Economic Forecast OUTPUT AND EMPLOYMENT WHAT THE TABLE SHOWS:

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2 June, Economic Forecast OUTPUT AND EMPLOYMENT United States Real GDP $ billions (fourth quarter) $,996 $,7 $, $,9 $, $, $,9 $6, $7, % change over the four quarters.9% -.8% -.%.8%.%.%.6%.%.8% Nonfarm employment Job count (fourth quarter) 8,6,,9,667 9,877,667,6,,6,667,8,667 7,7,667 9,69,88,679,6 % change over the four quarters.9% -.% -.%.6%.%.7%.8%.8%.% Average monthly change,667-9,6-68, 6,8 6,889 8, 8, 8, 8, WHAT THE TABLE SHOWS: Kansas GDP forecast is derived from the national forecast by allocating output to each of the states based on employment shares. So, forecast misses reflect surprises in the aggregate forecast as well as unexpected shifts in a state s GDP share. The recession took a heavy toll on Kansas economy but, like its neighbors, strong farm conditions have been a cushion. Kansas Real GDP $ billions (fourth quarter) $ $ $ $ $8 $9 $ $ $9 % change over the four quarters.% -.7% -.%.8%.%.%.8%.9%.% Nonfarm employment Job count (fourth quarter),86,6,86,,,,,,,,6,,8,,96,,,6 % change over the four quarters.8%.% -.%.%.9%.%.6%.9%.% Average monthly change,99-7 -,6 997,8,778,76,8 The state s expected to parallel the broad contour of the national recovery in and. Note: GDP figures are based on quarterly values that are interpolated from annual GDP estimates using quarterly employment changes. Unbolded figures are reported actual values and bold figures represent forecasts. Sources: US Department of Commerce; US Department of Labor Regional Perspectives: Kansas Economic Outlook Commercial Banking

3 Agriculture Mining Utilities Construction Durable manufacturing Nondudrable manufacturing Wholesale trade Retail trade Transportation Information Finance and insurance Real estate Professional and technical services Management of companies Administrative and waste management services Educational services Health care and social assistance Arts, entertainment, and recreation Hotel and food service Other services Government June, The Economy s Structure PERCENT OF TOTAL GDP DERIVED FROM SELECTED INDUSTRIES US industry mix Kansas' industry mix The figure compares the relative importance of selected industries to the state s economy with the national footprint of each industry (state and national figures reflect the value added of each industry as a percent of aggregate state or US nominal GDP, respectively). Kansas has a greater concentration in durable manufacturing, trade, transportation, information, and social services. Its important agricultural businesses are a help at the present time. Kansas has a more limited exposure to real estate than the national economy and that is a blessing at the moment, because it limited the disruptions associated with real estate speculation. Source: US Department of Commerce. Updated through. Regional Perspectives: Kansas Economic Outlook Commercial Banking

4 June, Bankruptcies RATIO OF BANKRUPTCY FILINGS TO THE 7 Q NUMBER The figure illustrates trends in bankruptcy filings by businesses and persons relative to the number of filings in 7 Q, prior to the Business bankruptcy filings Nonbusiness bankruptcy filings recession. Bankruptcy filings are back to normal. All US bankruptcy filings (shaded area) KEY MESSAGES: Indicators of financial stress are a useful coincident indication of economic distress. Strong business conditions bode well for the state s economic outlook. Source: Administrative Office of the U.S. Courts; Updated through March Regional Perspectives: Kansas Economic Outlook Commercial Banking

5 June, Oil & Gas Activity NUMBER OF DRILLING RIGS ON LAND, INLAND WATERS, AND OFFSHORE,,,,, United States (left scale) Kansas (right scale) The figure illustrates recent trends in the rig count for petroleum drilling operations. Oil and gas drilling activity in Kansas is relatively robust. KEY MESSAGES: Kansas energy sector is bringing welcome help to an otherwise slow economy. Source: Baker Hughes rig count. Updated through Q. Regional Perspectives: Alabama Economic Outlook Commercial Banking

