In the second quarter of 2018, the Kansas economy grew at the annual rate of 4.7 percent, the seventh-best rate in the nation.
In the second quarter of 2018, the Kansas economy grew at the annual rate of 4.7 percent in real (inflation-adjusted) dollars, according to statistics released today by Bureau of Economic Analysis, a division of the United States Department of Commerce. GDP for the quarter was at the annual rate of $164,018 million.
Click for larger.This is a sharp jump in the rate of growth from the first quarter of 2018, when the rate was 0.5 percent, with only three states having lower rates.
Quarterly GDP growth for states can be volatile, as shown in the nearby chart.
For Kansas, industries that differed markedly from the nation include agriculture, forestry, fishing, and hunting, and durable goods manufacturing. The nearby table shows more industries.
By Michael Austin
Director, Sandlian Center for Entrepreneurial Government
With a new Kansas Governor-elect and State Legislature, Kansans voted to make a change. Despite many elections however, the Kansas economy has been slowing for the past 40 years. While the new administration cites government as the solution to this problem, history shows that government is primarily the cause. Kansans need of a new way of thinking. They won’t get that from a Democrat or Republican as governor.
Kansas has had a storied life in celebrating freedom and improving its quality of life. Through our abolitionist beginnings to creative developments in industry, Kansas led in economic freedom with Wichita at its center. Legendary Wichitan entrepreneur Colby Sandlian got started in the 1950s, noticing permits for single-family homes averaging 150 a week. At the time, local government zoning staff had fewer than 10 employees. Today, Wichita averages around 45 permits a week with a local government zoning staff of near 50 individuals. While other factors have been at play in Wichita, economic vitality and government bureaucracy seem to have an opposing relationship.
Kansas families are nearly $12,000 poorer than the national average with 172,000 fewer available jobs. Like Wichita, with this sluggish growth, Kansas has more government jobs than the national average. Government is essential to a civilized society, but it can only act through taxes taken from Kansans. The bigger the government, the bigger the burden on families and commerce.
Kansans can’t keep up with inflation because government growth limits employers’ ability to attract qualified employees. Kansas government growth also creates and supports monopolies; forcing low-income consumers to pay higher prices for goods and services. Worst of all, Kansas government growth forces around 10,000 Kansans a year to abandon the state. Other states and countries that provide similar governmental services with fewer taxes entice Kansans to leave. This is likely to get worse under an ObamaCare expansion and record government spending growth, financed with high taxes.
We can give Kansans tools to demand their government return more choices and change course. For this reason, the Kansas Policy Institute created the Sandlian Center for Entrepreneurial Government. It captures the observation above and the entrepreneurial spirit needed to make Kansas a better place to live and work.
Reversing economic immobility, we will show where Kansas is headed if government taxes and spends. We’ll advise how government can better listen to Kansans, helping them keep more of what they earn while enacting the best policy to grow private wages and jobs. We’ll provide pathways to sensible regulations, ensuring public safety and encouraging new innovative businesses to keep prices low for Kansans. Most importantly, we’ll teach public organizations to provide better services at a better price to reverse the trend of out-migration seen in Kansas and Wichita.
For Kansans to live closer to the American dream, they need a responsive government that allows more opportunities and ensures their tax dollars are spent wisely. Politicians come and go, but the principles that can make this a reality never change.
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Michael Austin, Sandlian Center for Entrepreneurial GovernmentMichael Austin is the Director of the Sandlian Center for Entrepreneurial Government at the Kansas Policy Institute. In this role he is responsible for educating public organizations and the public on taxes and budget, using economic research to turn government inefficiencies into effective policy solutions. Before joining the Sandlian Center, Michael served as an economist in various roles of Kansas state government. As an adviser to former Kansas Governor Sam Brownback, Michael’s work made him the first to discover the drop in commodity and energy prices that plagued Kansas and the region, later termed “The Rural Recession.” Most recently as Chief Economist in the Kansas Department of Revenue, his research and presentation on the Federal Tax Cuts and Jobs Act, and its effects on Kansans jumpstarted discussions ensuring it will be a key concern in the upcoming Kansas legislative session.
