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.

A Few More Positive Notes

Seemingly every day we get more stories that indicate the recession may be over. Yesterday, the Kansas City Regional Association of Realtors released its July figures. Overall home sales have increased for the sixth consecutive month. In July, 2,778 homes were sold. This is a slight increase from July 2008’s figure of 2,754. Additionally, overall home prices increased for the sixth straight month. The average sales price in July was $174,691, an increase of nearly $38,000 since January.
National housing data is showing the same pattern. July saw existing home sales increase 7.2 percent from June and 5 percent from one year ago. Experts cite first-time home buyers who are taking advantage of tax refunds funded by economic stimulus money for much of the increase.
In more general economic news, Fed Chairman Ben Bernanke is optimistic about the economy, saying “Prospects for a return to growth in the near term appear good.”
Back on the local front, Harley Davidson has announced that it is considering Kansas City as the site for another manufacturing plant. This, coupled with the continued strength of the region’s two auto manufacturers, shows that Kansas City’s manufacturing base is solid.
The economic recovery is not expected to be particularly speedy or robust, as unemployment remains high, but with more and more positive news, we can at least believe we are on the right track.

A Double Dip of Good (Or At Least, Stable) News

A couple of news items released yesterday paint Kansas City’s economy in a good light. First, the Federal Reserve Bank released its July Beige Book which provides regional overviews of the US economy. The Kansas City region, which stretches from Missouri west to New Mexico, Colorado and Wyoming was said to be showing “signs of stabilization”. Kansas City was one of 4 districts (overall there are 12 Fed Districts) in this category. As a sign of these economic times, stabilization was the rosiest description handed out by the Fed. Other districts were still described as “slow”, “subdued”, or “weak”.
The other piece of good news also involves the word stable. Kansas City’s unemployment rate climbed up to 8.7 percent June from 8.6 percent in May. Stable is good when you consider some of our peer metros saw significant increases between May and June.


This news, coupled with our previous post regarding steady improvements to the local housing market point to a region that may have the worst of the recession in its rearview mirror.

Is the Housing Market Starting to Thaw?

Much of the blame for the current recession has been attributed to problems with the housing market. The bursting of the housing bubble (which was much more extreme in other metros than it was in the Kansas City region) set off a financial chain of events that led to our current economic woes. Many economists, KCEconomy included, believe the housing market must begin to recover before we can see meaningful improvements in the overall economy.
At long last, we might actually be seeing some positive signs in our local housing market. This past June marked the sixth straight month where the average sale price of Kansas City area homes increased.
The average home sale price in Kansas City was $173,445 in June. Last January, the average price was just $136,747. We know some of this has to do with the seasonal nature of the housing market ,but the June figure of $173,445 is at least in the same neighborhood as last June’s $181,000 (off by just $7,555), while the January 2009 figure was nearly $30,000 less than January 2008.
It is a modest sign, but at least it looks like things might be heading in the right direction. We will continue to monitor housing prices and many other variables. Stay tuned.

National Employment Figures are a Mixed Bag

According to the Bureau of Labor Statistics, the US unemployment rate jumped from 8.9 percent to 9.4 percent in May. On the surface that is not good news, but if you look closer you can find some positives that indicate that the economy might be set to recover before too long.
The unemployment rate increased because the labor force (the number of people actively employed or looking for work) increased by roughly 350,000 last month. This increase, coupled with a loss of 345,000 jobs nationwide, meant more people were looking for fewer jobs, thus the increase in the unemployment rate.
So, where is the positive news? May’s job loss of 345,000 is much lower than we have experienced in recent months. Monthly job loss peaked in January at over 700,000 and has trended downward ever since. No doubt the recession persists, but the slowing pace of job loss is at least a trend in the right direction.
Comparable local numbers will be available later this month but recently, we have been doing slightly better than the nation so far this year.

