Sector Analysis Report

Col

lege

of

Bus

ines

sCENTER

CBRED Special Report December 2012

UAFS.edu

FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT

2007 & 2010

A Sector

of the

MSA econoMy

AnAlySiSFort SMith

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

uafs.edu/cob/cbred

Van Buren Visitors Center

UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS

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

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.

CENTER

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 ANDECONOMIC DEVELOPMENTUAFS College of Business

5210 Grand Avenue, BI 218

P.O. Box 3649

Fort Smith, AR 72913-3649

Phone: (479) 788-7938

E-mail: [email protected]

Website: uafs.edu/cob/cbred

A Sector AnAlySiS oF the Fort SMith MSA econoMy: 2007 & 2010The Fort Smith economy has endured significant pressure in recent years, culminating recently in the departure of Whirlpool. While these high profile events garner all the 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 software1 and datasets, we examined the 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

the pre-recession (2007) and post-recession (2010) economy. We then drill deeper into key sectors that comprise our economy by taking a look at the economic impact of these 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.

ANALYST

1 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.

CENTER FOR BUSINESS RESEARCH AND ECONOMIC DEVELOPMENT 11

As of 2010 (the most current year of full data), just over 14% of total full-time equivalent positions can be attributed to the 117 individual industries that comprise the Fort 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.

Somewhat surprisingly, the government sector ranked third in most jobs provided in 2010 with a share of 13.4%. In 2007, the trade sector was third most important in jobs provided, but 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).

overview oF Sector contributionS in the Fort SMith MSA

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

Employment Employee Compensation Output

Sector 2007 2010 2007 2010 2007 2010Ag, 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%

Mining 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%

Educational 0.4% 0.4% 0.1% 0.2% 0.1% 0.1%

Health & social 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%

All Trade 13.2% 13.2% 10.4% 10.9% 6.9% 7.3%

Wholesale 2.6% 2.8% 3.9% 4.2% 2.6% 2.9%

Retail 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%

UNIVERSITY OF ARKANSAS - FORT SMITH COLLEGE OF BUSINESS2

When examining the services subsectors, we see that health and social services represented the highest proportion of total jobs in the MSA in 2010 (11.7%) followed by administrative and waste services (6.4%) and then accommodation and food services (5.8%).

Despite accounting for only 14% of the jobs in the MSA in 2010, manufacturing contributed 37% of the economic output of the region. Between 2007 and 2010, the sector remained 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 output.

Agai,n when looking at the subsector detail for the services sector, we see health and social services accounting for the largest share of production followed by real estate and rental (driven largely by the imputed service value of home ownership) as well as finance and insurance.

Further evidence of the shift in structure of our local economy can be found in the sector shares comprising total employee compensation. In contrast to number of jobs or economic 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%.

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%

Mining 4,062 4,840 19.1% $204.8 $187.4 -8.5% $1,536.3 $912.9 -40.6%

All services 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%

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%

Administrative & waste 10,190 9,842 -3.4% $153.6 $161.7 5.3% $320.7 $333.4 3.9%

Educational services 657 661 0.5% $6.7 $9.8 46.8% $19.9 $23.1 16.1%

Health & social services 16,450 17,954 9.1% $596.2 $674.3 13.1% $1,254.2 $1,382.5 10.2%

Arts-entertainment/recreation 999 1,045 4.7% $14.2 $10.6 -25.1% $45.1 $41.3 -8.6%

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%

All trade 21,427 20,226 -5.6% $523.6 $572.5 9.3% $1,488.8 $1,472.5 -1.1%

Wholesale 4,241 4,371 3.0% $196.6 $219.6 11.7% $563.8 $583.0 3.4%

Retail 17,186 15,856 -7.7% $327.0 $352.9 7.9% $925.0 $889.4 -3.8%

Transportation/Warehousing 8,471 7,290 -13.9% $317.0 $319.3 0.7% $1,054.0 $868.8 -17.6%

Utilities 832 829 -0.4% $57.1 $63.1 10.5% $439.2 $483.2 10.0%

Total 161,874 153,769 -5.0% $5,029.7 $5,268.3 4.7% $21,711.1 $20,293.2 -6.5%

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


Once again, note that health and social services represented a significantly higher proportion of employee compensation relative to its counterparts within the services sector in both 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 number of full-time equivalent positions, employee compensation, and economic outputs are examined by sector for both 2007 and 2010. Note that while employment and output fell for the MSA as a whole between 2007 and 2010, employee compensation increased by 4.7%.