6 June, FRB of KC Business Survey KANSAS REAL GDP (% CH VS QTRS PRIOR) KANSAS CITY FRB SURVEY ( = NO GROWTH) 8 6 Kansas real GDP (left scale) - FRB-Kansas City's manufacturing survey (right scale) Forecast The figure illustrates trends in GDP growth in Kansas and the Federal Reserve Bank of Kansas City s survey of local manufacturing conditions. Business conditions lost momentum toward the end of last year, but have firmed somewhat. KEY MESSAGES: The Federal Reserve Bank of Kansas City s business survey points to a moderate pickup in activity. Sources: Federal Reserve Bank of Kansas City; US Department of Commerce. Updated through May (surveys) and Q (GDP). Regional Perspectives: Kansas Economic Outlook Commercial Banking 6

7 June, Private Business Surveys REAL GDP (% CH FROM MONTHS EARLIER) PURCHASING MANAGERS ( = STEADY) Real GDP in the Midwest (left scale) Forecast - Business Barometer Index, Mid-America Purchasing -6 Managers (right scale) The figures shows the Business Barometer Index, based on the survey of purchasing managers, and real GDP growth in Kansas (a reading above means the state s economy is growing, while less than means the economy is shrinking). The index comprises seven business activity indicators, including production, new orders, order backlogs, inventories, employment, supplier deliveries, and prices paid. KEY MESSAGES: Diffusion indexes are a timely indicator of activity in the state and these are firming. Sources: Institute of Supply Management; US Department of Commerce. Updated through April (survey) and Q (GDP). Note: diffusion indexes represent the percentage of respondents seeing an increase in activity plus one half of the percentage reporting no change in activity. Regional Perspectives: Kansas Economic Outlook Commercial Banking 7

8 June, Initial Jobless Claims RATIO OF INITIAL CLAIMS FOR UNEMPLOYMENT INSURANCE TO THE 7 Q LEVEL The figure tracks layoffs in Kansas versus Kansas US (solid area) the national level of claims. Weekly layoffs, both the state and national tallies, are illustrated in the figure as a ratio to the level of layoffs in the fourth quarter of 7, prior to the recession. Layoffs are down and back to pre-recession levels The low level of applications for unemployment benefits implies that the recovery is getting traction. Source: US Department of Labor. Updated through May 7, (state) and May, (US) Regional Perspectives: Kansas Economic Outlook Commercial Banking 8

9 June, Economic Growth REAL GDP GROWTH (PERCENT CHANGE FROM FOUR QUARTERS EARLIER) Real GDP growth in Kansas (the line in the 6 Kansas US Forecast 6 figure) is superimposed on top of US real GDP growth (bars in the figure). The local economic recovery is beginning to track the national recovery Real GDP growth is expected to speed up somewhat this year and the next. Source: US Department of Commerce. Updated through (state) and Q (US). Quarterly estimates for states after are interpolated from employment figures (through April ), based on the historical correlation of state and national employment changes Regional Perspectives: Kansas Economic Outlook Commercial Banking 9

10 June, Economic Output REAL GDP LEVEL (RATIO TO Q) The figure illustrates the evolution of real.. GDP of the state and the overall US. Forecast. economy since the fourth quarter of, the peak of the previous business cycle.... US.... that is, at any point in time the lines trace the ratio of real GDP to its level in Q. Economic activity in Kansas only flattened in 8 and 9, even as the national economy fell into a deep recession.... Kansas... Kansas likely will match the performance of the national economy in the next several years Source: US Department of Commerce. Updated through (state) and Q (US). Quarterly estimates for states after are interpolated from employment figures (through April ), based on the historical correlation of state and national employment changes. Regional Perspectives: Kansas Economic Outlook Commercial Banking

11 June, Employment Growth NONFARM PAYROLL EMPLOYMENT (PERCENT CHANGE FROM MONTHS EARLIER) Many of the themes echoed throughout the 6 6 Midwest describe the job market trends in Kansas US Forecast Kansas. Employment growing at a respectable pace. Hiring is expected to remain solid for a while. - - Source: US Department of Labor. Updated through April (state) and April (US) Regional Perspectives: Kansas Economic Outlook Commercial Banking

