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Chuck Bartels, AP Business Writer

LITTLE ROCK, Ark. (AP) — Arkansas' unemployment rate probably hasn't peaked, but its economy remains strong and it is in a position to be among the quickest states to recover from the recession, a state economist said Wednesday.

While Arkansas couldn't escape being affected by key events of the economic downturn since the 1930s — including the banking crisis and widespread foreclosures — it also has seen sales tax collections grow by 7.2 percent over the year, compared with a 5.6 percent growth for U.S. retail sales during the same period.

"We were really dragged into this recession by everybody else," said Michael Pakko, chief economist for the University of Arkansas at Little Rock Institute for Economic Advancement.

Arkansas sales tax collections have risen four straight quarters. The most recent gain was 0.9 percent for the third quarter.
That's smaller than the two prior quarterly gains, but Pakko said there other indicators still show Arkansas' sales uptick is happening more rapidly than in the rest of the country.

"Sales is one area where we're seeing fairly good progress," Pakko said.

Real estate prices in Arkansas also didn't see the wild inflation that ultimately led to mass foreclosures in some pockets of the nation. Stable home prices prevented many Arkansas homeowners from winding up with "underwater" mortgages, in which the amount owed is greater than the value of the home, Pakko said.

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Arkansas consistently ranks among the best in the nation for low foreclosure rates in a variety of loan categories, including subprime lending, in which it is third, Pakko said.

Northwest Arkansas saw more than its share of foreclosures among developers. But the area still has the lowest unemployment rate — 6.1 percent — of any of the state's seven metropolitan statistical areas. Pine Bluff has the most dismal jobless rating, 9.6 percent. Jonesboro is the only MSA to have seen job growth, up 1 percent from when the recession began in December 2007 to September 2010, Pakko said.

The state lost about 50,000 jobs during the recession, which officially ended a little more than a year ago. Pakko said he expects those jobs to be replaced by the middle of 2012. Thus the state has about another year and half of recovery before it starts growing beyond pre-recession levels of economic activity.

The state unemployment rate has consistently tracked about 2 percent below the national rate, which Pakko said puts Arkansas in a good position when it comes to building back the work force.
"We're poised to lead the rest of the nation forward," said Pakko, a former economist with the Federal Reserve Bank.

Also Wednesday, Gov. Mike Beebe presented his fiscal 2011 balanced budget recommendation to the Legislature. Beebe's $4.6 billion plan is $110 million above this year's budget. Legislators convene Jan. 10 to plan the state's finances for the fiscal year that starts July 1, 2011.

Richard Weiss, director of the Arkansas Department of Finance and Administration, told legislators Wednesday that he also expects continued improvement in the state's economy.

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