Trajectory of Pandemic Will Impact Economic Recovery in Arkansas

The leisure and hospitality sector has been hit the hardest with thousands of jobs lost.

Arkansas lost 44,000 jobs in 2020 and it will likely take years for the economy to recover. Mervin Jebaraj, director of the Center for Business and Economic Research at the University of Arkansas, made this assessment during the 27th annual Arkansas Business Forecast event. 

“Our forecast is calling for half of those jobs to come back that we lost in 2020 next year and that the remaining jobs would happen in the out years,” Jebaraj said. “So things that could speed that up is obviously consumer behavior changing faster, vaccines getting out faster and additional stimulus.”

The state was not experiencing strong job growth prior to the pandemic. Arkansas added about 10,000 jobs in 2019. That represented a 0.8 percent growth rate, which at that time, was the slowest growth rate since 2013. 

“Not going into the pandemic particularly strong means that getting out of the pandemic isn’t going to be just enough for us,” Jebaraj said. “We want to do better than that.”

Job loss has varied around the state. The Little Rock metro area was the hardest hit region with a decline of 18,000 jobs. Northwest Arkansas and Fort Smith lost about 3,400 and 4,000 jobs, respectively. Meanwhile, Hot Springs is down about 1,300 jobs, Jonesboro is down about 700 and Pine Bluff is down about 1,200. 

Close to one fourth of small businesses in Arkansas are closed compared to Jan. 2020, which is slightly better than the nation as a whole. Small business revenue is down about 18 percent, compared to 31 percent nationally.  

From 2019 to 2020, the leisure and hospitality industry lost about 16,000 jobs, the most of any sector in the state. Manufacturing is down about 13,500 jobs, while education and health care are down about 6,600 jobs. Those losses represent a decrease of about 8.3 percent and 3.4 percent, respectively. 

Laundromats and personal care services like nail salons and hair salons are classified under the other services category. This sector has lost about 5 percent or around 3,000 jobs. Most of the state’s job losses are in leisure and hospitality, personal care services, and education and health services, Jebaraj said.

“Those are also the sectors where it’s going to take a while before people are going to be comfortable returning to full levels there and obviously that does depend to some extent on vaccine delivery,” he said. 

In order to take a closer look at the leisure and hospitality sector, Jebaraj and his colleagues researched the change in monthly tax revenue at bars and liquor stores. Since February 2020, bars have seen lower sales whereas liquor stores have had much higher revenue. 

“Which means people haven’t reduced how much they’re per se consuming alcohol, but they’ve just changed where they’re consuming alcohol,” Jebaraj said.

Between March and November, liquor store tax revenue was up about 28 percent while bar revenue was down about 34 percent. 

All the leisure and hospitality jobs are not expected to return once the pandemic ends because many of these businesses, which have small margins to begin with, won’t be able to keep up with deferred payments, Jebaraj said. Eventually, some businesses will have to repay Paycheck Protection Program loans or pay back rent to landlords who granted them forbearance. 

“I worry that you’ll see a lot of businesses in this sector that stay open through the pandemic and then reopen after the pandemic at full capacity. They do well for a while after the initial surge, but then eventually close because they’re not able to keep up with back payments,” Jebaraj said.

Short of providing direct grants to businesses, this issue will be one to keep an eye on, he said.

Antoinette Grajeda
Antoinette Grajeda

Antoinette Grajeda is Editor-in-Chief of Arkansas Soul, the host of the Affirmative Action podcast and a Northwest Arkansas-based journalist. She has covered race, culture, politics, health, education and the arts in Arkansas for nearly 15 years.