KC Economy

Missouri Leads Region in Low Business Taxes but Lags in Employment Growth

2012-01-11T10:07:00.006-06:00

In recent press release, the Kansas Economic Progress Council calls Missouri the “real tax competitor” in the region due to its low business tax rates. The press release cites a report conducted by the Arkansas Chamber of Commerce which analyzed effective business tax rates in eight states (Arkansas, Kansas, Louisiana, Mississippi, Missouri, Oklahoma, Tennessee and Texas). Missouri had the lowest effective tax rate in five of eight categories the study measured.

On the surface, this looks like good news for Missouri, as low business taxes should allow the state to be more competitive than others in the region in growing and attracting businesses. But is this low-tax strategy really effective?

Presumably, low taxes would lower business costs and enable Missouri firms to charge relatively lower prices, thus increasing the demand for Missouri products. But if so, we would expect this to show up as increased output and employment in Missouri relative to other states. Unfortunately, this has not recently been the case. As the chart below illustrates, Missouri ranked last among the eight states in terms of employment growth over the past year. Employment in Missouri has grown by 1,400 for the year ending November 2011, an increase of 0.1 percent. Louisiana, on the other hand added 46,700 jobs between November 2010 and November 2011 — despite having the highest overall effective tax rate.

Most studies of business relocation find that while relative tax rates play a role, it’s a relatively minor one compared to things like the quality and availability of labor, access to markets, availability of high-quality transportation services and proximity to a cluster of businesses serving similar markets. In other words, just like people, businesses seek value -the quality of service received relative to the price paid – rather than low cost alone.

As the employment growth in higher tax states indicates, at least some growing firms are finding a better “value proposition” in states other than Missouri.

Here is a link to the KEPC press release.

Retail Sales Starting to Trend Up

2011-12-02T09:21:00.004-06:00

During this time of year, retail sales become a key economic indicator. Early indications are that the 2011 holiday shopping season got off to a record start with consumers spending an estimated $45 billion over the weekend after Thanksgiving. Retail sales dipped during the 2007-09 recession and have been slow to recover, so this early indicator is a hopeful one. A more confident consumer will help spark what has been a slow economic recovery.

The chart below shows retail sales by quarter and a smoothed four quarter moving average. (Taxable retail sales differ from retail sales in that some items like some medical equipment and farm machinery are exempt from sales taxes so their sales are not included.) Regional retail sales peaked in mid-2008 before declining with the recession throughout 2009. The latest data available, through the 2^nd quarter of 2011, shows regional retail sales starting to trend up again, but still not at pre-recession levels.

Within the metro, 36 percent of these taxable sales ($8.98 billion) occurred in Johnson County. Jackson County was a close second with 32 percent ($8.07 billion).

On a per-capita basis, retail sales in Johnson County stands out again. Johnson County has retail sales in excess of $16,000 per person. Platte County is second with more than $15,000. All other counties are below the metro average of $12,414 per person. Retail sales taxes are a key contributor to revenues for many local governments. It would appear that this source of revenue might be heading back to the days of steady growth.

Employment Data Whiplash

2011-11-02T10:40:00.002-05:00

In an August press release, the Bureau of Labor Statistics said that Kansas City was the second-worst metro in the country in terms of employment change. Between August 2010 and August 2011, the region lost more than 11,000 jobs. Only Atlanta had a worse year-over-year performance.

This had us scratching our heads because it is unusual for Kansas City to be at the extreme end of most economic issues. Generally we tend towards the median.

Fasten your seatbelts. After posting that loss of 11,000 jobs in August, the September data shows a robust rebound — jobs in the region are up nearly 3,000 over September 2010.

Now, an employment increase of 3,000 jobs is nothing to write home about. In fact, it is a very bad annual figure — but at least it is on the positive side of the ledger. The negative August numbers got a lot of press. September’s good news needs some coverage, too.

The chart below shows that while U.S. employment (as measured by a year-over-year percent change) turned upwards in late 2009, and stayed positive through the middle of 2010, Kansas City’s has zigged and zagged. We’ve struggled to show consistent year-over- year growth since before the recession.

Our September spike is evident on the extreme right side of the chart. We will see in coming months if this spike is an anomaly or whether we can put the neck braces away and begin to enjoy the smoother ride of a long-term employment expansion.

Third-quarter GDP figures offer reason for optimism

2011-10-27T14:46:00.001-05:00

An initial look at the national economy’s third quarter should lessen the fears of a double-dip recession. Though the growth rate of 2.5 percent isn’t headline material in and of itself, it is solid enough to think the economy is slowly crawling back to sustainable long-term growth.

A detailed look at the numbers shows strong growth in domestic investment, specifically in equipment and software. This is an encouraging sign, as businesses have been reluctant to invest while the recovery is still shaky. Personal consumption grew to its highest point this year (a 2.4 percent growth rate) while government consumption was flat.

To be sure, there are still concerns out there. Chief among those is the European debt crisis. Just one year ago, we thought the economy was well on its way to recovery, but the earthquake in Japan and high fuel prices put on the brakes. Now, with consumption and private investment picking up some steam, the basic engines of economic recovery appear to be getting back on track.

The Roller Coaster Ride Continues.

