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The forecast is clear: Arkansas not hit as hard by recession as many other states.

The reason the current recession hasn't hit Arkansas as hard as some states is simple.

Arkansas had a head start.

This, according to John Shelnutt, a senior research specialist at the Arkansas Institute for Economic Advancement, has made a difference in the state's economic standing.

While most of the country struggles with rising unemployment rates, Arkansas continues to see a slow increase in non-agricultural performance, according to Shelnutt.

"Non-agricultural employment performance is reaching a plateau, not necessarily going down," he says. "Arkansas is pulling out |of the recession~.

"This part of the country went through a regional recession in 1986 and 1987 not experienced by the rest of the country."

That recession was due to falling oil prices.

"Arkansas is not a major producer of oil, but it is a significant participant in the regional economy," Shelnutt says. "An earlier restructuring that predates this recession cleaned out the cobwebs, making Arkansas less prone to the current recession."

The state received another boost two years ago in the form of industrial development.

"We generated a lot of investments starting in 1989," Shelnutt says. "Paper and steel plants began building, as well as other plants ... In other words, outside money."

Shelnutt says that "outside money" came because Arkansas is "more cost competitive than a lot of other places."

He offers New England as an example. The region has been hit worse than any other part of the country by the current recession.

Not Immune

Arkansas, of course, is not immune to economic downturns.

Shelnutt says, "Consumer confidence has been hurt right along with our national counterparts. What it boils down to is we can have a flat economy due to a lack of consumer confidence. But that is not the same thing as going into a deep recession."

Shelnutt says the "trendiness of restructuring companies" caused recent employment losses in Little Rock with the termination of 300 jobs at Little Rock's American Telephone & Telegraph Co. facility and more than 700 positions at the Gannett Co.'s recently closed Arkansas Gazette.

The state's unemployment rate was 6.9 percent in September, down four-tenths of a percentage point from August. The unemployment total was 76,400 people.

Shelnutt expects the losses to alter the employment scene in central Arkansas "moderately" and statewide "modestly."

Another factor that will affect the Arkansas economy is the closing of Eaker Air Force Base at Blytheville and the reorganization of Fort Chaffee at Fort Smith. An estimated 4,000 jobs will be lost as a result of the Department of Defense cuts.

The direct impact, according to Shelnutt, is the loss of base employees along with the loss of business for local suppliers.

The indirect impact will come from the absence of future contracts for construction firms, maintenance firms and the like.

"There will be a significant short-term decline from the closing |of Eaker~," Shelnutt says.

"The anticipation of closure as well as closure itself" is wreaking havoc with the northeast Arkansas economy.

"Do people who work at the base stay in the area or do they move?" Shelnutt asks. "Some jobs already are being lost. Behind the scenes, people already are looking at something to go in there."

The possibility of a commercial airplane maintenance center at Eaker has been widely discussed. The base is scheduled to close in 1992.

"They have the runways, warehouses and a lot of employees who have worked in that field before," Shelnutt says.

Workers at Fort Chaffee may find it easier to get a job than their Blytheville counterparts because of Chaffee's proximity to Fort Smith, Shelnutt says.

"There seems to be a fairly good growth rate in the Fort Smith area," he says. "They tend to be successful there."

Success And Failure

How does the state maintain its employment rate, forecast by Shelnutt to grow by 2.9 percent by the end of this year and by 3 percent by the end of 1992?

First-quarter employment figures showed growth in counties as diverse as Benton, Mississippi, Little River and Madison with 23 counties growing faster than the state average.

Thirty-five counties experienced declines.

To avoid joining the rest of the country in the throes of recession, Shelnutt says the state must emphasize industrial recruitment.

"There are some clouds on our horizon as well," Shelnutt says, pointing to a declining growth rate for non-durable manufacturing and less-than-respectable performances in the real estate, insurance and financial sectors.

The non-durable manufacturing decline is attributed to Arkansas' reliance on processed foods, long a mainstay of the state's economy.

"We've reached capacity," says Shelnutt.

He says the processed food industry must increase exports to improve sales.

"We need to find another market," he says.

Shelnutt says putting off a rise in the prime lending rate until late 1992 would increase the possibility of the recovery extending beyond the short term.
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Author:Taylor, Tim
Publication:Arkansas Business
Date:Nov 11, 1991
Words:804
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