A Case Study: The Economy Index as a Metric of Success of Eighteen Arkansas Cities

Document Type

Article

Publication Date

9-2016

Department

School of Business

Abstract

The economy is measured by a variety of economic indicators. These economic indicators may give mixed information at any given time. In our study labor force, unemployment rate, home sales, home price, commercial construction, residential construction, and retail sales are selected as component level indices to construct sector indices. Labor market, construction, housing, and retail sales are selected as sector indices to construct the Economy Index (EI). The proposed Economy Index (EI) is used to monitor the overall performance of eighteen cities across Arkansas on a monthly frequency. Labor markets, construction, housing, and retail are commonly followed economic indicators. Together they show the performance of the economy, they are available at a city level, on a monthly frequency, and in a timely manner. At a particular time and city, different economic indicators may move in different directions sending mixed signals about the health of the economy. An overall economic index is needed to synthesize these disparate indicators and gauge the performance of the economy. Particularly we are interested in the case of the state of Arkansas economy. The Arkansas economy is behind, below, and more stable than the national economy. Arkansas economy usually lags the nation in most trends. For example, while the nation hit its unemployment rate peak in October 2009, Arkansas hit its peak in early 2011. Arkansas is more insulated from the large swings of the rest of the nation. For example, while the national unemployment rate peaked at 10%, Arkansas’s peak was 8.4%. The economy relies heavily on Agriculture with rice and poultry being prevalent. Logistics is also important with several large trucking companies and Wal-Mart. The state consists of a strong economic engine in the northwest, an urban core with weak growth and white flight in the center, and many small cities around them. Only one city (Little Rock) has a population above 100,000 people. This study uses Arkansas city level data to test the proposed economy index model, which is different from commercial models like those by HIS Global Insights or Moody’s Analytics in that the latter predict future economic growth. Instead, our proposed model is used to monitor the current economic performance of eighteen cities across Arkansas and shed light on what drives or pulls economic performance for a particular city and particular month.

First Page

49

Last Page

56

Volume

22

Issue

1

ISSN

15407780

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