Economic forecast gives blunt warning to KC region

Looking around town, economist Frank Lenk sees plenty of activity. He also knows it’s not enough.

“The region is falling behind,” Lenk warned in his annual economic forecast for the region being presented Thursday at a Greater Kansas City Chamber of Commerce breakfast event.

We’re generating too little economic growth in the region. We’re creating too few “quality jobs.” Households see their incomes rising too slowly.

As in the past, Kansas City’s gains measured by these key yardsticks have been keeping pace with the gains that the nation sees as a whole.

But average won’t do. Not in an economic age driven increasingly by information and technology, Lenk’s 22-page report said.

Other cities of similar size – the ones Kansas City competes against to attract and keep growing businesses and skilled labor – are outpacing this region.

“No longer is it sufficient for the region to keep pace with the nation as a whole,” Lenk wrote. “It must keep up with its peer metros as well, and by this measure, the region is falling behind.”

November’s calendar is filling up with events that will help shape how well the Kansas City area can switch from keeping up to catching up. It may take longer to resolve a mysterious decline in job growth on the Kansas side of the state line.

Voters will decide Nov. 7 whether to push ahead on a proposed $1 billion terminal at Kansas City International Airport.

Banker Mariner Kemper compared the airport vote to debates over redeveloping Kansas City’s downtown, from the Sprint Center to the Power and Light District. The airport is one more element that employers weigh when deciding where their businesses should be.

“If Kansas City wants to remain competitive and attract companies like the future Garmins and future Cerners you have to compete. And if you don’t compete you don’t win,” said Kemper, CEO of UMB Financial Corp. in Kansas City.

November also is widely expected to see Sprint, still one of the area’s larger corporate employers, announce a merger with its bigger and faster growing rival T-Mobile US. A merger is seen as likely to cut into the 6,000 jobs at Sprint’s Overland Park headquarters campus.

Sprint’s fate goes directly to one of the bellwether’s that Lenk is tracking, namely quality jobs.

These include jobs that produce goods or provide services outside the Kansas City area, bringing money and resources here. Think Cerner, the electronic health records company in North Kansas City, Garmin, the commercial and consumer products maker in Olathe, and Sprint, the national wireless carrier in Overland Park.

Lenk is following quality job growth to evaluate the success of KC Rising, a 20-year plan to improve the area’s ability to compete in a changing economy. KC Rising is a partnership formed in 2014 by the chamber, the Civic Council of Greater Kansas City, the Kansas City Area Development Council and the Mid-America Regional Council, where Lenk is director of research services.

KC Rising’s goal is to propel the Kansas City area to among the top 10 of 31 metropolitan areas that are this area’s closest economic competitors.

Quality job growth here currently ranks 12th among the 31. To reach the top 10, Kansas City would have to overtake the current holder of that ranking, Seattle.

The Seattle area also happens to be where T-Mobile keeps its headquarters and is likely to fare better than Kansas City in any merger with Sprint.

Even without potential disruption from a Sprint merger, quality job growth in the Kansas City area “would need to grow nearly two-thirds faster” than its current pace to catch Seattle, Lenk’s report said.

Same situation for overall economic growth. Lenk’s report said that Kansas City, currently ranked 19th among the competing markets, “would need to double its current rate” of growth to surpass No. 10, Seattle.

On the household income front, Lenk puts Kansas City 14th among its rival markets. Household incomes are growing here but “will need to grow nearly 50 percent faster” to reach No. 10, currently held by Providence, R.I.

The Kansas City area’s economic future depends also on solving what Lenk called an unexplained slump in job creation on the Kansas side of the state line.

Kansas historically has been the job leader around here, generating 56 percent of the area’s job growth between 2012 and 2015. Since then, however, jobs have been a Missouri story with the Show Me side accounting for 78 percent of area job growth, Lenk said.

One possibility, Lenk said, is that the Kansas side of the Kansas City region has suffered as the entire state of Kansas has suffered a jobs slump.

“It is unclear which is cause and which is effect, but the fortunes of the Kansas side of the metro and the fortunes of the state appear to be significantly tied,” Lenk’s report said.

This story was originally published October 26, 2017 at 8:31 AM with the headline "Economic forecast gives blunt warning to KC region."