KC’s Economic Recovery is Picking up Speed
by Jeff Pinkerton
Kansas City’s economic recovery has been slow. Very slow. It has been over seven years since the end of the Great Recession, and we still haven’t had that “we’re back” moment. Sure, we have seen positive economic data from time to time indicating that we have reached new levels of recovery, but it seems it’s always followed by data that tempers our excitement.
Our 2016 economic forecast still doesn’t provide that “we’re back” moment, but it does paint a picture of a regional economy that is on solid ground and poised for growth in the years ahead.
Metro GDP, or Gross Domestic Product (the measure of all our economic activity), has been up and down in recent years, as shown in the chart below. Our forecast model has a tendency to smooth out the highs and lows as we look to the future. We will no doubt see some ups and downs, but the important thing is the trend line. On average, we can expect to see annualized growth rates of about 3 percent in 2016 and 2017. This is good, solid economic growth we have not seen in quite a while.
This GDP growth should result in strong employment growth — another area that has been slow to recover. Our forecast calls for employment growth of about 25,000 per year in 2016 and 2017. By comparison, the region added only 47,000 total jobs between 2010 and 2014.
We expect to see much of this employment growth in the services sector, specifically in Professional-Technical Services, Administrative Support and Health Care.
After years of decline or little growth, the Construction sector shows some real strength, with about 8,000 new jobs projected over the next two years. This development is worth exploring a bit more closely. Construction jobs are only added when there is increased construction activity, and that is certainly the case in the Kansas City region. We are on pace to have our biggest construction year (in terms of dollars) since 2005. Several ongoing, major construction projects (such as the Cerner Campus and the new streetcar) are driving this. There are also potential major projects in the works such as a new downtown convention hotel, possible renovations at KCI and the CityPlace project in Overland Park, just to name a few.
Undoubtedly, this is a boost to the construction industry, but it also says something else about the broader economy. This level of investment doesn’t happen unless investors think there is some real potential in the market.
Yes, progress has been slow for Kansas City’s economy, but even slow progress has brought us a long way from where we were back in 2010. All signs are pointing toward an economy that is building momentum and we expect the pace to quicken in the coming years.