UAFS Regional Economic Outlook Report Q1 2011

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

College of Business

www.uafortsmith.edu Vol. 2, Num. 1

1st Quarter, 2011

Fort Smith REGIONAL Economic Outlook Report

Sponsored by Arvest Bank

UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS

www.uafortsmith.edu

Vol. 2, Num. 1

1st Quarter, 2011

From the Director......................................... 1 First Quarter Summary of Regional Economy................................ 2-3 Consumer Sentiment in the Fort Smith Region............................... 4-8

The Fort Smith Regional Economic Outlook Report is published quarterly by the College of Business and the Center for Business Research and Economic Development (CBRED). Subscriptions are available for $25 per year. For more information, please visit us on the web at www.cob.uafortsmith.edu/ cbred, or contact us at:

Review of Regional Organizational Characteristics....................9-16

Center for Business Research and Economic Development UA Fort Smith College of Business 5210 Grand Avenue BI 218 P.O. Box 3649 Fort Smith, AR 72913-3649

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Phone: 479-788-7938 Fax: 479-424-6938 E-mail: CBRED@uafortsmith.edu The Center for Business Research and Economic Development 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.

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Fort Smith Regional Economic Outlook, 1st Quarter, 2011

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

From the Director

It is central to our mission as a center to provide the kind of information and analysis that will permit all of us to be better informed as citizens regarding the character of our community, the significant issues we face, and afford us the opportunity to then make better decisions regarding our economic future. Like so many communities in this country, we are pressed on many sides to adjust our thinking to the evolving realities we face. This is no easy task on the best of days, and even more complicated these days. Briefly, I’d like to comment on the broader economy. It can be said that the economy continues to improve as measured by GDP, employment, and consumer buying activity. However, it continues to not feel like it, as everything seems to be moving in slow motion. Mixed signals are everywhere as well. Recent inflation numbers suggest that core inflation remains largely in check. This is contested by many due to how inflation is currently measured. Nonetheless, this result adds support to Fed Chairman Bernanke’s claim that inflationary pressure due to commodity and energy price rises is temporary and has allowed him to argue that the Fed’s generous support of the economy was not only essential but did not harm the economy’s progress. The recent pull back in commodities and energy lends credibility to the Fed Chairman’s assertion.

queasy as we approach the end of QE2 scheduled for the end of June. The infusion of hundreds of billions of dollars into the economy has succeeded in propelling the stock market higher and commodity prices with it. The question is what will happen when this all stops? Further, budget deficits are a political hot potato and few want to be seen as not supporting legislation to rein in spending. Of course, this is running contrary to election season politics where no one, whether on the left or right of the political spectrum, wants to be seen as cutting constituent benefits and pet projects. Right along with this, of course, is the tendency for no one to talk too loudly about raising taxes. What’s likely to happen in all this with each passing month? Probably not much, and certainly not enough.

From the Director

Kermit W. Kuehn, Ph.D. Director, Center for Business Research and Economic Development

If you are reading this issue of the Fort Smith Regional Economic Outlook Report, we will have completed our second economic forum sponsored by Arvest Bank. During these events, Kathy Deck, director, Center for Business and Economic Research, and I speak about the state of the economy from the national, state, and regional levels, while attempting to add some insight as to the direction of our economy going forward and discussing some of the issues of the day in a Q & A session.

In this report, this broader context has had its effect on the Fort Smith area economy. Retail and auto sales and airport traffic do show progress, while the residential real estate and the job sectors remained more negative. The uptrend has yet to solidify as hoped. Our survey of Fort Smith consumers revealed that sentiment had declined for March from last quarter as well, providing a less positive view going forward. The final section of this report is our first attempt at sketching out the makeup of our business community. We attempt to provide a simple overview of the organizational units in our MSA by providing a look at the distribution of organizations by industry sectors, employment, size, and age of units. Before I close, I want to announce that Miss Brittany Christian is our new student assistant in the center. She replaces Mr. Tyler Lamon who is graduating this summer. Tyler has done a great job over the past year and I can assure you that without this kind of assistance this publication would not happen. And, as always and at every opportunity, I want to recognize our sponsors, advertisers, and subscribers for their support. We appreciate our partners in a common cause, that of making the Fort Smith region the best it can possibly be. To our future.

Looking ahead, however, prospects look quite messy. The markets will become increasingly

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First Quarter Summary of Regional Economy The Fort Smith regional economy’s first quarter performance was generally a mixed bag relative to the same period a year ago. Employment data have shown signs of life in recent months, but residential real estate has remained relatively weaker than a year ago. The area economy generated fewer than 50 more jobs than it did for the same quarter a year ago. The most recent economic activity index was for February and was estimated at 94.9, down 1.7% from 2010 levels for the same period. On the positive side, a solid performance for much of last year in auto sales continued into the first quarter, and the retail sales sector has improved ever so modestly as well. While one can hardly define this as evidence of a strong resurgence in the regional economy, it does suggest that essential components of our economy continue to stabilize or show some improvement, albeit at a painfully slow pace.

Retail sales were up 2.6% for the most recent three-month period ending in February, reflecting a consumer still willing to remain engaged. Recognizing that sales and use tax receipts data on which retail sales are calculated lag by as much as 60 days, it is difficult to get a sense of the most current consumer behavior. However, the retail sales picture shows some signs of weakening as February results were down slightly from last year.

However, consumer sentiment declined in the first quarter (see our discussion in the next section) by nearly 10%, supporting our more tentative assessment of retail activity going forward.

Auto sales, on the other hand, have continued a solid and generally consistent trend higher relative to a year ago, up nearly 9% in the first quarter. Because of the more current nature of auto sales data, it provides one of the more recent shots of consumer buying behavior. Passenger traffic is another case of clear improvement over last year, with traffic numbers up 6% for the quarter relative to the same period in 2010. This continues to support a more positive view of the local economy.

Employment activity showed some improvement relative to last quarter, but remained weak in the first quarter relative to 2010. Total MSA employment was largely unchanged from a year ago, adding fewer than 50 jobs relative to a year ago. Taking a closer look at Bureau of Labor Statistics estimates, we find that most of the jobs created were in business and professional services (467), leisure and hospitality (166), and health services (133). Sectors that were estimated to have lost jobs include the usual suspects of manufacturing (133) and trade, transportation, and utilities (33), but were surpassed by the government sector which was estimated to have lost over 400 jobs relative to the first quarter of 2010.

Table 1. Summary of First Quarter Performance 1st Quarter 2011 Sales Retail Sales (MSA, Dec, Jan, Feb, 000’s) Auto Sales (Seb., Craw., Frank. Counties, AR, 000’s) Residential Construction (MSA) Residential Permits Value of Permits (000’s) New and Existing Home Sales (MSA) Number Sold Value of Homes Sold (000’s) Average Price of Homes Sold (Q1 Avg.) Employment (MSA unless noted, Q1 Monthly Avg.) Wage & Salary Employment (Total Non-farm) Manufacturing Trade, Transportation, Utlities Government Education and Health Services Professional and Business Services Leisure and Hospitality Natural Resources, Mining, and Construction Financial Activities Information Services MSA Unemployment Rate (Q1 Monthly Avg., NSA) AR Unemployment Rate (Q1 Monthly Avg., NSA) U.S. Unemployment Rate (Q1 Monthly Avg., NSA) Airport Traffic (Fort Smith) Total Passenger Traffic (Q1 Monthly Avg.)

