When a senior editor at New York-based SmartMoney magazine addressed an economic forecast conference here in November, he opened by joking about how nice it was to come to a place where people weren't jumping off buildings because of financial distress.
It was a perfect icebreaker, largely because it rang true. In Little Rock and in several other corners of the country, the financial crash has been more of a fender-bender — at least so far.
Layoffs and foreclosures are on the rise and some business investments are on hold, but unemployment rates remain well below the national level in Arkansas and several other states, including Wyoming, North Dakota, Wisconsin and West Virginia. New companies are moving in and some are expanding, adding a few hundred jobs here and a few hundred there.
In December, Forbes named Little Rock one of the best middle-class housing markets because median home prices were rising while the national market was plummeting.
Those small successes are magnified in a dismal economic climate, especially when they play out in states that have never been economic high-flyers or big population gainers. "Arkansas never really experienced extreme highs or extreme lows," says Jim Youngquist, director of The Institute for Economic Advancement at the University of Arkansas at Little Rock.
This unassuming, steady-as-it-goes growth pattern is why places that did not enjoy dizzying highs before the recession are experiencing a gentler fall now.
"We're gratified that ... we've kind of withstood it," Arkansas Gov. Mike Beebe says. "But we're not immune from it."
"Heading into this recession, from Texas up to Montana, the upper Great Plains and mountain states have been doing much better in 2007 and into 2008 and starting out 2009," says Jim Diffley, managing director of regional services for IHS Global Insight, an economic analysis firm.
Many states "did not participate in the housing boom and bust, and households have not seen their wealth evaporate," Diffley says. At the same time, some regions benefited from a boom in commodities prices such as oil, minerals and agriculture. That edge is slipping as prices drop, and states that have been spared so far will feel the pain, he says. They could recover faster, however, because they're diversified and not overwhelmed by the mortgage meltdown.
The feverish housing boom that sent prices soaring in states such as Arizona, Nevada and Florida never landed in places such as Little Rock. Nor did the subsequent meltdown that collapsed prices and triggered a wave of foreclosures.
Unemployment rates in several metropolitan areas in Arkansas are well below the national average. The number for the Little Rock area is 4.9%.
Wisconsin, which is faring better than other Midwestern states decimated by hemorrhaging in the auto industry (6.2% compared with 10.6% in Michigan, 8.2% in Indiana and 7.8% in Ohio), never enjoyed big jumps in wages, says Joel Rogers of the Center on Wisconsin Strategy.
"Wisconsin was not booming and had not been booming for some time," he says.
Diversifying a key strategy
Whether it's in the South or Midwest, diversification is vital to an area's ability to weather the financial crisis:
•In central Arkansas' 11-county region that includes the capital city of Little Rock, jobs come from state government, higher education and medical centers. Now, the area is capturing a slice of the soaring wind energy industry by luring windmill blade manufacturers such as LM Glasfiber and Polymarin Composites, which together hope to hire more than 1,500 people in the Little Rock metropolitan area (population 665,000).
HP, one of the world's largest technology companies, is building a customer service and technical support center that will employ 1,200 in Conway, north of Little Rock. Caterpillar just announced that it will locate its new North American production facility in North Little Rock, creating 600 jobs. The Fayetteville Shale formation in central Arkansas holds the promise of bountiful natural gas production and more jobs. Indian company Welspun Gujarat Stahl Rohren Ltd., maker of steel pipes for the oil and gas industry, is building a facility in Little Rock.
The Clinton Presidential Center here has helped the River Market District along the Arkansas River expand from a single building to several blocks of shops, museums, bars and restaurants.
Without fast growth, home construction is slower — lessening the risk of new mortgages going bad, prices plunging and foreclosures spreading when the economy turns bad.
The number of homes sold here in Pulaski County dipped in 2008, but the median sales prices rose 1% to $142,500 and the average number of days on the market grew by only three. Foreclosure rates are up but remain very low compared with other parts of the country.
In northwestern Arkansas, where growth exploded in recent years from Bentonville to Fayetteville because of big employers such as Wal-Mart, Tyson Food and J.B. Hunt, the foreclosure rate is much higher than around Little Rock. Wal-Mart said this month it will cut 700 to 800 jobs at headquarters in the area.
•Wisconsin's economy is spread over 11 metropolitan areas — none as dominant as Detroit in Michigan or Chicago in Illinois — so trouble in one doesn't necessarily drag down the whole state. The state has many suppliers to the auto industry but not as many as Michigan, Ohio and Indiana. General Motors announced last year that it would close its plant in Janesville, Wis., by 2010, a loss of 2,400 jobs.
"It affects Janesville and the surrounding area greatly, but not so much the rest of the state," says Dennis Winters, chief of the Office of Economic Advisors in the Wisconsin Department of Workforce Development. "A lot of industries are doing really well — electric machinery, manufacturing equipment, export market." The state is home to companies that make motorcycles (Harley-Davidson), boats, giant cranes and medical devices.
•In Roanoke, Va., a city of 93,000, the largest employer is Carilion Clinic, a health care company of more than 10,000 workers. Mortgage delinquencies are below the national average.
"We're kind of a steady player," says Beth Doughty, executive director of the Roanoke Regional Partnership. "We don't have dramatic ups and, consequently, don't have any dramatic lows."
A $60 million art museum just opened, and Carilion is building a medical school with Virginia Tech, whose main campus is in nearby Blacksburg. "The only sectors adding jobs are health care and education," Doughty says, "and we're strong in both."
Cutbacks still occurring
Things may be going better in central Arkansas than in other parts of the country, but that doesn't mean all is rosy.
There are cutbacks. LM Glasfiber, the Danish windmill blade manufacturer, announced last month it would lay off 150 at its plant here. Arkansas' general revenue declined in December by $20.2 million compared with the same month the previous year because of a drop in income and sales tax collections.
"There's a large emphasis on tying education, workforce education, to the needs of businesses coming to an area," Gov. Beebe says. "I don't think anything is as important as the quality of the workforce."
That's why Pulaski Technical College is conducting classes to train people to work in wind energy industries. Donny Pointer has been an account development manager at Coca-Cola for 15 years, but he's always had a second job — until now. That's why he's taking a 20-hour training course to prepare for jobs at the new Polymarin plant.
"I need some supplemental income," Pointer says.