Kansas City’s Unemployment Rate Sees Significant Drop in October

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.

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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.

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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.


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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

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

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

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

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

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

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.