Base Year - Q1

Last Year - Q1

This Year - Q1

% Change

2005

2010

2011

2010-2011

$ 291,452 $ 22,772

$ 299,002 $ 24,818

79 $ 7,374

61 $ 7,392

51 $ 6,691

-16.4% -9.5%

174 $ 18,502 $ 106,333

135 $ 15,752 $ 116,681

121 $ 13,714 $ 113,339

-10.4% -12.9% -2.9%

117,167 28,500 23,267 16,800 13,900 10,633 8,267 6,467 4,000 1,600 5.2% 5.9% 5.6%

116,000 21,033 24,133 19,067 16,000 11,300 8,467 7,033 4,100 1,200 8.7% 8.7% 10.4%

116,033 20,900 24,100 18,600 16,133 11,767 8,633 7,000 4,100 1,200 8.9% 7.8% 8.9%

Unchg -0.6% -0.1% -2.4% 0.8% 4.1% 2.0% -0.5% Unchg Unchg 0.2% -0.9% -1.5%

15,065

11,482

12,174

6.0%

* Data as of April 27, except retail sales which includes December-February. Dollars are not inflation adjusted. Data not seasonally adjusted (NSA). Auto sales Arkansas only. Prepared by the Center for Business Research and Economic Development, UA Fort Smith College of Business.

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2.6% 9.0%

$ 326,176 $ 28,945

Fort Smith Regional Economic Outlook, 1st Quarter, 2011

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Of course, job numbers are preliminary and are an estimate based on BLS sampling. Overall, current views nationally continue to support a slow-growth scenario. It remains to be seen how this will play out in the Fort Smith MSA. If we thought employment languished in the first quarter, then residential real estate remains on life support relative to a year ago. Based on MLS data for the first quarter, the number of new and existing homes sold was down over 10% from last year, down nearly 19% in March alone, year-over-year. The decline is much improved from the 24% decline of the fourth quarter, but these results suggest that the sector is anything but healthy at this point. However, current results are being compared with the period when federal incentives for home buying were getting into full swing, artificially driving up home sales. This stimulus will continue to distort comparisons through much of the summer when the program ended, and when housing sales subsequently went into a tailspin. Nonetheless, even without this anomaly, the 121 average monthly unit sales for the first quarter 2011 are well below the 174 average of the 2005 base year. While many ingredients remain in place that support home sales, such as attractive interest rates, inventory, and pricing, buyers continue to face headwinds as well. Qualifying for loans continues to be difficult and the lethargic economic picture keeps many buyers on

the sideline. It doesn’t help consumer attitudes much when home values continue to decline in so many markets and are expected to continue to decline in 2011 for many areas. Fort Smith has not been immune to this decline in values. Residential construction results add to this pessimism with permits for new construction down nearly 16.5% compared to the same period last year and over 35% below the 2005 base year. This is in stark contrast to the permit activity of the first half of 2010, again likely impacted by the federal support in place during this time last year. On the less gloomy side, March permits were up 18% over last March and near the 2005 first-quarter level.

“The rather bland performance of the economy of the past few months will be further tested…”

Reflecting on broader themes for a moment, Fed Chairman Bernanke affirmed in his most recent statements that the ‘quantitative easing’ (QE2) will conclude at the end of June. He has also asserted that the Fed does not see inflation as a significant issue over the medium term. While critics have made the case that inflation is already an issue, he has argued that the recent rise in commodity and energy prices are likely temporary. The basic thesis seems to be that risking inflation is preferred over deflation at this point. This about sums up the current situation on the monetary side. On the fiscal side, Congress and the White House will continue to lock horns over budgetary issues going forward as they argue over raising the debt ceiling and next year’s budget priorities. Added to this dicey mix is the fact that we are moving ever closer to another election season, which will likely distort meaningful dialog on these significant issues even more.

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A look at national manufacturing (PMI) and non-manufacturing (NMI) numbers for March, reported by the Institute for Supply Management, were both higher than December. However, the PMI (for manufacturers) index of 61.2 was slightly lower than February, and April’s number was even lower. The NMI, which includes such sectors as professional services, information, and wholesale and retail trade, was slightly higher than the December reading at 57.3. The NMI did reveal the third consecutive monthly decline, however, and April was even lower at 52.8. Index scores that trend above 50 are interpreted as a growth mode for the sector. Arkansas employers’ hiring intentions for the second quarter of 2011 were largely unchanged from the last quarter of 2010, according to the most recent Manpower Inc. survey of Arkansas employers. The survey revealed that 13% of employers intended to increase hiring during the second quarter, the same number reported for the previous quarter. Six percent intended to reduce headcount versus 5% in the previous report. All told, there was a slight uptick in hiring intentions across the state as employers looked forward to the second quarter. No report specific to the Fort Smith MSA was available.

Summary of Regional economy

The 8.9% average unemployment rate for the quarter was .2% higher than this time last year and confirms the significant challenges in job creation we continue to face in the regional economy. The preliminary unadjusted rate for the Fort Smith MSA was 8.4% for March, noticeably improved over the 9-plus percent rates of January and February. The rather sharp decline in unemployment rate in March was due to the small but simultaneous increase in the number of employed and the slight decline in the total labor force. Since the unemployment rate is calculated by dividing the number of unemployed by the total civilian labor force, even minor changes can make significant impacts on month-to-month rates.

“Sluggish” seems the operative word to describe the economy at this stage of the recovery. The monthly index for the regional economy has run more or less flat for some months now. This is not what we would hope for at this point, particularly when considering the level of sustained government support of the past couple of years. The rather bland performance of the economy of the past few months will be further tested when the Federal Reserve brings QE2 to a conclusion in June. The tension will build even further between the conflicting goals of stimulating the economy on the one hand with lower interest rates and a generous money supply and on the other increased pressure to contain inflation and budget deficits. As stated earlier, adding to this conflict will be the dynamics associated with an election season. This dance will likely assure more turmoil in the coming months for our economy.

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Consumer Sentiment

in the Fort Smith Region

Introduction The Index of Consumer Sentiment (ICS) for the Fort Smith region declined in the first quarter from the modest improvement observed in the fourth quarter of 2010. The index for March, which measures consumer confidence for the Fort Smith MSA, was 58.2, a decline of 9.8% from the fourth quarter result of 64.5, and lower than the 63.1 of the first quarter a year ago. The decline was consistent with national results of 67.5 reported by the University of Michigan (UM) for the first quarter, a decline of 9.4% from the previous quarter. The two sub-indices for Fort Smith were also lower for the quarter, consistent with the national trend. The Index of Current Conditions (ICC) for the Fort Smith region, a measure of consumer attitudes toward their current economic situations, declined by 8.0% to 59.7, while the national ICC declined 3.3%. The Fort Smith Index for Consumer Expectations (ICE) score, which measures consumer

feelings about future economic conditions, recorded a 10.7% decline as well, less than the 14.2% decline observed in national data. UM national results have run generally higher than Fort Smith MSA scores since we started collecting these data, particularly in the case of ICC sub-index. The ICE sub-index score is essentially the same in the first quarter for both national and regional respondents.1 Overall, area consumers were noticeably more pessimistic than national respondents, but the differences were the smallest since beginning the survey. Taking a Closer Look Area consumer sentiment scores revealed less optimism in the first quarter relative to last quarter of 2010 (see Table 1). While the ICS and both subindices recorded declines relative to the December survey, a closer look into local sentiment suggests the attitude was across all components of the index.

