Kansas City Employees: Are We Still More Productive?

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

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

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

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

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

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

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.