Business

Has the Wichita economy hit bottom yet?

The nation's economy appears to have hit bottom and started to recover.

So, where is Wichita's economy?

The answer is most likely still headed down, experts say.

The Wichita economy is still slowing as the aircraft industry deals with a worldwide evaporation in demand, and the other sectors react to the manufacturers' struggles.

The 2010 economic landscape is the topic of the 30th Annual Wichita Area Economic Outlook Conference today. The Center for Economic Development and Business Research at Wichita State University, which puts on the conference, will release its annual jobs forecast for the Wichita area.

Wichita traditionally lags the national economy by at least nine to 12 months. If that holds true, Wichita's economy won't bottom out until next year and employment won't turn around until 2011.

Potential factors that could keep the local economy in the doldrums:

* More cuts at the corporate aircraft makers.

* Production cuts at the city's commercial aircraft suppliers.

* Cuts in the service sector — which makes up about 70 percent of employment — as it starts to grapple with the downturn.

Allan Safarik is guardedly optimistic for the year ahead after suffering through a dismal 2009.

The owner of Safarik Tool Co., a machine shop in Valley Center, he cut his work force from 16 in 2008 to four today. He is just now working his way out of debt because he didn't cut fast enough.

"We are at bottom," Safarik said. "I just don't feel we have more bottom left to go."

State forecast

WSU, which releases its 2010 forecast for Kansas before its metro forecast, is predicting a 0.8 percent decline in jobs across the state next year.

The biggest hit will come in the manufacturing of durable goods, such as airplanes and farm combines. The center forecasts that this sector will lose 10,000 more jobs, or 8.4 percent.

The manufacturing of nondurable goods, such as soybean oil, will also see a loss, but only about 2.1 percent.

Other sectors that will see declines, although smaller, are retail, information technology, transportation and business services.

Health care will gain nearly 2,500 jobs, government will gain 2,400 and financial services and leisure will see small increases.

In sum, said Jeremy Hill, director of the center, the national recovery will slowly seep into Kansas during 2010. The state will lose jobs but at a slower rate than in 2009.

Aircraft outlook

In Wichita, the trends seen at the state level are made sharper by boom-and-bust aircraft manufacturing.

Cessna, Hawker Beechcraft, Bombardier and their suppliers have already cut more than 11,500 workers. Some of those workers have found new work, mitigating the impact, but most have not, according to state employment statistics.

Corporate jet orders will rebound 10 to 18 months after corporate profits turn up, said Ray Jaworowski, senior aerospace analyst for Forecast International of Newtown, Conn.

Profits are starting to grow again, but the recovery in profits remains fragile and uneven.

Jaworowski expects the number of jets built by U.S. corporate jet makers to fall slightly in 2010 and again in 2011, before a surge of new orders and production in 2012.

"Once corporate profits turn around, the business jet market will turn around, after a lag," Jaworowski said.

A much happier story has been commercial aviation. Spirit AeroSystems hasn't laid off any workers because Boeing hasn't cut back on production of the 737, although Boeing has cut back on its widebodies, he said.

But, Jaworowski sees Boeing cutting production in 2010 and 2011 as demand for new jetliners falls. The number of new orders for 737s this year is on a pace to equal fewer than half of the orders in 2008.

"I expect to see some turnaround by the end of 2010," Jaworowski said. "While we see some bottoming out, it will be some time before we truly recover. Build rates won't pick back up until 2012."

Wichita will have a jobless recovery, at first, Hill said, as manufacturers slowly refill their idle production lines and use the resulting cash to buy machines, rather than hire new workers.

"Every time you have a recession, you have a new economy that's birthed," Hill said. "There will be new rules to the game."

Layoff echo in services

So far, the number of Wichita area service workers has remained relatively constant at about 183,000 in 2009, even as the number of factory workers plunged.

Rick Ehresman, owner of Spectrum, which develops custom software for a variety of companies, said his five-employee business is doing better than ever.

"We have been very blessed," he said. "We have not seen any downturn at all."

But that may not last. A look at the 2001 recession shows a layoff echo taking place in the service industries about a year after the manufacturers began to cut.

In January 2003, following the Christmas season, retailers, hotels, financial firms, even health care companies, suddenly cut about 8,000 jobs, about 5 percent of their work force.

The number of private service jobs fluctuated for the rest of 2003 but averaged 2.6 percent — more than 4,000 jobs — below 2002 levels.

Despite the prospects of a long recession, most people are working and earning money. They may be gritting their teeth, but they know the city will survive this downturn as it has every other.

Marcia Traylor, owner of CCM Countertops & Cabinets, which supplies commercial and residential markets, said 2010 seems very much up in the air.

She understands the problems facing local manufacturers, and the prospect of new government programs and higher taxes worries her. Still, she's optimistic.

"We have a tremendous ability to recover from adversity," she said.

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