Many economic indicators in Kansas are rebounding from the crash at the start of the coronavirus pandemic, but not all have returned to pre-pandemic levels.
While the unemployment rate is roughly where it was before the first case of COVID-19 was reported in March 2020, lawmakers remain concerned about soaring inflation and shrinking workforces. ‘artwork.
Edward Penner, senior economist in the Kansas Department of Legislative Research, gave the Legislative Budget Committee an update on quarterly economic indicators at Tuesday’s meeting.
GDP declined 32.4% in the United States and 32.2% in Kansas in the second quarter of 2020 as the pandemic and lockdowns led to the recession. But the third quarter saw a strong rebound of 38.7% in the United States and 39.5% in Kansas.
Since then, the growth of seasonally adjusted nominal GDP has been more regular. In Kansas, growth was 6.7% in the last quarter of 2020 and 13.7% in the first quarter of 2021.
Second quarter data is not available for Kansas, although the state’s GDP growth over the past two years has consistently exceeded the national number, which was 13% in the second quarter.
“The economy continues to rebound from this decline,” said Penner.
Senator Rick Billinger, R-Goodland, asked if GDP included companies that have closed permanently due to the pandemic.
“Even despite these companies, their closures are largely reflected in the declines in GDP in the first and second quarters of 2020,” Penner said. “The reality of the economy that we have seen is that the economy has rebounded largely, even with the closure of these companies. New companies would have replaced them, or other existing companies that have survived and have grown since. during.
“They’re basically built into the data. It’s just kind of the reality that yes, there have been a lot of businesses that haven’t closed during the recession, but the economy is growing and has grown for the past four years. consecutive quarters since then. “
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Rising inflation; national housing market slowdown
“Inflation has been rising steadily, really for most of the current calendar year,” Penner said.
Year-over-year changes in the unadjusted consumer price index show that inflation was around 2% and was slowly increasing in the Midwest before the pandemic.
The change in the CPI briefly turned negative during the first months of the national emergency. Inflation was broadly stable around 1% for the remainder of 2020, then surged sharply during the first half of 2021 to almost 6%.
“Inflation has certainly been significant for several months in a row now,” Penner said. “There has been a lot of inflation, and it hasn’t come down.”
He said some sectors were the main drivers of inflation, including timber, energy, food, transport and housing.
Rep. Kathy Wolfe Moore, of D-Kansas City, asked if the housing market would start to calm down after “many cash buyers who buy well above appraised value, and therefore house prices rise dramatically.” .
Penner said the national real estate market has started to slow down, but he’s not sure if the trend has reached Kansas.
“No one expects house prices to collapse,” he said. “But I think the acceleration of the market – most people think so – is behind us at this point.”
Billinger said he had seen the price of wafer board inflation at his local lumber yard. He said the price of gasoline has increased by more than $ 1.
“It’s terrible,” he said.
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The business organization AAA Kansas reports that the state average price on Wednesday was $ 2.912 per gallon. Exactly one year ago, the average price was $ 2,010.
Representative Troy Waymaster, R-Bunker Hill and Chairman of the Legislative Budget Committee, said Great Bend car dealerships typically have full car lots. This is no longer the case.
“It’s very strange to see the loss with literally, GM one, but only two vehicles sitting on the ground,” Waymaster said. “I know it’s the same with other dealerships, at least in the central part of the state.”
Waymaster said he and his wife were considering purchasing a new vehicle and had to travel to Kansas City, where they were surprised at the trade-in value of their current vehicle.
“I was actually shocked at how much I was going to get for a used car that I was going to trade in because it was about $ 6,000 more than NADA,” he said.
Penner said the global chip shortage was to blame, with pandemic supply issues to the semiconductor manufacturing industry in East Asia. He said most forecasters predict the chip shortage will start to subside by the end of the calendar year, but there will be a lingering lag affecting international industries.
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Penner said that it “has a cascading effect on the economy” and is also “one of the factors contributing to inflation”.
The downward shift in the supply of new vehicles has thus led to an upward shift in demand for used vehicles, pushing up the prices of new and used vehicles while creating a relative shortage of used vehicles. opportunity.
The policy of the Federal Reserve is also a major factor in inflation.
“Coming out of the pandemic and recession shutdown, interest rates have remained close to zero,” Penner said. “The Fed is getting the inflation it was looking for. Now it has given signals that it is going to pull out and maybe adopt a monetary stance that would slow inflation down a bit.
“But for now, they’ve taken an approach that seems designed to keep inflation down. And certainly monetary policy, the fiscal policy that the federal level has, has had the same effect.”
Wages rise and unemployment stabilizes with a reduced labor force
“Wage growth, which had been relatively slow during much of the early parts of the pandemic, has really started to pick up in the past two months,” Penner said. “Of course, that probably matches what you’re going through and what your constituents are telling you, that in order to get workers back they are offering higher wages, and that’s consistent across pretty much every industry.”
Wages fell in the first months of the pandemic, but have steadily increased since June 2020. The average hourly wage of a private sector employee was just over $ 25.5 at the time. As of June 2021, it was around $ 27.
Waymaster asked about job shortages.
“When you drive anywhere in the state, you see signs outside of buildings indicating hiring bonuses, even for fast food restaurants,” Waymaster said. “In my community, they couldn’t find employees so they had to adjust their schedules for shift reasons… because you can’t find people who want to re-enter the workforce.”
A labor shortage does not appear to have increased the number of hours worked by employees.
“As far as businesses go, they basically make up for the shortage of workers by increasing the hours of their existing workers… you really don’t see much of that,” Penner said, pointing to a graph on average weekly hours.
The private sectors work, on average, about the same number of hours today as they did a year ago. Penner suggested that such a trend could emerge in the third quarter data.
The seasonally adjusted unemployment rate jumped to around 12% in Kansas in April 2020, but has declined steadily since. It has remained between 3% and 4% since the start of the calendar year.
“We are pretty much back to pre-pandemic levels in terms of the unemployment rate,” Penner said.
Unemployment insurance claims are not used to calculate the unemployment rate, which comes from a household survey.
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Kansas labor force is smaller than before the pandemic
Kansas’ unemployment rate is lower than the national rate, which hasn’t recovered as much. However, there are fewer Kansans working now than there were a year and a half ago.
“The workforce is not as large now as it was before the pandemic, and we don’t necessarily know very well when that will rebound,” Penner said.
More than 100,000 jobs were lost statewide in April 2020, according to non-farm employment data. Employment statistics have started to recover, but not as quickly as the unemployment rate.
“We’re still way below where we were, probably around 50,000 jobs,” Penner said. “… This is probably partly due to the fact that the labor force participation rate is still not in line with what was before the pandemic.”
Rep. Kyle Hoffman, R-Coldwater, noted that people who have left the workforce are not factored into the unemployment rate.
Billinger questioned the accuracy of the data, citing his experience returning from Topeka.
“It just seems to me that when it comes to unemployment, it’s pretty hard to know how many people are actually unemployed, how many have dropped out,” Billinger said. “The only thing I can tell you… when you pay people to stay home, they’re going to stay home. I don’t think those numbers are even close.
“It’s a shame when you stop at a fast food restaurant and you can’t even go in and use the restroom because there is no one working. So I think it’s way higher than that. as these graphs show. “