Two items comprise the ICC: peopleâ&#x20AC;&#x2122;s ratings of their current personal finances and whether the time is right to make major purchases (referring to durable goods). Area consumers reported more negative attitudes this quarter regarding their personal finances, down 5.7% from last quarter. National numbers were essentially unchanged from the previous quarter. The second item in the ICC, which asks whether this was a good time to purchase durable goods, was 9.4% lower than last quarter (96 to 87). National numbers were down 5% from last quarter. Area consumers appear to view their current economic reality in less optimistic terms this quarter relative to last quarter. The ICE consists of three items and seeks to measure consumer attitudes going forward in areas of personal finances and national economic prospects. As to personal finances over the next 12 months, there was noticeably less optimism relative to last quarter, with

Possible reasons for the relatively lower scores compared to the national results are discussed in detail in the first quarter 2010 report, which is available online under our Publications link: http://cob.uafortsmith.edu/cbred.

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Fort Smith Regional Economic Outlook, 1st Quarter, 2011

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

Indices

Q1/2010

Q4/2010

Q1/2011

% Change Q4-Q1

UM*

Index of Consumer Sentiment (ICS)

73.6

63.1

74.5

64.5

67.5

58.2

-9.4

-9.8

Index of Current Conditions (ICC)

82.4

65.0

85.3

64.9

82.5

59.7

-3.3

-8.0

Index of Consumer Expectations (ICE)

67.9

61.9

67.5

64.2

57.9

57.3

-14.2

-10.7

0.0

-5.7

112

103

-8.0

-11.4

Economic Outlook – 12 Months (ICE)

-24.1

-13.8

Economic Outlook – 5 Years (ICE)

-14.1

-9.0

136

140

133

-5.0

-9.4

Index Components Personal Finances – Current (ICC) Personal Finances – Expected (ICE)

Buying Conditions – Durables (ICC)

*UM= University of Michigan National Survey; FS = Fort Smith Survey using same UM survey questions.

an 11.4% decline reported (88 to 78). This was in line with the decline seen in national results of 8.0%. In percentage terms, 18% of respondents in the Fort Smith area felt their personal finances would be better off a year from now versus 39% who expected them to be worse. When asked about prospects for the general economy over the next 12 months and over five years, Fort Smith area respondents reported more pessimistic views about shortterm prospects and only slightly less pessimistic views for the longer term. Area consumer scores registered a 13.8% decline relative to last quarter when asked about prospects for the economy over the next 12 months (80 to 69).

National scores declined even more, down over 24% from last quarter on this item. When looking at the five-year range, area respondents recorded less optimism than last quarter with scores declining 9.0% (89 to 81). National scores were also lower by 14.1% from last quarter. To summarize to this point, clearly the improved optimism that closed out 2010 did not carry forward into the first quarter of 2011. This pattern was consistent across items and indices. Fort Smith respondent scores for the quarter reflected less optimistic views of current conditions and for prospects going forward than those recorded in the fourth quarter.

CONSUMER SENTIMENT

Table 1. March 2011 Index and Component Scores

Results Specific to the Fort Smith Economy For each survey we modify two items in the UM scale to focus participants on the Fort Smith regional economy versus the national. These two items ask respondents to rate their expectations about the business conditions in the Fort Smith economy over the next year and also five years from now. The overall FS ICS index and FS ICE sub-index are impacted by the change. As these items focus on future expectations as opposed to current conditions, the FS ICC scale is not affected. As can be seen from Table 2, Fort Smith respondents rated the overall situation (FS ICS) and future prospects (FS ICE) of the regional economy higher than the

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UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS U.S. economy on the same dimensions (UM ICS). These results continue to affirm earlier reports where there was noticeably more optimism toward the Fort Smith economy a year and five years from now than in the national economy as a whole. However, this gap has declined significantly from earlier surveys. Scores from the unmodified scale are restated from Table 1 and are presented in the column labeled UM ICS. Results for the first quarter reflected a 5.3% decline in the overall index (FS ICS) and a decline of 3.3% in the FS ICE relative to last quarter. While the decline in optimism was consistent in direction with the ratings Fort Smith consumers gave the national economy, they were significantly less pessimistic about the prospects for the Fort Smith economy going forward than they were about the national economy. Beyond the Core Measures Seven additional questions were asked of consumers in order to better understand their views and expectations about inflation, personal spending, jobs, and income. Three more items were included relating to the use of the internet. The specific questions, comparative scores, and percentage breakdown of positivenegative responses for each are contained in Table 3. General Economy and Consumption Indicators Perceptions of the current U.S. economy were lower than December ratings, with

Table 2. March 2011 Index Scores of Fort Smith MSA Fort Smith Scores

UM ICS Survey (Q1/11)

FS ICS Survey (Q1/10)

FS ICS Survey (Q4/10)

FS ICS Survey (Q1/11)

% Change Q4-Q1

FSICS

58.2

66.1

65.7

62.2

-5.3

FSICC*

59.7

65.0

64.9

59.7

-8.0

FSICE

57.3

66.8

66.1

63.9

-3.3

*Items included in the FS ICC are identical to the ICC in Table 1; thus, no change.

12% of the respondents indicating they thought the economy was better now than it was a year ago. Fifty-five percent indicated it was worse. The decline from 60 of last quarter to 57 on the index score was in line with ratings from the first quarter of 2010. Consumers in this survey seem convinced that higher inflation will occur over the next 12 months, with 95% indicating this view. This perspective was up markedly from the 76% who felt that way the previous quarter. Clearly higher prices remain the dominant expectation among area consumers for 2011. When asked about overall consumption expectations over the next three months, respondents indicated they intended to spend more than those from last quarter (115 vs 95). Thirty-seven percent of respondents indicated that they would spend more overall in the first quarter versus 22% who intend to spend less. This was a 15 percentage point increase over the previous quarter.

When it came to specific purchasing activity, 12% expected to increase spending on such activities as dining out, while 49% indicated they would spend less. These results were an improvement over the 6% and 43%, respectively, that was reported last quarter. Ratings regarding intentions in buying largeticket items decreased slightly, with only 9% (versus 11% last quarter) indicating they expected to make such purchases in the first quarter and the 77% who did not being essentially the same as last quarter. The strong up-tick in intentions to increase spending over the next quarter (Q10) was not supported by the largely unchanged ratings observed in the areas of spending on dining out or on larger ticket items. The overall assessment here is ambiguous, based on the mixed responses on these three items. It does suggest that consumers do expect to spend more as we head into summer, but not necessarily in the specific areas mentioned in the survey.

