National Employment Figures are a Mixed Bag

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

April Unemployment Numbers Show Upward Trend

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

Signs of a Recovery?

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

Metropolitan Area Unemployment Rate Trends Show an Uneven Recession

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

February 2009 Unemployment Rate

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

Change in Unemployment Rate Feb. 2008 to Feb. 2009

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

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

Unemployment Rate Skyrockets

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

Searching for that Silver Lining

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

December Employment Numbers Released

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