services

305

340

11.7%

$3.8

$4.0

4.1%

$14.0

$15.4

9.7%

Other services

321

282

-12.2%

$4.5

$5.5

24.5%

$14.8

$18.8

27.1%

757

764

1.0%

$12.9

$16.4

27.1%

$41.0

$46.4

13.4%

81

95

17.3%

$2.1

$3.8

81.5%

$6.5

$11.7

78.7%

676

669

-1.0%

$10.8

$12.6

16.4%

$34.4

$34.7

0.9%

147

160

8.5%

$2.2

$5.2

140.5%

$13.8

$16.5

20.0%

258

242

-6.0%

$16.8

$18.2

8.4%

$124.7

$135.5

8.6%

6135

6738

9.8%

$196.9

$225.3

14.4%

$887.6

$968.1

9.1%

Educational services Health & social services Arts - entertainment & recreation

All trade Wholesale Retail Transportation & Warehousing Utilities Total

FORT SMITH MSA SECTOR ANALYSIS

loss in jobs, while Crawford County declined almost 34%. This

* Measured by number of full-time equivalent positions ** MIllions of dollars

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

17

Table 18. Sector Analysis, 2007 and 2010, Le Flore County Employment*

Employee Compensation**

Sector

2007

2010

% Change

Ag, Forestry, Fish & Hunting

2409

1266

Construction

1233

912

Government

4431

Manufacturing Mining All services

Output**

2007

2010

% Change

2007

2010

% Change

-47.4%

$7.9

$6.9

-12.5%

$269.4

$62.4

-76.9%

-26.1%

$28.7

$4.7

-83.8%

$144.3

$80.8

-44.0%

3567

-19.5%

$179.4

$153.2

-14.6%

$225.7

$221.0

-2.1%

2417

314

-87.0%

$90.1

$14.1

-84.3%

$787.6

$111.5

-85.8%

694

72

-89.7%

$33.9

$1.0

-97.0%

$255.8

$13.1

-94.9%

5545

6742

21.6%

$92.5

$111.7

20.8%

$441.9

$556.0

25.8%

90

80

-11.8%

$3.0

$2.4

-18.3%

$21.2

$16.5

-22.1%

Finance & insurance

638

613

-3.9%

$13.1

$17.7

35.3%

$77.5

$91.7

18.4%

Real estate & rental

186

348

86.5%

$1.2

$1.0

-16.6%

$125.3

$133.3

6.4%

rofessional - scientific & P tech services

410

382

-6.9%

$9.0

$6.8

-24.0%

$30.9

$51.5

66.6%

Management of companies

27

102

283.7%

$0.7

$6.3

835.7%

$3.1

$14.1

358.5%

871

1017

16.8%

$14.1

$4.6

-67.3%

$28.4

$39.4

39.0%

Information

dministrative & waste A services Educational services Health & social services Arts - entertainment & recreation Accomm. & food services Other services All trade Wholesale Retail Transportation & Warehousing Utilities Total

2

18

616.4%

$0.0

$0.0

67.3%

$0.1

$0.5

503.2%

1265

2436

92.5%

$26.7

$47.0

76.2%

$59.6

$112.0

87.8%

19

180

862.6%

$0.1

$1.1

713.7%

$0.8

$7.1

772.6%

692

819

18.4%

$8.4

$11.2

33.8%

$30.9

$41.1

32.7%

1344

747

-44.4%

$16.2

$13.5

-17.0%

$64.0

$48.7

-23.9%

2324

1766

-24.0%

$42.9

$34.2

-20.2%

$137.8

$110.1

-20.1%

252

130

-48.5%

$8.7

$3.4

-61.0%

$26.5

$13.6

-48.5%

2072

1636

-21.0%

$34.2

$30.9

-9.8%

$111.3

$96.5

-13.4%

627

422

-32.8%

$20.0

$17.9

-10.2%

$100.6

$51.2

-49.1%

151

45

-70.0%

$11.4

$2.7

-75.9%

$57.9

$30.9

-46.6%

19833

15106

-23.8%

$506.7

$346.5

-31.6%

$2,420.8

$1,236.9

-48.9%

* Measured by number of full-time equivalent positions ** MIllions of dollars

Franklin County also saw higher-than-MSA increases in

growth for MSA). Output in the sector also increased at a rate

and transportation sectors. When comparing changes in output

MSA of 5.5%.

employee compensation for the agricultural, services, trade, for the county between 2007 and 2010 to changes in output for the MSA, we see overall output increasing at a slightly

higher rate for the county (9.1% compared to 6.5%). This can be explained by higher-than-MSA output growth rates in the services, trade, and transportation sectors.