2011-07-11T11:03:00.000-05:00

A common joke in economic circles (yes, economists do occasionally have a sense of humor) is that economic forecasters are around just to make weather forecasters look good. Well, in our defense, here is a sample of what we have to work with.
Last Thursday we got this headline “Stocks advance on strong jobs report.” Friday’s headlines read “Stocks drop after weak jobs report.”
Two days, two different reports, two different directions for the stock market. So how can we have such divergent job reports released within 24 hours?
Let’s start with the “strong” jobs report. This is actually two separate reports. The first was the federal government’s weekly report on first-time unemployment benefits. This report showed that for the week ending July 2, fewer filings for unemployment insurance occurred than expected. This definitely qualifies as good news.
The second good news report that drove the market up on Thursday was a report from ADP, a private company that provides payroll services for businesses. This report found that employment in the private sector added 157,000 jobs in June, far exceeding expectations.
This set the stage for Friday’s unveiling of the official June jobs report. With the positive news released on Thursday, hope arose that the June employment numbers would show a solid rebound from May’s disappointing figures.
Instead the June figures were even more disappointing. The national economy added a paltry 18,000 jobs in June. Economists had expected growth of about 125,000. According to the June report, private employers only added 57,000 new jobs, while the public sector lost 39,000. This is a far cry from the 157,000 new private sector jobs ADP indicated we created in June.
The discrepancy between these reports is really not the story here, although it is a good example of how difficult it is to accurately measure our economy. The true story is, and continues to be, where are all the jobs?
This year had been fairly solid in job creation through April, but the back-to-back down months since then is a real concern. Jobs will lag the recovery, but by this point, we would expect to see some real employment growth.
This may be just a temporary employment lull caused by the earthquake in Japan and the political wrangling over the debt ceiling. On the other hand, it may instead be a new normal brought on by a combination of increased productivity and a private sector that is more concerned with paying down debt than spending. [Little known fact – the private sector, households and businesses, holds 63 percent of the nation’s nonfinancial sector debt, twice as much as government’s 31 percent.] Which of these two scenarios will ring most true remains to be seen.

Higher productivity equals fewer workers working harder

2011-06-21T14:33:00.001-05:00

The nation is now two years removed from the end of the recession. The economy, as measured by GDP is now at pre-recession levels. We have become accustomed to seeing the economy expanding well before employment picks up after a recession. Employment has always been a lagging variable, but should it lag by two years?
The chart below perhaps best illustrates our current economic situation. The economy has recovered. We are producing the same amount of economic output as we were back in late 2007. But now we are doing this with 7 million fewer workers.

Source: Bureau of Labor Statistics, Bureau of Economic Analysis

So far in 2011, employment has begun to pick up slightly, so perhaps employers have maxed out the productivity they can get from their existing workforce. But questions remain: Is the lack of employment so far simply an unfortunate reflection of the severity of the recession, with employers still stinging so much they are reluctant to take on the risk of hiring? Or, are we at a “new normal” where new technologies and outsourcing mean we shouldn’t expect to see full employment (below 5 percent) anymore? This writer still leans to the former, but if employment levels don’t start climbing soon that answer may soon change.

Great National Job Numbers

2011-05-06T15:38:00.000-05:00

April job numbers for the nation were released today and the results exceeded expectations as 244,000 jobs were added last month. So far this year the nation has added 768,000 jobs. Perhaps even more encouraging is the broad nature of the growth. Every sector except government saw employment increases. Retail trade led the way with 57,100 new jobs, followed by professional and business services with 51,000 jobs.
Despite the added jobs, the unemployment rate still increased in April, but that’s not all bad news. The unemployment rate rose because the size of the labor force increased faster than employment. This reflects the renewed optimism of people who had given up looking for work, but now — with positive economic news on the rise — are reentering the job market and giving it another try.
The economy is still on shaky ground as spikes in energy costs threaten the recovery, but it is certainly encouraging to see private sector businesses across the board actually bringing on more staff in significant numbers.

Kansas City, the Brain Magnet

2011-03-03T10:49:00.000-06:00

Lists that rank cities on various criteria seem to be a trendy way for the media to attract attention. You can find lists for the most livable cities, the safest cities or greenest cities. There are lists telling you the best cities for single people or best cities for bicycle riders. There are so many, in fact, it is sometimes easy to overlook the truly interesting ones — interesting to us economists, that is. Forbes recently produced such a list and Kansas City ranks pretty well on it. On the list of top “brain magnet” cities, the Kansas City metro ranks fifth. The rankings were based on the increase in the number of residents who are at least 25 years old and college educated, compared to the population as a whole, between 2007 and 2009. The Kansas City area added more than 38,000 adults with at least a bachelor’s degree during that time.
Prevailing wisdom says that recent college graduates flock to the trendy coastal cities after graduation, but the data shows this is not really the case. The article says graduates are increasingly looking at affordability and employment growth when deciding where to start their careers. This would help explain why the list is dominated by lower cost metros away from the coasts.
And while we’re talking about lists, Kansas City was also on another recent Forbes top ten list that’s not as impressive. We rank seventh on the list of most miserable sports cities. Baseball season starts later this month. Come on, Royals, let’s try to get off that list!

New Metro Employment Figures are Puzzling

2011-02-03T10:18:00.000-06:00

At KCEconomy.com, we strive to find interesting facts and figures regarding our local economy and do our best to explain what these figures mean. It is only fair that we include facts and figures that we… well, simply cannot explain. Such is the case with the recent employment figures for metro areas.
According to the Bureau of Labor Statistics the Kansas City area saw nonfarm employment decline 1.9 percent between December 2009 and December 2010. Out of the large metro areas with populations greater than 750,000, only Sacramento, Calif., had a more severe decline (2.2 percent). For the Kansas City area this means a loss of nearly 16,000 jobs.
The BLS data is the industry standard. It is the source for local area unemployment rate data, but these Kansas City numbers on employment change just don’t seem right to us. In the 2011 economic forecast MARC prepares for the Greater Kansas City Chamber of Commerce, released back in October, we predicted modest employment growth of about 8,000 for the region in 2010. This prediction was made using a national employment forecast with our model of the regional economy to predict how the local economy will perform. In the past, this approach has proved to be fairly accurate. This is the first time our estimate of the region’s employment direction is opposite that of BLS. Additionally, it has been generally accepted that our local economy weathered the recession better than other parts of the country. It is certainly surprising that Kansas City is so low relative to other large metros in terms of employment growth.
This BLS data will be revised this spring and we will look over the updated numbers with great interest. Either the current figures have somehow gotten out of alignment in 2010, or we may have to re-think how the local economy relates to the nation’s.
In the meantime, we will examine local employment data in detail so we can perhaps shed some light on this puzzling difference.