April Unemployment Numbers Show Upward Trend

The release of April’s metro-level unemployment data showed a positive trend (if two or three months can be considered a trend) for the Kansas City area. Employment in the region increased by over 8,800, and outpaced the labor force growth of 3,600. This led to a decline of 5,218 in the number of unemployed and a good-sized drop in the unemployment rate, to 7.8 percent. It was 8.3 percent in March.
Kansas City was not alone, as the data showed a slightly improving employment picture in most metros throughout the country. But it is significant to note how Kansas City’s unemployment rate is performing relative to the national rate. In recent years, our unemployment rate has generally run even with or slightly higher than the national rate. But beginning in January the region’s unemployment rate started diverging from that pattern and it now stands nearly a full percentage point below than the national average.

Signs of a Recovery?

As you know, we at kceconomy.com are always looking for any sign that the Kansas City area economy might be rebounding. Those signs have been very hard to find over the past six months or so, but we have seen a few positive figures popping up over the past few weeks.
First of all, the local unemployment rate declined for the first time since last October — from 8.4 percent to 8.2 percent. Granted, 8.2 percent is still a high unemployment rate, but the fact that it declined is somewhat encouraging. The U.S. rate went up over the same time period, as did the rate in Kansas. Missouri’s rate remained the same.
Secondly, we got some good news in the manufacturing sector. The General Motors plant in Fairfax was expected to be shut down for at least nine weeks over the summer (as were most GM plants). However, GM announced that the Fairfax plant is one of the few plants that would remain open over the summer. This is clearly a feather in the cap for Kansas City area auto workers and shot in the arm to the many other workers who support the auto industry.
These signs are small compared to the mountains of bad news in recent months, but in these tough times any good news is welcome. Hopefully these positive notes will prove to be the beginning of a recovery trend.

Metropolitan Area Unemployment Rate Trends Show an Uneven Recession

According to the National Bureau of Economic Research, the current recession officially began in December 2007. This recession has been anything but typical. Most economic news during the recession had focused on the financial industry. Terms like credit default swaps, securitized mortgages, toxic assets and bailouts have dominated economic news. But make no mistake; this recession is becoming more and more evident in the traditional economic indicators as well, particularly…employment.
Recent releases of employment data have painted a grim picture. Nationwide, the non-seasonally adjusted* unemployment rate was 8.9 percent. This marks the highest point since 1983. Just one year ago, the unemployment rate was a relatively mild 5.2 percent. Roughly 4.5 million jobs have been lost across the nation in one year. All told, we are looking at the worst employment picture this country has seen since at least the early 1980s.
While the entire country is feeling the impacts of the recession, the economic woes are not evenly distributed. Some parts of the country may get by relatively unscathed, while others are facing a severe downturn and a long recovery. This is perhaps best illustrated by looking at February’s unemployment rate figures by metropolitan area. A quick look at the map below shows some definite patterns.

February 2009 Unemployment Rate

The blue to turquoise colors represent unemployment rates below the national rate, while the warmer colors are above the national rate. In looking at the map, five distinct regions emerge, with two of them doing better than the national average and three doing worse.
First, let’s look at the two “better than average” regions, the Great Plains and the Northeast. With a few exceptions, metro areas along the east coast, from Virginia to Maine, are doing fairly well when compared to the nation. Keep in mind this is in relative terms, because we are still talking about high unemployment rates — over 6 percent. The second “better than average” region is very large, ranging basically from the Mississippi River to the states bordering the Pacific. This region includes some of the country’s lowest unemployment rates in metros like Lincoln, Omaha, New Orleans and Salt Lake City.
The three “worse than average” regions are the South, the Great Lake States and the West Coast. The trouble in these regions makes sense in light of some of the economic headlines of recent months. The West Coast and the South are home to the metros that saw the largest housing bubbles burst. Housing values declined by 25 or 30 percent in places like Miami and Las Vegas, with profound impacts on their local economies. In the Great Lakes area and in parts of the South, the decline in manufacturing, particularly automobile manufacturing, has led to high unemployment rates.
The same pattern is evident when looking at the change in unemployment rate over the past year (below). Not surprisingly, those regions with the highest unemployment rates also have experienced the greatest increases in unemployment rates. Nationally, the unemployment rate has increased 3.7 percentage points since February 2008. Most metros in the South, Great Lakes region and the West Coast had increases in excess of 3.7 percentage points, while the rest of the country generally saw lower increases.