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Fort Smith Regional Economic Outlook, 1st Quarter, 2011

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CONSUMER SENTIMENT

Table 3. Additional Consumer Sentiment Scores and Current Quarter Percentages Index Scores 2010

Survey Questions

% pos

% neg

Q8) Are current business conditions in the country better, about the same, or worse than they were a year ago?

552

Q9) During the next 12 months, do you think that prices overall will go up, go down, or stay the same?

273

Q10) Compared to the last three months, how much do you expect to spend overall as a household in the next three months?

100

115

Q11) Do you expect to spend more, about the same, or less per week in the next three months on dining out?

Q12) In the next three months, do you expect to purchase a major household item, such as furniture, appliances, or TV?

Q13) Thinking about the Fort Smith area, how would you describe the availability of jobs today?

Q14) A year from now, will there be more or fewer jobs available in the Fort Smith area than there are today?

Q15) Do you have internet access from your home computer?

Q16) During the PAST 12 months, did you purchase a product or service online (using the internet?)

Q17) Do you use an online (internet) social networking site such as Facebook, Twitter, Linked-In, or a similar site?

Employment Fort Smith respondents reported more optimism about the regional job market. Index scores of current availability of jobs and prospects for job improvement over the next year were the same or higher than last quarter. While the index was noticeably higher, ratings of current perceptions of job availability in the Fort 2

2011

Qtr. 1 Percent

Smith area indicated that 51% of the respondents felt that jobs were hard to get now (versus 56% last quarter) and only 3% stating that they were plentiful (up from 1% last quarter). When asked about job prospects a year from now, respondent scores were essentially the same as last quarter at 73. However, the percentage of respondents

Neutral scores are not included in calculating index scores. Positive responses to item Q9 are reflective of negative sentiment regarding pricing; thus, scores are reversed to reflect sentiment-score consistency. That is, a pessimistic tone regarding inflation should score lower relative to a more optimistic tone, consistent with the other items in the table.

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UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS who felt job prospects would improve over the next year declined from 18% to 15%. This was offset by fewer people reporting that job prospects would be worse over the next year, declining from 45% last quarter to 42% for March 2011. Overall, survey participants continue to hold less optimistic views of the regional employment situation than those who participated in previous quarters. For the most part, little has changed this quarter from last quarter with consumers remaining far from optimistic about the regional job market. Internet Usage Three questions asked respondents to rate their use of the internet for economic and social purposes. Items Q15-Q17 in Table 3 relate to this theme. The intent was to learn from respondents if and how they use the internet in their personal lives. When asked about their access to the internet from their home computer, 69% indicated they had access while 18% indicated they did not. Thirteen percent reported they did not have a computer at home. Respondents were asked if they had purchased a product or service over the past year using the internet. Forty-two percent indicated they had, with 58% reporting they had not. Finally, 55% of the respondents indicated they use the internet for social networking purposes, whereas 45% reported they did not. Internet usage is viewed by many as a key engine for innovation and learning necessary for a region’s future success in the broader economy. While these brief measures have hardly exhausted the questions related to this theme, Arkansas has invested significant resources in research in order to understand usage in the state and identify key obstacles to access and usage.

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Briefly, the state survey found that 68% of state respondents had access to the internet through either work or home, whereas 69% of the respondents in this survey indicated they had access from home.

About the Survey Of the 3,000 surveys mailed to the five-county MSA, 253 were returned undeliverable, and 486 usable surveys were returned, providing a return rate of 17.7%. The confidence level as a result exceeds 95% for this survey.

summary Generally, results for this quarter revealed weaker sentiment across all three indices. The declines were quite strong in some cases. The exception to this was in the area of general consumption, where consumers indicated intent to spend more in the second quarter, though apparently not for dining out or durable goods. The reading on jobs prospects continues to be weak.

The University of Michigan’s (UM) Index of Consumer Sentiment (ICS) survey is used to measure consumer attitudes on several economic themes. Collectively, these represent consumer optimism or confidence levels for any given period and can be used to compare any one period with other periods.

“Generally, results for this quarter revealed weaker sentiment across all three indices. The declines were quite strong in some cases.” Looking forward, it seems evident that the consumer attitude toward the economy will tend to be more negative. Even though employment news has improved, consumers seem inundated with negative headlines. Consumers expect higher prices and already have visible evidence each time they fuel their autos. National media continues to report heavily on conflicts over budget issues, government shutdowns, inflation, and the impending debt “crisis.” Adding to these negative headlines, we are moving toward election season again. These are hardly “happy” topics and may serve to fuel a more pessimistic consumer going forward.

The overall ICS score includes five core questions and constitutes a general measure of consumer sentiment for the period. These questions cover three general areas of consumer sentiment: personal finances, business conditions, and buying conditions. Two subindices within the ICS make up the Index of Consumer Expectations (ICE) and the Index of Current Economic Conditions or more simply, Index of Current Conditions (ICC). The ICE “focuses on three areas: how consumers view prospects for their own financial situation, how they view prospects for the general economy over the near term, and their view of prospects for the economy over the long term” (University of Michigan). The ICC focuses on consumers’ views of their current financial condition and whether they feel secure enough about their financial situations to engage in major consumption activity. For more information on the Consumer Sentiment Survey, methodology used, and discussion regarding results, a more extensive narrative is provided in the first quarter 2010 report that is available online under our Publications link at http://cob.uafortsmith.edu/cbred.

Fort Smith Regional Economic Outlook, 1st Quarter, 2011

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

This report examines some of the demographic features of the Fort Smith MSA community as they relate to area organizations, profit and nonprofit. Specifically, we will survey the makeup of these organizations along the dimensions of size, industry-sector participation, and age of organizations in the region. In essence, in much the same way we examined the demographic features that describe our human population, we’ll view similar aspects of our organizational population. As in previous issues1, and where possible, we will compare the Fort Smith region relative to the State of Arkansas and Northwest Arkansas MSA (NWA MSA).2 We will also discuss trends and implications for the region. We will use the terms “business” and “organizations” interchangeably to mean for-profit and non-profit entities, including governmental.

Finding reliable data is always a challenge and particularly so as you move down to local levels. For this report, we used a subscription dataset by Hoovers.com, a Dun and Bradstreet company. Hoovers provides subscription services related to company information. Of course, results are limited to the quality of the dataset and we will point out key issues we encountered in this process. Before we begin, here is a preview of what you’re about to read in this report. The first sections will discuss regional organizations based on the industry sectors (NAICS defined) in which they are involved and the number of employees associated with these organizations. We will then provide an overview of the age of the various units in our community relative to the industry sectors with which they’re involved. Finally, we’ll briefly look at these organizations based on the number of employees on their payrolls.

