Economic effects of aviation cuts pervasive

First Hawker Beechcraft, now Cessna. The travails of the general aviation industry are giving the rest of Wichita an anxiety attack. And for good reason. Even in a best-case scenario, Wichita may be worse off in the short run than we are right now.

The city's general aircraft makers are still shedding jobs. Cessna announced this week that it is cutting 700 more jobs, which will take effect sometime after late November. Hawker Beechcraft is threatening to ship large parts of its production work out of state.

The area has lost about 20,000 non-farm jobs since late 2008, with aircraft workers making up more than half of that.

The economic effects of those layoffs spread far and wide, even for those who don't actually see a large number of aircraft workers.

"It's the trickle down," said Jim Williams, owner of Williams Ace Hardware.

"It's not just people shopping here, it's all the peripheral things. As those people stop spending, it affects more and more people around them. Indirectly, it affects my business."

Malcolm Harris, an economist and professor at Friends University, said that while the Cessna layoffs hurt, he doesn't believe they are enough to derail Wichita's recovery.

"We've already absorbed about eight times that set of layoffs from Cessna," he said of previous Cessna layoffs.

Three scenarios

Here are some scenarios on the actual expected impacts:

1. Best case: status quo.

This scenario envisions that Wichita will continue to see its unemployment rate in the 7.5 to 8.5 percent range and a slow-growing national and international economy.

The Cessna layoffs will mean about $32 million in lost wages over the course of a year, according to Jeremy Hill, director of the Center for Economic Development and Business Research at Wichita State University.

That is about one-tenth of 1 percent of the area's total personal income, which was $23.1 billion in 2009.

Area businesses would see about $16 million less business as a result. That may sound like a lot, but is only a quarter of 1 percent of actual retail sales.

The impact, Hill notes, will affect higher-dollar discretionary goods such as jewelry and boats, while groceries would be less affected.

Adding the 700 to the unemployment lists could boost the jobless rate by 0.2 percentage points. The unemployment benefits for those workers would add $16 million back into the economy if they were to be drawn for a year.

2. Medium case: Hawker moves 1,800 production jobs to Louisiana, Mississippi or Mexico.

Hill estimates the local economy would lose nearly $90 million a year in payroll.

When the ripple effect on other jobs in the community is included, that impact expands to nearly 8,000 jobs and $200 million a year in lost payroll. Dramatic, but still less than 1 percent of the area's wages.

The impact would be heightened by the effect on local subcontracting businesses and would be reduced when the laid-off workers found new jobs.

3. Worst case: Hawker Beechcraft leaves Wichita.

This would be considerably worse than the second scenario because it would more than triple the job loss and would include the better-paid managers, engineers and executives. The direct impact of lost wages, if none of those workers found work, would be $286 million, which is still less than 2 percent of all Wichita income. The ripple would push the loss closer to 3 percent of the Wichita economy.

The ripple through the economy would be reduced because Hawker's local subcontractors wouldn't be likely to move with them, at least in the short term.

And, Hill noted, the company would leave behind its plant, which would be attractive to another manufacturer at some point.

When will work return?

During the last recession, it took Wichita about two years to move from its peak employment in July 2001 to its bottom in August 2003. By mid-2004, the area had regained 5,000 jobs.

Wichita is now more than two years from its peak employment in July 2008, and in August set a new low in jobs for this business cycle, at 283,700, so we may have reached the trough. Or not.

Could that mean we will see growth of 5,000 jobs in the coming 12 months? Possibly, but the national and world recoveries, which pull the Wichita economy along, are much more fragile than last time — as shown by the Cessna layoffs.

But Harris said the local economy may be stronger than people realize.

The world economy has been expanding for 18 months, and that has created business for Wichita's non-aircraft manufacturers.

"There's a good deal of momentum there," Harris said. "In the last five or six recoveries, it wasn't unusual to see large layoffs and the underlying data eventually show there was higher employment.

"The new jobs aren't in the Boeings and Cessnas," Harris said. "They are created in the small businesses — and that is what the data has a hard time capturing."

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