2018 State of the Northwest Arkansas Region Report

Sam M. Walton College of Business Center for Business & Economic Research Northwest Arkansas Overview The State of the Northwest Arkansas Region Report is an annual publication, commissioned by the Northwest Arkansas Council, that serves as a tool for evaluating economic performance. In July 2018, the Northwest Arkansas Council created a new blueprint for development that outlines the peer regions and a strategic action agenda for 2018-2021. In this plan, the performance of Northwest Arkansas is benchmarked with other contemporary, high-performing regions, namely Austin, Des Moines, Madison, Durham-Chapel Hill, Raleigh and Provo-Orem. The 2018 State of the Region Report compares Northwest Arkansas with these geographies in the areas of gross domestic product, employment, unemployment, establishment growth, median household income, average annual wages, poverty, educational attainment, research and development, homeownership costs, commuting time, and average domestic airfares. The table below provides a summary of the performance of the Northwest Arkansas region on these measures. Important indicators such as gross domestic product, business establishment growth, average annual wages, and university R&D expenditures showed strong increases from the previous year, while improvements in metrics such as poverty rate and higher education attainment were more limited.

Northwest Arkansas Economic Indicators Most Recent Percent Change from Indicator Previous Year Annual Data Previous Year Population Estimate, July 2017 537,463 525,176 2.3% p Real GDP (millions of chained 2009 dollars), 2017 $25,341 $24,507 3.4% p Average Annual Unemployment Rate, 2017 2.8% 2.9% -0.1% q Total Nonfarm Employment, 2017 253,500 245,900 3.1% p Median Household Income, 2017 $56,038 $51,848 8.1% p Average Annual Wages, 2017 $45,830 $44,980 1.9% p Business Establishments, 2017 13,047 12,653 3.1% p Percent of Adult Population with a Bachelor’s Degree or Higher, 2017 31.8% 30.9% 0.9% p Poverty Rate, 2017 12.1% 13.2% -1.1% q R&D Expenditures (in thousands), 2016 $145,020 $133,660 8.5% p Average Annual Domestic Airfare, 2017 $538 $509 5.8% p

2 Peer Region Overview

Des Moines-West Des Moines MSA Madison MSA Durham-Chapel Hill MSA Iowa Wisconsin North Carolina 2017 Population: 645,911 2017 Population: 654,230 2017 Population: 567,428 2016 Population: 634,740 2016 Population: 647,432 2016 Population: 558,920 Growth 2016-2017: 1.8% Growth 2016-2017: 1.0% Growth 2016-2017: 1.5% MSA Growth Rank: 53/383 MSA Growth Rank: 116/383 MSA Growth Rank: 70/383

Fayetteville-Springdale-Rogers MSA Arkansas-Missouri 2017 Population: 537,463 2016 Population: 525,176 Growth 2016-2017: 2.3% MSA Growth Rank: 14/383

Provo-Orem MSA Austin-Round Rock MSA Raleigh MSA Utah Texas North Carolina 2017 Population: 617,675 2017 Population: 2,115,827 2017 Population: 1,335,079 2016 Population: 601,478 2016 Population: 2,060,558 2016 Population: 1,304,896 Growth 2016-2017: 2.7% Growth 2016-2017: 2.7% Growth 2016-2017: 2.3% MSA Growth Rank: 8/383 MSA Growth Rank: 9/383 MSA Growth Rank: 16/383

3 Peer Region Comparisons

Change in Real GDP Source: U.S. Bureau of Economic Analysis Metropolitan GDP US 2.2% 2.2% Real metropolitan gross domestic product (GDP) in the Arkansas 1.3% 1.1% Northwest Arkansas region increased by 3.4 percent Peer Average 4.6% 4.0% between 2016 and 2017, bringing the GDP to $25.3 Provo-Orem MSA 6.7% 5.6% billion. The region’s five-year average annual growth Raleigh MSA 3.9% 2.7% rate from 2012 to 2017 was 4.9 percent, slightly higher Durham-Chapel Hill MSA 0.8% 0.0% than the average annual growth rate for peer regions Madison MSA 3.3% 1.8% but was more than double that of the nation, and four Des Moines-West Des Moines MSA 4.5% 2.9% times higher than the average growth rate in the state Austin-Round Rock MSA 6.4% 6.9% of Arkansas. Fayetteville-Springdale-Rogers MSA 4.9% 3.4% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 2012-2017 Average Annual Growth 2016-2017

Employment Growth Rate Employment Source: U.S. Bureau of Labor Statistics 6.0% From 2012 to 2017, the Northwest Arkansas region’s 5.1% employment grew at an average annual rate of 5.0% 3.9 percent. Northwest Arkansas’ annual rate of 4.3% 4.1% 4.0% 3.9% employment growth during this time period was greater

3.2% 3.2% 3.2% 3.1% than all but two of the peer regions, the state, and the 3.0% 2.7% 2.5% nation. Employment in Northwest Arkansas increased 3.1 2.2% 2.2% percent from 245,900 in 2016 to 253,500 in 2017, a pace 2.0% 1.8% 1.7% 1.8% 1.5% 1.6% that was faster than the peer regions’ average, Arkansas, 1.0% 1.0% 0.9% 0.9% and the United States.