GDP up 3.2 Percent in Fourth Quarter 2010

2011-01-28T16:01:00.000-06:00

The Bureau of Economic Analysis released its first estimate of how rapidly Gross Domestic Product grew in the fourth quarter of 2010 earlier today. The annualized rate of 3.2 percent marks the 6th straight quarter of growth. This ends a good year for the national economy, especially considering that the 2007-09 recession is fresh in our minds. If you recall, that many economists were worried about a double-dip recession in 2010. That talk has pretty well dissipated.
Also, as we discussed on Wednesday’s blog, personal consumption grew at 4.4 percent rate. This was actually higher than the 4 percent growth rate that was predicted.
What this means is the economy is on solid ground and should soon be providing those much needed jobs throughout 2011.

Welcome Back Shoppers!

2011-01-26T11:58:00.004-06:00

Although the Gross Domestic Product figures for the fourth quarter will not be released until Friday, economists are already predicting a solid bump based on personal consumption. According to 27 leading economists, consumer spending in the fourth quarter of 2010 jumped by 4 percent. This would make for six consecutive positive quarters and would mark the highest increase since 2006.
Economists cite a strong holiday shopping season and solid new car sales as reasons for the optimism. Additionally, the Consumer Confidence Index jumped 7.3 points in January (from 53.3 to 60.6, where 1985=100).
Taken together, all this information indicates that the consumer is finally spending again, which will help reverse the downward cycle we have experienced in recent years. As consumers demand more goods and services, employers will have to hire more workers to meet this demand. More hiring leads to more consumption, and the cycle continues.

The depths we experienced in the recession will likely keep the economy from feeling particularly strong for a while. A lot of hiring will have to occur before we can even begin to reach pre-recession levels, but if Friday’s GDP release does in fact include a good consumption figure we can feel confident that the economy is on the way back.

Beige Book Paints a Positive Picture

2010-12-02T11:13:00.000-06:00

The Federal Reserve just released the latest edition of its Summary of Commentary on Current Economic Conditions, better known as the “Beige Book.” The Beige Book is a collection of largely anecdotal information gathered by Federal Reserve Bank officials from business and market experts throughout the country. It is published eight times each year.
The latest report states that the economy in the Kansas City district (which includes western Missouri, Kansas, Nebraska, Wyoming, Colorado, Oklahoma, and northern New Mexico) grew at a strong pace in October and early November. Other districts with economies growing at a strong pace included New York, Richmond, Chicago and Minneapolis. The Boston, Cleveland, Atlanta, Dallas and San Francisco districts also grew, but at a more modest pace. Economic growth in the St. Louis and Philadelphia districts was described as mixed.
The growth in the Kansas City district was attributed to increased optimism from manufacturers and increased demand for energy and agriculture products produced in the region. On the down side, real estate and construction activity continued to languish in the district.
For more information on the Federal Reserve Bank’s Beige Book, click here.

Kansas City’s Real Estate Market Emerging Trends

2010-11-24T14:47:00.000-06:00

The Urban Land Institute (ULI) released its “2011 Emerging Trends in Real Estate” report last month. The report grades the country’s major metropolitan areas on investment and development opportunities. It is no surprise that very few markets are seen as “markets to watch.” Washington, D.C., New York, San Francisco and Austin top the list as the best markets for commercial/multifamily investment and development. Out of the largest 51 metros in the country, Kansas City ranked in the bottom third. ULI’s report considers Kansas City a “modestly poor” investment prospect and a poor development prospect.
In looking at the prospects for these large metros, it does appear that things fare better in the traditional big cities on the coasts, like New York, Los Angeles, San Francisco-San Jose and Washington, D.C. Texas metros appear to be emerging, as does Denver, but most of the non-coastal metros have poor prospects.
Kansas City has never really been a trendsetter when it comes to real estate prospects, but its poor showing in the ULI report is still somewhat concerning. Markets that are perceived as established or emerging global cities are attracting the real estate development and investment while the secondary markets are being overlooked. If this perception is not changed, the gap between the hot, trendy markets and colder, secondary markets will widen.

Are We Turning the Corner in Employment?

2010-11-08T10:23:00.002-06:00

October employment figures for the U.S. were released today to overall positive reviews. The most positive feature was the month-to-month increase in employment of 151,000 jobs nationwide. Public-sector jobs lost 8,000, but a stronger-than-expected increase of 159,000 in the private sector made for the first positive growth since May.
The National Bureau of Economic Research declared the 2007-09 recession over 16 months ago. Despite this passage of time, a very sluggish employment market keeps us feeling as if we are still in the recession’s grip. This leads us to wonder, how does this recovery compare to the 2001 recession in terms of employment?
The chart below shows month-over-month change in private employment for the 16-month period after the end of the 2001 recession compared to the 16 months after the 2007-09 recession. (We chose to focus on private employment since temporary census hiring and layoffs skewed the total figures, and growth in employment in the long-term will ultimately depend on private hiring.) Notice that the columns to the left are both negative for many months after recession’s end. This is typical, as employment is a lagging indicator. Employers will typically not start hiring until they are fairly certain the economy is on solid footing.
Somewhat surprising is the difference we see beginning about eight months after the end of each recession. Private employment has grown faster in the 2007-09 recovery than in the 2001 recovery. In the current recovery, monthly private employment change has been positive since December 2009. The 2001 recovery did not exhibit steady private employment growth until almost two years after the recession ended.
There are two important things to keep in mind, however. First, we are celebrating a total employment increase of only 151,000 nationwide. While encouraging, this increase did nothing to the overall unemployment rate, which stayed steady at 9.6 percent. Economists estimate that for the unemployment rate to go down, the U.S. economy would need to add at least 200,000 jobs a month. Second, the 2001 and 2007-09 recessions are very different animals. The 2001 recession saw a loss of almost 3 million private sector jobs, which was tame by comparison to the nearly 8.5 million lost in the 2007-09 recession. So with a much deeper loss in the most recent recession, it stands to reason that the recovery should be a bit more robust.
Regardless, the positive take away from this should be 10 consecutive months of private employment growth nationwide. Granted, the monthly growth figures could be higher, but 10 months still looks like a positive trend.

