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New KCI will help region grow faster than U.S., but KC growth still lags behind peers

Kansas City’s economy will fly higher than the rest of the nation in coming years, as construction of a new airport terminal masks the region’s “disappointing” comparison to similar markets, said a forecast released Friday.

The $1.4 billion project at Kansas City International Airport stands at the center of economist Frank Lenk’s outlook for the region in 2019 and 2020. Lenk provided his annual economic projections at a Greater Kansas City Chamber of Commerce breakfast Friday at the Kansas City Marriott Downtown.

Lenk’s outlook reminded his audience that Harley-Davidson is shutting down its factory next year, and Procter & Gamble is heading that way in 2020, taking other jobs with them. T-Mobile plans to turn Sprint’s Overland Park headquarters campus into a secondary property if Washington approves the companies’ plans to merge.

Those setbacks, his report noted, will be offset by continued expansion at the Cerner Innovation Campus and Garmin’s Olathe operations, job growth at Honeywell Federal Manufacturing & Technologies and Burns & McDonnell, and new call centers and distribution centers opening here.

This is the normal churn of an active economy, said Lenk’s prepared report, which was provided to The Star ahead of his presentation.

KCI is something different.

“Because the funds to build the airport are coming from the airlines and not local taxpayers, this expenditure brings net new dollars to the regional economy that would not otherwise be expected,” Lenk’s report said.

Specifically, KCI’s new terminal means construction jobs. Spending by those workers means more jobs in other fields.

Add that to the growth expected in health care and in professional and technical services, Lenk’s report noted, and the Kansas City region will grow faster than the United States as a whole.

The national and regional economies likely will have grown at a 2.9 percent pace this year, Lenk wrote. It’s far faster than expected a year ago, and Lenk said both are in “a period of maximum growth significantly above their potential to sustain it.”

So a slow down would not be a surprise.

In 2019, the Kansas City area will grow at a 2.7 percent pace compared with the expected U.S. rate of 2.1 percent, Lenk predicted. The gap narrows in 2020 when Lenk expects the Kansas City area to grow 1.6 percent and the nation 1.5 percent.

Counting all employment, Lenk’s forecast showed 17,300 new jobs will have been added to the Kansas City area economy this year, 20,700 in 2019 and 12,100 in 2020.

Construction leads the expected growth with 4,000 new jobs forecast for 2019 and a return to pre-airport project growth levels in 2020. Health care growth will create 2,800 next year and 1,900 in 2020, followed by professional and technical services adding 2,300 jobs next year an 1,600 in 2020.

Kansas City could use the boost that Lenk predicted. The region has been lagging behind most of the 31 metropolitan areas that Lenk considers its peers.

During 2016 and 2017, the Kansas City area grew at a 1.2 percent pace. Better than St. Louis, Milwaukee and three others in the 31-market peer group. Far behind the 2.1 percent to 7.6 percent growth among 21 others in the peer group, including Minneapolis, Oklahoma City, Indianapolis, Portland and Nashville.

Lenk, director of research services at the Mid-America Regional Council, had focused on Kansas City’s relatively poor showing in a blunt warning a year ago. The Kansas City region was “falling behind,” he’d said, generating too little growth and too few quality jobs. The then-proposed new terminal at KCI was one measure expected to help.

With construction at KCI officially set to begin next year, the Kansas City area gains some breathing space to continue work that addresses the lagging trend.

Lenk’s report noted several efforts to improve and match a local workforce with business needs, including Talent to Industry Exchanges that seek to align education tracts with workforce needs, KC Scholars that opens post-high school educations to students and adults, and KC Degrees that helps adults return to and finish college degree programs.

America’s economic outlook, and therefore Kansas City’s outlook, includes no recession for the foreseeable future, Lenk wrote. The economic slowdown will result in “a soft landing” that levels out at a more sustainable rate of growth.

Risks to that forecast include an unexpected spike in inflationary expectations or “abrupt and significant changes to the rules of international trade,” Lenk’s report said.

This report was updated to include some corrected details of forecasts for jobs and economic growth for the Kansas City region. The update does not affect the overall outlook.
Contact Mark Davis at 816-234-4372, @mdkcstar
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