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Compared with most U.S. cities, the Kansas City area’s growth rate struggles

A Brookings report said Kansas City’s gross domestic product — its output of goods and services — actually shrank by 1.3 percent in 2013, the most recent year for which complete data are available.
A Brookings report said Kansas City’s gross domestic product — its output of goods and services — actually shrank by 1.3 percent in 2013, the most recent year for which complete data are available. The Kansas City Star

A Brookings report to be released today ranks Kansas City’s recovery from the recession a dismal 73rd out of 80 cities studied.

The report is based on cities’ growth in productivity and jobs since the end of the recession in 2009 and is the second study in eight months to find the area’s recovery lagging its peers. Perhaps most startling in the Brookings report is that Kansas City’s gross domestic product — its output of goods and services — actually shrank by 1.3 percent in 2013, the most recent year for which complete data are available.

The decline in 2013 was a surprise, countering a small but positive GDP growth rate of 0.3 percent for the entire five-year period after 2009.

“In other words, the five-year trend was up, but then you saw a one-year decline,” said Joseph Parilla, an analyst with the Brookings Institution Metropolitan Policy Program. “If it’s going down, it gives pause for concern.”

That GDP measure, which Parilla said was a “rough proxy” for productivity, should have continued to grow in a recovery, not shrink. Area employment has grown. Its productivity should have followed suit.

Civic boosters have long championed the area’s productivity as a reason for companies to move here.

“It’s not an encouraging report, nor is it surprising,” said David Warm, executive director of the Mid-America Regional Council. “It’s consistent with our analysis last year that our rate of recovery since the recession has not been equal to our peers. But we’re working diligently to fix that.”

The report follows a June 2014 assessment conducted by MARC, the UMKC Center for Economic Information and Brookings headlined “Prosperity at a Crossroads.”

Warm said the previous report helped galvanize the Kansas City business and civic leadership. Since then, several alliances or strategies have been introduced to spur growth of existing local industries or professions.

“The Kansas City region has been on a roll in many respects, but we lag the field in terms of real economic growth — a concern the KC Chamber has had for some time,” said Jim Heeter, president and chief executive of the Greater Kansas City Chamber of Commerce.

Heeter noted that the chamber’s continuing “Big 5” initiative addresses specific economic growth goals. And the chamber last week announced its participation, along with the World Trade Center-Kansas City, in the Global Cities Initiative Exchange. It’s designed to boost exports and foreign investment.

Another civic effort in November created KC Rising — backed by MARC, the Kansas City Area Development Council and the Civic Council — which aims to focus growth on key industries.

“I think we have some cause for optimism,” Warm said. “Our economy is diverse, and we’re understanding that to compete in the global economy you have to be excellent in some sectors. The diversity of our economy gives us great stability to avoid the high high and the low lows, and we’re now invested in building on our strengths.”

The area has developed a host of life science and animal health institutions and companies, and it has a strong push for entrepreneurship and “wired” city programs. It’s working to build its reputation for high-tech talent and business development.

New data

The new Brookings analysis ranked 28 U.S. cities, including Kansas City, as “not recovered” from the recession. Twenty others were rated “partially recovered,” and 32 were ranked as “recovered.”

Among U.S. cities, the low 2013 performance put Kansas City ahead of only Allentown, Pa.; Columbus, Ohio; Washington, D.C.; Virginia Beach, Va.; Dayton, Ohio; Syracuse, N.Y.; and Albuquerque, N.M.

Eighty U.S. metro areas were included in a global analysis that figured recovery data for 300 worldwide cities in all.

Parilla said Kansas City’s national ranking was lower than it was just after the recession in 2010. He said the study has changed its sampled cities in each report, so it can’t make direct “apples to apples” comparisons of annual ratings.

“So the takeaway here is that Kansas City did experience employment growth since the recession, but less than the national average,” Parilla said. “But the startling factor was its GDP decline.”

The top 10 U.S. metros in Brookings’ recovery analysis were Austin, Texas; Houston; Dallas; Baton Rouge, La.; Oklahoma City; San Jose, Calif.; Nashville, Tenn.; Denver; Knoxville, Tenn.; and Portland, Ore.

Overall, the booming cities benefit from expanding high-tech sectors and burgeoning energy industries. Some areas also are fueled by “really good universities driving innovation,” Parilla said.

“If you look at the characteristics of bottom performers, they tend to be clustered in the old upper Midwest,” he said. “They’re having a tougher time shaking off the recession. They’re having to figure out a way to retool their economies.”

Parilla said the Kansas City area shouldn’t despair.

“You have a really good civic community in Kansas City,” he said. “They see the growth problem, and they’re addressing it.”

Parilla made special note of the economic “border war” between Missouri and Kansas: “Our research on border wars shows that offering subsidies and stealing business is not the way to sustain or grow economies.”

He called subsidy battles “short-sighted” and said “Kansas and Missouri need to rely on each other to deal with the growth challenges, not compete with each other. They need to work together to compete against China, India, Austin and all those other global cities.”

A separate report, released Wednesday by the U.S. Conference of Mayors and IHS Global Insight, buttressed the Brookings’ report. It noted that all major U.S. cities are expected to record job growth in 2015, the first time that’s happened since the recovery began.

The IHS analysis said that at the start of 2015, 164 U.S. metro areas had returned to their pre-recession peak levels of employment. It put the Kansas City area among 199 cities that are expected to regain that peak by the end of this year.

Peter Eaton, a UMKC economist who worked on last year’s study with MARC and Brookings, said people shouldn’t “come to the conclusion that the Kansas City metro area is doomed. … The recovery is relatively new, and all the data isn’t ready yet.”

Brookings’ Parilla offered a parting thought: “It’s one thing to look at the data. It’s another thing to do something about it.”

To reach Diane Stafford, call 816-234-4359 or send email to stafford@kcstar.com. Read more from Diane at kansascity.com/workplace. Twitter: @kcstarstafford.

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