Michael is a New York City transplant, living with his wife and two children in the Lawrence Area. Michael is a Washburn University School of Business Scholar earning his Bachelor of Business Administration and double majored in management and economics. Michael also graduated from the University of Kansas’s Department of Economics with a Master of Arts with honors. Email Michael at Michael.Austin@kansaspolicy.org.
For the Wichita metropolitan area in September 2018, jobs are up, the labor force is up, and the unemployment rate is down, compared to the same month one year ago.
Data released today by the Bureau of Labor Statistics, part of the United States Department of Labor, shows an improving employment situation for the Wichita Metropolitan Statistical Area.
Click for larger.
The best numbers for Wichita are the total nonfarm employment series, which rose from 294,400 last September to 299,600 this September. That’s an increase of 5,200 jobs, or 1.8 percent. (This data is not seasonally adjusted, so month-to-month comparisons are not valid.)
The unemployment rate fell to 3.3 percent, down from 3.9 percent one year ago.
Considering seasonally adjusted data from the household survey, the labor force rose by 1,315 persons (0.4 percent) in September 2018 from August 2018, the number of unemployed persons fell by 398 (3.6 percent), and the unemployment rate fell to 3.5 percent from 3.6 percent. The number of employed persons not working on farms rose to 298,510 in September from 296,797 the prior month, an increase of 1,713 persons, or 0.6 percent.
For September 2018, more jobs in Kansas than last September, but fewer than in August.
Data released this week from the Bureau of Labor Statistics, part of the United States Department of Labor, shows an improving jobs picture for Kansas in September 2018.
Over the year (September 2017 to September 2018), the Kansas labor force is up slightly, and also rising slightly over the past three months. These changes are small, all being in the range of 0.1 percent or less.
The number of unemployed persons continues to fall, declining by 1.3 percent from July to August. The unemployment rate was 3.3 percent in September, down from 3.6 percent from one year ago, and unchanged from August.
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The number of Kansas nonfarm jobs for September 2018 rose by 1.4 percent over last September, adding 19,600 jobs. This is using seasonally adjusted data, and the non-adjusted figure is slightly larger at 20,600.
From August 2018 to September 2018, nonfarm employment in Kansas fell by 6,900, which is 0.5 percent.
Each year the Kansas Department of Transportation surveys the condition of highway pavement and issues a report called the Network Optimization System (NOS) Survey. 1
Of the condition of highways, the report notes: “Since the data was first collected in 1983, the percentage of pavement surface in good condition has appreciably increased while the percentage of poor pavement has significantly decreased.”
Kansas Highway Conditions, through 2017. Click for larger.Here’s a chart of the conditions of Kansas roads and highways. 2 It shows that, for interstate highways, the percent of the system in good condition has been pretty level since 2001, although there is a slight decline recently that is within the range of normal year-to-year variation. For non-interstate highways, the percent in good condition fell starting in 2004, but has rebounded, with a small decline in the most recent year.
Based on these charts, there’s no factual basis to claim that Kansas roads and highways are deteriorating or crumbling.
KDOT notes that the condition report “…also shows that while the last few years have been challenging due to very tight budgets, KDOT and its partners continue to find means to maintain the pavement surface condition.” The most recent financial report from KDOT shows that spending on preservation has fallen significantly the past three years, while spending on maintenance has been level. 3
A look at some of the large economic development programs in Wichita and Kansas.
Here’s video of a presentation I gave at the Wichita Pachyderm Club this week on economic development incentives. The video was produced by Paul Soutar of Graphic Lens. View below, or click here to view at YouTube.
Following, articles that address some of the topics I presented:
Industrial revenue bonds in Kansas: Industrial Revenue Bonds are a mechanism that Kansas cities and counties use to allow companies to avoid paying property and sales taxes.
Wichita TIF projects: some background: Tax increment financing disrupts the usual flow of tax dollars, routing funds away from cash-strapped cities, counties, and schools back to the TIF-financed development. TIF creates distortions in the way cities develop, and researchers find that the use of TIF means lower economic growth.
Community improvement districts in Kansas: In Kansas Community Improvement Districts, merchants charge additional sales tax for the benefit of the property owners, instead of the general public.
STAR bonds in Kansas: The Kansas STAR bonds program provides a mechanism for spending by autopilot, without specific appropriation by the legislature.
