MANUFACTURERS BULLISH ON NATURAL STATE; WILL WORKFORCE BE READY?

A bird’s eye view of Arkansas economic development in 2024 would include some now-familiar landmarks — more growth in northwest Arkansas and in the state’s fast-rising steel industry, for starters — but also reveal new points of interest, in addition to challenges that continue to pose a threat to progress.

Those new points of interest begin with the amount of capital investment coming into the state from beyond its borders, and lately, there is much of it.

Manufacturers are choosing Arkansas and, better yet, companies that already have a presence in the state are choosing to double down on their initial investments, said Randy Zook, president and CEO of the Arkansas State Chamber of Commerce and the Associated Industries of Arkansas.

“You’re seeing a lot, and I mean an enormous amount, of capital investment in Arkansas,” he said. “Most of that is being made by existing in-place businesses. We’ve got several billions of dollars of capital investment going on across the state, and that’s everything from refurbishing and remodeling sawmills in south Arkansas to the expansion of the Albemarle [chemical manufacturing] plants in Magnolia, which is a $550 million project on its own, to the Exxon investment in lithium development prospects, as well as Standard Lithium and Lanxess together. That whole industry, there’s probably $3 billion in play just in that industry alone down there already. It’s just beginning to kind of take off.”

Then there is steel in Mississippi County, now recognized as the No. 1 steel-producing county in the nation. Nucor became the first to set up shop there in 1988. In 2017, Big River Steel opened a $1.3 billion mill and, the following year, announced a $1.2 billion expansion. U.S. Steel acquired Big River in 2021 and is building a second mill in the county that will employ 1,000 and require roughly 3,000 local construction workers to help build it.

Last fall, U.S. Steel introduced a new electrical steel line to accommodate electromagnetic devices such as the motors found in electric cars. The impact of this new line alone is expected to top $5.2 billion over four years. Majestic Steel is building a mill in the county, and a new player, Hybar, announced last year that it will build a $2 billion sustainable scrap-metal steel rebar mill in Osceola.

Mitch Parrish, chief operating officer of Missouri-based FHC Ready Mix – East, the parent company of Razorback Concrete, the firm pouring the concrete for the second Big River and Hybar mills, said Mississippi County currently is home to one of the largest concrete pours in the nation. He declined to say how much is being poured but said, “Arkansas has been very good to us.”

Parrish said his company’s work in Mississippi County should wrap this summer. FHC employs just under 400 people, Parrish said, including about 150 in Arkansas. Razorback Concrete, based in West Memphis with locations across the state, also worked on the Lowe’s distribution center in central Arkansas, another recent big win for Arkansas economic developers.

“It’s been challenging, but we’ve been very pleased with how things have gone in Arkansas,” Parrish said.

Zook said he would give the state a letter grade of A-minus for homegrown new business. As for pulling in new business from outside the state, “I’d say we’re a B-plus but getting better.”

In central Arkansas, he noted the Lowe’s project, Amazon distribution centers on both sides of the Arkansas River, Trex’s soon-to-go-online decking and railing manufacturing plant, Dollar General and Tractor Supply distribution centers, and major expansion from Little Rock-based Westrock Coffee Co. in Conway and Maumelle.

In Fort Smith, the Ebbing Air National Guard Base at Fort Smith Regional Airport is undergoing $800 million in new construction to accommodate its new status as the new home of the U.S. Air Force’s Foreign Military Sales program. Pilots from allied countries that purchase aircraft from the U.S. military should begin showing up in Fort Smith later this year to begin training.

Zook said the area should see a lot of growth tied to the program, which is expected to deliver an economic impact of more than $1 billion a year. He added that the expected growth will provide impetus for completion of the Interstate 49 extension and expansion from Alma across the Arkansas River to Barling, opening the east side of Sebastian County for future development.

“Around the rest of the state in lots of places, there’s capital investment, all we can keep up with,” Zook said. “The casinos are all building or expanding. West Memphis has got that big new events center coming up. Saracen’s got a big new facility coming out of the ground in Pine Bluff. It’s just amazing, and those are all existing companies. Those are not new move-ins. You’ve got the Hostess plant in Arkadelphia and 200 to 300 jobs. Hot Springs is doing great, and they’re about to get that big water project completed, which is going to open them up for new development and expansion.”

Northwest Arkansas, of course, is familiar with the kind of economic momentum starting to envelop the rest of the state. Thanks to the region’s big three — Walmart, Tyson Foods and J.B. Hunt — new residents continue to arrive from across the country.

Nelson Peacock, president and CEO of the Northwest Arkansas Council, a nonprofit entity that works to advance economic development opportunities and quality of life in the region, said indications point to the area continuing to grow economically and in population throughout 2024 and beyond. Since the 1970 census, the region has experienced 10-year growth cycles of 35.8 percent, 38.4 percent, 17.1 percent, 46.2 percent (between 1990 and 2000), 35.3 percent and 24.2 percent. Over the first two years of the current decade, the three-county area has already seen 5.4 percent growth and boasts an estimated 2022 population of more than 576,000.

In the next few decades, northwest Arkansas is expected to surpass greater Little Rock as the state’s primary population center.

“The region continues to add around 36 people per day, and regional leaders will need to ensure there are policies in place to accommodate the growth while preserving the character of the communities that make NWA special,” Peacock said.

Growth is evident everywhere one looks. Two of the biggest construction projects in the state are ongoing in Bentonville with Walmart’s new, Google-like corporate campus and the holistic Alice L. Walton School of Medicine. Plus, Tyson is consolidating its corporate offices and bringing in workers to its Springdale headquarters from other states, and industry leaders like J.B. Hunt, Simmons Foods and George’s are experiencing growth.

