How Arkansas Has Missed Out on the Recession (For Now)

Fact: Arkansas is one of only six states projecting a budget shortfall less than 5 percent for 2010, according to a Center on Budget & Policy Priorities report issued last week.

In this week’s Arkansas Business, Mark Hengel takes a look at how Arkansas has managed (so far) to dodge the recessionary bullets that have shredded so many other state budgets and, among other things, allowed Gov. Mike Beebe to continue his push to eventually eliminate the state’s tax on groceries.

I know, I know. You’ve heard this before: Arkansas doesn’t experience the highs of the economy and, therefore, neither does it experience the lows. But there’s gotta be more to it, right?

Turns out, not really!

Throughout the current recession, Arkansas business and government leaders and economists have repeated what has become a mantra. The state’s economy isn’t suffering as badly as those of other states because, while Arkansas doesn’t fully experience nationwide economic highs, neither does it fully experience the lows.

But why is that?

There are several reasons, but they can probably be boiled down to two.

One, the state learned a hard lesson during the Great Depression, when its almost complete reliance on an agriculture-based economy caused intense economic suffering. That lesson was to diversify.

Second, when most economic indicators consistently put you near the bottom, you don’t have as far to fall.

“During the boom times we talk about why we underperform, but during the bad times we turn to the story 2.0: We’re not as bad as our neighbors,” said Kathy Deck, an economist at the University of Arkansas.

Seriously, though, Arkansas’ economy is more diverse than most of us probably think, which helps when times get tough. Our manufacturing base, while on the decline, isn’t reliant on producing as many durable goods, which are closely tied to business investment. And, unlike in other states, our governmental employment levels have remains steady.

All this is good, but it doesn’t mean we won’t dodge all those bullets. Recession is coming to Arkansas:

The Natural State has many industries that will struggle as the recession deepens. Trucking is a strong sector in Arkansas, DeVol said. As manufacturing, exports and imports decline nationwide, fewer rigs will need to ship goods from place to place, which could affect Arkansas companies like J.B. Hunt Transportation Services Inc. and USA Truck Inc.

Arkansas’ manufacturing sector, even the makers of basic goods, might also feel the economy’s downturn soon, said John Shelnutt, an economist at the Arkansas Department of Finance & Administration.

See the full story here.


In the wake of Wehco and Gannett, surveying the health of other Arkansas media companies

Gwen Moritz on The Prodigal Nation


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