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Report: Only “Robust Growth” in Little Rock Is from Government

Arkansas capitolAnother new study adds to the evidence we’ve written recently about: namely, there’s lots of room for improvement with respect to economic growth in central Arkansas.
According to the Manhattan Institute’s America’s Top Metros report, the Little Rock-North Little Rock-Conway area ranks 90 out of 100 metros in economic recovery from the recession since 2009. (To be clear: #1 is the top; #100 is the bottom.)
From the report:

Unlike most of the bottom 20 on our list, the Little Rock MSA is not trying to dig out from a building slump. Construction earnings rose 11.8 percent from 2009 to 2012, though construction jobs (lumped with logging and mining for this MSA by the BLS) slipped by 1.7 percent. Little Rock’s problem seems to be the lack of robust growth in any sector. It is not held back as much as it is failing to push forward. The leadership of the “government and government enterprises” sector in its earnings growth shows the value of being a state capital, along with the sluggishness of the private sector.

The news that government is the industry in the Little Rock area which is experiencing the most “earnings growth” is depressing, because this “earnings growth” in government takes away resources from private citizens that could be used for real economic growth in the private sector.
The report also concludes that higher-performing metro areas rely less on government for their economic recovery than lower-performing metro areas like Little Rock.
From the report:

It’s no surprise, then, that the top 20 MSAs tend to get significantly less of their overall personal income from government activities than the 20 laggards do. The share of total earnings from government averaged 14.6 percent for MSA leaders and 21.3 percent for the bottom 20. The average three-year gain in this income was low for both groups: 4.7 percent for the top 20 and 2.8 percent for the bottom 20. What made more difference was the government share of MSA income. The capitals of the two largest states make an instructive contrast here. Austin had a relatively modest gain of 6.4 percent in government income, but it was one of the top-performing MSAs overall. Sacramento had a nearly identical increase (6.3 percent) from the public sector. But it was one of the laggards. The key distinction between the two is that Austin’s public-sector income share was 17 percent, while Sacramento’s was much higher, at 25.5 percent. Put another way, Austin had a bigger stake in the private sector and was rewarded when private-sector growth outstripped that of government.

You can read more from this report here.

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