FDIC: Arkansas Employment High; Katrina May Strain State Services

October 6, 2005

Arkansas’ employment numbers look good now, but a recent report from the Federal Deposit Insurance Corp. cautioned that a refugee influx after Hurricane Katrina could strain state services.

The Arkansas’ state profile for Fall 2005 said growth in service industries helped the state to its employment high – at 1.1734 million – despite weaknesses in manufacturing, which lost 1,600 jobs in the first half of the year.

The report for the federal insurance program said that an expanding economy led previously discouraged workers to re-enter the work force and that only Drew County reported a drop in its civilian labor force.

It also noted the state’s $100 million budget surplus and said state government services would likely benefit the most from it, as the state faces obligations under the Lake View school funding case and increases in the Medicaid costs.

“While the education and health services and government sectors combined make up 30 percent of total state employment, one out of every two new jobs in the state over the past year has come from these sectors,” the report said.

The FDIC report also said that hurricanes Katrina and Rita could have a long-lasting impact on the state. It said an estimated 50,000 to 100,000 people arrived in Arkansas after Katrina and that more arrived after Rita.

“The immediate impact of this migration may temporarily strain the government and private aid services sectors,” the report said.

“In addition, rising energy prices as a result of the hurricanes could negatively affect consumer and business finances,” it said. “The retail and lodging sectors will most likely benefit from the influx of evacuees. However, the long-term effects on the economy and banking in the state will depend to a considerable extent on the number of evacuees who decide to establish permanent residence.”

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