For the Wichita metropolitan area in August 2018, jobs are up, the unemployment rate is down, and the labor force is smaller, compared to the same month one year ago.
Data released today by the Bureau of Labor Statistics, part of the United States Department of Labor, shows an improving employment situation for the Wichita Metropolitan Statistical Area.
Click for larger.
The best numbers for Wichita are the total nonfarm employment series, which rose from 291,300 last August to 296,000 this July. That’s an increase of 4,700 jobs, or 1.6 percent. (This data is not seasonally adjusted, so month-to-month comparisons are not valid.)
The unemployment rate fell to 3.8 percent, down from 4.6 percent from a year ago.
Considering seasonally adjusted data from the household survey, the labor force rose by five persons from July 2018, and the number of unemployed persons fell by 511 (4.7 percent), and the unemployment rate fell to 3.6 percent from 3.8 percent. The number of employed persons not on farms rose to 296,366 in August from 295,810 the prior month, an increase of 556 persons, or 0.2 percent.
What is the importance of agriculture to the Kansas economy?
United States Representative Roger Marshall said: “My district is the largest ag-producing congressional district in the country, with 60 percent of the economy being ag related. Forty percent of the Kansas economy is ag related.” (1)Quoted in the Wichita Eagle. Available at http://www.kansas.com/news/business/article125840694.html.
The Kansas Hospital Association argues: “In Table 5, the total income impact of health care services resulted in an estimated $19.4 billion for the economy. Thus, health care is directly or closely related to about 11.6 percent of the state’s total income.” (2)John Leatherman. The Importance of the Health Care Sector to the Kansas Economy. Archived here.
The Kansas Department of Transportation produced a study that finds: “In 2017, $20.6 billion in annual economic benefit was supported by aviation and aviation-related activities in Kansas, supported nearly 91,300 jobs, and generated more than $4.4 billion in annual payroll.” (3)Kansas Department of Transportation. Kansas Aviation Economic Impact Study. Available at https://www.ksdot.org/Assets/wwwksdotorg/bureaus/divAviation/pdf/2016EISExecutiveSummary.pdf. $20.6 billion is 14.9 percent of the $138.328 billion Kansas economy.
The nonalcoholic beverage industry says: “With a direct economic impact of $2.0 billion.” Then “Factoring in this retail impact further broadens the economic reach of the nonalcoholic beverage industry by an additional $1.7 billion beyond what our industry generates directly.” (4)American Beverage Association. Available at https://www.ameribev.org/files/resources/kansas-2.pdf. The total of $3.7 billion is about 2.7 percent of the Kansas economy. That’s coming just from nonalcoholic beverages.
We can easily find other examples of industry groups emphasizing their importance to the Kansas economy. But these findings are almost always exaggerated, especially in the case of agriculture.
For example, the Kansas Department of Agriculture says “Using the most recent IMPLAN data available (2015) adjusted for 2017, 65 agriculture, food, and food processing sectors were analyzed to determine their overall contribution to the Kansas economy. These 65 sectors have a total direct output of approximately $47.9 billion and support 125,714 jobs in Kansas.” (5)Kansas Department of Agriculture. Estimated Economic Impact of Agriculture, Food, and Food Processing Sectors. Available at https://agriculture.ks.gov/docs/default-source/ag-marketing/ag-contribution-2017.pdf. The document says this is 31.6 percent of Kansas GDP.
Direct output is defined in the same document in this paragraph: “Direct, indirect, and induced effects sum together to estimate the total economic contribution in the state. Direct effects capture the contribution from agricultural and food products. Indirect effects capture the economic benefit from farms and agricultural businesses purchasing inputs from supporting industries within the state. Induced effects capture the benefits created when employees of farms, agricultural businesses, and the supporting industries spend their wages on goods and services within the state.”
Adding indirect and induced effects results in $67,461,102,358 ($67.5 billion) in economic contribution, which the Department of Agriculture says is 44.5 percent of Kansas economic output, also called gross domestic product (GDP).
It is true that agricultural workers spend money like anyone else. They spend on food, shelter, taxes, recreation, cars, clothing, and other things. Therefore, an agriculture industry support group might say “Farmers keep small town Kansas restaurants in business, providing jobs for restaurant workers.”