Housing Price Chart From “Central Standard”

2010-10-13T17:20:00.001-05:00

Below is the chart I referenced today on KCUR’s “Central Standard” program. The data comes from the Federal Housing Finance Agency. The chart shows how the housing values in these 6 metros all increased at relatively the same rate until about 2003. Then the housing bubble began to grow, especially in hot growth markets like Las Vegas and Miami and, to a lesser extent in Denver and Minneapolis-St. Paul. Kansas City, however maintained a stable rate of growth until the housing bubble burst in late 2007. During the recession in 2008 and early 2009 housing prices fell precipitously in those markets that saw huge increases in values just a few years earlier. In Kansas City, we did not experience the large increase, so consequently we did not experience a great home value collapse.
To close on a positive not, across all of these metros, it appears that the worst may be over. All are showing signs over the past few quarters that their home prices are stabilizing.

Area Unemployment Rate Remains Stubborn

2010-09-29T16:25:00.001-05:00

The unemployment rate for August, released today, sits at 8.8 percent for the second consecutive month. One year ago the rate was 8.9 percent. Although the economy is now officially in recovery mode (the National Bureau of Economic Research declared the recession over as of June 2008) we have yet to see a surge in employment. There remains a great deal of uncertainty in the economy. Businesses are not going to start hiring again until they are confident the economy is on solid ground. While economic figures like GDP were encouraging earlier in the year, the third quarter numbers are not expected to be as strong. This will likely forestall many employers’ hiring plans even further. Unfortunately, this is looking more and more like a very slow recovery.

Competition for Open Jobs Remains High

2010-08-23T15:39:00.001-05:00

For every job posting in the Kansas City area there are three unemployed persons, according to the job search site Indeed.com. Out of the top 50 metro areas, Kansas City ranks right in the middle at 25th. The best place to be looking for work according to the site was Washington, D.C., with one job posting for every one unemployed person. At the bottom of the list are Metro Detroit and the Miami area with eight unemployed persons for every job posting.

June Employment Numbers Released

2010-07-30T17:41:00.000-05:00

Kansas City’s unemployment rate edged up from 8.3 percent to 8.5 percent in between May and June. This is still better than the 8.9 percent rate we had one year ago.
We typically see a boost in employment and labor force during the summer months as students are looking for work. This is clearly the case this summer, as the labor force (the number of people who are employed or are actively looking for work) increased by nearly 11,500. Employment also increased, but by less than 9,000, thus leading to a higher unemployment rate.
Historically, June is the high point of the year for employment rates because of seasonal summer jobs. Hopefully that will not be the case this year. If the economic recovery gains some traction and we begin to see some real employment increases we can look forward to higher employment levels in the months to come.

May Unemployment Rates Released

2010-07-02T14:39:00.000-05:00

As much as we want the recession to be over and to be on a solid road to recovery, the sad fact is we are still a ways away from a strong economy, at least in terms of employment. Sure, April gave us reason to hope when the regional unemployment rate dropped from 9.3 percent to 8.3 percent. The number of people who were unemployed dropped by nearly 10,000 and actual number of people working climbed by nearly 12,000.
May’s numbers were released this week, and they were not bad, but they were not particularly good either. All variables (Labor Force, Employment, Unemployment and Unemployment Rate) leveled off instead of showing continued signs of improvement. The labor force increased by 213, unemployment decreased by 714, while employment grew by just 927. The unemployment rate remained unchanged at 8.3 percent.
Adding to this lackluster news is today’s release of the national employment numbers for June (remember the state and local figures will lag the national) indicating a net loss of 125,000 jobs. The loss of 225,000 temporary census jobs is largely to blame for the net decline. Were it not for the loss of these census jobs, the country would have added roughly 100,000 jobs. The bulk of these jobs (83,000) were in the private sector, but economy-wide, this increase barely makes a dent.

April Home Sales Figures are Strong

2010-05-21T10:40:00.000-05:00

The Kansas City Regional Association of Realtors released its April home sales figures this week, and there is reason for cautious optimism. April saw 2,644 home sales, an increase of 672 from April 2009. Even more encouraging is the fact that these homes’ average selling price was up by more than $5,000 from one year ago.
Additional good news is that the overall housing inventory has leveled off at around 16,500 homes. There were actually fewer homes for sale in April 2010 than April 2009. On average, it takes 7.4 months for a home to sell in the Kansas City area, down from eight months one year ago.
Overall, this is all good news so why the cautious optimism? Undoubtedly the ending of the Housing Tax Credit in April spurred much of the activity last month. It is likely that many potential homebuyers made their purchases in April to beat the deadline, so we might see that sales are down in May and June because so many buyers already jumped into the market. May’s figures will be very telling. If sales plummet, we can assume April was an anomaly caused by the tax credit. However, if sales remain strong, we might be seeing the beginnings of the housing market recovery that the economy has been yearning for since 2008.

Random Economic News

2010-05-17T08:33:00.000-05:00

There are a couple of positive economic notes in today’s news. RealtyTrac reports that nationwide foreclosures dropped 9 percent in March and an additional 2 percent in April compared to the previous month. Now that we are a good three years into the housing crisis, it would appear that foreclosures may have finally reached their peak and we will see foreclosure numbers continue to decline.
The negative effect of foreclosed properties on all surrounding properties is well documented. While this negative impact should begin to slowly mitigate as foreclosure numbers drop, it is still far too early to declare victory over the housing crisis. An estimated 25 percent of all homeowners still owe more on their homes than they are worth. It will likely take years before the housing market gets back to some semblance of normalcy — and before homeowners can once again feel their home is a valuable asset and not a net negative to their financial well being.
On the employment side, first time unemployment filings declined again for the fourth straight week. This news comes on the heels of a solid April job growth number of 290,000.
These are not giant leaps ahead for the economy, but they can be looked at as baby steps in the right direction.

http://money.cnn.com/2010/05/13/real_estate/april_foreclosures/index.htm?hpt=T2
http://money.cnn.com/2010/05/13/news/economy/initial_claims/index.htm

March Unemployment Figures Released

2010-04-28T15:46:00.000-05:00

Several signals in recent months have indicated that we are well on our way to economic recovery. Unfortunately we can’t include March’s employment data in that group. The Kansas City metro’s unemployment rate increased in March to 9.3 percent. This is an increase from 9.1 percent last month and 8.4 percent one year ago. The labor force (the count of all people who are either employed, or unemployed and are actively looking for work) declined to 1,025,298, the lowest figure since June of 2006. Meanwhile employment (the number of people who are employed) dropped to 930,131 — its lowest point since September 1996!
We can’t say these figures are a complete surprise. Employment is a lagging indicator, so we will not likely see employment growth until the recovery is deemed to be strong and sustainable. However, the fact that we have to go back to 1996 to see local employment at the same level we have today is still startling. These numbers really speak to the magnitude of the 2008-09 recession. Yes, we believe we are on our way to economic recovery, but it is certainly going to take a while, especially on the employment front.