0.0% Fayetteville- Austin- Des Moines- Madison Durham- Raleigh MSA Provo-Orem Peer Average Arkansas US Springdale- Round Rock West Des MSA Chapel Hill MSA Rogers MSA MSA Moines MSA MSA

2012-2017 Average Annual Growth 2016-2017 Unemployment Unemployment Rate, Annual Average The average annual unemployment rate for Northwest Source: U.S. Bureau of Labor Statistics Arkansas in 2017 was 2.8 percent, down from 2.9 percent US 7.4% 4.4% 5.3% in 2016. The 2017 unemployment rate in Northwest Arkansas 7.2% 3.7% 5.0% 5.3% Arkansas was the second lowest in all the peer regions, Peer Average 3.9% 3.2% 4.3% the state, and the nation. The lowest was the Madison Provo-Orem MSA 3.3% 2.9% 6.3% region with 2.5 percent. The Des Moines-West Des Raleigh MSA 4.8% 4.0% Moines and Provo-Orem regions both followed closely Durham-Chapel Hill MSA 6.3% 4.0% 5.0% 5.0% at 2.9 percent. Since 2013, the unemployment rate Madison MSA 3.4% 2.5% 4.6% declined 2.7 percent in Northwest Arkansas, which was Des Moines-West Des… 3.6% 2.9% 5.2% the largest decline in the unemployment rate among Austin-Round Rock MSA 3.4% 3.1% peer regions, but was smaller than the declines in the Fayetteville-Springdale-… 5.5% 2.8% 3.7% state of Arkansas and the nation. 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 2013 2015 2017

4 Business Establishment Growth Source: U.S. Bureau of Labor Statistics 6.0% Business Establishment Growth 5.4% Northwest Arkansas business establishment growth 5.0% 4.8% 4.6% from 2016 to 2017 was 3.1 percent, higher than both the 4.2% 4.0% state and the nation, but slightly slower than the average 3.5% 3.3% 3.4% growth rate in peer regions. The five-year change in the 3.1% 3.0% 3.0% 2.9% 2.6% number of establishments from 11,683 in 2012 to 13,047 in 2.3% 2.2% 2.2% 2017 represents an annual increase of 2.2 percent, which 2.0% 1.7% 1.6% 1.4% was the second slowest growth rate among the peer 1.1% 1.1% 1.0% 1.0% regions. However, it was still higher than the growth rate in Arkansas and the nation. 0.0% Fayetteville- Austin-Round Des Moines- Madison MSA Durham- Raleigh MSA Provo-Orem Peer Average Arkansas US Springdale- Rock MSA West Des Chapel Hill MSA Rogers MSA Moines MSA MSA 2012-2017 2016-2017

Median Household Income Median Household Income Source: U.S. Census Bureau The median household income for Northwest Arkansas $80,000 $73,800 $73,800 $72,576 $71,301 $71,301

$70,196 $70,196 grew 8.1 percent to $56,038 from 2016 to 2017. The $69,632 $69,632 $68,649 $68,649

$70,000 $67,195 $65,778 $65,092 $65,092 $64,174 $64,174 $63,071 $62,024 $62,024 $61,750 $61,710 $61,710 region’s median household income was 80.5 percent $61,271 $61,271 $61,194 $61,194 $60,336 $60,336 $60,051 $60,051 $59,611 $59,611 $60,000 $59,466 $56,038 $55,775 $55,775 $54,160 $53,492 of the peer region median income and 92.9 percent of $52,250 $52,250 $50,788 $50,788

$50,000 $47,905 $45,869 $45,869 the national median household income. The median $41,995 $41,995 $40,511 $40,511 $40,000 household incomes in Austin-Round Rock and Raleigh

$30,000 were the highest among the peer regions, and were

$20,000 31.7 and 29.5 percent higher than Northwest Arkansas, respectively. From 2013 to 2017, Northwest Arkansas’ $10,000 average annual rate of change was 4.0 percent, the same $- Fayetteville- Austin- Des Moines- Madison Durham- Raleigh MSA Provo-Orem Peer Arkansas US Springdale- Round Rock West Des MSA Chapel Hill MSA Average as average growth rate in the peer regions. Rogers MSA MSA Moines MSA MSA 2013 2015 2017 Annual Wages Average Annual Wages Source: U.S. Bureau of Labor Statistics In spite of having a low uenmployment rate, average

