Arkansas labor pool gets holiday jolt in December, adds thousands of new workers

February 1-7, 2021

Arkansas’ civilian labor pool added nearly 39,000 new jobs during the 2020 holiday season as the state’s jobless rate fell to levels not seen since the COVID-19 pandemic alighted upon the state in March 2020, state workforce officials reported in December job market report released last week (Jan. 26).


According to labor force data produced by the U.S. Department of Labor’s Bureau of Labor Statistics (BLS) and completed by the state Division of Workforce Services, Arkansas’ seasonally adjusted unemployment rate dropped two and one-tenth of a percentage point from the revised 6.3% in November to 4.2% in December. 


In highlighting the news that Arkansas’ jobless rate is 2.5% below the national average, Gov. Asa Hutchinson celebrated the comeback of the state’s 1.35-million-person workforce as he looks to pass a new round of tax cuts during the 93rd General Assembly that started on Jan. 11.


“The coronavirus knocked the wind out of our sails for a moment, but the strong economic foundation we had built before the pandemic held firm, as I knew it would, and now a robust recovery is in sight,” Governor Hutchinson said. “The falling unemployment rate combined with the $319 million more than we expected in state revenue for fiscal year 2021 are signs that we have taken the right steps to limit the economic damage of COVID-19. 


“This news does not soften the blow of the human toll on our state. We must continue to do everything we can to stop the spread of the virus and to come to the aid of the thousands of Arkansans who have lost loved ones to this disease,” said Hutchinson. 


Nationally, BLS reported on Jan. 8 that the U.S. jobless rate held steady between November and December at 6.7%. In December 2019 and the first two months of 2020 before the pandemic, the state’s jobless rate held steady at a strong of 3.5%, which is only 0.1 percentage point off Arkansas’ all-time low touched on three occasions in 2019 and 2020.


However, Arkansas jobless rate climbed to 10.8% in April 2020 after Gov. Asa Hutchinson declared COVID-19 a public health emergency in mid-March and issued stay-at-home orders for businesses across the state as coronavirus cases climbed to over 1,000 at the time.


In the last week of March 2020, the number of people on unemployment rose a whopping 190.5% or 17,669, compared to only 9,275 jobless claims on March 21. On March 14, only three days after the first positive coronavirus case was reported in Arkansas, there were only 7,012 people seeking unemployment benefits in the robust Arkansas job market. 


The new job additions to the state’s 1,360,897-personal labor pool were the result of Arkansas’ civilian labor force gaining a robust 38,904 new positions, which includes 65,543 employed and 26,639 fewer unemployed Arkansans. The U.S. and Arkansas jobless rate does not include people considered to be outside the labor force who would like to work but have given up due to lack of opportunities, an injury or illness.



Pakko’s predictions and predilections


In his Arkansas Economist blog highlighting the December employment snapshot, University of Arkansas Little Rock forecaster Michael Pakko said the sharp decline in the unemployment rate was both unexpected and surprising in its magnitude.


“The state employment report for December … suggest a very robust labor market improvement in Arkansas to say the least,” Pakko said in a Jan. 26 research note. “The headline, a 2.1% decline in the unemployment rate to 4.2%, is an unprecedented change. While that particular statistic probably overstates the degree of the improvement, the details of the report suggest improvement nonetheless.”


Pakko, director and chief economist at UA Little Rock’s Economic Development Institute, also noted that Arkansas’ jobless rate was the second-largest decline among all 50 states and the District of Columbia. BLS data shows that the median change was a slight decline of 0.1%.


Pakko said the December drop in Arkansas’ unemployment was also surprising in the context of recent data on weekly unemployment insurance claims. After dropping sharply over the summer months, the number of initial and continued claims for unemployment insurance in Arkansas had leveled off in November and December.


In the December job market report, Pakko noted the disparity in the number of Arkansans getting new jobs and those out of work but seeking gainful employment. The record number of unemployed was driven primarily by the underlying household survey results as Arkansas unemployment fell by 26,639 from 83,863 to 48,186.  


Given that the recent volatility of the labor force is an indication of the uncertainty behind the unemployment estimates during 2020, Pakko said the BLS has reported that the household survey has been plagued by misclassifications during the pandemic. “The magnitudes of changes in the employed and unemployed figures in the December report suggests that measurement uncertainty is a factor that should be considered in interpreting the reported unemployment rate,” he said.


As in the past, the outlier in the unemployment statistics is the annual BLS revisions that will take place over the next few weeks. “These revisions typically smooth out some of the extreme month-to-month changes in the series. However, during the pandemic, the BLS has adopted modified procedures for identifying outliers and applying seasonal factors,” said Pakko. “It is not clear how the revisions might effect the preliminary estimates this year.”


In addition, Pakko said December’s report on nonfarm payroll employment does seem to corroborate an encouraging view of Arkansas labor market conditions with an increase of 4,300 jobs, or 0.35%. Compared to December 2019, employment was down 35,500 or 2.8%.


