Wichita State forecast for jobs growth in 2016: 3,360 jobs | The Wichita Eagle

Thursday morning, Wichita State University economist Jeremy Hill will publicly forecast that Wichita will gain 3,360 jobs, 1.1 percent, next year.

This year will be Hill’s seventh annual jobs forecast delivered to a crowd of community and business leaders at the 36th Annual Wichita Area Economic Outlook Conference at Century II.

If his prediction comes to pass, it will be the best year for job growth in Wichita since 2008. He is forecasting even better results statewide, 1.4 percent growth, or about 20,000 jobs.

But the bad news is that the forecast gains are actually pretty weak – the U.S. has been seeing significantly faster job growth for years.

And even Hill’s best guess may be too strong. He has consistently overestimated – or the Wichita economy has consistently underperformed – the local job rebound since the recession.

Wichita has regained about 10,000 jobs since it hit its employment bottom, but the truth is, it only has regained a third of what it lost from its peak.

The Wichita and Kansas jobs rebound has been hobbled by:

▪ A tepid recovery in general aviation sales, which led to corporate consolidation, the mothballing or killing of several jet lines and large job losses.

▪ A boom in crop farming and oil and gas exploration that has turned into a bust.

▪ A conservative shift in politics and policies at all levels of government leading to shrinkage of the government workforce.

▪ A lack of startups in a city known for entrepreneurism.

▪ A cautious, aging populace, tighter credit and emigration that have kept a lid on consumer spending.

As a result of slow job growth, wages haven’t risen that much. Nor has spending.

Hill expects retail spending in the Wichita area to rise just 0.7 percent in 2016, the same level as 2015, which was the slowest growth since emerging from recession.

Well, Hill said, baby steps. First, add enough jobs, then wages will rise. This year he is seeing a rise in pay for the most highly sought employees, but less so for the general workforce.

Maybe, he said, we just need to stop comparing ourselves to the national average.

“I’ve often used the U.S. as a benchmark,” Hill said. “We haven’t met that benchmark in a long time. We need a realistic expectation.”

Kansas outlook

The jobs, wages and sales forecast for Kansas are stronger, Hill said, because the overall economy statewide is somewhat stronger and more diversified.

Job growth in Kansas over the past six years has averaged more than 15,000 per year, and he is calling for more than that in 2016.

Hill is predicting wage growth statewide at 2.9 percent this year and 2.5 percent next year, which is actually stronger than the U.S. He isn’t making a Wichita wage prediction.

However, he noted, with the fading of the agriculture and oil and gas sectors, a significant amount of money and some employment has been pulled out of the rural economy.

The good news, Hill said, is that businesses several years ago adjusted to the slow-growth economy and figured out how to be quite profitable. This year, he said, Wichita and Kansas businesses are finally feeling confident enough to spend money and expand – although maybe not here because the growth is so slow.

“If you remove farm incomes, proprietors’ income grew faster than the U.S. as a whole,” he said. “This is something the governor should be touting.”

Then Hill offered a grim thought: At some point in the not-too-distant future, the U.S. will go back into recession. That can’t be good for Kansas and Wichita.

“Am I negative?” he said. “It comes across as pretty negative because there are a lot issues with the state and Wichita economy.

“But there are positives. The economies are expanding, businesses are feeling better. There will be some investments, although they won’t pay off right away.”

Selected sectors

▪ Oil and gas: Oil and gas producers aren’t big employers, but they generate a lot of wealth, which funds all kinds of spillover growth, Hill said. But the plunge in oil prices, and the still-low gas prices, has dramatically curtailed exploration and slowed production. For many low-volume wells, the pause could be permanent.

“The longer the wells stay stagnant, the harder it is re-activate them,” Hill said. “And, with the price down so low, some of them could be out forever.”

But overall trends for gasoline consumption are up in the U.S., so the transportation, refining and retail parts of the industry should continue to do well.

▪ Construction: Construction employment continues to be a bright spot, although Hill said he doesn’t quite understand why. He is predicting several hundred additional jobs.

“Those with higher incomes are building houses,” he said, “and commercial real estate, we are building faster than I can imagine we should be building, but we keep building.”

▪ Business and professional services: This catch-all sector includes everything from accountants to janitors and has long been the fastest-growing sector. Think of the office workers attached to the Koch expansion, he said.

But, he said, another source of growth here has been in the city’s call centers, a reflection of the national economy.

“We have a growth U.S. economy and there is more demand for business services,” he said. “And, anecdotally, I’m seeing some wages going up there.”

▪ Health care: The health care industry continues to shift as the rules and economics change. The population is aging, the government is becoming a larger player and competition is ratcheting up, Hill said.

“There is a lot more happening in this market than what’s going on with Medicaid, Medicare and the Obamacare situation,” he said. “It’s deeper than that. They’re really competing against each other.”

Some doctors have sold their practices to institutions and become employees in order to reduce financial risk. Hospital ownership has consolidated.

“Who will be the long-term winner in this market?” he said. “Will it stay with the hospitals we had before or will one become the dominant one, and one sort of the boutique one?”

▪ Non-Durable Goods Manufacturing: Hill sees a drop in non-durable goods manufacturing, particularly grains and meat products, largely because of the drop in exports.

Because of the rising value of the dollar, Wichita-produced goods are 15 to 20 percent higher against the euro than a year ago. And international markets are slowing.

“The global economy is squelching growth,” Hill said.

Local businesses said their number one concern right now is global competitiveness, he said, as it has been for the last three years. That includes the value of the dollar as well as government regulations and policies,

▪ Retail: Wage growth is what drives retail growth. It will be strong in Kansas; less so in Wichita.

But people aren’t spending all of that. He is predicting that retails sales will rise 1.1 percent in Kansas and 0.7 percent in Wichita.

“People are being conservative,” he said. “They are holding tight because they don’t like the uncertainty.”