Industry Sector Participation by Organization Units In this section, we segment the organizations into their primary industry sectors and then discuss the structure of our community relative to NWA, MSA, and Arkansas regions. Table 1 presents this information both in terms of number of organizational units per each sector and in percentage terms as a proportion of the total within the regional category (i.e. Fort Smith MSA sectors relative to total MSA units). First, let’s talk about the constraints in the data. The dataset contains some company entries that did not reveal primary NAICS identifiers and thus were not included in this table. Other information service providers indicate that there are approximately 15,000 business units in the Fort Smith MSA, for example, different from the nearly 14,000 listed here. Manta.com claims to have over 200,000 business units in its database for

rEGIONAL ORGANIZATIONAL cHARACTERISTICS

Review of Regional Organizational Characteristics

Earlier issues of this publication are available on the CBRED website under “Publications.” The link is http://cob.uafortsmith.edu/?q=node/251. The Fort Smith Metropolitan Statistical Area (MSA) includes the counties of Sebastian, Crawford, and Franklin in Arkansas and Sequoyah and Le Flore in Oklahoma. The Fayetteville-Springdale-Rogers MSA (NWA) includes the counties of Benton, Madison, and Washington in Arkansas and McDonald in Missouri.

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UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS Table 1. State and MSA Business Units by Industry Sector Fort Smith - MSA

Industry Sectors Agriculture, Forestry, Fishing, and Hunting Mining, Quarrying, and Oil and Gas Extraction Utilities Construction Manufacturing Wholesale Trade Retail Trade Transportation and Warehousing Information Finance and Insurance Real Estate and Rental and Leasing Professional, Scientific, and Technical Services Management of Companies and Enterprises Admin. & Support/Waste Mgt. & Remediation Educational Services Health Care and Social Assistance Arts, Entertainment, and Recreation Accommodation and Food Services Other Services (except Public Administration) Public Administration Total

Businesses Number 679 108 63 1,311 625 660 1,885 544 197 614 716 1,031 20 873 295 1,076 175 703 1,988 335 13,898

% of Total 4.9 0.8 0.5 9.4 4.5 4.7 13.6 3.9 1.4 4.4 5.2 7.4 0.1 6.3 2.1 7.7 1.3 5.1 14.3 2.4 100.0

Northwest Ark - MSA

Arkansas

Businesses Number 843 23 45 2,262 988 1,133 3,017 680 379 954 1,234 2,433 61 1,676 431 1,557 350 1,117 2,770 282 22,235

% of Total 3.8 0.1 0.2 10.2 4.4 5.1 13.6 3.1 1.7 4.3 5.5 10.9 0.3 7.5 1.9 7.0 1.6 5.0 12.5 1.3 100.0

Businesses Number 8,092 407 562 14,430 6,707 8,397 19,620 5,639 2,645 6,465 7,546 13,309 284 9,779 3,306 10,249 2,499 7,312 22,477 4,061 153,786

% of Total 5.3 0.3 0.4 9.4 4.4 5.5 12.8 3.7 1.7 4.2 4.9 8.7 0.2 6.4 2.1 6.7 1.6 4.8 14.6 2.6 100.0

* Excludes cases where company listings were not categorized by NAICS code.

Arkansas. Our dataset indicates 153,786. This illustrates that there are variations we need to be aware of. While numbers differ based on a host of legitimate reasons, it is believed that the

Hoover dataset is representative of the general makeup of the areas included in this study. That is, while the actual number of operating businesses in any community or region at any one time is unknown, the general proportions within

sectors are believed to be representative of the organizational mix. In viewing Table 1, the first thing we observe is that the structure of the regions is largely similar in terms of the primary

Table 2. State and MSA Employment by Industry Sector Industry Sectors Agriculture, Forestry, Fishing, and Hunting Mining, Quarrying, and Oil and Gas Extraction Utilities Construction Manufacturing Wholesale Trade Retail Trade Transportation and Warehousing Information Finance and Insurance Real Estate and Rental and Leasing Professional, Scientific, and Technical Services Management of Companies and Enterprises Admin. & Support/Waste Mgt. & Remediation Educational Services Health Care and Social Assistance Arts, Entertainment, and Recreation Accommodation and Food Services Other Services (except Public Administration) Public Administration Total

Fort Smith - MSA

Northwest Ark - MSA

Arkansas

Employees

Number 1,743 1,233 917 8,051 20,724 4,939 13,465 4,079 2,064 2,645 2,479 3,815 45 3,351 9,290 18,850 811 6,611 5,863 4,176 115,151

% of Total 1.5 1.1 0.8 7.0 18.0 4.3 11.7 3.5 1.8 2.3 2.2 3.3 0.0 2.9 8.1 16.4 0.7 5.7 5.1 3.6 100.0

Number 5,663 145 913 10,151 31,873 11,225 36,226 12,776 2,217 4,879 4,479 10,606 134 6,351 11,772 14,935 2,089 11,453 9,210 6,799 193,896

% of Total 2.9 0.1 0.5 5.2 16.4 5.8 18.7 6.6 1.1 2.5 2.3 5.5 0.1 3.3 6.1 7.7 1.1 5.9 4.7 3.5 100.0

Number 43,602 4,565 7,169 62,380 191,694 65,620 93,605 53,298 28,942 36,463 28,366 50,505 1,601 41,618 103,684 124,742 15,976 72,805 68,386 87,606 1,182,627

* Excludes cases where company listings were not categorized by NAICS code.

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Fort Smith Regional Economic Outlook, 1st Quarter, 2011

% of Total 3.7 0.4 0.6 5.3 16.2 5.5 7.9 4.5 2.4 3.1 2.4 4.3 0.1 3.5 8.8 10.5 1.4 6.2 5.8 7.4 100.0

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In surveying the headcount of organizations in each sector from Table 1, we find that the top five sectors across all three regional groups are quite similar. For the Fort Smith MSA, the top five (in descending order) include Other Services, Retail Trade, Construction, Health Care, and Professional Services. It is not an anomaly to find “Other Services” at or near the top in terms of total business units. The category is a catch-all grouping of a host of typically smaller, “mom and pop” businesses such as personal care, machine repair, and the like. These are the businesses we typically think of as the heart and soul of any community as they typically have a community face and personality that comes to define the business and our neighborhoods and communities. As we’ll see from Table 2, however, they are proportionally not the largest source of employment. They often are the purest form of self employment. As we look across Arkansas and NWA data in Table 1, the top five are more or less the same. One exception of note is the relative proportion of establishments in NWA that are classified as Professional, Scientific, and Technical Services. In NWA, nearly 11% of the companies were classified here versus just under 7.5% in the Fort Smith MSA. These activities tend to reflect more sophisticated activities and would include legal, engineering, architectural, accounting, computer technologies, consultants, and similar skilled activities, and of course, the relatively higher value these businesses bring to a community.

Industry Sector Participation by Number of Employees Looking now at these same industry sectors and companies in terms of the number of jobs, the picture shifts somewhat. Table 2 summarizes these data.

rEGIONAL ORGANIZATIONAL cHARACTERISTICS

sector activity that makes up any given geographic space. This is to be expected to some degree. Communities of any given size tend to attract and support a given set of business activity that meets the basic needs of the community. Hence, various retail outlets, service providers (i.e. plumbers, barbershops, etc.), restaurants, health care, and governmental services would be expected.