In the final month of 2020, Arkansas’ nonfarm payroll jobs increased 2,600 in December to total 1,252,900. Three major industry sectors added jobs, more than offsetting minor losses in five sectors. Employment in three industry sectors was unchanged. 


By industry, jobs in trade, transportation and utilities rose 3,700, mainly related to seasonal hiring for the Thanksgiving and Christmas holidays. The state’s white collar professional and business services also added 2,600 jobs with large increases in administrative and support services hiring at employment agencies. In the loss column, the season leisure and hospitality put 2,600 jobs on the shelf due to the temporary closure of food services at educational facilities during winter break.


Compared to a year ago, nonfarm payroll jobs in Arkansas are down 33,900 as employment decreased in eight major industry sectors. Manufacturing posted the largest drop, losing 14,300 jobs of its 162,400 jobs over the past year as both durable and nondurable goods factories pushed workers onto the unemployment rolls.


Employment in leisure and hospitality also declined 13,700, mostly in the frontline food services industry that was hard-hit by the pandemic. Jobs in government decreased 9,600, largely in local government as many educational and health services workers began working remotely or were furloughed. “Other services” sector also declined 4,300 as activities such as repair-maintenance and membership organizations saw a loss of business to shelter-in-place orders.


The state’s trade, transportation and utilities sector reported the largest increase in the past year, adding 13,500 jobs. Professional and business services and construction also posted notable gains in employment, 3,100 and 2,800, respectively. 


Nationally, total nonfarm payroll employment declined by 140,000 in December as U.S. Labor Department officials said the decline in payroll employment reflects the recent increase in COVID-19 cases and efforts to contain the pandemic. 


In December, job losses in leisure and hospitality and in private education were partially offset by gains in professional and business services, retail trade and construction. In December, average hourly earnings for all employees on private nonfarm payrolls increased by 23 cents to $29.81. Average hourly earnings of private-sector production and nonsupervisory employees increased by 20 cents to $25.09. 


These increases largely reflect the disproportionate number of lower-paid workers in leisure and hospitality who went off payrolls, which put upward pressure on the average hourly earnings estimates. The average workweek for all employees on private nonfarm payrolls declined by 0.1 hour to 34.7 hours in December. In manufacturing, the workweek was unchanged at 40.2 hours and overtime increased by 0.1 hour to 3.3 hours.



Biden stimulus package


The state’s declining jobless rate comes as the new Joe Biden administration works to put in place new approved by Congress on Dec. 27 as part of $900 billion stimulus package. Among many things, that legislation includes a new round of direct stimulus payments of $600 to most Americans including dependents and the $300 per week extension of the unemployment assistance to out-of-work employees and the self-employed through the first quarter of 2021.


In the retooled COVID-19 relief package, Congress also allocated another $325 million in targeted aid to small business owners, including an additional $284 billion for PPP loans and $20 billion for EIDL grants through the SBA offices in all 50 states. Locally, lenders across the state began accepting PPP loan applications around Jan. 15 for businesses with fewer than 300 employees and at least a 25% reduction in revenues in at least one quarter in 2020 to gain access to up to $2 million in forgivable loans. 


The legislation also provides $25 billion through the U.S. Treasury to offer emergency assistance to struggling renters. Modeled after the CARES Act’s Coronavirus Relief Fund, $800 million will be set aside for tribal designated housing entities, and $400 million divided by all 50 states, U.S. territories and the District of Columbia. Metropolitan areas with populations greater than 200,000 will be able to apply directly to Treasury for funds.


For families in distress, eligible households may receive up to 12 months of assistance, plus an additional three months if necessary. The new act also extends the eviction moratorium issued by the Centers for Disease Control and Prevention (CDC) for one extra month through Jan. 31, 2021.


For most American families, the massive appropriations bill will offer a new round of direct payments worth up to $600 per adult and child, half of the amount in the prior CARES Act legislation. In other areas, the emergency relief bill will provide nearly $50 billion in urgently needed funds for coronavirus testing and vaccine purchases and distribution as Arkansas and other states accelerate the delivery of recently approved COVID-19 serums from Pfizer Inc. and Moderna Inc.


House and Senate leaders also approved a $13 billion increase in SNAP and child nutrition benefits to help relieve the COVID hunger crisis, while $10 billion for childcare assistance to help get parents back to work and keep childcare providers open. Another $82 billion in funding will be set aside for colleges and schools that have seen dramatic enrollment declines due to the fast-spreading virus.


As Biden and Vice President Kamala Harris settle in after their Jan. 20 inauguration, the new administration is looking to approve another $1.9 trillion stimulus bill that will extend much of the aid in the previous two COVID-19 emergency relief packages through the end of 2021.




The state’s jobless rate declined two and one-tenth of a percentage point to 4.2% in December, the lowest level since COVID-19 was declared a public health crisis. Dozens of Arkansans wait in line at the state Division of Workforces office on University Avenue in Little Rock to file for extended unemployment benefits from the new stimulus bill. Arkansas jobless fell to 4.2% on Jan. 26, 2021.