Then, a restaurant industry support group might say “By buying meats and produce locally, restaurants keep Kansas farmers in business.”
All this is true. But we need to be careful when counting contributions to the whole. Here, when farmers eat at restaurants, that is counted as induced effects of agriculture contributing to Kansas GDP. But, the restaurant industry counts the production and serving of these meals as its own direct output to Kansas GDP.
Similarly, when the restaurant buys food from a farmer, the purchase counts as indirect effects of the restaurant industry as they purchase inputs and contribute to Kansas GDP. The farmer, of course, considers that as his direct output, again contributing to Kansas GDP.
This economic activity is good and natural, and the more, the better. But we can’t count it twice when allocating GDP to industries.
Consider the industry category “Dog and cat food manufacturing,” said by the Department of Agriculture to employ 2,183.7 people in Kansas, producing $3,125,350,139 ($3.1 billion) in contribution to the Kansas GDP. That’s 2.2 percent of Kansas GDP. Should all the output of this industry be considered part of Kansas agriculture? The manufacturing industry counts this as part of its contribution to GDP. It’s true that the inputs to the manufacturing are agricultural products, but we don’t know if they are ag products that are produced in Kansas and should be counted as part of Kansas GDP.
Kansas GDP by Industry
The nearby table shows that for 2017, agriculture counted for 3.2 percent of the Kansas economy. For the period 1997 to 2017, it was 2.7 percent. There are many industry groups with greater output than agriculture.
How are the GDP numbers for agriculture inflated to 44.5 percent? IMPLAN, that’s how. It is an economic model used to estimate contributions of economic activity to the larger economy. (6)University of Wisconsin Center for Cooperatives. IMPLAN Methodology. Available at http://reic.uwcc.wisc.edu/implan/.
It’s true that when an industry produces economic activity, it spawns other economic activity. These are the indirect and induced effects that IMPLAN produces. But these numbers are hugely inflated. When considering all industries, economic activity is counted more than once.
When it suits their needs, industry groups, like other special interest groups, use IMPLAN to boost their importance. Consider manufacturing, which at 16.4 percent of GDP is the second-largest industry in Kansas. When manufacturing companies appeal to state or local government for subsidies, they use IMPLAN or related mechanisms to inflate their importance. Almost everyone does this. It’s standard procedure.
Except: When multiple industries the same indirect and induced economic activity, such analysis becomes meaningless. If we added up the IMPLAN-calculated value of each industry to the Kansas economy, we’d end up with a value several times larger than the actual value. This is what the Kansas Department of Agriculture has done. We expect this behavior from companies or local economic development agencies when they appeal for economic development incentives and other forms of special treatment. They need to inflate their importance to gullible government bureaucrats and elected officials. But government agencies should not do this.
On the other hand, what is the harm in overstating the importance of an industry? The harm is that policy decisions are made using false evidence.
For August 2018, more jobs in Kansas, and a nearly unchanged labor force. Wichita jobs also rose.
Data released this week from the Bureau of Labor Statistics, part of the United States Department of Labor, shows an improving jobs picture for Kansas in August 2018.
Over the year (August 2017 to August 2018), the Kansas labor force is down slightly, while up slightly over the past three months. These changes are small, all being in the range of 0.1 percent or less.
The number of unemployed persons continues to fall, declining by 1.4 percent from July to August. The unemployment rate was 3.3 percent in August, down from 3.6 percent from one year ago, and from 3.4 percent in July.
Click for larger
The number of Kansas nonfarm jobs for August 2018 rose by 1.9 percent over last August, adding 26,600 jobs. This is using seasonally adjusted data, and the non-adjusted figure is larger at 29,900.
From July 2018 to August, jobs in Kansas rose by 3,600, which is 0.3 percent.
Click for larger
This release also provided some data for metropolitan areas. For the Wichita MSA, here are employees on nonfarm payrolls, not seasonally adjusted:
August 2017: 291,300
July 2018: 294,500
August 2018: 296,000 (up 4,700 jobs, or 1.6 percent over the year)
Comparing July 2018 to August 2018 isn’t meaningful using this data, as it is not adjusted for seasonality.
Photo by Patrick Emerson. Used under a Creative Commons license.