Again, keep in mind that these data are best seen as representative and are not to be seen as a census. For example, BLS data estimates non-farm employment in the Fort Smith MSA as between 116,000 and 117,000, making the 115,000 of total employment in this table well short of that. Again, data unclassified based on NAICS identifiers were excluded here. First thing to note as we look at the top five sectors in terms of employment is that the Other Services sector is not included, falling well down the list in all regions examined here. Second, while manufacturing did not make the top five as to numbers of business units in our earlier list, it tops the list in Fort Smith and is in the top two positions in the other regions examined here. For Fort Smith, the top five (in descending order) include Manufacturing, Health Care and Social Assistance, Retail Trade, Educational Services, and Construction. The list was similar for the other two regions discussed with the exception that the NWA MSA had Transportation and Warehousing make the top five, while the State of Arkansas had Public Administration making the list. In all regions, the hospitality sector was a very close sixth in terms of employment. One observation at this point is that while sectors with more organizational units do reflect more jobs, it does not necessarily mean it creates many more jobs. Looking more closely at the Fort Smith MSA, we see that in terms of business units, Other Services had the highest percentage of units at 14.3%, while only creating 5.1% of the jobs in the MSA. In Manufacturing we find that 4.5% of the units produce 18.3% of the jobs; or Health Care with 7.7% of the units producing 16.4% of the jobs. UA Fort Smith College of Business

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UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS Table 3. Fort Smith MSA County Business Units and Employment by Industry Sector Sebastian County, AR

It is worth noting the consistency of the sector mix among the regions included here and what this pattern reveals about what is “natural” and “normal” for a community to have, especially when it looks to implement initiatives for business growth and jobs. Industry Sector Participation by Counties Breaking the Fort Smith MSA into the respective five counties reveals variations that define the economic capacities of each. As we saw in the earlier state and MSA comparisons, each area economy will have similar building blocks to sustain the residents in the community. In general, as one moves from the larger regions to smaller ones, as defined by population and economic activity, the more diverse and substantive the economic activities.

Employees Number 439 519 268 5,085 15,045 2,763 8,167 2,379 1,300 1,373 1,535 2,103 32 2,310 4,233 14,584 466 4,445 3,134 1,691 71,871

% of Total 0.6 0.7 0.4 7.1 20.9 3.8 11.4 3.3 1.8 1.9 2.1 2.9 0.0 3.2 5.9 20.3 0.6 6.2 4.4 2.4 100.0

Crawford County, AR

Businesses Number 108 63 18 530 319 360 934 224 103 308 395 539 14 442 112 653 87 371 905 103 6,588

% of Total 1.6 1.0 0.3 8.0 4.8 5.5 14.2 3.4 1.6 4.7 6.0 8.2 0.2 6.7 1.7 9.9 1.3 5.6 13.7 1.6 100.0

In terms of employment, it is interesting to note that Sebastian County appears to be more concentrated in the top five sectors than the other counties based on the percentage of employment. Sebastian County has 65.8% of all employment in the top five sectors compared to 53.7% in Crawford County. The remaining counties range from 55.3% to 59.9%. Calculating all sectors in a county comprising 5% or more of total county employment reveals that Sebastian County has the fewest number of sectors that meet this criterion, registering six sectors. All other counties range from seven to eight sectors. While this might suggest some vulnerability in Sebastian County due to its relatively higher exposure to fewer sectors, its relative size also mitigates against wide swings in economic wellbeing. A loss of 250 manufacturing jobs in Sebastian County is less traumatic than it is in Sequoyah (with less than 300 total manufacturing jobs reported here). Nonetheless, it appears that Crawford County has greater balance within the five-county complex.

In viewing county-level data we see a similar pattern of building blocks that we noted in the earlier discussion of state and MSA economies. The largest sector as defined by number of business units tends to reflect Other Services, followed closely To the degree this is a better structure by the Retail Trade sector. employment-wise, it is likely offset by

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Employees Number 556 159 110 1,636 3,380 1,192 2,196 729 552 436 412 967 2 531 1,638 1,429 143 865 1,303 902 19,138

% of Total 2.9 0.8 0.6 8.5 17.7 6.2 11.5 3.8 2.9 2.3 2.2 5.1 0.0 2.8 8.6 7.5 0.7 4.5 6.8 4.7 100.0

Businesses Number 201 14 13 423 169 165 399 163 42 121 143 254 1 236 65 144 49 128 485 71 3,286

% of Total 6.1 0.4 0.4 12.9 5.1 5.0 12.1 5.0 1.3 3.7 4.4 7.7 0.0 7.2 2.0 4.4 1.5 3.9 14.8 2.2 100.0

the interconnectedness of all the counties, particularly Crawford and Sebastian counties, and the relative ease of movement of labor to other counties. Age of Businesses by Industry Sector In this section, we look at the age of businesses relative to the sectors in which they belong, summarizing the impact of longevity on sector headcounts and related employment. Table 4 includes the results for the Fort Smith MSA, while Table 5 contains the same data for Northwest Arkansas. Looking at Table 4, please note that unclassified entities (missing a NAICS identifier) were included in the table. This “Not Available” category was sizable in the Fort Smith dataset. Since age was our factor of interest, it was determined that this data added more value than it hurt in this particular analysis. Several things jump out at us when looking at the summary data at the bottom of the table. First, notice the row labeled “Percent of Total MSA,” where the age group is viewed as a proportion of total MSA employment. Taking a look at the companies in existence five years or less,

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Employees Number 388 152 296 556 685 93 734 133 55 227 115 135 6 107 935 552 40 242 307 425 6,183

% of Total 6.3 2.5 4.8 9.0 11.1 1.5 11.9 2.2 0.9 3.7 1.9 2.2 0.1 1.7 15.1 8.9 0.6 3.9 5.0 6.9 100.0

Le Flore County, OK

Businesses Number 188 8 11 146 42 26 158 48 20 48 52 72 2 65 35 71 9 59 172 54 1,286

Employees

% of Total 14.6 0.6 0.9 11.4 3.3 2.0 12.3 3.7 1.6 3.7 4.0 5.6 0.2 5.1 2.7 5.5 0.7 4.6 13.4 4.2 100.0

Number 245 335 172 487 1,320 258 1,295 551 108 403 270 437 4 262 1,520 1,234 47 633 707 703 10,991

we see that they comprise nearly 34% of all business units in the MSA, but only 12% of the jobs. This amounts to creating two jobs for every business unit, as indicated in the row labeled â&#x20AC;&#x153;Average Jobs per Business Unit.â&#x20AC;?