LE FLORE COUNTY

As is shown in Table 18, the economic situation between

2007 and 2010 in Le Flore County declined more rapidly

than the overall MSA in every sector except services. Jobs

in the services sector increased at a rate of 21.6% (compared to a decrease of 1.5% for the MSA), while compensation to services-sector employees grew at a pace of 20.8% (13.3%

18

of 25.8% which was well above the rate of growth for the

The positive growth in the sector is associated with significant job creation in three main subsectors: educational services, arts, and management. The Le Flore sectors suffering the greatest job losses between 2007 and 2010 were

manufacturing and mining, with rates of decline near 90%.

SEBASTIAN COUNTY

The rates of change in job numbers for Sebastian County kept

pace fairly well with the overall MSA between 2007 and 2010

in agricultural, construction, mining, and utilities sectors, with the county’s percentage-loss rates being slightly smaller than the MSA’s (Table 19). However, in manufacturing, services,

UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS

Figure 2. Summary Performance of MSA Counties: 2007 & 2010

outpaced the MSA, leading to an overall rate

of job loss during the period of just over 10% as compared to 5% for the MSA.

Overall, employee compensation grew at a pace just slightly less than the MSA (4.4%

compared to the MSA’s 4.7%), while output in Sebastian County declined by 14%.

Double-digit output declines in agriculture, construction, mining, and transportation

largely explain the overall decline in output for the county.

finance and insurance services recorded the largest headcount

Sectors registering the largest increases in

employee headcounts included government and mining, while

increase in the services sector.

Table 19. Sector Analysis, 2007 and 2010, Sebastian County Employment* Sector Ag, Forestry, Fish & Hunting Construction Government Manufacturing

