Business

Economic outlook for Wichita area mostly grim

The Wichita-area economy will continue to shrink and shed jobs in 2010, according to a forecast unveiled Thursday by Wichita State University.

The area is projected to lose 3,550 jobs next year, especially in manufacturing, according to WSU's Center for Economic Development and Business Research.

The forecast was the centerpiece of the 30th annual Wichita Area Economic Outlook Conference held Thursday morning at Century II. More than 600 people attended.

The forecast might come across as gloomy, conceded center director Jeremy Hill, but Wichita hadn't felt the economic crisis as deeply as the rest of the country until recently.

"We are into the worst part of the cycle, where the U.S. was six months ago," Hill said. "And recovery will be slow."

Other pieces of the conference included forecasts for the housing industry, the energy sector and the national economy.

The forecast is considerably different than last year's, which predicted 6,100 new jobs.

It was delivered last October, a few weeks after the financial panic hit Wall Street and a few weeks before the first large-scale aircraft layoffs were announced.

That prediction for 2009 was lowered to 1,600 more jobs in November. In reality, 2009 has been much worse than the center forecast, with an estimated loss of 5,000 jobs.

People at the conference said they appreciated the 2010 forecast, despite the outlook.

"I thought there was lot of positive news, such as that housing has about leveled off," said Jeff Lucke, an accountant.

Breakdown by sector

Here's a look at each sector:

Manufacturing — down 3,850 jobs.

The bulk of this will be at the durable goods plants, particularly aircraft, Hill said.

Sales for corporate jets reached an all-time high in late 2008 and then plunged as companies worldwide frantically cut costs to cope with the recession.

Hill said the high number of used corporate jets for sale — an indication of weak demand for new jets — hit a peak in July and has come down only slightly since then.

He said he expects further job cuts as new orders continue to be slow and companies work through their backlog of orders.

Commercial aircraft construction is expected to dip in 2010 as airlines react to declining air traffic and volatile fuel prices.

Oil and gas, construction — down 275 jobs.

The bulk of the job losses will come in the construction industry as the number of new houses and commercial buildings will remain down.

Wholesale trade — down 100 jobs.

Many companies in the wholesale category are also manufacturers.

Retail trade — down 175 jobs.

Local retailers will suffer as consumers stop spending as freely because of layoffs, high debt loads and economic uncertainty.

Hill said 52 percent of local businesses the center surveyed thought their customers have become more conservative in their buying habits more or less permanently.

Transportation and utilities _ down 175 jobs.

Information — down 500 jobs.

Hill said he sees a nearly 10 percent drop in local employment in this sector caused by the Internet and by outsourcing.

Financial services — No change.

A sector hit hard nationally will remain flat because of conservative local practices.

Professional and business services — up 125 jobs.

Health care and private education — up 225 jobs.

Health care will continue to grow, although at a slower rate, as the population grows.

Restaurants and hospitality — up 150 jobs.

People continue to eat out during the recession, although maybe at less expensive restaurants, Hill said.

Other services — up 25 jobs.

Government — up 1,000 jobs.

Hill said the center is predicting a big increase in government jobs, despite job cuts by local and state governments and schools, because of the affect of the federal stimulus.

He said Sedgwick County has received $54 million from the federal government and he expects that to translate into jobs — either federal or federally funded jobs in other governments — in education, job training, social services, housing and transportation.

Other segments of the economy

Several other experts also offered forecasts for different segments of the economy, including:

Housing — The drop in home sales has probably bottomed out here and nationally, said Stan Longhofer, director of WSU's Center for Real Estate, but they won't rebound much. And new home construction will take even longer.

Prices have likely bottomed, and there may be even a sharp uptick in prices in the worst markets.

Energy — Although demand for gasoline will be flat in the U.S. in 2010 because of conservation, strong growth in China and India will drive up demand and fuel prices worldwide.

Mike Jennings, president of Frontier Oil, said he expects crude prices of around $70 per barrel and natural gas prices of $6 to $7 per thousand cubic feet.

National — The national economy will probably have a slower, U-shaped recovery — rather than a faster, V-shaped recovery — because of the great amount of debt built up by consumers and the government.

Alan Barkema, senior vice president of the Kansas City Federal Reserve Bank, said the country will see some growth in the last two quarters of 2009, but the unemployment rate will continue to rise. 2010 will see growth of about 2.5 percent and a slow reduction in the unemployment rate.

2011 will see stronger recovery and a falling unemployment rate, he said.

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