Wichita’s 2014 jobs forecast: growth in all sectors, but not much
10/03/2013 7:07 AM
10/03/2013 7:07 AM
Maybe they should declare Oct. 3 Groundhog Day.
Thursday morning, Jeremy Hill will deliver an eerily familiar-sounding annual forecast for job growth to hundreds of breakfasting community leaders at the Wichita Area Economic Outlook Conference. His call for 3,400 more jobs in the Wichita metro area in 2014, a 1.2 percent increase, is the fourth lukewarm jobs prediction in a row.
“We are projecting better growth next year, but not a whole lot better growth,” said Hill, an economist and director of the Center for Economic Development and Business Research at Wichita State University.
Every sector will grow, but in a subdued way.
The center is predicting that the biggest gainers will be professional and business services, and health care – sectors that have done well throughout the sluggish recovery.
The sectors performing less well in 2014 include wholesale trade, information and a gainer from previous years, leisure and hospitality.
The report has the combined federal, state and local governmental agencies in the Wichita area making a small gain in employees, but Hill acknowledged that with budget cutting still in the air, that may get revised downward later. The combined government sector lost 600 workers this year, he said.
Generally, he said, local employers remain cautious after years of “recovery” and are refusing to spend or hire in anticipation of coming growth.
“Businesses here are only going to invest just enough to match demand,” he said. “They are pretty clear about that … so employment growth is going to be in fits and starts.”
Business and professional services, a catch-all category that runs from janitors to accountants, is expected to add more than 800 more new jobs, according to the center’s forecast.
This category has grown strongly in recent years as companies have reduced expenses by outsourcing certain tasks. That may mean a company has reduced its own staff and instead hired outside companies or contractors to provide tech support, security guards, call centers, accounting, human resources services and a range of other services.
“We are close to the end of the shift where companies are taking out some components of their company and outsourcing it,” Hill said.
Health care will see a gain of about 750 jobs, according to the forecast, from the continuing aging of the population.
But Hill did note that the Affordable Care Act has pushed some doctors to sell their practices, laying off office staff, to join hospitals or larger clinics.
There is also a bit of a resurgence in home construction, which means more jobs there, he said.
“Residential keeps improving because the top end has income and they want product,” he said.
The fate of Wichita’s outsize manufacturing sector is the big news, as always, because of its role in driving the local economy.
Hill is calling for a small increase in jobs because almost any upturn in aircraft sales will mostly go into the companies’ production backlog, for now, as companies remain cautious, he said.
The big aircraft companies have been cutting jobs this year, but not because sales are falling, he said. The sector is in the midst of restructuring operations, looking hard at what is profitable and cutting those things that aren’t.
Beechcraft, which shed it crippled jet-building business in bankruptcy, is the best example, he said. But Cessna Aircraft and Spirit AeroSystems have also cut managers and support staff, while freezing or adding production workers. That is dictated by an effort to improve profitability and efficiency, he said.
“If the economy had grown, it could have disguised a lot of this restructuring they were doing,” Hill said. “But the economy hasn’t grown, and that just forced them to make those structural changes in more dramatic ways.”
Richard Aboulafia, vice president of Teal Group, said that 2014 may – finally – be the year that demand for corporate aircraft rebounds. Corporate profits, long seen as a key indicators of future demand for business jets, continue to hit records, although growth has slowed. And when the uptick comes, it may come quickly, he said.
“I really think the green shoots you are starting to see are sustainable,” he said. “I’d be surprised if by the end of 2014 there wasn’t more production and more hiring.”
But, he said he was more optimistic on Monday before the federal shutdown proved that Congress isn’t afraid to damage the economy. He is particularly worried about the upcoming vote to raise the debt ceiling.
Failure to reach agreement on the amount the U.S. government can borrow could have even more dramatic economic consequences.
Hill arrived at the center in June 2009 and this is his fifth jobs prediction.
The center had an epic miss at its 2008 conference. The conference was held about three weeks after the Lehman Brothers bankruptcy, amid a plunging stock market and frenzied negotiations over the Troubled Asset Relief Program. The center called for Wichita – at the time still basking in the glow of the economic boom – to add 6,000 jobs in 2009; it actually lost 15,000, a difference of about 21,000.
The recession started in late 2007. Wichita has a history of lagging the national economy by 12 to 18 months.
At his first conference in October 2009, Hill predicted a decline of 3,500 jobs. But 2010 was worse than projected, as the Wichita area actually lost another 9,000 jobs.
Since then the center has been closer, but it remains consistently more optimistic than the actual annual job numbers. The prediction was 4,000 new jobs too high in 2011 and 2,100 jobs too high in 2012, and it appears it will be about 2,500 jobs too high in 2013.
Hill said that much of the reason the forecasts have been too optimistic is the impact of national politics on the economy.
“You’re seeing it again this week,” he said, and added: “If they pass the debt ceiling, it shouldn’t have an effect on the forecast, but it they don’t, we’ll have to revise it.”
Congress must raise the debt ceiling by Oct. 17 or the federal government won’t be able to pay all of its debts, which many warn would be an enormous blow to the U.S. and world economies.
After the 2013 forecast proved overly optimistic, Hill said the center staff trimmed the 2014 forecast for job growth to 1.2 percent, which is considerably below national job forecasts.
Janet Harrah, who held Hill’s position until 2008 and now does similar work at the University of Northern Kentucky in metro Cincinnati, said Wichita is hard to forecast because it is a smaller area with less reliable statistics and because it is so heavily dependent on a single industry. Forecasts have to be based as much on industry intelligence as on economic statistics, she said.
“Since I got here my forecasts have miraculously improved, and it’s not because I’ve gotten better, it’s because I’m in a bigger metro area,” she said.
What’s fair, she said, is that forecasters be judged on whether they correctly call whether jobs will grow or shrink, and the magnitude of that change.
Forecasting, generally, is hard, she said. Even the national forecasters with most of the random events ironed out of the numbers often don’t make the right call, she said.
“Forecasts will be never be precise,” she said. “If they were, we would be picking stocks.”