Government: Arkansas' Largest Labor Market Sector

(February 2010) Government will emerge as Arkansas' largest labor market sector this decade if two long-term employment trends continue to advance.

The Policy Foundation published a 2003 memo ("Convergence") that forecast total Arkansas Government employment would exceed Manufacturing employment given long-term trends. The memo identified two trends: long-term contraction in Arkansas Manufacturing, and growth in Government employment.

Convergence occurred December 2004 (201,800) and total Government (221,100) employed nearly 60,000 more than Manufacturing (162,800) in the latest BLS report (December 2009). Total Government includes federal, state, county and local employment including K-12 education. Most of the Arkansas sector is composed of non-federal jobs.

The continued growth of Government, coupled with another trend employment means it could emerge as Arkansas' largest labor market sector this decade.

Strong Arkansas Government Sector Growth

The first trend is strong Arkansas Government sector growth, which has exceeded the U.S. in the last two national expansions (March 1991 to March 2001 and November 2001 to December 2007). Arkansas Government expanded at average annual rates greater than the U.S. in both expansions.

Subpar Arkansas Private Sector Growth

The other trend is subpar Arkansas private sector employment growth versus the national average. Arkansas average annual private employment growth surpassed the U.S. in the first expansion. But Arkansas private employment growth trailed the U.S. in the second expansion.

Trade, Transportation and Utilities is Arkansas' largest private sector labor market. But the component has contracted by 21,400 jobs since the official start of the recession in December 2007 (National Bureau of Economic Research).

Trade, Transportation and Utilities employment expanded at a higher average annual rate than Arkansas Government in the first expansion. But it trailed Arkansas Government in the second expansion. This weak employment growth means Trade, Transportation and Utilities (228,800) employed only 7,700 more employees than Government (221,100) in Arkansas in December 2009 (BLS).

Convergence Scenarios

Three Convergence scenarios are plausible given the long-term trends of strong Arkansas Government sector growth, and weak private sector growth.

Jobless Recovery

A continued jobless recovery in private employment would mean that Government would emerge as Arkansas' largest labor market at an earlier date. Convergence would occur before 2012.

Modest Recovery

A modest recovery, coupled with continued weak Arkansas employment growth would mean convergence could be postponed until mid-decade (2013-2016).

Strong Recovery

A strong private sector employment recovery and fiscal reforms including a state hiring freeze and government sector restructuring could prevent convergence.

- Greg Kaza

(Paragraph 8) Revised data for January show an 11,600 job margin between Trade, Transportation and Utilities (229,000), and Government (217,400).