The agriculture, trade (wholesale and retail), services, and 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 increases in employee compensation according to the data with the exception of timber extraction and commercial logging. The percentage increases in employee compensation 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 positions decreased between 2007 and 2010 for all sectors except mining and government. Manufacturing experienced the highest rate of decline (-16.2%) followed by construction (-15.9%) and transportation & warehousing (-13.9%). Output also decreased for most sectors between the years considered in the analysis. Only the services and government sectors 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**

Ag, Forestry, Fish & Hunting $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*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.


where the increase in output equaled 69%. The most notable decline in output for the Fort Smith MSA was in the mining sector where a 40.6% decrease was observed. Construction, 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 EMPLOYEEAs 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 employee followed by manufacturing, and mining. Output per employee can be regarded as a proxy for productivity of a sector – it measures the amount of production output attributable to one full-time equivalent employee. The retail trade, government, and services sectors had the smallest output per employee. This is due to the fact that these sectors do not generate high value output relative to the large numbers of individuals they employ. It should be noted, however, that within the services sector, there is disparity in outputs per employee among the various services categories. For example, information, finance/insurance, real estate, and management all generate a much higher value of outputs per employee relative to their counterparts in the sector.

Compensation per employee was greatest in the utilities sector in 2010 followed by government and wholesale trade. Manufacturing ranked fourth. The sectors with lowest per-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.

In order to evaluate the relative value of a particular sector or subsector to our economy, a Value Index was calculated. The index seeks to reveal the relative value of each sector by combining the value of the compensation and output per employee and comparing that new value with the MSA average value. Values above the MSA average (index score above 1.00) might be categorized as high-value sectors (in green) and those below the MSA average (index score below 1.00) as of relatively less value in terms of the combined impact of compensation and output (in red). Based on this metric, mining, utilities, manufacturing, wholesale trade, transportation and warehousing, information services, finance and insurance and management of companies offer the strongest value in terms of joint value of compensation paid and estimated output for the sector.

Downtown Van Buren


Clearly, the sectors of manufacturing, services, and trade are the most significant to the Fort Smith MSA. As shown in previous analysis, these sectors represent the three largest shares of total regional output. Altogether, in 2010, they account for three-quarters of total MSA output. Services and manufacturing also rank as the top two sectors providing jobs for the MSA, with trade tying government for the third spot. Trade also tied the government sector for providing the 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

operates independently in the economy. However, within the regional economy, there are linkages between the sectors as local companies purchase inputs from one another and as employees spend paychecks. To define the true importance of a sector and its significance to the regional economy, all linkages that sector has with others in the economy must be examined. These connections are known as multiplier effects and must be added to the direct economic activity to gain an estimate of the true importance of a sector to the MSA.

MANUFACTURINGManufacturing 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

iMpAct oF top three MSA SectorS: MAnuFActuring, Service, And trAde

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

Industry 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 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

Petroleum refineries 48 $3.9 $542.5* Measured by number of full-time equivalent positions ** MIllions of dollars


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Smith MSA but also as the top output producer. While this industry also ranks at the top for employee compensation, this is due largely to its large number of employees (see per-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

firms source inputs), and there are jobs that are supported by the spending of income by the people who work both for the manufacturing firms and the supply-chain firms. The supply-chain effect is known as the indirect effect in economic impact 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

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


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%

Total Effect 48,356 41,138 -14.9% $1,970.2 $1,825.6 -7.3% $10,802.0 $9,726.2 -10.0%


Garrison Pointe Market and Cafe in Fort Smith, AR


number of jobs and output presented in Table 5. Table 6 shows which sectors in the MSA are most impacted by the presence of manufacturing, as well as the interconnections between 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.