$70,000 annual wages in Northwest Arkansas is the second lowest among peer regions at $45,830 in 2017. This was $60,000 $59,340 $56,980 $56,980

$54,400 $54,400 up 1.9 percent from the previous year, 0.5 percent less $52,190 $52,190 $51,827 $51,840 $51,390 $50,620 $50,620 $50,600 $50,600 $49,560 $49,030 $49,030 $48,967 $48,967 $48,590 $48,320 $48,320 $50,000 $47,900 $47,170 $47,100 $47,100 $47,027 $46,770 $46,770 $46,440 $46,440 $45,830 $45,600 $45,600 $45,310 than the average annual change for all the peer regions. $43,570 $42,470 $42,470 $41,560 $40,680 $40,680 $40,530 $40,530 $38,540

$40,000 $37,340 From 2013 to 2017, average wages grew 2.5 percent in Northwest Arkansas, placing the region in the middle $30,000 of the pack when compared to the peer regions. Annual $20,000 wage growth was strongest in the Provo-Orem region $10,000 between 2013 and 2017 at 2.9 percent.

$0 Fayetteville- Austin- Des Moines- Madison Durham- Raleigh MSA Provo-Orem Peer Arkansas US Springdale- Round Rock West Des MSA Chapel Hill MSA Average Rogers MSA MSA Moines MSA MSA

2013 2015 2017

5 Poverty Rates: All Ages Poverty Source: U.S. Census Bureau 25.0% In 2017, the poverty rate for Northwest Arkansas was 12.1 percent, a 1.1 percent improvement from 2016. Only the 19.7% 20.0% 19.1% Durham-Chapel Hill region had a higher poverty rate at 16.9% 16.8% 16.4% 15.9% 15.8% 14.9 percent. The large proportion of college students in 14.9% 14.7%

15.0% 14.3% 14.3% 13.7% 13.4% 13.4% these regions drives the higher poverty rates. Since 2013, 12.6% 12.1% 12.0% 11.7% 11.6% 11.0% 11.0% 10.8% 10.7% 10.6% 10.5% 10.4% the poverty rate in Northwest Arkansas fell 4.7 percent 10.0% 8.3% which was the largest decline among peer regions. The 2017 poverty rate in Northwest Arkansas was significantly 5.0% lower than the 17.2 percent poverty rate for the state of

0.0% Arkansas. Fayetteville- Austin- Des Moines- Madison Durham- Raleigh MSA Provo-Orem Arkansas US Springdale- Round Rock West Des MSA Chapel Hill MSA Rogers MSA MSA Moines MSA MSA 2013 2015 2017

Bachelor's Degree or Higher in Adult Population Source: U.S. Census Bureau Educational Attainment 50.0% The percent of adults 25 years or older with a bachelor’s 46.9% 46.2% 45.9% 45.5% 45.1% 44.8% 44.4% 43.7% 43.6% 45.0% 43.5% 42.6% 42.4% degree or higher in Northwest Arkansas increased by 0.9 41.5% 41.4% 41.3% 41.0% 40.0% 37.7% 37.7% percent to 31.8 percent in 2017. On average, 43.6 percent 36.6% 35.4% 35.0% 35.1% 32.0%

31.8% of adults 25 years or older had a bachelor’s degree 30.8% 30.6% 30.0% 29.6% 28.2% or higher in peer regions. Over the years, Northwest

25.0% 23.4%

21.8% Arkansas has been gradually catching up to the national 20.6% 20.0% higher education attainment level (32.0 percent in 15.0% 2017). Since 2013, higher education attainment grew 3.6 10.0% percent in Northwest Arkansas, more rapidly than the 5.0% 2.6 percent average change among peer regions. 0.0% Fayetteville- Austin- Des Moines- Madison Durham- Raleigh MSA Provo-Orem Peer Arkansas US Springdale- Round Rock West Des MSA Chapel Hill MSA Average Rogers MSA MSA Moines MSA MSA 2013 2015 2017 Academic Research and Development R&D Expenditures 2016 Source: National Science Foundation The University of Arkansas had more than $145 million in $1,400,000 research and development expenditures in 2016, up 8.5 $1,200,000 $1,157,680 percent from 2015. The University of Arkansas improved $1,045,338 $1,055,778 $1,000,000 its ranking from No. 131 in 2015 to No. 130 in 2016 among all universities in the United States. Northwest $800,000 $621,692 Arkansas’ peer regions include some of the nation’s $600,000 Thousands top universities when it comes to academic research

