Wichita and Kansas show some resilience | The Wichita Eagle

Wichita is hurting, no doubt about it. But look at Las Vegas, Tampa, Charlotte, Los Angeles, or, worse, Detroit.

The unemployment rate here in January was 8.6 percent, more than a percentage point below the national average and well below the nation's worst-hit cities.

If you're not in aircraft construction, you were much more likely to keep your job or find a new one. More than half of the 20,000 Wichita-area jobs lost in 2009 were concentrated in aircraft production.

The rest of the losses, 9,000 jobs, were spread over the 85 percent of the work force that doesn't do aircraft work. A few sectors, especially hospitals, even added staff.

For Kansas as a whole, unemployment was nearly 3 percentage points below the national average.

The difference for Wichita and Kansas' is the old-fashioned economy, say experts. For once, it was good to be left behind by the high-flying parts of the country.

Kansas has largely avoided the real estate bubble. Real estate and construction never made up an outsized portion of the Kansas economy, as it did in the so-called "sand states" of Arizona, Nevada, Florida and California.

The lack of a real estate collapse also means less of a burden on the state's banking sector, although the general disappearance of credit has hurt the local economy badly.

Just as importantly, the state's large agriculture sector and oil-and-gas sector suffered only mild downturns in 2009, softening the blow in Kansas, as it did throughout the Midwest.

What helped Wichita was the fact that it missed the hottest sectors of the past decade: real estate, construction and finance.

Those three sectors expanded dramatically as low interest rates, financial innovation and lax regulation combined to push trillions of dollars in

credit into the housing market.

Some markets grew 10 or 20 percent or more every year for four or five years. As a result, builders and developers and investors went crazy.

Huge swaths of the labor force went into home construction. At the height of the boom in 2006, Nevada's construction industry employed nearly 10 percent of its work force.

But once the prices got too high and people stopped buying, credit dried up and prices have fallen 20 percent and are expected to continue to fall.

Real estate research firm First American CoreLogic projects that Las Vegas homes won't be worth their cumulative mortgages for 10 more years, until their owners pay down the principle and home values start to rise again.

In Wichita, equity remains in positive territory, even though foreclosures are up and home prices have fallen slightly.

Our construction industry has dropped, but not by the disastrous amounts seen in Nevada.

"We don't grow as fast so we don't fall as fast," said Donna Ginther, director of the Center for Economic and Business Analysis at the University of Kansas.

Agriculture and oil

Rural economies are doing better in the recession than urban ones, said Bill Greiner, chief investment officer for UMB Bank.

That's true in Kansas, where the state is doing better than Wichita, because of its agricultural and energy sectors.

Farm incomes fell 20 percent from 2008, their best year ever, but agriculture remained a steadying force. Oil and gas production also fell in 2009 as prices plunged off of 2008 highs before finding more reasonable levels.

Both were hurt by the slowdown in demand caused by the global recession, but they benefited from moderating input costs.

"Kansas and Kansans tend to be good at pulling things out of the ground, be it food or energy," Greiner said.

And even during a recession, he said, sales of food and energy remain relatively strong compared with discretionary items such as corporate jets, he said.

The future

But if these factors kept the state from falling as deeply into a hole, does it mean the state and city will climb out of recession more quickly?

Not really, say the experts. It will take another two years before the aircraft industry begins serious hiring again, and that is what really drives the Wichita economy. Much of that requires corporate profits, a healthy credit market and time to heal.

A rebound in jet production tends to be very late in the cycle, after the economy has been up and going for a while. However, Greiner said, he expects businesses to take a stronger role in the rebound than usual, with businesses spending at twice the rate as the economy's growth — 3 percent in 2010 —and that would tend to help the aircraft industry.

The state and, to some extent, the metro area will be aided by demand for Kansas agriculture and energy, which will rebound as the globe rebounds and needs more of both.

Where Kansas really benefits is the relative health of the housing market. A Wichita State University forecast for 2010 calls for local home prices to start appreciating again. And that could lead to healthier banks, more real estate sales and more spending by homeowners.

Las Vegas, Tampa and other boom cities probably won't see that this year.

"It will be places like Wichita that lead the comeback," said WSU economist John Wong.

But he noted that Kansas continues to lose tax revenue, one indication the state economy is still hurting.

"It's not blue sky and roses, yet," he said.