Employee Compensation**

Output**

2007

2010

% Change

2007

2010

% Change

2007

2010

500

474

-5.3%

$3.4

$5.7

65.9%

$72.0

$72.0

% Change 0.0%

4,363

3,753

-14.0%

$140.5

$129.3

-8.0%

$544.4

$422.5

-22.4%

8,165

8,830

8.2%

$433.2

$502.6

16.0%

$556.1

$656.0

18.0%

17,894

14,303

-20.1%

$851.1

$779.5

-8.4%

$5,965.4

$4,730.5

-20.7% -46.6%

2,768

3,255

17.6%

$136.6

$127.5

-6.6%

$1,132.9

$605.3

44,984

39,184

-12.9%

$1,171.2

$1,275.3

8.9%

$4,059.1

$3,886.9

-4.2%

Information

1,295

965

-25.5%

$58.6

$54.7

-6.8%

$287.7

$223.2

-22.4%

Mining All services

Finance & insurance

2,102

3,414

62.4%

$87.7

$127.4

45.3%

$355.0

$568.8

60.2%

Real estate & rental

4,244

2,861

-32.6%

$39.9

$40.9

2.5%

$784.3

$738.0

-5.9%

rofessional - scientific & P tech services

6,903

2,330

-66.3%

$76.1

$79.4

4.3%

$584.1

$302.0

-48.3%

Management of companies

1,876

1,838

-2.0%

$156.3

$164.1

5.0%

$367.5

$314.4

-14.4%

dministrative & waste A services

7,623

6,355

-16.6%

$115.8

$116.9

0.9%

$214.5

$200.4

-6.6%

453

443

-2.3%

$6.0

$8.1

34.7%

$15.5

$16.5

6.7%

11,151

11,054

-0.9%

$473.3

$516.0

9.0%

$978.0

$1,028.2

5.1%

535

599

12.0%

$8.6

$7.7

-11.2%

$24.0

$24.3

1.5%

Accomm. & food services

5,159

5,396

4.6%

$76.0

$82.3

8.3%

$251.4

$262.2

4.3%

Other services

3,643

3,928

7.8%

$72.8

$77.8

6.9%

$197.2

$208.8

5.9%

12,912

12,103

-6.3%

$357.5

$383.0

7.1%

$970.3

$930.5

-4.1%

Wholesale

3,039

3,057

0.6%

$149.1

$163.8

9.8%

$425.8

$419.5

-1.5%

Retail

9,873

9,047

-8.4%

$208.4

$219.3

5.2%

$544.6

$511.1

-6.2%

2,460

2,464

0.2%

$92.8

$122.5

32.1%

$298.2

$317.1

6.3%

Educational services Health & social services rts - entertainment & A recreation

All trade

Transportation & Warehousing Utilities Total

363

370

2.0%

$25.9

$27.9

7.7%

$235.3

$243.4

3.4%

94,409

84,738

-10.2%

$3,212.2

$3,353.4

4.4%

$13,833.8

$11,864.3

-14.2%

FORT SMITH MSA SECTOR ANALYSIS

trade, and transportation, percentages

* Measured by number of full-time equivalent positions ** MIllions of dollars

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

19

seen that the county experienced above-MSA growth in the

SEQUOYAH COUNTY

As illustrated in Table 20, Sequoyah County experienced

better-than-MSA performance in job creation between 2007 and 2010 for all sectors except manufacturing, trade, and

transportation. For example, Sequoyah County’s employment

in the agriculture sector fell by only 4% relative to the overall MSA’s decline of 8.7%. However, the county experienced a 50% decline in manufacturing jobs, while the rate of

decline for the MSA was 16%. When comparing the county’s employee-compensation changes to the MSA, it can be

agriculture, services, trade, transportation, and utilities sectors.

Sequoyah County also saw economic production increase at rates higher than its peer counties in the MSA for all sectors

except manufacturing and trade. The larger-than-MSA decline in trade production is largely due to the county’s double-digit decline in the retail side of the sector.

Figure 2 on page 19 summarizes performance results for the respective counties in the Fort Smith MSA.

Table 20. Sector Analysis, 2007 and 2010, Sequoyah County Employment*

Employee Compensation**

Output**

Sector

2007

2010

% Change

2007

2010

% Change

2007

2010

% Change

Ag, Forestry, Fish & Hunting

1,319

1,266

-4.0%

$3.3

$6.9

111.6%

$40.2

$62.4

55.2%

Construction

665

912

37.0%

$5.8

$4.7

-19.0%

$68.4

$80.8

18.1%

Government

3,426

3,567

4.1%

$143.7

$153.2

6.6%

$176.7

$221.0

25.0%

630

314

-50.1%

$32.2

$14.1

-56.1%

$246.2

$111.5

-54.7%

49

72

44.9%

$1.2

$1.0

-18.6%

$10.0

$13.1

30.3%

6,626

6,742

1.7%

$90.3

$111.7

23.7%

$483.3

$556.0

15.0%

86

80

-7.5%

$3.0

$2.4

-18.8%

$15.3

$16.5

8.4%

Finance & insurance

442

613

38.6%

$15.5

$17.7

14.4%

$58.2

$91.7

57.5%

Real estate & rental

156

348

123.0%

$0.9

$1.0

8.6%

$98.3

$133.3

35.7%

rofessional - scientific & P tech services

1,257

382

-69.6%

$7.2

$6.8

-4.7%

$95.3

$51.5

-45.9%

Management of companies

33

102

213.3%

$2.5

$6.3

153.7%

$6.1

$14.1

133.5%

dministrative & waste A services

612

1,017

66.4%

$5.8

$4.6

-20.3%

$29.0

$39.4

36.1%

Educational services

128

18

-86.2%

$0.0

$0.0

32.3%

$2.1

$0.5

-78.4%

2,133

2,436

14.2%

$34.7

$47.0

35.4%

$91.7

$112.0

22.1%

245

180

-26.6%

$4.0

$1.1

-71.8%

$12.9

$7.1

-45.1%

1,098

819

-25.4%

$13.5

$11.2

-16.8%

$49.2

$41.1

-16.5%

436

747

71.3%

$3.3

$13.5

314.5%

$25.4

$48.7

91.7%

2,291

1,766

-22.9%

$29.5

$34.2

16.0%

$121.5

$110.1

-9.4%

129

130

1.2%

$3.5

$3.4

-2.7%

$11.5

$13.6

18.4%

2,163

1,636

-24.3%

$26.0

$30.9

18.5%

$110.0

$96.5

-12.3%

491

422

-14.1%

$16.0

$17.9

12.2%

$58.7

$51.2

-12.8%

37

45

22.4%

$2.2

$2.7

23.9%

$18.2

$30.9

69.2%

15,536

15,106

-2.8%

$324.2

$346.5

6.9%

$1,223.4

$1,236.9

1.1%

Manufacturing Mining All services Information

Health & social services rts - entertainment & A recreation Accomm. & food services Other services All trade Wholesale Retail Transportation & Warehousing Utilities Total