$400,000 and development spending. Additionally, in 2017, the University of Arkansas received 54 invention disclosures $200,000 $145,020 $42,304 $1,558 (down from 58 in 2016), filed 8 new patent applications $- University University Drake University University Duke Brigham (down from 26 in 2016), and saw 13 patents issued (down of of Texas, University of of North University, Young Arkansas, Rank 34 Rank 564 Wisconsin, Carolina, Rank 10 University, from 37 in 2016). Rank 130 Rank 6 Rank 11 Rank 206

6 Median Cost of Homeownership as Percent of Income Cost of Homeownership Source: U.S. Census Bureau 25.0% The cost of homeownership as a percentage of monthly household income for Northwest Arkansas continued 20.4% 20.0% 19.3% 19.3%

20.0% 19.1% 19.1% 19.0% 18.9% 18.7%

18.6% to be lower than all the peer regions and the nation. 18.4% 18.4% 18.4% 18.3% 18.1% 17.9% 17.7% 17.6% 17.6% 17.5% 17.4% 17.3% 16.8% 16.2%

16.0% Homeownership costs were 15.2 percent of household 15.8% 15.6% 15.6% 15.2% 15.0% 14.7% income in 2017, down 0.1 percent from the previous year. Since 2013, median homeownership cost as a percent of 10.0% household income in Northwest Arkansas has dropped 1.0 percent as a result of improvement in the region’s 5.0% household incomes.

0.0% Fayetteville- Austin- Des Moines- Madison Durham- Raleigh MSA Provo-Orem Peer Average Arkansas US Springdale- Round Rock West Des MSA Chapel Hill MSA Rogers MSA MSA Moines MSA MSA 2013 2015 2017 Commuting Commuting: Percent of Workers Traveling Fewer than 30 Minutes Source: U.S. Census Bureau In 2017, 73.9 percent of Northwest Arkansas workers

75.0% Fayetteville-Springdale-Rogers MSA 74.4% spent fewer than 30 minutes commuting to work, down 73.9% 60.7% Austin-Round Rock MSA 60.5% from 75.7 percent in 2016. Only the Des Moines-West 59.1% 78.5% Des Moines region had a higher percent of workers Des Moines-West Des Moines, MSA 79.7% 77.9% 73.8% who spent less than 30 minutes commuting to work Madison MSA 73.3% 71.6% in 2017. The percent of workers in Northwest Arkansas 70.6% Durham-Chapel Hill MSA 70.1% 66.1% who used alternative modes of transportation to get 63.6% Raleigh MSA 63.2% 60.6% to work, including biking, walking, and public transit, 75.3% Provo-Orem MSA 75.3% 72.7% decreased 0.3 percent from 2016 to 2.2 percent in 2017. 73.2% Arkansas 73.0% 73.0% Most peer regions had significantly more workers who 63.7% US 62.4% 61.5% used alternative modes of transport.

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 2013 2015 2017

Average Annual Domestic Airfare Average Annual Domestic Airfare Source: U.S. Bureau of Transportation Statistics Flights from the Northwest Arkansas Regional Airport $600

$538 had an average annual domestic fare of $538 in 2017, an $521 $516 $509

$500 $484

$475 increase from $509 in the previous year. The regional $408 $411 $411 $410 $396 $396 $387

$394 airport had the highest average fare among peer $379 $389 $372 $382 $379 $400 $376 $385 $354 $370 $352 $348 $354 regions. Average fares in Northwest Arkansas were 39.9 $300 percent higher than the peer region average and 54.6 percent higher than the national average. From 2013 to $200 2017, average fares in Northwest Arkansas increased by $100 4.3 percent. *Salt Lake City airport was used as the fare comparison for the Provo-Orem MSA. $- Fayetteville- Austin-Round Des Moines- Madison MSA Durham- Provo-Orem Peer Average US Springdale- Rock MSA West Des Chapel Hill MSA* Rogers MSA Moines MSA MSA 2013 2015 2017

7 Information for this report was gathered from the following sources: National Science Foundation, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics, U.S. Census Bureau, and U.S. Bureau of Transportation Statistics.

Thanks to the Northwest Arkansas Council for providing the photographs. Odessa Ellie provided research assistance for the report.

The Center for Business and Economic Research would like to give credit to Thrive, an economic development enterprise in Madison, Wisconsin. That organization provided an excellent model for the State of the Northwest Arkansas Region Report.

For questions about this report, contact: Mervin Jebaraj Director Center for Business and Economic Research Sam M. Walton College of Business University of Arkansas Willard J. Walker Hall 538 1 University of Arkansas Fayetteville, AR 72701-1201 (479) 575-4151 http://cber.uark.edu