After a string of disappointing years, 2015 is expected to be better year for Wichita – and a much better year for the country.
Experts are calling for the city’s corporate jet makers to finally start taking off, while others see spillover from the strongest growth in the U.S. economy in 10 years.
More jobs, falling gasoline prices and low inflation all contribute to what may become the best year since 2008.
But not all is golden, of course. Tumbling grain and oil prices are punishing key Kansas industries, and the rising value of the dollar will hurt exports.
And the likelihood of deep spending cuts in the state budget could mean job losses for state and local government and school employees.
Even so, most local experts are encouraged.
“I’m more optimistic about the overall economy than I’ve been in a long time,” said Stan Longhofer, director of the center for Real Estate at Wichita State University. “And, if the economy follows traditional patterns, that means that by the end of the next year (2015), we will be seeing some of that in Wichita.”
Nation and region
Most economists are calling for a stronger national economy in 2015, with real GDP growth somewhere in the 3 percent range, which is up from 2.2 percent forecast for 2014 and would be the best yearly total since 2005.
The median forecast from a survey by the National Association of Business Economists, a panel of 48 professional forecasters, is 3.1 percent in real GDP growth.
The NABE survey also forecast an improvement in the unemployment rate, the national rate should fall to an average of 5.6 percent in 2015, with an average of 217,000 new jobs created each month.
Regionally, the news isn’t quite as unclouded. High prices for grain and oil had made the Great Plains the country’s strongest economic performer in recent years. But now prices for both have plunged, and that will take a particular toll on the region. Most oil companies have scaled back drilling plans as the price of a barrel of crude oil produced in the Midwest has fallen from more than $90 to between $40 and $50.
And farmers across the country have had to make hard decisions about what to grow, when to sell, and how to manage with considerably less money than in previous years.
Jon Rolph, president of Sasnak Management, owner of Carlos O’Kelly’s and an Applebee’s franchisee across the region, said his segment of the restaurant business, called casual dining, has suffered as financially squeezed customers have traded down to fast food. But, now, he said, things are looking up, and his company is already seeing stronger results.
“Job growth, wage growth, in 2015 all those things that are key to the industry will be up,” he said. “It’s been a rough six years, particularly in casual dining, and now we’re starting to feel the wind at our back instead of in our face.”
Wichita’s lag time
Wichita has long lagged Kansas, the region and the nation in its recovery because the local economy relies so heavily on aircraft construction.
And while there have been false dawns for several years in a row, some aircraft analysts are forecasting business jet deliveries rising in double digits.
Rolland Vincent, with Rolland Vincent Consultants, is calling for deliveries in 2015 at nearly 800 business jets in 2015, close to 12 percent more than his predicted 2014 totals.
And Richard Aboulafia, of the Teal Group, is even more optimistic. He predicts the industry will deliver 772 business jets in 2015, growth of 19 percent over his predicted 2014 final. In addition, he projects deliveries of 263 turboprops in 2014 followed by 295 turboprops in 2015, growth of 12 percent.
That stronger activity probably won’t be felt right away, but build slowly as the aircraft companies slowly start bringing on more employees. But as time goes on more work means more jobs, more jobs means more spending, and more spending means more work. It’s a virtuous circle.
As that money filters out to companies and workers beyond aircraft and other basic industries, others in Wichita will start to feel the sunshine.
Gary Walker, vice president and general manager of J.P. Weigand & Son’s residential division, said 2015 won’t see a landslide of home purchases, but he sees some important missing players rejoining the market.
“2015 will be very, very good year for first-time buyers,” he said. “They got a raise, they’ve rented long enough, they are confident enough in the economy and ready to buy.”
He also sees the moribund home construction industry start to show more life.
The market didn’t sell as many houses as it could last year because of the lack of supply, particularly in the popular $125,000 to $250,000 range, he said. With new homebuyers coming in at the bottom of the market, freeing sellers to move up, and home builders coming back in, the housing market will really start to regain some life.
And Phillip Hayes, vice president with the Arnold Group, said he is already seeing the results of the economic acceleration: More workers are getting raises or quitting – and it’s not just the executives.
It’s broad-based, he said, in all industries for skilled and semi-skilled positions, although not in the lowest paid jobs.
Because the war for talent is just starting to heat up, some companies have gotten out in front, while others have lagged. Hayes sees a differential of 30 to 35 percent between companies for the same job and skill level. Workers are starting to hunt again, and low-paying companies are starting to have turnover problems.
“It’s a buyers’ market,” he said.
Reason for caution
David Harris, CEO and founder of RelianzBank is skeptical. He’s heard the optimism before and won’t believe it until he sees it.
“I don’t see a whole lot happening,” he said of Wichita. “I continue to see pockets of prosperity and pockets of stress. My sense is that layoffs in this town have really begun to have a tangible impact. It’s hard to see anything driving this economy. It’s just lingering along. Some companies are hiring a few people or buying a new machine or looking to relocate, but some are looking to lay off.”
He said that every new business loudly opening on the edge of the city simply means that another business in the city’s core is quietly closing.
“There might be a new big box store opening at the edge of town, but look at Towne West and Towne East – nothing,” he said. “That might be good for (developers) Slawson and George Laham, but there’s somewhere else in the city that’s hurting.”
He said that people are still anxious because of conflict and uncertainty at the federal level.
Malcolm Harris, an economist and professor of finance at Friends University, said he sees a pretty mixed bag for Wichita. The national economy will spill over into Wichita, in a good way, but the hits to the oil industry and to exporters will hurt.
“The good news,” he said, “is there is not a recession in the next 12 months.”
Contributing: Molly McMillin of The Eagle