SERVICETable 7 supplies a listing of the top industries providing jobs in the services sector for the Fort Smith MSA. Since there are fewer specific industries in the services sector, relative to manufacturing, and since this sector comprises the largest proportion of employment for our MSA (as compared to manufacturing), each industry represented in the services list has a much larger number of employees than its counterpart ranking in the top industries list for manufacturing. However,

the corresponding totals for employee compensation and output are not as great, which reflects the significant difference in wages between the two sectors as well as value 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 8 shows the change in economic impact of the services sector on the Fort Smith MSA between 2007 and 2010. Recall, services jobs comprised a slightly larger proportion of employment, employee compensation, and output in 2010 as compared to 2007. The result of services jobs becoming a larger part of our economy can be seen as increases in direct economic impacts for the sector across employment and employee compensation as well as output, with the highest percentage increase being observed in employee

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

Employment* Output**Sector 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%

Educational services 113 118 4.8% $3.4 $4.1 20.6%

Health & social services 2,082 2,319 11.3% $161.2 $181.7 12.7%

Arts- entertainment & recreation 202 205 1.9% $8.7 $8.0 -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%

All Trade 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%

Transportation & Warehousing 1,779 1,757 -1.3% $227.6 $211.6 -7.0%

Utilities 255 209 -18.0% $136.3 $120.1 -11.9%



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

Industry 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* 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


Direct Effect 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%

Total Effect 70,702 69,945 -1.1% $2,143.2 $2,350.5 9.7% $6,289.5 $6,649.7 5.7%


14 Flags Museum in Sallisaw, OK


compensation. In 2010, the services sector supported almost 70,000 jobs in the MSA with 5,000 of those stemming from the indirect and induced economic impacts. However, as the 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 the significant increase in induced effect between 2007 and 2010. The induced effect traces spending throughout the economy that is performed by workers in the services sector as well as any workers in industries that supply services sector companies. From this increase in spending, the model estimates the corresponding number of jobs necessary to support this economic activity.

Table 9 presents the economic impact of services on other sectors aggregated by sector. The services 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 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

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 TRADEWhile 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

impact of retail trade for both 2007 and 2010. Note that for the direct effect, the percentage decline in output is smaller than the percentage decline in jobs in this sector. This helps to explain the increase in total economic impact that the retail sector had on the MSA between 2007 and 2010. Another explanation for the increase in economic impact (even in the

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

Employment* Employee Compensation**Sector 2007 2010 % Change 2007 2010 % Change

Ag, Forestry, Fish & Hunting 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%

Mining 25 30 21.9% $8.1 $5.2 -36.1%

All Trade 3,183 3,291 3.4% $230.9 $225.3 -2.4%

Wholesale 512 538 5.1% $69.9 $71.7 2.6%

Retail 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%


“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.”


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 subsectors. There also appear to be significant economic

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


Direct Effect 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%

Total Effect 20,846 19,859 -4.7% $511.9 $536.3 4.8% $1,282.3 $1,314.0 2.5%


Table 11. Sectors Most Impacted by Retail Trade in Fort Smith MSA

Employment* Employee Compensation**Sector 2007 2010 % Change 2007 2010 % Change

Ag, Forestry, Fish & Hunting 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%

Manufacturing 60 67 11.0% $14.6 $21.1 44.6%

Mining 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%

Management of companies 43 43 -0.9% $8.4 $7.1 -15.8%

Administrative & waste services 501 480 -4.2% $18.4 $17.5 -5.1%

Educational services 34 40 16.8% $1.1 $1.4 29.7%

Health & social services 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%

Utilities 29 29 -1.5% $12.2 $14.2 16.7%


Fort Chaffee Barbershop Museum in Fort Smith, AR


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

A CLOSER LOOK AT HEALTH CAREPreviously, 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.

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

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.

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 health-industry 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.

