Local Housing Sector Shows Real Strength in November

According to data released today by the Kansas City Regional Association of Realtors (KCRAR) there were 2,454 home sales in the area this past November. This is sharp increase from November 2008 when only 1,518 homes sold. As Chart 1 shows below, home sales have remained steady after peaking in the summer months. In a typical year, home sales will dip in fall and winter as shown in chart 2. This dip is largely absent in 2009. It appears that incentives such as the first-time homebuyers program and low mortgage rates have buoyed home sales, even during what have traditionally been slow months.

CHART 1

CHART 2

The news is good not only in terms of homes sold, but also in rising prices. The average sale price was significantly higher last month, at $160,621 compared to $155,195 in November 2008. The figures are even more impressive for existing homes, where the average sale price jumped by nearly $12,000 from one year ago ($136,000 to $148,000).
All told, this is the best home sales news we have received in three years. Home sales are up (although they have a long way to go to get back to numbers we saw prior to the recession), sale prices are up, and inventory is down, as is the length of time it takes to sell a home.
Many economists, including ourselves, believe that a resurgent housing market is key to any economic recovery. If these November numbers truly signify a housing market on the rebound, then we can begin to feel more optimistic about the economy as a whole. It is possible that the federal homebuying programs are simply shifting future sales to the present. If so, while this relieves some of the current pent-up demand, sales next spring might not pick up as much as usual. Time will tell.

Kansas City’s Unemployment Rate Sees Significant Drop in October

The Kansas City area’s unemployment rate fell one half of a percentage point between October and September (8.9 percent to 8.4 percent). This is the first decline in unemployment since April. This is certainly good news as we look to put this recession behind us, but the story behind the numbers is not all that rosy.
The unemployment rate declined because the labor force declined significantly (by 6,146) while employment declined only slightly (414). This means while the number of jobs available is stable, the number of people looking for work has declined. We would prefer to see the unemployment rate decline because the number of available jobs has increased more than the increase in labor force, but considering where we have been, a lower unemployment rate and an apparent end to the huge job loss numbers — for whatever reason — is at least something to feel positive about.

PDF Version of the Map

Metro unemployment rates held a familiar pattern in October. The highest unemployment rates continued to be in the Southeast, Great Lakes region and in California and Oregon with the upper Midwest having the lowest unemployment rates in the country.

PDF Version of the Map

The decline in unemployment rate that Kansas City experienced in October was not unique. Many metros across the country saw declines, especially in the New England states, upper Midwest and Michigan, where the recession has been particularly hard. The unemployment rate still increased between September and October in South Carolina, Ohio, Indiana, Illinois and many of the smaller metros in California.


PDF Version of the Map

Compared to last year, all metros saw an increase in unemployment rates. Kansas City’s rate jumped from 6.0 percent in 2008 to the current 8.4 percent. This increase places Kansas City right in the middle in terms of unemployment rate change. The greatest increases in employment rates were seen in parts of the south, the Great Lakes area and the Pacific coast states. The Midwest and Northeastern states had smaller increases.

Missouri and Kansas See Employment Bump

Both Missouri and Kansas had reason to smile with today’s release of the seasonally adjusted state employment figures. Employment in Kansas increased by 2,800 jobs between September and October, while Missouri employment jumped by 4,000. This is the greatest monthly increase in Missouri since January 2008. Kansas had a sharp increase of 7,400 jobs last July, but it was followed by two months of decline that erased that growth.
Unemployment rates fell in both states (from 9.5 percent to 9.3 percent in Missouri and from 6.9 percent to 6.8 percent in Kansas).
Hopefully we will be able to look back at these October figures as the beginning of employment expansion in both states. We should note that 29 states experienced a decline in employment over the past month so both Missouri and Kansas are in the happy minority.
Metro level data will be released on Dec. 2. We will see if the Kansas City area follows the state trends.

