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.

A Double Dip of Good (Or At Least, Stable) News

A couple of news items released yesterday paint Kansas City’s economy in a good light. First, the Federal Reserve Bank released its July Beige Book which provides regional overviews of the US economy. The Kansas City region, which stretches from Missouri west to New Mexico, Colorado and Wyoming was said to be showing “signs of stabilization”. Kansas City was one of 4 districts (overall there are 12 Fed Districts) in this category. As a sign of these economic times, stabilization was the rosiest description handed out by the Fed. Other districts were still described as “slow”, “subdued”, or “weak”.
The other piece of good news also involves the word stable. Kansas City’s unemployment rate climbed up to 8.7 percent June from 8.6 percent in May. Stable is good when you consider some of our peer metros saw significant increases between May and June.


This news, coupled with our previous post regarding steady improvements to the local housing market point to a region that may have the worst of the recession in its rearview mirror.

Is the Housing Market Starting to Thaw?

Much of the blame for the current recession has been attributed to problems with the housing market. The bursting of the housing bubble (which was much more extreme in other metros than it was in the Kansas City region) set off a financial chain of events that led to our current economic woes. Many economists, KCEconomy included, believe the housing market must begin to recover before we can see meaningful improvements in the overall economy.
At long last, we might actually be seeing some positive signs in our local housing market. This past June marked the sixth straight month where the average sale price of Kansas City area homes increased.
The average home sale price in Kansas City was $173,445 in June. Last January, the average price was just $136,747. We know some of this has to do with the seasonal nature of the housing market ,but the June figure of $173,445 is at least in the same neighborhood as last June’s $181,000 (off by just $7,555), while the January 2009 figure was nearly $30,000 less than January 2008.
It is a modest sign, but at least it looks like things might be heading in the right direction. We will continue to monitor housing prices and many other variables. Stay tuned.

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.