$136 Million Investment in Fairfax Plant Announced

2010-04-21T12:55:00.000-05:00

General Motors CEO Edward Whitacre announced today that GM will be paying back the government loan it received last year four years ahead of schedule. Whitacre said much has changed at GM in the past year, and these changes have allowed them pay back the government and look forward to a brighter future.
This was certainly good economic news in itself, but the best news, at least for the Kansas City area, was Whitacre’s announcement that GM will invest $136 million in the Fairfax plant to make the next-generation Chevy Malibu. This investment will make Fairfax the primary manufacturer of the Malibu.
We have written much about the local auto manufacturing sector in this blog. Despite the severe downturn in this sector, Kansas City’s auto manufacturers have not only survived, but thrived. Last year, Fairfax added a third shift when there was speculation that it might lose jobs. The Claycomo plant continues to make two very popular models in Ford’s line. Now with news of today’s GM investment, we can say that auto manufacturing in Kansas City is one of the region’s economic bright spots.

Positive Economic News This Week

2010-04-02T11:20:00.000-05:00

After two years of mostly dire economic news, three positive economic items released this week almost seems like an embarrassment of riches.
On Tuesday, the Conference Board announced that consumer confidence rebounded from a surprising dip in February. March’s index figure was 52.5, up from 46.4 in February. Consumer confidence had been increasing steadily between October 2009 and January 2010 before February’s drop.
Thursday’s bit of good news was a positive manufacturing report. The Institute for Supply Management’s manufacturing index rose for the eighth straight month in February. This index is based on a survey of purchasing managers and is seen as a reliable measure of manufacturers’ confidence in the economy.
And today, the Labor Department announced that the national economy added 162,000 jobs in March, the largest increase in three years. It is worth noting that an estimated 48,000 of those jobs are temporary Census jobs; still, the other 100,000-plus jobs will mark an end to the continuous job losses we experienced in 2008 and 2009. These new jobs did not lower the unemployment rate. It stands at 9.7 percent for the third straight month.
We will get updated employment data for the Kansas City area next week, on April 7, when February’s local data is released. March’s data will be released on April 28.

Kansas City Home Prices Expected to Continue Downward Trend

2010-03-01T10:25:00.002-06:00

Kansas City home prices have not yet reached their low point according to a joint study from Moody’s and Fiserv. Kansas City home prices declined 1.3 percent between 3rd quarter 2008 and 3rd quarter 2009. The study predicts a further decline of 2.2 percent between 3rd quarter 2009 and 2010, and another 1.6 percent drop between 3rd quarter 2010 and2011.

Kansas City is not alone in this decline. The report indicates that all of our peer metros will also see some decline this year before showing signs of stability next year. Even though Kansas City’s housing prices appear to be stabilizing between the last two periods (-2.2 percent to -1.6 percent), the 1.6 percent decline will represent the greatest decline in values among the peer metros.

Among our peers, Minneapolis-St. Paul and Portland have seen the greatest drops in value. These declines are still tame compared to places like Miami, where prices will have dropped by a whopping 64 percent over the past three years.

Foreclosures continue to be the main cause for the declines. Foreclosure activity is expected to pick up in the spring, which will cause a flood of homes to enter the market, many at greatly reduced prices.

We have been looking for the housing market to stabilize and provide a steady foundation for a recovery for a while now. It is looking more and more like that will not happen anytime soon. Here in the Midwest, we can at least be thankful that our housing prices did not hyper-inflate as they did in many sunbelt states.

Area Home Foreclosures Increased in 2009

2010-01-28T14:17:00.001-06:00

RealtyTrac released its 2009 metro-level foreclosure activity report today. There is a definite “good news-bad news” angle to the Kansas City data. First, the bad news: there were more foreclosures in 2009 than there were in 2008. All told, 15,067 homes in the Greater Kansas City area had at least one foreclosure filing in 2009. This is an 11 percent increase from 2008 and a 50 percent increase over 2007. This represents 1.75 percent of housing units in the area, or one out of every 57 homes.
Now for the good news angle: the Kansas City area had fewer foreclosures than a lot of other areas, ranking 79th out of the largest 203 metros in the country in terms the percentage of homes in foreclosure. Our 1.75 percent rate falls well below the national average of 2.21 percent. Among our 9 peer metros, Kansas City ranks 5th on the list behind Salt Lake City (2.91 percent), Denver (2.78), Indianapolis (2.47), and Portland (2.26). Of our peers, Omaha had the lowest rate at .52 percent.
Las Vegas, Nev., was on top of this dubious list, with over 12 percent of its housing units — one out of every eight homes — in foreclosure in 2009. The top of the list was dominated by metros in the southwest and in Florida. In fact, 27 of the 30 metros with the highest foreclosure rates were in California, Nevada, Arizona or Florida.

Metro Unemployment Rate Declines Slightly in November

2010-01-05T15:51:00.000-06:00

Kansas City’s unemployment rate declined for the second straight month in November, although the decline was slight — from 8.4 percent to 8.3 percent. This is the lowest the local unemployment rate has been since April.
Looking under the surface we see that the decline occurred primarily because people dropped out of the labor force. The labor force dropped by 2,866, which overshadowed the decline in employment of 1,644. So even though there were fewer jobs, the unemployment rate dropped — because fewer people were participating in the workforce. For more on how the unemployment rates are calculated see our glossary. As we have mentioned before, we would prefer to see declining unemployment rates because employment is rising faster than the labor force.
By way of comparison, the national non-seasonally adjusted unemployment rate was 9.4 percent. (The adjusted unemployment rate was 10 percent. Since metro level seasonally adjusted unemployment rates are not available, we use the non-seasonally adjusted national figure for comparison.) Missouri’s unemployment rate rose to 9.2 percent from 8.9 percent in October. Kansas continues to have one of the lowest unemployment rates in the country at 6.2 percent.

