KC region has lost -- not added -- thousands of jobs
By ERIC PALMER
The Kansas City Star
Posted on Wed, Sep. 25, 2002
kansascity.com
Area economist Frank Lenk on Tuesday threw cold water on federal government numbers that recently indicated the region had created 10,600 jobs in the 12 months ending in July.
Instead, Lenk estimated in a report sponsored by the Greater Kansas City Chamber of Commerce that the area lost about 17,000 jobs in the same period.
When studied since the first quarter of 2001, the area has lost 20,000, said Lenk, director of research for the Mid-America Regional Council. He said the area would not regain those jobs until the end of next year.
"The latest (monthly) employment estimates lead to the conclusion that the region did, in fact, lose jobs over the last year," Lenk said. "Nonetheless, the economy is expected to bounce back over the coming year and regain all the lost jobs by the end of 2003."
Despite a struggling job market, the report said, regional economic growth has resumed following a brief recession last year. Lenk estimates the area economy will grow at a 3 percent rate in 2003, compared to about 2.5 percent in 2002.
The report was released as part of an annual economic outlook program sponsored by the chamber. About 320 persons attended the program Tuesday at the Muehlebach Tower of the Kansas City Marriott Downtown.
Lenk's analysis of the job market differed sharply from a report released recently by the federal Bureau of Labor Statistics. That report indicated that even though the area unemployment rate had hit a nine-year high of 5.3 percent, the area had added 10,600 jobs in the 12 months through July. The area ranked fourth nationwide among 274 metropolitan areas in job creation, according to the bureau.
Lenk said he found problems with those numbers.
The bureau's sample is based on companies' willing to volunteer numbers, Lenk said. Notably, it did not include Sprint Corp., the area's largest private-sector employer, which has been hit particularly hard in the last two years. The federal data also were light in other sectors, such as transportation and utilities, where Kansas City has been bleeding jobs.
Lenk said he arrived at his job-loss numbers by using national payroll employment data, which he thinks is more accurate than estimates from the regional survey.
"Given the well-publicized difficulties experienced by local firms in these industries, it is more likely the region is sharing in the national trends" rather than running counter to them, Lenk said.
He said the bureau's samples also underreported small companies, which Lenk said were more vulnerable during economic recessions.
"I was using the data from which I can get the best estimates," Lenk said. "The data get confusing when the times are confusing. When everything is showing growth, these discrepancies will vanish."
Some of Lenk's critiques of the bureau's numbers are valid, said Dave McDermott, regional economist with the agency. But those shortcomings are accounted for in the survey.
"If critical employers decline to participate, that can be a problem," McDermott said. "That said, we have been in survey research for a 100 years."
Transportation, communications and public utilities have been flayed by the recession, but McDermott said he stood by the bureau's numbers. He said more than half of the growth the bureau counted came from services and wholesale and retail trade. Services, a category that includes businesses such as law, accounting, medicine and finance, is a much larger category than manufacturing, for example.
"The growth we are seeing is in places other than where people are experiencing significant job declines," McDermott said.
Some observers had speculated that job growth for the area might be accounted for by its many small companies whose improvements are not as visible as the layoffs at companies such as Consolidated Freightways and Vanguard Airlines. When those two companies filed for bankruptcy in the last two months, the area saw about 1,400 jobs vaporize.
Kingston Environmental Services in Lee's Summit, for example, has added seven or eight employees in the last year, said William Worley, company chairman. It now has about 100 employees. But Worley said he had a hard time imagining that his peers in small businesses could make up for the huge losses among the bigger firms.
"I am kind of isolated out here. We have 100 employees and are busier than heck, and the world seems great," Worley said. "But I have had two bankers tell me in the last month they thought the area was in a recession. If small business is making up for all of those losses, that is a phenomenal feat. That is a lot of onesies and twosies."
Lenk agreed that the job growth numbers did not feel right. They simply did not jibe with what local executives were telling him. Industry reports from members of the chamber of commerce provided validation to his conflicting job loss statistics, he said.
"Written by key executives in each industry, their description of what's been happening in their sector of the economy is simply more credible than any published data source," Lenk said in his forecast.
Some of those reports were written by executives from area companies in the most dire financial straits. They include Sprint, which has cut at least 5,000 local jobs; Farmland Industries, which is now in bankruptcy reorganization; and Aquila, the Kansas City-based energy company that has been cutting jobs and jettisoning assets after its energy trading business floundered.
Next year, Lenk predicts, job growth will return in all sectors, led by 10,300 jobs in services and 3,700 jobs in retail trade. By the second quarter of 2003, he said, employment and personal income should return to typical average growth rates of between 1 percent and 2 percent for employment and between 2 percent and 3 percent for personal income.
So how likely is it this forecast will hold true?
Last year's forecast, issued shortly after the terrorist attacks on New York and Washington, predicted the Kansas City area economy would experience a recession from about August 2001 until about May of this year, Lenk said, reaching a 3 percent contraction at its deepest point.
Instead, the area economy already was recovering from a brief recession. Gross regional product hit 4.59 percent growth during the fourth quarter of 2001, when the forecast said it should decline about 3 percent.
Lenk pointed out that economists had relied on national data that had been revised this year, showing the economy was in recession during three quarters of 2001, when earlier national data had indicated it was growing during that period.
"The authors of this report have tried to weave a consistent story out of the inconsistent data and answer the questions about where the economy has been and where it is heading at the times the questions are being asked," he said.
--------------------------------------------------------------------------------
To reach Eric Palmer, regional business editor, call (816) 234-4335 or send e-mail to epalmer0@kcstar.com. |
