Jobs highlight Kansas City area’s return to ‘historical norms,’ forecast says

America’s economy has slowed in recent months, testing how well we’re standing up to bigger problems around the globe.

The official word came Thursday from the Bureau of Economic Analysis. It said the U.S. economy grew at a modest 1.5 percent pace in the third quarter — a sharp slowdown from the brisk 3.9 percent growth in the year’s second quarter.

Slower growth explains why jobs reports for July, August and September were all softer than their predecessors and why job holders haven’t seen much in the way of pay increases.

It echoes earlier reports that industrial production had declined in August and September, that once-optimistic surveys of companies’ purchasing and credit managers had soured, and that exports, particularly of business equipment, were suffering.

Blame China, Europe and emerging economies like Brazil, economists say, as talk of a recession in some regions has begun to pop up.

Despite worries abroad and the strain it could put on the U.S. economy, recession talk doesn’t include America.

The point was driven home in Kansas City with an optimistic local economic forecast Thursday morning. Economist Frank Lenk of the Mid-America Regional Council said the area has grown faster than the rest of the nation. And he’s not sold on how weak the national trend had turned.

“There is data showing we did slow down,” Lenk said about the U.S. economy. “But it’s also data that gets revised. I’m not sure I believe it entirely.”

Lenk and another area economist, Chris Kuehl of Armada Corporate Intelligence, shook their heads “no” at the question of whether the current U.S. slowdown could turn into a recession. Instead, expect economic growth to continue and those monthly jobs gains to pick back up.

“That’s real growth. Those people get paid,” Lenk said. “There’s no (U.S.) recession in the future.”

“Nope,” came agreement from Kuehl.

There is precedent for an economic pickup. Winter dealt a harsh blow, shrinking the nation’s economic output in January, February and March to a 0.2 percent pace. It was from this stall that spring’s 3.9 percent growth erupted.

Economists’ outlooks are buoyed by Thursday’s report that consumer spending during the third quarter was only slightly less than during the strong second quarter. It meant that businesses, which had seen inventories begin to pile up, were able to slow production and allow shelves to clear.

Their shelf-clearing strategy, however, limited economic growth in the recent report. Companies had less luck overseas as export business slowed, the bureau’s report said.

Still, policymakers feel compelled to confront the drag on the U.S. economy from economic weakness and threat of recessions abroad.

Citigroup chief economist Willem Buiter, for example, lists China, Brazil and Russia as candidates for an economic downturn next year. A Bank of America Merrill Lynch economist has said Singapore already may be in a recession.

These concerns were one reason policymakers at the Federal Reserve stalled again Wednesday in their quest to find the right time to raise U.S. interest rates. They’ve held a benchmark interest rate near zero since late 2008.

Fed chairwoman Janet Yellen has been fumbling with the central bank’s keys since June, talking about revving up interest rates but declining to turn the ignition.

The Fed counterparts overseas have been taking action but in the opposite direction. Central bankers in China and Europe have been dropping interest rates to support weaker growing economies there.

China also has cut the value of its currency, which will make Chinese-made goods cheaper for Americans, Europeans and others to buy. This poses some added problems for U.S. exporters, particularly manufacturers who now have to compete with lower-priced competitors. It’s why the economics group at Wells Fargo expects weaker export trends to linger.

At the same time, economic cures overseas likely will become a signal for the Fed to push interest rates on their path to something normal. Economists see the U.S. rebounding, too.

“Bottom line,” chief economist Scott Anderson wrote in an analysis for clients, “the worst may be over for the U.S. economy.”

Kuehl said an economic indicator that he generates for the National Association of Credit Management had been weakening but turned upward last month. His surveys of companies’ credit managers found sales increasing, more credit applications and more approvals.

“We’re doing OK. It’s not something we’re tremendously excited about, but it’s progress,” Kuehl said at the Kansas City event.

Lenk was more enthusiastic in his forecast, which was sponsored by the Greater Kansas City Chamber of Commerce. He called it “admittedly optimistic.”

By his math, the Kansas City area likely will end this year with 22,200 more jobs than it had at the beginning of the year. And Lenk sees even more new area jobs in the next two years — 25,600 in 2016 and 26,000 in 2017. There are about 1.04 million people employed in the area.

Lenk acknowledged that others have greater worries about the U.S. economy, fueled by slowdowns in China, the need to boost sagging growth in Europe and the strong U.S. dollar’s damage to U.S. goods in foreign markets.

“What is not a matter of debate, however, is that the U.S. economy is on the verge of returning to some semblance of ‘normal,’ ” Lenk concluded..

With that, Kansas City’s regional economy also can return to what Lenk called “historical norms,” including broad-based growth and significant hiring by most local industries.

Although Lenk’s forecast is sponsored by the chamber, it hasn’t always had the hopeful tone of this one. Two years ago, the economist specifically rejected a things-are-getting-better forecast for 2014 in favor of one that set a plodding course ahead.

Lenk, speaking then to his audience of business leaders, told them he’d made those rosier forecasts for three years, including one that saw Kansas City adding a whopping 36,700 jobs during 2013.

“I’m tired of being wrong,” Lenk had said in October 2013.

His forecast report Thursday showed the area’s economic growth rate likely exceeds the nation’s this year, 2.7 percent locally compared with 2.5 percent nationally. Next year, the nation may catch up, 3.1 percent locally and 3.2 percent nationally. The region’s more stable economy means it likely grows at 2.6 percent in 2017 compared with a more robust national pace of 2.9 percent, according to Lenk.

Lenk finds reason for his local optimism particularly among several construction projects planned or underway. These include $1 billion of development around the downtown Streetcar, the proposed $300 million downtown hotel, Cerner’s office complex at the former Bannister Mall site, a second downtown luxury residential tower called Two Light and others.

Construction, of course, means construction jobs, and those are in his forecast. But it means something more.

“Large projects don’t happen in a market unless investors see strong growth potential there. Given the number and size of major projects underway currently, this bodes well for the future growth of the greater Kansas City region,” Lenk’s forecast report said.

This story was originally published October 29, 2015 at 2:33 AM.