Local Housing Sector Shows Real Strength in November

2009-12-16T15:07:00.004-06:00

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

2009-12-04T15:03:00.011-06:00

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

2009-11-20T16:12:00.001-06:00

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

2009-10-29T15:11:00.000-05:00

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

2009-10-08T13:35:00.000-05:00

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

2009-09-23T14:43:00.001-05:00

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

2009-09-04T15:49:00.005-05:00

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

2009-08-21T14:26:00.000-05:00

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

2009-07-31T08:56:00.002-05:00

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?

2009-07-17T16:01:00.001-05:00

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

2009-06-05T14:52:00.001-05:00

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

2009-06-03T16:20:00.001-05:00

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?

2009-05-08T09:33:00.000-05:00

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

2009-04-03T11:11:00.007-05:00

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

2009-03-23T14:53:00.001-05:00

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

2009-02-06T15:45:00.001-06:00

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

2009-02-05T10:43:00.000-06:00

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

2009-01-27T14:43:00.000-06:00

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

2009-01-20T13:52:00.003-06:00

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

2009-01-15T09:47:00.000-06:00

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.

More bad economic news to close out 2008

2008-12-30T13:30:00.001-06:00

Economically speaking, 2009 cannot get here soon enough. We are about to close out one of the worst economic years in recent memory, but the release of two pieces of economic data today tells us that we need more than just a new calendar to make things better.
According to the Case-Shiller index, national home prices dropped 18 percent between October 2007 and October 2008. This marks the 27th consecutive month the index has declined. The continued decline is harmful in two ways. First, it keeps potential buyers from entering the housing market as they are waiting for prices to hit rock bottom before they purchase. Second, it undermines consumer confidence. Homeowners who are watching the value of their homes drop are less likely to go out and purchase new goods than they once were.
Which brings us to the second piece of bad news, the Conference Board's consumer confidence index hit an all-time low in December. Historically, about 70 percent of economic output is devoted to satisfying the demand for consumption, so this lack of consumer confidence means we will likely carry 2008's economic woes with us well into 2009.

Kansas City Employees: Are We Still More Productive?

2008-12-17T15:35:00.005-06:00

Last month we released our newest report “Economic Growth: Comparing Metros, 2001-2006”. In that report we compared metro level Gross Domestic Product (GDP) among the top metros in the country. Today, we take one further step and look at GDP per employee. This should give us a reasonable proxy for employee productivity.

Historically we have claimed the average Kansas City worker is more productive than the national average. According to the 2006 data, this claim still holds. The average Kansas City area employee contributes $65,052.40 to the regions GDP. Nationally that figure is $63,335.48. However, when we compare Kansas City’s productivity to some of our peer metros, we are in the middle of the pack.

By comparison, each Denver area employee contributes nearly $10,000 more a year to its economy than do Kansas City area employees, on average.
Even more concerning is the change in productivity between 2001 and 2006. Kansas City slips behind the nation in terms of productivity growth over this period. If this trend continues, it puts our claim to being more productive than average in jeopardy.

So does this mean that Kansas City employees are getting lax? Are other metros employees working harder than us? No. It appears more likely that our recent productivity performance is tied to the type of industries we have here than our work habits, given that the the leaders in productivity are metros like San Jose, San Francisco, Seattle and Washington DC.

But this means that some of our peers have attracted or grown industries with greater numbers of “good jobs” than we have. What are those industries? Stay tuned for part 2.

October Employment Numbers Released

2008-12-02T15:46:00.000-06:00

The Bureau of Labor Statistics (BLS) released October employment figures today. Nationwide, the unemployment rate increased from 6 percent in September to 6.1 percent in October, but unemployment rates actually decreased in our region:
· Down from 6.2 percent to 5.9 percent in the Kansas City Metro
· Down from 6.2 percent to 6.1 percent in Missouri
· Down from 4.8 percent to 4.5 percent in Kansas
Keep in mind these figures are subject to revision. Also, figures for one month do not constitute a trend.
In these times where we are all looking for a bit of good news, however, maybe this will be the start of a positive trend for the area. We will continue to monitor employment data and other indicators in the coming months.

Financial Crisis Impact Difficult to Gauge

2008-09-22T14:59:00.002-05:00

The financial crisis has grabbed headlines over the past few weeks, but it is difficult to assess how this situation will be felt here in the Kansas City area. The crisis is rocking the economy at its core, so virtually everyone who participates in the economy — that is, anyone who uses credit in our credit-based economy — will feel the impact directly or indirectly. While congress is debating what steps to take to ensure this doesn’t happen again, we can assume that there will be some shake-up in the financial sector, a rather important sector for the Kansas City economy.
The location quotient for the financial activities sector is 1.2, meaning that the percent of our workforce employed in the finance sector is 20 percent higher than the nation’s percentage. Overall, Kansas City has nearly 74,000 people employed in financial services. (Learn more about location quotients.)

Employment growth has been slow but steady in recent years, outpacing the nation. But the growth rate dropped dramatically in the end of 2007, and has turned negative over the summer. This is likely due to the problems in the home lending industry. While this industry has already begun to adjust, it is reasonable to expect more losses over the next several months.
With the finance sector’s relative importance to Kansas City, we could feel the impact of its difficulties more than the rest of the nation. We will keep an eye on Financial Activity employment and inform you of any changes in the months to come.

