Forecast: Kansas jobs to increase 1.8 percent

WICHITA, Kan. -- Kansas will see employment growth of 1.8 percent next year, regardless of who wins the White House, as business picks up after the uncertainty of the November elections, economic researchers at Wichita State University said Wednesday.

The university's Center for Economic Development and Business Research reported it expected roughly 24,175 new jobs to be created in Kansas next year. Most of those new jobs are anticipated to be in professional and business services, education and health services, and leisure and hospitality. Job losses were forecast in government and information industries.

The research group's director, Jeremy Hill, said in a phone interview that although consumer demand is weak, retail sales across the state have gone up. Income has been growing above the inflation rate. Bankruptcy filings are down. Business loans in Kansas have gone up.

"Businesses are ready. They are well capitalized, or can get capital, because loans are cheap. They are waiting, but they are sitting on their hands because of uncertainties. And as soon as we can get through these clouds in Kansas, they are going to start moving forward," Hill said. "They are not likely to jump out, but they are definitely going to tip toe, or they are slowly going to walk out into the economy next year, based on the outcome of the elections."

That business growth is expected to happen regardless of whether President Barack Obama or Republican challenger Mitt Romney is elected.

"They may not like it, or they may love the new environment, but they will still move forward either way. ... The reality is here and they are going to move forward with the new reality," Hill said.

The outlook does not take fully into account concerns that the U.S. economy could fall off a "fiscal cliff" at the end of the year. That's when tax increases and deep spending cuts will take effect unless Congress reaches a budget deal. A recession could follow.

The forecast also does not factor in automatic federal government spending cuts, which would require an across-the-board cut of 9 percent to most Pentagon programs and 8 percent in many domestic programs. Hill said the defense cuts would "significantly affect" the aviation-dependent economy in Wichita.

The automatic cuts were mandated by the failure of last year's congressional deficit "supercommittee" to strike a budget deal. The process of automatic cuts is called sequestration, and the administration has no flexibility in how to distribute the cuts, other than to exempt military personnel and war-fighting accounts.

Some aircraft manufacturing in Wichita involves critical components and is not likely to be as affected by defense cuts as some other aircraft business. The light aerial attack fleet is one such critical defense component. Another is the tanker refueling planes, parts of which are built by Spirit AeroSystems in Wichita.

"I talked to aviation experts, I talked to other military experts and I have not been able to get a clear understanding of how that sequestration will be taking effect on the Kansas economy," he said. "It is very complex."

Some defense suppliers have already prepared for slowing growth in military demand. "So a lot of the companies have already done some downgrades of employment over the last couple of years preparing for some of this," he said.

The report projects the largest expanding sector of the economy next year in Kansas will be professional and business services, up 5.7 percent for a gain of 8,980 jobs. That would be followed education and health services with an increase of 2.8 percent for a net gain of 5,330 jobs. Leisure and hospital trailed with a 2.7 percent increase for the addition of 3,195 jobs.

Manufacturing jobs next year are forecast to increase by 1.8 percent for 2,955 jobs.

Government at all levels in Kansas is expected to shed 1,555 jobs. The information industry is expected to lose 230 jobs.

The impact of an oil and gas boom driven by use of new technologies in horizontal drilling, or "fracking," has not yet been fully felt in Kansas.

"Permits have been going up but until recently jobs really haven't materialized in our employment numbers in Kansas," Hill said. "We are just now seeing employment numbers go up. The reason why is a lot of temporary jobs are being created within Kansas to start up this oil industry, and we also have existing jobs at a higher productivity."



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