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


Direct Effect 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%

Total Effect 19,746 21,419 8.5% $758.8 $889.7 17.3% $1,628.3 $1,884.4 15.7%


“[F]irms in health industries are increasing

both the number and volume of input-supply transactions with[in]…

the MSA.”


Stanley Tubbs Memorial Library in Sallisaw, OK

13

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, and mining sectors.

GOVERNMENTThe government sector also experienced gains in employment, employee compensation, and output between 2007 and 2010. This is not surprising with spending on government 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 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 the federal level, as well as state and local levels. Output also

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 increases in compensation as well as output between 2007 and 2010, but state and local employees saw their pay increase at a much greater rate. The contribution to total output was also much greater for the state/local subsector. One large contributor to this subsector is public education.

CONSTRUCTIONWhile 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.

breAkdown oF governMent, conStruction, And Mining into SubSectorS

Table 13. Breakdown of Government Sector


State & Local 16,201 17,101 5.6% $699.0 $791.2 13.2% $878.3 $1,055.4 20.2%

Federal 3,706 3,570 -3.7% $249.2 $254.0 1.9% $329.4 $352.0 6.9%

All Government 19,906 20,671 3.8% $948.2 $1,045.2 10.2% $1,207.7 $1,407.5 16.5%


“[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%.”


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While residential construction dropped sharply during the period, commercial projects, which tend to be longer-term in nature and funding, continued to push projects through 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.

MININGSome 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.

When deconstructing the increase in employment, compensation, and output for each subsector in Table 15, it is noted that the subsector having the greatest increase in 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 event-driven forces.

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

Table 14. Breakdown of Construction Sector


Residential 2,991 1,765 -41.0% $74.0 $38.0 -48.6% $507.5 $208.8 -58.9%

Commercial 7,070 6,700 -5.2% $176.5 $187.4 6.2% $680.6 $697.1 2.4%

All Construction 10,061 8,465 -15.9% $250.5 $225.4 -10.0% $1,188.1 $905.9 -23.8%


Table 15. Breakdown of Mining Sector


Oil and Natural Gas 3,525 4,470 26.8% $178.7 $168.1 -5.9% $1,429.4 $821.2 -42.5%

Quarrying 335 192 -42.9% $11.7 $9.1 -22.1% $47.4 $40.6 -14.3%

Coal and Other 202 178 -11.8% $14.4 $10.2 -29.1% $59.6 $51.1 -14.3%

All Mining 4,062 4,840 19.1% $204.8 $187.4 -8.5% $1,536.3 $912.9 -40.6%


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

Arkansas Best Corporation Performing Arts Center in Fort Smith, AR


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.

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.

CRAWFORD COUNTYFor 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 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%

Sector AnAlySiS oF the countieS coMpriSing the Fort SMith MSA

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


Ag, Forestry, Fish & Hunting 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%

Mining 467 479 2.6% $29.5 $17.7 -39.9% $121.1 $67.4 -44.4%

All services 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%

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%

Professional - scientific & 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%

Administrative & waste services

962 1,501 56.1% $17.0 $27.5 62.2% $45.9 $57.0 24.1%


Health & social services 1,449 1,914 32.1% $47.9 $61.3 28.1% $99.4 $125.1 25.9%

Arts - entertainment & recreation

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%

All trade 3,143 3,335 6.1% $80.8 $92.1 14.0% $218.1 $240.9 10.4%

Wholesale 741 804 8.6% $33.2 $39.1 17.6% $93.5 $106.4 13.8%

Retail 2,403 2,531 5.3% $47.5 $53.0 11.4% $124.6 $134.4 7.9%

Transportation & Warehousing

4,744 3,775 -20.4% $186.1 $157.6 -15.3% $582.7 $410.0 -29.6%

Utilities 24 30 26.8% $0.7 $1.0 40.8% $3.0 $3.9 29.6%

Total 25,962 27,310 5.2% $789.7 $819.1 3.7% $3,345.6 $3,312.6 -1.0%



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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.