* Measured by number of full-time equivalent positions ** MIllions of dollars

20

UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS

Ozark Courthouse in Ozark, AR

21

Summary and Conclusions The economy of the Fort Smith MSA is changing. Like the

service-sector job growth, just as some counties shouldered

of jobs in the manufacturing sector is shrinking, while the

transportation job loss.

composition of the national labor market, the proportion

services sector continues to serve as the dominant sector for jobs. In 2010, the manufacturing sector in the Fort Smith

MSA provided over 20,000 jobs, produced $7.6 in output, and paid over $1.1 billion in employee compensation. Relative

to other sectors in the MSA, it contributed the largest share

of output as well as the second largest shares of employment and employee compensation. Since 2007, the number of

employees in this sector has declined by more than 15%,

while employee compensation and output has dropped by about 8% and 9.5%, respectively.

By contrast, the services sector in the Fort Smith MSA

provided almost 65,000 jobs in 2010, produced $6.1 billion in output, and paid over $1.7 billion in employee compensation.

Between 2007 and 2010, service-sector jobs in the MSA

declined by a modest 1.5%, while employee compensation and output both rose by 13.3% and 5.5%, respectively.

Clearly, with job numbers dropping only modestly, and compensation and output both increasing, the services

sector outperformed manufacturing in the Fort Smith MSA

during the beginning stages of the recovery. However, when examining growth or decline in job numbers, employee compensation, and output across the five counties that

the majority of the burden of manufacturing as well as

Since jobs in manufacturing declined between 2007 and 2010, the total economic impact of the sector declined as well,

while the opposite was true for the service sector and retail

trade. The majority of the increase in economic impact for the service and trade sector was due to the increase in employee compensation in these sectors, and the additional consumer spending (multiplier effects) that resulted.

As mentioned in the introduction to this report, the Fort Smith MSA experienced a significant hit mid-year 2012 with the

departure of Whirlpool, a company that had once employed more than 4,000 in the region. The Center for Business

Research and Economic Development has estimated that the economic impact of Whirlpool’s loss to the region is severe.

The most recent data for this analysis do not reflect this recent event.

The Fort Smith MSA economy reflects a broad shift to

services-sector jobs, a trend that has been evident in national data for decades. However, unlike the national economy,

the regional economy continues to rely more heavily on the

contributions of the manufacturing sector. This is not likely to change any time soon.

comprise the MSA, not all counties experienced increases in

22

UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS

As we conclude this report, several things were noted from

the second largest subsector within the manufacturing sector

data examined here is from the years 2007 and 2010 -- nearly

around $800 million in GDP in 2010 and nearly 2,000

this analysis. First, it is important to keep in mind that the

two years ago. Like snapshots taken from a moving train, the scenery has continued to change since then. However, the

broader shifts in the economy observed in these data have

been going on for some time, and, to some degree, the recent recession accelerated these underlying trends.

1) While Fort Smith-MSA manufacturing has certainly taken a hit during the 2007-2010 period, it was during

2010 when the contraction began in earnest in the sector.

This makes the contrast of the pre-recession boom of 2007 and the rapid decline seen in 2010 so sharp and startling.

This partially reflects the sector’s leading-indicator status

– predicting improving and declining performances for the economy before many other sectors, such as services.

The services sector trailed manufacturing during this period in terms of rate of decline, as did the government sector (always slower to react than the private sector to economic setbacks).

We might expect the reverse to be true in manufacturing

were we to see 2011 data or even 2012 data, except for the “Whirlpool effect.”

is household refrigerators and home freezers, contributing

jobs. While one cannot say from these data that Whirlpool comprises all these outputs, it certainly makes up a large proportion of it. These evaporate by the end of 2012.

3) Not all manufacturing jobs are created equal, even if we replace jobs. We see that poultry processing is the

largest segment of the MSA manufacturing sector in terms of jobs, compensation, and GDP output. It is by far the largest segment of the sector. Yet, on a per-job basis the sector

is one of the weakest in the top ten listed here in terms of

compensation and GDP per employee. In contrast, number ten in the sector, iron and steel, rates the highest on both of these factors.

4) We learned from our comparison of industries in terms of per-employee compensation and output (Table 3)

that considerable variability exists among sectors. Some sectors had low per-employee compensation but relatively

high outputs and vice versa. The value index2 is an attempt

to weigh these two values in a way that creates a composite score which could be ranked.