“It’s hard to overstate the impact these projects will have on northwest Arkansas,” Peacock said. “Walmart’s investment in its new home office is demonstrating to the world that Bentonville will continue to be the center of the retail world for decades to come. The investment the company is making in the community is simply incredible. At the same time, the Alice L. Walton School of Medicine represents a potential generational change. The school will be able to recruit the best and brightest students from around the world to Arkansas to learn how to practice medicine in a new way. The health care community is working hard right now to create the type of ecosystem that can retain those physicians in Arkansas after they graduate.”

Promoting growth has not been the issue in northwest Arkansas — accommodating it has. The only question surrounding regional growth is if the region can keep up with all the growth. Peacock said NWA needs significant investments in its infrastructure, both the physical and social kind.

“City officials will have to work closely together as their jurisdictions continue to grow together,” he said. “Leaders must continue to address housing affordability challenges, ensuring there is enough high-quality, attainable housing for the essential workforce in and around downtowns and employment centers. Investments are also needed to improve roads, trails and water infrastructure, and, with respect to social infrastructure, with the influx of new residents and demographic shifts, it’s important to ensure everyone who chooses to live here feels like they belong.”

Peacock said the region’s entrepreneurial ecosystem represents an important developing area and added that a supportive environment that drives and nurtures innovation could result in America’s “next great company” being launched.

“There is still a ton of momentum in northwest Arkansas,” he said. “The economy is strong, and communities continue to make the investments in amenities like trails and schools that improve quality of life for residents. As the region continues to grow, there is some anxiety about NWA losing what has made it special all these years. Maintaining that character and charm will require a concerted effort by our leaders to make smart, forward-looking decisions to grow the right way. The growth will continue, and the question is how do we use that to our advantage?”

Establishing a sufficiently trained workforce to meet the demands of the state’s recent economic growth remains the state’s biggest challenge, said Michael Pakko, chief economist and state economic forecaster for the Arkansas Economic Development Institute at the University of Arkansas at Little Rock and the Libertarian candidate for state treasurer.

“Workforce development is always an issue with the state’s employers, particularly those in manufacturing,” he said. “Recent labor shortages have shown how the lack of available workers can impede business growth and expansion. As the baby-boom generation continues to retire, we need good training programs, apprenticeship programs, etc., to make sure we have an adequate supply of trained personnel in the pipeline. On the other hand, technological development continues to drive more automation in manufacturing, lessening the demand for some labor-intensive manufacturing processes and personnel than in the past.”

Zook said Arkansas is not unique in its workforce challenges, including those caused by the COVID-19 pandemic.

“Every state has the same challenge. The U.S. is basically talent starved,” he said. “We need more people in the workforce. The labor force nationally continues to go down, not up. COVID, as it did everything, aggravated that situation. We have tens of thousands of high-wage, high-demand jobs across the state that we cannot fill because people willing to do the work and able to do the work are simply not presenting themselves in adequate quantity. The people who are working are incredibly talented and top-notch. It’s the ones who are not working or who are underemployed that are the challenge.”

Zook said the state needs more Arkansans graduating high school prepared to do entry-level kinds of jobs at which they can advance and build careers.

“We have companies that are willing to invest heavily in talent improvement and development and skills acquisition and will pay for it if you’re on their payroll, but you’ve got to be working, and you’ve got to be showing up,” he said. “We’ve just got a challenge in getting more young people to pursue these opportunities. First of all, we need more kids. We need more babies. Our birth rate nationally is below the replacement rate, and that’s not sustainable long term.”

On the flip side, the state added 19,000 new residents last year, Zook said.

“We’ve had a really good growth in population faster across the state than in the prior decade, and that’s good. We added a little over 18,000 people just last year, which is much faster than the prior decade, and it’s more widespread across the state, not just concentrated in northwest Arkansas,” he said. “We’ve got population growth got population growth and growth in the gross domestic product of the state, which went up 11.1 percent last year, the ninth-best performance of all 50 states in terms of percentage of growth in our economy. We were a top-10 state last year. We’re not typically in that kind of ranking.”

Arkansans have long considered their home state to be a well-kept secret. With an influx of new residents and capital investments in Arkansas, the secret may be out. Zook attended the first-annual Arkansas Lithium Innovation Summit in Little Rock in February. The event drew industry officials and investors from across the globe to central Arkansas.

“It was an overwhelming success,” Zook said. “It was sold out with people screaming to get in who couldn’t get in and people trying to scalp tickets. It was crazy. People came from, literally, all over the world. We had people from both coasts, nearly every major finance center in the country and people from Africa here to investigate that possibility and figure out ways to participate in it.”

Policy matters, Zook said, and state leaders have figured out how to maneuver the landscape in terms of tax burdens and the “nuts and bolts of government and how it operates and affects business.”

The state’s regulatory environment is constructive and effective, and that attracts capital, he added.

Zook said the state’s message at the lithium summit was that it is open for business, and the message made an impact. He said one investor told him that capital goes where it’s wanted, and Arkansas made it clear that capital is wanted — capital, Zook added, that can trickle down.

“We’ve got a tax regimen that’s much more accommodating and much more attractive, and that’s what’s generating this economic activity,” he said. “That all adds up to a bigger pie, better opportunities and better employment opportunities for young people, as well as people in mid-career or nearing retirement. We’ve got a lot going on, and for the most part, it is incredibly effective and good.

“People are discovering Arkansas. That’s the only way to phrase it. All of the outdoor recreation activity emphasis is attracting people. Our tourism and hospitality businesses are all busier. State parks are packed. People are finding Arkansas as a heck of a nice place like we’ve always known, and a lot of it is driven by pressure from Texas. When Texas adds 400,000 to 500,000 people in a year, some of it pushes up on us, and that’s a good thing. We bask in their shadow.”