FRANKLIN COUNTYTable 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

relative to 2007. This is due to the agricultural, services, and transportation sectors performing better, while its construction sector performed worse. Similar to the previously discussed 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 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


Ag, Forestry, Fish & Hunting 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%

Manufacturing 961 841 -12.5% $41.4 $41.3 -0.1% $251.4 $247.2 -1.7%

Mining 84 300 257.7% $3.5 $10.0 183.6% $16.5 $47.1 185.4%

All services 1375 2052 49.2% $34.1 $48.4 42.0% $152.9 $237.2 55.1%

Information 43 34 -21.0% $1.2 $1.0 -18.3% $6.9 $6.3 -8.8%


Real estate & rental 87 150 71.7% $1.1 $0.8 -20.2% $53.1 $68.1 28.4%


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%


Health & social services 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%

All trade 757 764 1.0% $12.9 $16.4 27.1% $41.0 $46.4 13.4%

Wholesale 81 95 17.3% $2.1 $3.8 81.5% $6.5 $11.7 78.7%

Retail 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%

Utilities 258 242 -6.0% $16.8 $18.2 8.4% $124.7 $135.5 8.6%

Total 6135 6738 9.8% $196.9 $225.3 14.4% $887.6 $968.1 9.1%



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


Ag, Forestry, Fish & Hunting 2409 1266 -47.4% $7.9 $6.9 -12.5% $269.4 $62.4 -76.9%

Construction 1233 912 -26.1% $28.7 $4.7 -83.8% $144.3 $80.8 -44.0%

Government 4431 3567 -19.5% $179.4 $153.2 -14.6% $225.7 $221.0 -2.1%

Manufacturing 2417 314 -87.0% $90.1 $14.1 -84.3% $787.6 $111.5 -85.8%

Mining 694 72 -89.7% $33.9 $1.0 -97.0% $255.8 $13.1 -94.9%

All services 5545 6742 21.6% $92.5 $111.7 20.8% $441.9 $556.0 25.8%

Information 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%


410 382 -6.9% $9.0 $6.8 -24.0% $30.9 $51.5 66.6%



871 1017 16.8% $14.1 $4.6 -67.3% $28.4 $39.4 39.0%


Health & social services 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%

Accomm. & food services 692 819 18.4% $8.4 $11.2 33.8% $30.9 $41.1 32.7%

Other services 1344 747 -44.4% $16.2 $13.5 -17.0% $64.0 $48.7 -23.9%

All trade 2324 1766 -24.0% $42.9 $34.2 -20.2% $137.8 $110.1 -20.1%

Wholesale 252 130 -48.5% $8.7 $3.4 -61.0% $26.5 $13.6 -48.5%

Retail 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%

Utilities 151 45 -70.0% $11.4 $2.7 -75.9% $57.9 $30.9 -46.6%

Total 19833 15106 -23.8% $506.7 $346.5 -31.6% $2,420.8 $1,236.9 -48.9%


Franklin County also saw higher-than-MSA increases in employee compensation for the agricultural, services, trade, and transportation sectors. When comparing changes in output 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 COUNTYAs 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%

growth for MSA). Output in the sector also increased at a rate of 25.8% which was well above the rate of growth for the MSA of 5.5%.

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 COUNTYThe 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,


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Table 19. Sector Analysis, 2007 and 2010, Sebastian County


Ag, Forestry, Fish & Hunting 500 474 -5.3% $3.4 $5.7 65.9% $72.0 $72.0 0.0%

Construction 4,363 3,753 -14.0% $140.5 $129.3 -8.0% $544.4 $422.5 -22.4%

Government 8,165 8,830 8.2% $433.2 $502.6 16.0% $556.1 $656.0 18.0%

Manufacturing 17,894 14,303 -20.1% $851.1 $779.5 -8.4% $5,965.4 $4,730.5 -20.7%

Mining 2,768 3,255 17.6% $136.6 $127.5 -6.6% $1,132.9 $605.3 -46.6%

All services 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%

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%


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%


7,623 6,355 -16.6% $115.8 $116.9 0.9% $214.5 $200.4 -6.6%

Educational services 453 443 -2.3% $6.0 $8.1 34.7% $15.5 $16.5 6.7%

Health & social services 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%

All trade 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%

Utilities 363 370 2.0% $25.9 $27.9 7.7% $235.3 $243.4 3.4%

Total 94,409 84,738 -10.2% $3,212.2 $3,353.4 4.4% $13,833.8 $11,864.3 -14.2%


trade, and transportation, percentages 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.