May Employment Figures Return to Negative Territory

2008-07-21T14:05:00.000-05:00

In a recent blog we wrote (with a great deal of hope) that the local employment figures in April might be the beginning of an economic turn-around. Well, May’s figures have crushed that hope.
Overall employment dipped by 3,429. This decline, coupled with an increase in the labor force (+5,892), sent the local unemployment rate to 5.5 percent (up from 4.6 percent in April).
It is important to keep in mind that local employment data can fluctuate dramatically from month to month. Even so, we look to these monthly figures for some sign that the local economy is beginning to recover from this slowdown. Unfortunately it appears we will have to keep looking.

Gas Prices Take Their Toll on Area Consumers

2008-07-17T14:09:00.000-05:00

July marked the first time ever that Kansas City area drivers put $4-a-gallon gasoline in their vehicles. As of this writing, the average cost of regular gasoline in the metro is $4.04 a gallon. Many residents have little choice but to pay this price to fuel their cars so they can get to and from work and run their errands.
It wasn’t that long ago that gasoline was around the $2-a-gallon mark (January 2007). The increased money going into the gas tanks has undoubtedly put the brakes on normal spending habits.
Kansas City residents, on average, are going to feel the pinch of gas prices a bit more due to the fact we have to drive a bit farther to get around than in other cities. According to the Center for Neighborhood Technology (www.cnt.org) the average Kansas City household drives 16,596 miles per year. At $4.04 a gallon this comes to over $3,300 in gasoline a year. Or looking at it another way, that’s over $1,600 more a year than we spent on gasoline at January 2007 prices. By comparison, Denver area residents are now spending approximately $2,800 a year in gas, or $1,400 more than when it was $2 a gallon.
The additional money going towards gasoline has to come from somewhere, and consumers are likely to cut back on discretionary spending to make up the difference. This is clearly dampening the economy, as consumers are looking for ways to save money rather than going out and spending it.
We will continue to research consumer spending and hope to have more information in the coming weeks.

Foreign Exports from the Region Increase

2008-07-03T13:46:00.008-05:00

The Kansas City Metropolitan Statistical Area (MSA) exported nearly $5.7 billion worth of goods to foreign countries in 2006. This marked a 16 percent increase from 2005. While $5.7 billion is a lot of money, this amounts to only 6.2 percent of the region’s gross regional product (GRP) in 2005 (the most recent GRP figure available). Exports make up larger percents of GRP in all of our peer metros except Denver and Omaha.

Sources: US Department of Commerce, Bureau of Economic Analysis

Kansas City’s top exporting industry is Transportation Equipment ($1.5 billion) followed by Crop Production ($1.2 billion), Chemicals ($827 million), Food and Kindred Products ($770 million) and Computer and Electronic Products ($844 million)
Canada is the largest destination for our goods, receiving nearly $1.8 billion worth of goods from the Kansas City metro area. Mexico is second with $852 million, followed by Japan, China and Taiwan.
With the weakened U.S. dollar, American-made goods are more attractive to foreign buyers. Kansas City’s auto manufacturers are likely to see at least some benefit from the weak dollar, but other metros with an even greater international reach are more likely to see their economies buoyed by foreign trade.

April Employment Numbers are Encouraging

2008-05-29T15:49:00.005-05:00

Kansas City’s unemployment rate dropped nearly a whole point between March and April (from 5.5 percent to 4.6 percent) according to the Bureau of Labor Statistics. Overall employment grew by nearly 7,000 while the labor force declined 2,473. This is all certainly positive news, but remember — we are dealing with non-seasonally adjusted data at the metro level, so these figures need to be taken with a grain of salt. Historically the unemployment rate normally drops between March and April. Since 2000, the local unemployment rate has dropped about a half percent every April.

Source: Bureau of Labor Statistics

The chart above shows the recent unemployment rate trend since 2000. The red dots show the unemployment rate for each April. You can see that the April rate is typically in a valley, and in most instances is the lowest unemployment rate for the year. So, the nearly 1 percent drop in the unemployment rate is somewhat significant, but we will need more months of data to determine whether we are just seeing typical seasonal effects, or if we maybe seeing the beginning of a positive trend in employment.

What maybe more noteworthy about Kansas City’s April unemployment rate is its relationship with the national rate.

Source: Bureau of Labor Statistics

Kansas City’s April rate of 4.6 percent was lower than the national rate of 4.8 percent. This marks the first time this has occurred since April 2003. It used to be that Kansas City’s unemployment rate was consistently lower than the U.S. rate, but we’ve been consistently higher the past five years (shown in yellow). We will keep an eye on this relationship to see if this is a one-month aberration, or a return to our normal pattern.

Housing Market Hasn’t Bottomed Out Yet

2008-04-28T09:35:00.003-05:00

Economy watchers have been keeping a close eye on housing statistics lately. It is no secret that the troubles in the housing market have contributed greatly to the overall economic woes we are now feeling. Real estate experts have been waiting (so far in vain) for the housing market to bottom out so the recovery — for housing and for the economy in general — can begin.
Nationally, seasonally adjusted sales figures for existing homes dropped 2 percent between February and March. Locally, existing home sales rose for the second consecutive month, but we normally expect that kind of increase at this time of year as housing activity usually picks up in the spring and summer months. In order to evaluate our local market more realistically, we applied the seasonal adjustments from the national data to our local data. This assumes that the Kansas City market experiences seasonal changes similar to the national housing market.

Using the seasonal adjustment, we see that existing home sales dropped 9 percent between February and March. So it would appear that the housing market (both nationally and locally) is still struggling to gain momentum.
The March numbers were not without some good news, however. Local housing supply (current inventory divided by number of sales) for new homes continued dropping to 12.8 months. It was 20.9 months in January. Existing home supply also declined slightly to 7.9 months. A good rule of thumb says a five-to-six month supply indicates a balanced market (below five is a seller’s market and above six is a buyer’s market).
Also, the average home sales price increased in March to $168,384. It had been decreasing over the past three months.
So with housing supply declining and average homes sale prices increasing, the stage is set for buyers who are trying to time the market to go ahead and buy homes. If enough buyers do that, hopefully the logjam will be broken. Families looking to move will be able to sell their existing homes and make their moves. Such a domino effect could see home values recover rather quickly, making homeowners more confident that their investment is sound. This renewed confidence is just what the general economy needs to start its recovery.