Change in Unemployment Rate Feb. 2008 to Feb. 2009

The Kansas City area has done slightly better than the U.S. in terms of both current unemployment rate (8.4 percent compared to 8.9 percent) and increase in the unemployment rate (3.2 percentage points compared to 3.7). We are not, however, doing as well as some of the smaller surrounding metros like Des Moines and Omaha. This is likely due to Kansas City having a larger manufacturing base than these metros, although manufacturing does not play as prominent a role in Kansas City as it does some Great Lakes metros like Detroit or Cleveland.
The recession is forecast to continue for several more months, with a recovery coming at the end of 2009 or early 2010. The Kansas City area should continue to outperform the nation slightly during the recession and be well positioned to recover when the national economy begins to rebound.

*Until very recently, seasonally adjusted data was not available from the Bureau of Labor Statistics so the unseasonally adjusted data is used to compare national and local data. KCeconomy.com is currently working with the newly available seasonally adjusted data and will have that available soon.

Unemployment Rate Skyrockets

The Kansas City area’s unemployment rate jumped from 6.5 percent in December to 8.2 percent in January. This marks the highest unemployment rate since at least 1990. An increase was certainly expected as the national economy slides further and further into recession, but an increase of 1.7 percentage points in one month is still alarming. The Kansas City area can take some solace that it is not alone in such a huge jump. The national unemployment rate jumped from 7.1 percent to 8.5 percent, Missouri’s went from 7.0 percent to 8.7 percent and Kansas’ from 4.9 percent to 6.4 percent. Similar jumps were seen in metro areas across the country.
An increase in the unemployment rate can either arise from fewer people working or more people entering the labor force and looking for work. In January, the labor force was stable, implying that the large jump in the unemployment rate was caused by an equally large drop in the number of people in the region who had a job. In fact, total employment in the region declined 18,000 from December.
People often look at the employment picture as a quick measure of how the economy is doing. Certainly both are trending in the negative direction at this time. However, employment is typically a lagging economic indicator, meaning that the economy is going to show signs of improvement in other areas (GDP, consumption, housing) before we see improvements in employment.

Searching for that Silver Lining

Since we started KCeconomy about a year ago, most economic news has been decidedly bad, from the housing bubble to the financial market turmoil to massive employment losses. Until now, any sign that the economy has bottomed out has been difficult, if not impossible, to find. We at KCeconomy.com believe that the spark that ignited the current crisis — the housing market — will also be the first indicator to tell us when the economy is ready to recover. And we might finally be seeing some long-awaited signs that the housing market is ready to turn around and fire up a recovery.
The first sign? According to an article in today’s edition of The Kansas City Star, many economists are forecasting very low mortgage rates later this summer. These low rates, coupled with home prices that have fallen in recent months and years, will prompt people to enter the housing market. Because housing starts have fallen in recent years, relatively fewer new homes have been added to the housing inventory. All this would indicate that home prices might soon stabilize or even begin to increase again in the not too distant future.
The housing market is very important to economic recovery for many reasons. New home construction can provide quality jobs and investment in equipment and materials, which will boost the economy. But perhaps more importantly, home price stability could give consumers a much needed confidence boost. Even though we are still living in a tenuous labor environment, homeowners would at least be comforted to know that their most valuable physical asset, their home, will not continue to lose value.
Locally, we still see an eight-month inventory of homes on the market today. A balanced market should have a five- to six-month housing inventory. New housing permits are at their lowest point since we began tracking them in 1985. In December, only 136 new housing permits were issued metro-wide. An average December since 2000 would have seen over 730 permits.
We monitor housing local housing data as it comes available. We will continue to do so and look for that first hint of silver lining in the months ahead.