2) The “Whirlpool effect” will rumble through the

As a result of this score, we were able to see which industries

is relatively clear from these data. In Table 4, we see that

output efficiency per employee. Scores above the average

economy for some time to come. Its more immediate impact

FORT SMITH MSA SECTOR ANALYSIS

Further Commentary

had the most valuable combination of compensation and

Components included in an index are selected to reveal relative meaning or significance of data, depending on the goal of the analyst in creating it. What defines a valuable sector?

Value of a sector might just as readily include employment totals, employment growth rates, compensation, or future prospects.

2

Downtown Van Buren

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

23

might be viewed as more valuable than those below the

Health care has seen considerable growth during the

sectors with above-average scores three of them (utilities,

experienced this growth even with a recession thrown in

average. From this analysis, we see that from the list of

information services, and management of companies) have some of the strongest scores in the group but involve the

fewest number of employees (ranging from 829 to 2,037).

2007-2010 period. As we saw from Table 2, the sector has the middle. Health services provides an interesting mix of employment opportunities in terms of skill requirements, education, and compensation.

On the other hand, mining, manufacturing, wholesale trade,

It is a growth industry, in general, but prospects for long-term

have weaker index scores but much larger employment

which is dependent upon a growing economy.

transportation and warehousing, and finance and insurance numbers (ranging from 4,300 to 22,000).

A community must determine what defines a valuable job (or sector) and make investment decisions accordingly. If

creating jobs is the goal, then generating small percentage improvements in larger sectors will have greater effect in

terms of numbers of jobs than will small, though attractive, sectors. The sectors with this potential will have higher

value to the economy. If efficiency, as measured by output per employee, is important, then GDP is relevant. Growth rate of sectors is another potential measure of value. Any combination of these could be developed.

5) Health services showed considerable resilience to the downward pressure in the economy during this period.

In fact, four of the top ten services subsectors (Table 7) were from health care-related services.

growth are largely dependent upon a growing community,

While the sector did not rate high in the value index, this is an example of the limitations of the current formulation of the index. Because the health care sector includes “social”

subsector workers, which have generally lower compensation,

for example, the whole sector is pulled down on per-employee compensation.

6) Government sector growth was positive during the

period. Since government jobs are a reflection of income transfers from the private sector to the public sector, the

source of these transfers are important to the local economy.

What we found is that most growth comes from local and state jobs, thus these are more likely based on local tax transfers. If federal jobs had been the source of growth in the government

sector, then this would largely have been made up of “outside” (new) money flowing into the MSA. That wasn’t the case,

however. In essence, then, we robbed our local “Peter” to pay a local “Paul.”

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Drennen-Scott House in Van Buren, AR 7) The construction sector was not impacted equally by

experienced declines. Overall, it appears that Le Flore and

recession effects, according to these data. This was suspected

2007 and 2010.

the recession. Residential construction bore the brunt of the based on the source of the recession in the first place. Bad

mortgage loans to consumers was a key cause of the recent

recession. The relative impact of the recession on commercial and residential construction, however, was also quite large.

8) As was the case in the construction sector, the mining sector revealed considerable variation in terms of

subsector economic realities pre- and post-recession. The

oil-and-gas subsector experienced solid growth in jobs during the period, unlike quarry and coal mining. The energy sector lives up to its boom-and-bust reputation, however, as the

value of the outputs dropped significantly during the period.

This subsector offers growth potential going forward, based on broader national trends in energy development.

9) As would be expected, counties varied considerably in

terms of changes overall during the period and by where

and how much the changes were felt. While these variations

Sebastian Counties were most affected by the events between ____________ The goal of these types of analyses is to unearth the relative strengths and weaknesses of an economy. Ultimately, the objective is to identify pathways to a better future for a

community – our community. This report is the first of a

series of reports which will seek to refine these preliminary

findings in order to recommend sectors and subsectors which would seem to have the greatest potential for growth for our community.

This report will be available in digital format on the CBRED

website under publications at http://uafs.edu/cob/publications.

Note: The analyses in this report were done using the IMPLAN software. This well-recognized economic analysis software is proprietary and uses a dataset created and managed by the vendor. The resultant output is an estimate and will not always compare easily with datasets from the Bureau of Labor Statistics or the Bureau of Economic Analysis, though they are incorporated into the IMPLAN dataset.

are expected, the differences are notable. For example, Crawford and Franklin Counties saw a net increase in

employment during the period, while the remaining counties

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