12 June, Employment NONFARM PAYROLL EMPLOYMENT (RATIO TO THE Q LEVEL) The figure illustrates the evolution of.6. Forecast.6. employment in the state compared with the nation since Q, the peak of the previous business cycle. The lines trace out... US Kansas... the ratio of employment at the time to employment in Q. Employment trends in the state had been mirroring the trends in the national economy.. but recently have lagged somewhat the jobs.. recovery elsewhere The job market outlook is reasonably favorable Source: US Department of Labor. Updated through April (state) and April (US). Regional Perspectives: Kansas Economic Outlook Commercial Banking

13 June, Intrastate Employment NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO Q LEVEL) The figure shows job trends in local Forecast US forecast US Manhattan communities within the state. Kansas has lagged the national economy, but is faring better now. Economic conditions vary widely across the state Kansas City Lawrence Kansas benefits from the relative strength of the agricultural sector Wichita Topeka Source: US Department of Labor. Updated through April (state) and April (US) Kansas forecast Kansas Regional Perspectives: Kansas Economic Outlook Commercial Banking

14 June, Unemployment UNEMPLOYMENT (PERCENT OF THE LABOR FORCE) Forecast 9 Kansas 8 7 US (shaded) The figure compares the unemployment rate in Kansas with the national average. Kansas unemployment rate peaked at 7½ percent and has come down steadily, to under percent most recently. KEY MESSAGES: The unemployment rate is the single best indicator of the relative economic performance of a region. Unemployment is forecast to continue to fall in, perhaps at a more gradual pace than last year. Source: US Department of Labor. Updated through April (state) and April (US). Regional Perspectives: Kansas Economic Outlook Commercial Banking

15 June, Relative House Prices RATIO OF THE STATE S HOUSE PRICES TO THE NATIONAL AVERAGE (99 Q =.) The figure tracks the relative price of houses versus the nation in the state that is, it reflects the ratio of the state price index to the national house price index, with that ratio set to unity in the summer of 99. A drop in the line means that house prices in the state lag the national trend. States that did not suffer from speculative conditions saw a decline in the relative price of houses in this last decade. Kansas did not suffer from real estate speculation in the last decade, so house prices fell relative to the national average. Real estate values are back in normal alignment with the national average Real estate excesses are absent in Kansas. Source: FHFA. Updated through Q. Regional Perspectives: Kansas Economic Outlook Commercial Banking

16 June, Real Estate Markets HOUSE PRICES IN SELECTED COMMUNITIES (RATIO TO THE 99 Q LEVEL) The figure tracks the cumulative percentage..7 US Topeka Wichita Lawrence..7 deviation in house prices since 99 in selected local markets and compares those with the national average. The real estate roller coaster ride was fairly muted across the state.. Kansas City. House prices have been on a moderate.. incline through the housing debacle. Source: FHFA. Updated through Q Regional Perspectives: Kansas Economic Outlook Commercial Banking 6

17 June, New Home Building HOUSING STARTS (RATIO TO THE JULY 99 LEVEL) New home construction in Kansas, matches the US trend in proportionate terms. New home building in the state is edging up. US Kansas Housing starts have been on a moderate incline through the housing debacle. Forecast Source: Census Department. Updated through March (state) and April (US). 6 9 Regional Perspectives: Kansas Economic Outlook Commercial Banking 7

18 June, Office Markets PERCENT OF OFFICE SPACE THAT IS VACANT Office market conditions remain challenging, Kansas City metropolitan area St. Louis metropolitan area compared with the national performance. Vacancy rates appears to have stabilized at a high level. Commercial real estate conditions remain challenging. Source: CB Richard Ellis (formerly CB Commercial Property Information Systems), Office Vacancy Index of the United States. Updated through Q. All metropolitan areas (shaded area) Regional Perspectives: Kansas Economic Outlook Commercial Banking 8

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