December Employment Numbers Released

The Bureau of Labor Statistics released the December 2008 local area employment figures yesterday. The Kansas City area’s unemployment rate surged to 6.5 percent, the highest point it has been since June 2004. The rate would have been even higher were it not for a 6,276 member drop in the area’s overall labor force. For more information on how the unemployment rate is calculated visit our glossary.
Despite the jump, the area unemployment rate is still lower than the nation’s (7.2 percent) and is right in the middle of the pack compared to other large metros. Of the 50 largest metros, Kansas City’s unemployment rate was the 28th highest. Detroit led the way at 10.6 percent and Riverside-San Bernardino was second-highest at 10.1 percent.
The lowest unemployment rates were in Salt Lake City (3.8 percent) and Oklahoma City (4.6 percent).

Major Job Cut Announcements Hit Kansas City Area

Last month we said good-bye to an economically dismal 2008 and held out hope for a better 2009.
Well, so far the economic news in 2009 has been far from hopeful. Perhaps the worst news, at least locally, came yesterday as Sprint-Nextel announced plans to eliminate 8,000 jobs by the end of March. Sprint was not alone in delivering gloomy news yesterday, as Caterpillar, Pfizer, Home Depot and ING also announced significant layoffs. So far this year more than 200,000 job cuts have been announced nationwide.
According to The Kansas City Star, about 2,000 of the jobs Sprint eliminates will be in the Kansas City area.
Speaking of Kansas City employment, the Bureau of Labor Statistics recently released data showing a loss of 8,900 jobs in the Kansas City area between November 2007 and November 2008. The Missouri side of the region accounted for 4,900 of those lost jobs, while 4,000 were on the Kansas side. Most of the job loss occurred in the Construction, Manufacturing and Trade, Transportation and Utilities sectors. Education and Health Service saw modest gains. For details, see the BLS news release.

Conference of Mayors Predicts Gloomy Employment Picture for 2009

The United States Conference of Mayors and the Council for the New American City recently released employment forecasts for all metropolitan areas across the country. Out of 363 metros, only two are projected to see employment rise in 2009 — St. George, Utah and McAllen-Edinburgh-Mission, Texas.
The Kansas City metro area is forecast to lose 20,100 jobs in 2009, or 2 percent of the regional total. This predicted decline is right on par with the national metro average, which would indicate that the impact of this recession will be approximately the same here as the nation overall. The decline also matches the projected employment loss from MARC’s 2009 economic forecast, which predicted just under 20,000 jobs lost in calendar year 2009.
The impact of this recession appears to be more focused on some Sunbelt metros. The Florida metros of Miami, Jacksonville and Tampa-St. Petersburg, along with Las Vegas, Nev. and San Jose, Calif., are among the large metros expected to see employment drop by 3 percent or more. Not coincidentally, these metros were also among the leaders in housing value growth. As a result, the popping of the housing bubble has had its greatest impact there.

Regional Foreclosures up 35 Percent in 2008

In 2008, 13,609 properties in the Kansas City entered into some stage of foreclosure. All told, this amounts to 1.56 percent of all properties in the metro and is a 35 percent increase from 2007. Kansas City ranked 49th out of the largest 100 metros.
Most of the high-foreclosure-rate metros were in the Western United States or the Sunbelt. Stockton, Calif., was the metro with the highest percentage of properties in foreclosure, at 9.46 percent, followed by Las Vegas (8.89 percent) and Riverside/San Bernardino (8.02 percent).
Many economists agree that a stable (or at least stabilizing) housing market is crucial to recovering from the recession. These foreclosure figures would indicate that recovery might still be a long way off.