The economies of Wichita and Kansas are expected to grow slowly in 2021, but not enough to offset all of the losses incurred in 2020.
Jeremy Hill, director of the Center for Economic Development and Business Research at Wichita State University, presented his forecast for the Wichita area and the state Thursday at the annual economic outlook conference.
Hill says state and local economies could grow as much as 1.3% in 2021 if the national economy also improves. If the national economy continues to struggle, local growth could remain stable.
“So while we expect the state’s economy to grow over the next year, we have a very wide range of expectations ranging from growth almost more than double our forecast for basis for even a contraction next year,” Hill said. “And it just has to do with all the underlying uncertainties in the economy and some of the things that we can’t predict.”
The obvious uncertainty is the coronavirus. Another major increase in cases followed by a partial or complete shutdown would stifle any growth.
Hill said there are other factors at play, including whether Congress passes another stimulus bill and who wins the November election.
Whatever happens in 2021, Hill said it will be a slow and long climb back to the economy the state enjoyed in 2019.
“So the expectation to come back when the economy is running at full steam is…a tough expectation to achieve over a period of a year, isn’t it?” said Hill. “We shouldn’t have that expectation.
“So I can be positive about that next year. And I’m really positive about that next year, given all the uncertainties. It doesn’t mean we’re going to go back to where we were in January. .”
Employment in 2020 in the Wichita area is expected to end 4.5% below 2019, or about 14,000 fewer jobs. Hill expects Wichita to add just over 1,000 of those jobs in 2021.
For Kansas, unemployment will decline by nearly 60,000 jobs in 2020, or about 4%. Hill expects the state to add about 7,000 jobs in 2021.
In either case, the bulk of these job gains will come from retail and the leisure and hospitality sectors, which have suffered badly in 2020. But both sectors will remain below employment levels of 2019.
Hill said manufacturing, particularly aerospace manufacturing, will continue to decline in Wichita in 2021. The sector has already seen thousands of layoffs, first due to the grounding of Boeing’s 737 Max, then due to reducing air travel during the pandemic.
If the national economy is performing at a high level, Hill said local airlines stand to benefit. He said large companies and small suppliers have made the tough decisions needed to prepare for the next economic cycle.
“We’ve restructured. They’re efficient, they’re ready to go,” Hill said.
“They still need that workforce. And that’s why they’re holding them back again. We can push that button and grow, expand and produce products. If the economy comes out faster, we’re ready. to go faster.
“We have been through a whole new renaissance in aerospace, which is the biggest driver of our economy.”
Hill said the local and national economy would be boosted if Boeing’s 737 Max was certified to fly again in 2021. The plane was grounded in March 2019 following two fatal crashes.
Boeing has resumed production of the 737, but at much lower levels. The 737 Max normally accounts for more than 50% of Spirit AeroSystems’ revenue.
Spirit has traditionally been the region’s largest employer, and the 737 program also supports smaller aviation supply companies.
“So having a recertification again makes money, it gives confidence,” Hill said. “It helps the bankers know that they can make other loans to help these small businesses stay alive long enough for all the inventory to be reprocessed and moved through the system and producing these planes again. “
While employment in 2021 will remain below 2019 levels, Hill said retail sales in Wichita — which are expected to fall 2.3% in 2020 — will recover to nearly 2019 levels.
He said this is because the national economy will slowly recover, consumer confidence will rise and people will start to feel more comfortable with spending.
“If you look at the consumer side over the last year, we’ve had a lot of savings, especially in the high-income categories where you just accumulate your savings,” Hill said. “You have all this pent-up demand.
“As we go into the next year, and we have more certainty and it looks like we have a vaccine for COVID and we don’t look like we’ll have another shutdown, that’s going to loosen up some of that l money we’ve saved, and we’ll probably put it back into the economy.
One silver lining Hill sees coming out of the whole coronavirus mess is that the pandemic may have rattled the city’s entrepreneurial DNA. He said there had been an increase in the number of people applying to the state to set up new businesses.
“I think these business apps are just an indication of how we’re going to see new innovations, new things coming to market,” Hill said. “We might not see everything today. It might take a year or two for that engine of being an entrepreneurial city to really kick in.
“But I think there’s some of that happening. And I think we’re already seeing it on the ground. And I think it could grow our economy a lot faster, five years from now, where we can say that was a pivotal point.”