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.

Housing Market Hasn’t Bottomed Out Yet

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.

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

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

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

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.