Sectors registering the largest increases in employee headcounts included government and mining, while

finance and insurance services recorded the largest headcount increase in the services sector.

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


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


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%

Manufacturing 630 314 -50.1% $32.2 $14.1 -56.1% $246.2 $111.5 -54.7%

Mining 49 72 44.9% $1.2 $1.0 -18.6% $10.0 $13.1 30.3%

All services 6,626 6,742 1.7% $90.3 $111.7 23.7% $483.3 $556.0 15.0%

Information 86 80 -7.5% $3.0 $2.4 -18.8% $15.3 $16.5 8.4%


Real estate & rental 156 348 123.0% $0.9 $1.0 8.6% $98.3 $133.3 35.7%


1,257 382 -69.6% $7.2 $6.8 -4.7% $95.3 $51.5 -45.9%



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%

Health & social services 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%

Accomm. & food services 1,098 819 -25.4% $13.5 $11.2 -16.8% $49.2 $41.1 -16.5%

Other services 436 747 71.3% $3.3 $13.5 314.5% $25.4 $48.7 91.7%

All trade 2,291 1,766 -22.9% $29.5 $34.2 16.0% $121.5 $110.1 -9.4%

Wholesale 129 130 1.2% $3.5 $3.4 -2.7% $11.5 $13.6 18.4%

Retail 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%

Utilities 37 45 22.4% $2.2 $2.7 23.9% $18.2 $30.9 69.2%

Total 15,536 15,106 -2.8% $324.2 $346.5 6.9% $1,223.4 $1,236.9 1.1%


SEQUOYAH COUNTYAs 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

seen that the county experienced above-MSA growth in the 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.


Ozark Courthouse in Ozark, AR

21

The economy of the Fort Smith MSA is changing. Like the composition of the national labor market, the proportion of jobs in the manufacturing sector is shrinking, while the 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 comprise the MSA, not all counties experienced increases in

service-sector job growth, just as some counties shouldered the majority of the burden of manufacturing as well as transportation job loss.

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.

Summary and Conclusions


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As we conclude this report, several things were noted from this analysis. First, it is important to keep in mind that the data examined here is from the years 2007 and 2010 -- nearly 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.”

2) The “Whirlpool effect” will rumble through the economy for some time to come. Its more immediate impact is relatively clear from these data. In Table 4, we see that

the second largest subsector within the manufacturing sector is household refrigerators and home freezers, contributing around $800 million in GDP in 2010 and nearly 2,000 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.

As a result of this score, we were able to see which industries had the most valuable combination of compensation and output efficiency per employee. Scores above the average

Further Commentary

2 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.

Downtown Van Buren


might be viewed as more valuable than those below the average. From this analysis, we see that from the list of sectors with above-average scores three of them (utilities, 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).

On the other hand, mining, manufacturing, wholesale trade, transportation and warehousing, and finance and insurance have weaker index scores but much larger employment 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.

Health care has seen considerable growth during the 2007-2010 period. As we saw from Table 2, the sector has experienced this growth even with a recession thrown in the middle. Health services provides an interesting mix of employment opportunities in terms of skill requirements, education, and compensation.

It is a growth industry, in general, but prospects for long-term growth are largely dependent upon a growing community, which is dependent upon a growing economy.

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.”


7) The construction sector was not impacted equally by the recession. Residential construction bore the brunt of the recession effects, according to these data. This was suspected 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 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

experienced declines. Overall, it appears that Le Flore and Sebastian Counties were most affected by the events between 2007 and 2010.

____________

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.

Drennen-Scott House in Van Buren, AR


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