Metropolitan Area Unemployment Rate Trends Show an Uneven Recession

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

February 2009 Unemployment Rate

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

Change in Unemployment Rate Feb. 2008 to Feb. 2009

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

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

Unemployment Rate Skyrockets

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

Searching for that Silver Lining

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

December Employment Numbers Released

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

Major Job Cut Announcements Hit Kansas City Area

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

Conference of Mayors Predicts Gloomy Employment Picture for 2009

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

Regional Foreclosures up 35 Percent in 2008

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