Economists project that Arkansas will experience moderate economic performance in the coming months, despite a backdrop of rising unpredictability. During the Arkansas Economist Forecast luncheon on Thursday, Michael Pakko, the chief economist and state forecaster at the Arkansas Economic Development Institute, described 2025 as a period defined by ambiguity, dubbing it the “year of uncertainty.” His outlook was supported by insights from officials at the St. Louis Federal Reserve Bank, who provided broader national context. n nDue to a federal government shutdown, third-quarter economic data remains unreleased, preventing updates to earlier projections. Pakko highlighted challenges within the agricultural sector, particularly for row-crop farmers, as a contributing factor to the cautious statewide forecast. n nHe anticipates that payroll employment in Arkansas will expand by less than 1%. While the national unemployment rate could climb to between 4.5% and 4.6%, Arkansas is expected to remain more stable, potentially reaching around 4% but not exceeding 4.2% in the next year, largely due to a robust number of unfilled jobs across the state. n nPakko noted that labor force participation has plateaued near 58.5%. Personal income is projected to grow by approximately 5.2%. Meanwhile, the state’s gross domestic product (GDP) is forecast to increase by under 2%. n n”There are no immediate signals pointing toward a recession,” Pakko remarked, adding that growth is simply decelerating and aligning more closely with the U.S. average when agricultural fluctuations are excluded. n nOne potential drag on the economy, he warned, could stem from household expenditures. “It’s possible that residents have reached their spending limits, which may continue to weigh on economic momentum,” he explained. n nFrom 2021 to 2023, Arkansas experienced subdued expansion, though the state maintains a notable advantage in its relatively low cost of living. Pakko also emphasized lingering questions about tariff policies and their economic consequences. “The full impact of trade measures remains unclear,” he said. “We’re likely to see higher prices, with inflation peaking early next year as tariff effects ripple through consumer markets. This could contribute to softness in both domestic and international economic activity as supply chains adapt and trade relationships shift.” n nB. Ravikumar, senior vice president and deputy research director at the St. Louis Fed, pointed out that manufacturing employment has been on a decades-long decline, a trend spanning the past 70 years. Both Pakko and Federal Reserve representatives observed that consumers are exercising greater prudence in their purchasing decisions. n nIn October, the central bank reduced its benchmark federal funds rate by 0.25 percentage points, setting it within a range of 3.75% to 4%. Kathleen Navin, a senior economist at the St. Louis Fed, cautioned that while a rate cut in December is possible, it is far from guaranteed.
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Arkansas’ economic forecast decent, despite uncertainties, experts say
Arkansas ‘ economy is expected to do “fairly well” in the near future, economists said Thursday, while growing uncertainty remains. n nMichael Pakko, chief economist and state economic forecaster at the Arkansas Economic Development Institute, made his predictions Thursday at the Arkansas Economist Forecast luncheon. He dubbed 2025 the “year of uncertainty.” n nExecutives with the St. Louis Federal Reserve Bank also provided national economic predictions and context. n nBecause of the government shutdown, economic data from the third quarter has not been released. Earlier predictions can ‘t be updated for lack of new data. n nPakko acknowledged the challenges row-crop farmers are facing and how that contributed to his predictions for the overall Arkansas economy. n nIn his forecast, Pakko said Arkansas ‘ payroll employment will see less than 1% growth. n nThe national unemployment rate might rise to 4.5% or 4.6%, but Arkansas ‘ should only rise to about 4%, and not more than 4.2%, sometime next year, mostly because of a high job opening rate in the state. n nHe said that the labor force participation rate is stuck around 58.5%. He also predicted personal income growth of about 5.2%. n nThe state ‘s gross domestic product growth will be less than 2%, Pakko predicted. n n”We ‘re not seeing any signs of recession on the horizon, just a slower pace of growth, which even looks closer to the U.S. average once we take out that agriculture component once again,” Pakko said. n nOne source of weaknesses may be in consumer spending, he said. n n”Perhaps Arkansas consumers have tapped out at this point, and that ‘s going to be an ongoing source of weakness,” Pakko said. n nPakko said Arkansas has seen slow economic growth from 2021-23 but highlighted the state ‘s low cost of living. n nHe also mentioned ongoing uncertainty about tariffs. n n”We have the inherent uncertainty about how tariffs are going to end up affecting the economy,” Pakko said. “We are likely to have the rising prices, measured inflation will probably peak sometime early next year, given the effects of tariffs as they flow through to consumer prices. We ‘re likely to see some weakness in the global and U.S. economy as supply lines change and adjustments are made to trade patterns.” n nB. Ravikumar, senior vice president and deputy director of research at the Federal Reserve Bank of St. Louis, explained that manufacturing employment has been declining for the past 70 years. n nPakko and the Fed executives noted they have seen consumers being cautious with spending. n nIn October, the Fed cut its benchmark federal funds rate by a quarter percentage point to a range of 3.75% to 4%. n nKathleen Navin, a senior economist at the Federal Reserve Bank of St. Louis said that while there was a predicted cut for December, it ‘s not a “foregone conclusion.”