US Economy grows in 3rd Quarter

After contracting for four consecutive quarters, the US economy saw economic growth of 3.5 percent this past quarter. According to the Commerce Department, the upswing in economic activity was helped in large part due to increased consumer spending as consumers took advantage of government program to purchase cars and homes. Many of these programs such as “cash for clunkers” have ended or will end soon so it will be interesting to see if the economy can put back to back positive quarters. Most economists, including ourselves believe that this quarter’s growth will eventually mark the beginning of an economic recovery. This recovery does not look to be very robust as unemployment remains high and credit is still proving more difficult to get, but just getting some major positive news could boost our confidence and get the economy going again.
Perhaps best demonstrating the weak nature of this recovery is the current unemployment picture. The Bureau of Labor Statistics released the September unemployment rates for the Kansas City area. For the third straight month, Kansas City’s unemployment rate stood at 8.9 percent.
Employment has always been a lagging indicator. The economy will show real growth for several quarters before we can expect any real growth in employment. We are certainly not out of the woods yet, but we can at least begin to gain some confidence that we are on the right path.

Kansas City Metro Economy is Nation’s 28th Largest

Kansas City’s economy (measured by gross domestic product) generated over $100 billion in activity in 2008 according to the Bureau of Economic Analysis. This ranks as the country’s 28th largest economy right between Cleveland and Cincinnati.
Kansas City’s gross domestic product has enjoyed steady growth since 2001 (when the data series was started), growing 13 percent in real terms. Even with the recession, Kansas City’s economy grew 1.3 percent between 2007 and 2008.

Third Shift at Fairfax to Boost Manufacturing Sector

Kansas City’s manufacturing sector got a nice shot in the arm on Tuesday when the General Motors plant in Fairfax announced they would be adding nearly 1,000 new workers to work a third, overnight shift. The plant, which manufactures the Buick LaCrosse, Chevy Malibu and Saturn Aura will employ 2,400 manufacturing workers by January when it is running all three lines.
This is certainly welcome news to the manufacturing sector, which continues to see job loss despite the growth at the area’s automobile plants. Since the start of the current recession (December 2007) the Kansas City metro has lost 5,900 manufacturing jobs or 7.2 percent of the total. While that is a large number, Kansas City is losing manufacturing jobs at only half of the rate of nation. Over the same period, the U.S. has seen manufacturing employment shrink by 13.8 percent.

Manufacturing employment has long been on the decline in the U.S. as we shift to a more service-oriented economy. But, at least for the time being, Kansas City appears to be doing a better job of holding onto manufacturing sector jobs than the rest of the nation.

Unemployment Rates Keep Creeping Upward

The national and local unemployment rates continue their slow climb according the latest releases from the Bureau of Labor Statistics. The national rate reached a 26-year high at 9.7 percent in August. Kansas City’s unemployment rate rose to 8.9 percent in July, up from 8.7 percent in June and 6 percent in July 2008. (Local data is one month behind the national data.) Now, this is certainly not the direction we want the unemployment rate to go, but it is not unexpected. While the economy as a whole is showing signs of recovering, most economists expect unemployment will remain high into next year.

Kansas City’s unemployment rate is fairly high when compared to some of our peer metros. Of our nine peers, only Portland and St. Louis have higher unemployment rates. It is important to remember, however, that the unemployment rate doesn’t tell the whole story.

Take Kansas City and Indianapolis for example. Their unemployment rates over the past year have trended along the same path over the past year. Currently, Indianapolis has a slightly lower unemployment rate than Kansas City (8.7 percent to 8.9 percent). All things equal, one would assume that the employment picture in Indianapolis and Kansas City are pretty similar. A closer look tells us this is not the case.
Like virtually all metros in the country, both Indianapolis and Kansas City have a higher unemployment rate in July 2009 than they had in July 2008. Both also have seen an increase in unemployment of over 31,000. However, their respective labor forces have gone in different directions. Indianapolis’ labor force declined by over 32,000 while Kansas City’s increased by more than 13,000. The difference in the Labor Force change is significant because it shows that workers perceive that job prospects are better in Kansas City than Indianapolis. Labor force decline, like in Indianapolis, indicates that people have either given up on finding work, or left the area all together.

The employment change is also quite different. Both lost employment during the past year of economic decline, but Kansas City’s loss was only 18,513 compared to Indianapolis’ 63,869.
So high unemployment rates are likely to be with us for at a least a few more months, but we can at least take solace in the fact that Kansas City’s high unemployment rate is partially caused by our increasing labor force.