Sequoyah County, OK

Businesses

% of Total 2.2 3.0 1.6 4.4 12.0 2.3 11.8 5.0 1.0 3.7 2.5 4.0 0.0 2.4 13.8 11.2 0.4 5.8 6.4 6.4 100.0

Number 134 20 15 129 63 65 237 71 22 89 72 101 2 72 53 121 18 87 259 63 1,693

Employees

% of Total 7.9 1.2 0.9 7.6 3.7 3.8 14.0 4.2 1.3 5.3 4.3 6.0 0.1 4.3 3.1 7.1 1.1 5.1 15.3 3.7 100.0

Number 115 68 71 287 294 633 1,073 287 49 206 147 173 1 141 964 1,051 115 426 412 455 6,968

As the businesses survive and even prosper, they begin to add jobs and the ratio of jobs to employer increases with increases in age. The headcount of organizations declines over the age categories, reflecting in large part both

Businesses

% of Total 1.7 1.0 1.0 4.1 4.2 9.1 15.4 4.1 0.7 3.0 2.1 2.5 0.0 2.0 13.8 15.1 1.7 6.1 5.9 6.5 100.0

Number 48 3 6 83 32 44 157 38 10 48 54 65 1 58 30 87 12 58 167 44 1,045

% of Total 4.6 0.3 0.6 7.9 3.1 4.2 15.0 3.6 1.0 4.6 5.2 6.2 0.1 5.6 2.9 8.3 1.1 5.6 16.0 4.2 100.0

attrition and consolidation. It is also interesting to observe that most of the new businesses (five years and under) are in Retail Trade and Health Care and Social Assistance. In fact, the health care sector has consistently created

Table 4. Age of Fort Smith MSA Business Units by Industry Sector (As Percentage of Respective Age Groups) Industry Sectors

0-5 Years Old

6-10 Years Old

11-25 Years Old

26-50 Years Old

51-75 Years Old

Older than 75

% of Total

rEGIONAL ORGANIZATIONAL cHARACTERISTICS

Franklin County, OK

Employees Businesses Employees Businesses Employees Businesses Employees Businesses Employees Businesses Employees Businesses Agriculture, Forestry, Fishing and Hunting Mining, Quarrying, and Oil and Gas Extraction Utilities Construction Manufacturing Wholesale Trade Retail Trade Transportation and Warehousing Information Finance and Insurance Real Estate and Rental and Leasing Professional, Scientific, and Technical Services Management of Companies and Enterprises Admin & Support/Waste Mgt & Remediation Educational Services Health Care and Social Assistance Arts, Entertainment, and Recreation Accommodation and Food Services Other Services (except Public Administration) Public Administration Not Available

5.0 0.3 0.3 9.4 6.4 4.3 9.9 3.4 1.2 3.8 5.8 6.9 0.2 6.4 0.9 11.4 1.3 4.9 8.6 0.2 9.3

8.1 0.2 0.2 9.0 3.6 2.2 10.3 3.3 1.0 3.4 5.1 7.8 0.2 8.0 0.8 6.5 1.2 4.5 12.2 0.3 12.3

1.1 1.2 0.2 5.6 5.1 4.6 8.1 2.8 1.1 1.8 3.1 3.7 0.1 4.3 0.7 20.3 1.7 7.8 7.7 1.9 17.3

2.1 0.7 0.2 6.5 2.2 2.7 7.5 2.8 0.9 2.1 3.5 4.7 0.1 4.8 0.3 5.4 1.0 3.6 8.9 0.7 39.2

1.8 2.3 0.1 8.2 3.3 14.8 8.8 3.1 2.9 1.4 2.6 6.1 0.0 4.5 4.9 19.4 0.9 7.6 6.9 0.3 0.1

2.8 1.3 0.3 10.9 4.5 5.4 14.1 4.0 1.0 3.1 5.1 9.3 0.1 5.2 0.7 7.5 1.6 5.4 16.9 0.3 0.5

1.9 1.5 1.5 9.9 10.7 3.8 7.2 2.1 2.2 2.2 3.2 3.3 0.0 4.3 1.7 33.1 0.8 4.9 4.6 1.0 0.0

5.4 1.2 1.2 13.5 6.6 5.1 14.3 2.1 0.9 4.3 5.2 7.7 0.1 3.0 1.0 9.1 1.2 3.6 13.9 0.6 0.1

0.7 0.3 2.6 4.8 25.8 8.5 13.7 2.4 1.8 0.9 1.2 2.5 0.0 0.3 12.1 14.5 0.4 0.4 6.7 0.2 0.1

5.0 0.6 0.9 7.2 7.5 8.5 19.7 2.2 1.3 2.2 2.8 4.4 0.0 0.6 4.1 5.0 1.9 2.2 23.2 0.3 0.3

4.1 0.0 0.0 12.7 24.3 4.3 0.9 6.6 0.6 2.6 0.1 1.6 0.0 0.3 11.0 19.1 1.2 0.0 6.9 3.7 0.0

1.6 0.4 0.0 1.2 3.2 4.4 6.0 1.6 3.2 4.8 0.8 3.6 0.0 0.4 12.1 3.2 1.6 0.8 40.7 10.1 0.0

Total Units in Each Age Category

8,569

4,268

10,085

3,220

19,720

2,826

19,663

1,730

5,038

319

8,631

248

Percent of Total MSA

12.0%

33.8%

14.1%

25.5%

27.5%

22.4%

27.4%

13.7%

7.0%

2.5%

12.0%

2.0%

Average Jobs per Business Unit

2.0

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11.4

UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS jobs, as has the granddaddy of them all, Manufacturing, particularly in companies operating 25 years or more. Construction and retail sectors have a solid presence, as well, in the Fort Smith MSA. The results are similar when looking at Table 5 for NWA MSA. The exception seems to have been in persistent and solid presence in the Professional, Scientific, and Technical Services sector. It is assumed that this has something to do with the university and larger scale enterprises that will naturally attract such higher-skill companies.

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The anomaly in the 51-75 year category in Retail Trade is related to Walmart’s recording of all state employees out of the NWA MSA. It was determined to not attempt to extract somewhat arbitrary pieces out of corporate headquarters such as Walmart and Tyson, but to simply acknowledge their presence and significant impact at certain junctures. Of course, these large headquarter companies also impacted the jobsto-employer ratio as well. This is particularly evident in the last two age groupings in Table 5. The pattern that emerged in the Fort Smith data is similar in the first four age groupings here.

As the businesses survive and even prosper, they begin to add jobs and the ratio of jobs to employer increases with increases in age. MSA Businesses and Size of Workforce Table 6 provides a brief look at the relationship between the organizations in the individual MSAs and the size of workforce within these units. Cases where headcount wasn’t provided were excluded. Again, it is the proportions that are of greatest interest here. The similarities between MSAs as revealed in the table are quite remarkable. While it is consistent with the data presented in Tables 4 and 5 on aging and job creation, it is clear from this table that businesses in both MSAs are essentially small businesses. These many smaller companies are the backbone of our community and provide the breadth of goods and services we so often take for granted.

Table 6. MSA Workforce Size by Business Units

Fort Smith MSA

NWA MSA

# of Employees

Businesses

% of Total

Businesses

% of Total

13,164

87.0

18,260

87.1

10-24

1,134

7.5

1,560

7.4

25-49

484

3.2

580

2.8

50-99

195

1.3

325

1.5

over 100

146

1.0

244

1.2

15,123

100.0

20,969

100.0

1-9

Total Businesses

* Excludes cases where listings were not available.