2008-04-02T15:58:00.000-05:00

Local February Employment Figures Don’t Show Much Change

The Bureau of Labor Statistics released local employment figures for February today. Overall, the numbers for Kansas City were fairly flat. Employment did decline by 1,812, but so did the number of unemployed, by 926. These equaled a total labor force decline of 2,738. The unemployment rate also declined slightly, from 5.4 percent in January to 5.3 percent in February.

Our local trends mirrored the national (CPS) figures from February in that employment, unemployment, unemployment rate and labor force all declined slightly.

For more information on the current employment picture, be sure to check out our employment section.

February Employment Numbers Add to Economic Concerns

2008-03-14T16:07:00.000-05:00

The national economy lost 63,000 jobs in February, the biggest loss in employment since March 2003. This dismal figure comes on the heels of a January job loss of 22,000 and adds more fuel to the fire for those who think that the economy has entered a recession.

We are still awaiting the local employment numbers for January (due out next week) and February (due in early April), but we can begin to speculate what our numbers might look like. Nationally, the greatest level of national job losses occurred in construction (39,000 losses), manufacturing (down by 52,000) and retail (34,000 losses), while health care (up by 37,000) and government (up by 38,000) added jobs to help soften the blow.

We expect that the same industries will see job losses locally as well, but proportionately, they won’t be as dramatic here as nationwide at least not in construction and manufacturing.

Why? First of all, nationwide construction losses can largely be blamed on the well documented housing crisis. In Kansas City, however the housing market did not experience the same kind bubble as elsewhere, so the local residential market, while slow, will not come to a complete standstill. (For more information on Kansas City and the current housing crisis see our special report). Also, non-residential construction activity has increased in recent years and has been able to absorb some of the losses from residential construction.

Second, as discussed in our January 17th entry, our two local auto manufacturers have received good news recently that should keep them producing cars well into the foreseeable future. Moreover, if we examine manufacturing employment trends in recent years, while manufactures have lost significant numbers of jobs nationally, locally the trend has been virtually flat. So in terms of construction and manufacturing, Kansas City should not see the same level of job losses.

Kansas City felt the full force of the 2001 recession because two industries where we were particularly vulnerable, transportation and information, were most impacted. If this 2008 downturn ends up being a recession, it is likely that this time, Kansas City will fare better than the rest of the nation.

KC Foreclosures Increased in 07

2008-02-13T15:44:00.001-06:00

The Kansas City Metro Area saw an 83.7% increase in the foreclosure rate between 2006 and 2007. According to RealtyTrac, 1.177% of all housing units in the region were in some stage of foreclosure throughout the past year. Kansas City’s 1.177% was less than the average for the 100 largest metro areas in the country (1.382%) but was higher than the nation as a whole (1.033%).
Out of the top 100 metro areas, Kansas City ranked 40th. The Detroit, MI area had the highest foreclosure rate at 4.918% followed by Stockton, CA (4.866%), Las Vegas, NV (4,228%), Riverside/San Bernardino, CA (3.826%) and Sacramento, CA (3.189%).
The metros with the highest foreclosure rates tended to be in one of 2 areas. The areas most impacted by the bursting housing bubble like Florida or the Southwest. Here, people purchased homes speculatively thinking that the values would continue to skyrocket. When the bubble burst, many people found themselves over extended in their monthly payments and owing more on their mortgages than their home is worth.
The second area of high foreclosure rates was in the rust belt area, where economic troubles have made it difficult for some homeowners to make ends meet.
Kansas City managed to avoid the housing bubble for the most part, and the local economy has proven itself diverse enough to weather economic storms. While we don’t yet know the full impact of the housing foreclosure crisis, these factors should keep Kansas City’s foreclosure rates close to the national average.

Local Employment Figures Not Encouraging

2008-02-06T13:53:00.000-06:00

December’s employment figures released by the Bureau of Labor Statistics (BLS) showed a weakening local employment picture. Overall employment dropped by 6,377 while the number of unemployed rose 4,619. The unemployment rate rose only slightly (from 4.8% to 5.1%) because the labor force also shrank.
It is difficult to draw conclusions from one month’s data. But after the call of recession was sounded with the release of the weak national employment figures last month, it is noteworthy that the local figures were equally disappointing.

Spate of Major Employer News Mostly Good

2008-01-17T11:06:00.000-06:00

This week has seen big news from several of the Kansas City areas top employers, and most of it was good news. We'll start with the bad news and we will work our way up.
Sprint Nextel Corp., the region's largest private employer, is considering job cuts according to the Wall Street Journal. Sprint has not officially commented on the cuts, so it uncertain how many of the region's 13,000 Sprint employees might be affected. On the positive side of the Sprint story, The Wall Street Journal also speculates that the executive headquarters in Reston, VA. might move back to the Sprint Campus in Overland Park. Such a move would not likely result in a lot of new jobs however.
Certainly job cutbacks are never welcome news, but they are necessary as Sprint tries to remain a player in a very competitive industry. Regaining a fortune 500 Headquarters would be a boost to the local economy's psyche. This and a leaner, more competitive Sprint could translate into better economic news for the region in the future.
Elsewhere, the future continues to look bright for the region's 2 auto manufacturers. The Ford plant in Claycomo is preparing to produce the redesigned F-150 pickup truck. This is certainly a plus for the local plant since the F-150 has been the top selling US vehicle for the past 26 years.
Across the state line at the General Motors plant in Fairfax, demand for the locally manufactured Chevy Malibu will translate in to 300 new jobs.
This good news in manufacturing is worth emphasizing. While manufacturing jobs have been in a steady decline nationally, Kansas City has held it's own in manufacturing employment. In fact MARC's economic forecast calls for thousands of new manufacturing jobs to be created locally in the next 2 years. The fact that Kansas City's strong manufacturing heritage persists despite national decline says a lot about the region's productive workforce and should be a source of pride for the local economy.

Introducing the new KC Economy Blog

2007-12-18T11:16:00.000-06:00

We are pleased to announce the addition of a blog to KCEconomy.com. Check back regularly to read about the state of Kansas City's economy and links to other relevant articles.