story by Ryan Saylor
rsaylor@thecitywire.com
It is no secret that the Fort Smith economy has had its ups and downs throughout the recession, but things are starting to look up according to one local economist.
Dr. Kermit Kuehn, director of the Center for Business Research and Economic Development at the University of Arkansas at Fort Smith, told attendees of the Fort Smith Regional Economic Outlook Forum that the worst is likely behind the region, though there has been a snag in the recovery. The forum was also sponsored by Arvest Bank.
"Looking at the most recent numbers, in May the non-farm jobs has improved 1% in May over the previous year, which is what I've been talking about, which is employment has been showing signs of improving while the unemployment rate seems to be working higher on the average."
Even with the hiccup in the recovery, Kuehn said the public's view of the economy, while not markably higher, is less pessimistic.
The Fort Smith region, which was once largely dependent on manufacturing jobs, has lost nearly 10,000 jobs in that sector, he said, adding that the recovery that is underway is largely in other areas of the economy not necessarily tied to the manufacturing of goods.
Instead, much of the growth experienced in recent years have been in the healthcare industry, where there has been an explosion of of growth, according to Kuehn.
Kevin Kliesen, a business economist and research officer with the Federal Reserve Bank of St. Louis, also spoke at the event. He pointed to another area that is seeing a lot of growth nationally – new home construction.
The industry, he said, is starting to see a resurgence in the Fort Smith area in recent months as home prices have increased and interest rates have remained low.
"Housing is clearly the source of strength for the economy and housing is a tide that can lift all boats in terms of other parts of the economy."
The growth in new homes is something that has been seen across the region, not just in Fort Smith, with the most recent building permit report for Fort Smith, Greenwood and Van Buren showing a 38.9% increase in permit values for the first part of this year.
What can possibly throw a wrench in the growth in the housing market, Kliesen said, would be if the Federal Reserve were to raise interest rates. But he added that such a rise is not the sudden halt to the market that other economists think it will be. Rather, it will just slow the growth.
"Interest rates have popped recently. That has filtered into mortgage rates. This chart shows you the conventional mortgage rate since the first of the year. For most of the year, a 30-year conventional was running a little under 4%, and you compare that with the average of what it was (before the recession) and it was around 6%. You can see the mortgage rates are still extremely low compared to historical terms,” Kliesen explained.
While Kuehn and Kliesen expressed optimism toward growth in certain industries, one industry that has been surprisingly weak during the first part of this year has been retail.
Kuehn said he could not explain why the retail sector in the Fort Smith region was "down considerably" even though consumer sentiment had risen.
"You can see in discussions with the city of Fort Smith about revenue shortages and unexpected things like that, so this is evidence of retail sales not holding up to last year's performance."
In order to not only recover the retail sector, but to continue to recover and rejuvenate the overall Fort Smith regional economy, Kuehn said evaluating strengths and weaknesses was important for local business and government leaders.
Finding what sectors did well during the recession, he said, helps to determine what the area's competitive advantage is, and with an understanding of the area's competitive advantages, you are able to sell those to potential industries and businesses.
"Knowing what you're good at as a community can help target companies to come to the region. In other words, targeting instead of just taking anything that comes. You want to take what comes, but you want to target what you're suited for. And knowing what you're not good at as a community can help you with solutions to enhance your strengths, be good at what your good at," Keuhn said.
He later added that Fort Smith has strengths, "we just need to understand them and how they work and how to enhance them and how to sell them. And life can become different."
(For an independent look at economic conditions in the Fort Smith region, link here to the first quarter 2013 report of The Compass Report.)