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Fort Smith Regional Economic Outlook, 1st Quarter, 2011

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Industry Sectors

0-5 Years Old

6-10 Years Old

11-25 Years Old

26-50 Years Old

51-75 Years Old

Older than 75

% of Total

Employees Businesses Employees Businesses Employees Businesses Employees Businesses Employees Businesses Employees Businesses Agriculture, Forestry, Fishing, and Hunting Mining, Quarrying, and Oil and Gas Extraction Utilities Construction Manufacturing Wholesale Trade Retail Trade Transportation and Warehousing Information Finance and Insurance Real Estate and Rental and Leasing Professional, Scientific, and Technical Services Management of Companies and Enterprises Admin. & Support/Waste Mgt. & Remediation Educational Services Health Care and Social Assistance Arts, Entertainment, and Recreation Accommodation and Food Services Other Services (except Public Administration) Public Administration Not Available

3.4 0.2 0.1 7.8 12.3 4.6 10.3 3.3 1.4 3.8 5.7 10.6 0.4 8.7 1.5 10.5 1.9 4.5 7.8 1.0 0.1

5.5 0.1 0.1 10.7 2.3 4.3 11.8 2.7 1.7 3.8 5.6 13.0 0.4 11.4 1.1 6.7 1.4 5.1 11.7 0.3 0.0

1.3 0.3 0.1 10.8 8.6 3.9 9.6 5.2 1.2 3.0 4.6 9.9 0.2 4.6 1.2 14.2 1.8 10.7 7.8 1.1 0.0

2.7 0.2 0.1 13.5 4.5 4.4 12.1 3.2 1.6 3.9 6.8 11.9 0.4 7.6 1.1 7.8 1.7 5.2 10.9 0.3 0.1

1.3 0.1 0.4 10.1 11.4 3.9 8.8 2.6 1.6 2.9 3.6 9.5 0.0 4.4 7.5 9.7 2.6 11.4 7.5 0.3 0.3

2.6 0.1 0.2 11.5 5.9 4.5 14.8 3.4 1.7 3.3 4.9 11.8 0.2 5.2 1.0 8.0 1.9 5.1 13.8 0.2 0.1

7.7 0.0 0.1 6.5 12.3 4.5 8.3 21.7 0.7 2.9 2.7 5.3 0.0 5.9 2.1 7.6 1.4 3.6 6.1 0.6 0.0

3.9 0.0 0.1 12.2 6.5 5.7 16.1 2.0 1.4 2.9 5.8 8.7 0.0 3.5 1.0 7.7 2.0 2.9 17.1 0.4 0.0

6.5 0.0 1.3 2.7 2.7 2.1 63.5 2.5 0.2 0.9 0.3 0.4 0.0 0.0 0.3 14.1 0.2 0.4 1.8 0.0 0.0

10.1 0.3 1.2 9.5 5.2 7.3 12.8 2.4 1.2 4.9 3.4 3.7 0.0 0.9 0.9 4.3 0.9 2.1 28.1 0.6 0.0

3.9 0.0 1.1 0.0 47.5 0.5 3.6 11.4 2.4 2.5 0.0 0.1 0.0 0.1 7.8 2.7 0.1 0.4 7.9 7.8 0.0

5.5 0.1 0.2 10.5 2.4 4.3 11.7 2.7 1.7 3.9 5.5 12.7 0.4 11.1 1.2 6.6 1.4 5.0 12.5 0.5 0.0

Total Units in Each Age Category

17,770

7,807

16,010

3,492

28,171

3,987

28,663

2,104

19,395

327

9,153

188

Percent of Total MSA

14.9%

43.6%

13.4%

19.5%

23.6%

22.3%

24.1%

11.8%

16.3%

1.8%

7.7%

1.0%

Average Jobs per Business Unit

2.3

Summary and Discussion In this report we examined some of the key features of our community in terms of organizational make up. The point, of course, is to continue to understand the underlying structure that defines our regional economy. In previous issues we focused on the human element – demographics and social strata. Here the emphasis was on the demographics of our organizations. Following are a few observations we can take from this analysis: 1. A “normal” community, if not a healthy one, economically speaking, is one that can support a diversity of products and services offered by multiple suppliers. That is, we want a community that is able to support a high percentage of businesses, most of them small, that are classified as Other services. These are organizations that typically offer more personal services such as the barbershop, dry cleaners, repair shop, civic and social organizations, and the like. We also appreciate the diversity of restaurants and entertainment available, as

4.6

7.1

well as educational and health care organizations. They make a community a great place to live and comprise a significant portion of the total organizations in our community. It is also normal that not all these business types have the same potential to significantly increase the economic output of our community or deliver the number of jobs we might want. It is clear that some sectors have more potential to multiply economic output than others. When looking at the percentage of business units in a sector relative to the percentage of jobs created, this fact becomes quite clear. Organizations that create the most jobs as a percentage of total jobs are typically located in manufacturing, health care, and to some degree, retail and hospitality sectors. That’s normal. 2. In a very real way, older companies are our economic “friends.” Companies that survive past the tenyear mark really start cranking up employment. On average, a company in the 11-25 year category uses three times UA Fort Smith College of Business

13.6

59.3

48.7

more workers than one that’s less than five years old, and one that is between 26 and 50 years old raises that number five times. From an economic development perspective, which is easier (and more likely): add a single job to each of the existing 2,826 Fort Smith organizations in the 11-25 year range (the total from Table 4), or bring in one company that adds 2,826 jobs to the Fort Smith economy?

rEGIONAL ORGANIZATIONAL cHARACTERISTICS

Table 5. Age of NWA MSA Business Units by Industry Sector (As Percentage of Respective Age Groups)

3. Entrepreneurial initiatives are unlikely solutions for short- or intermediate-term employment problems in a community, but are an important source of employment in the longer term. Right along with that thought, however, is the notion that self-employment should be viewed as an important and vital part of any entrepreneurial initiative. Most personal care and many professional services are self-employment arenas – the lawyer, the accountant, the barber, and the therapist are a few examples. So, what does a viable, cohesive economy look like? It is a mix of

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UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS all three notions highlighted above and likely more. It is a community that cultivates an environment where organizations survive, prosper and grow “old,” but also stirs them to remain responsive, adaptable, and growing. It is a community that invites the new risk takers and does not hinder them. The community facilitates their pursuits. From this furnace of the startup will come the “old” companies of tomorrow.

constantly seeks to draw in those organizations that bring the highest value to our community and then multiplies the impact of successful recruits. In sum, a viable economic initiative is more than the execution of a single strategy, however comfortable we are with it, and regardless of how tried and true it has been in the past. It’s tomorrow we’re really talking about here, and that’s a whole new game.

And, finally, it is a community that

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Fort Smith Regional Economic Outlook, 1st Quarter, 2011

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

Sponsored by Arvest Bank

BUSINESS BANKING FOR YOUR CHANGING WORLD As a member of the business community, your world is constantly changing. Thatâ&#x20AC;&#x2122;s why Arvest is the perfect bank for you. With 12-hour weekday banking, remote deposit and online tools, we give you what you need to keep up. Our bankers are committed to responding quickly to your financial needs. Stop by any of our local Arvest locations or visit us at arvest.com and get more for your business.

Arvest Bank. The perfect bank for your changing world.

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