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Optimism builds for Wichita economy in 2012
October 7, 2011
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  • October 6, 2011
    By: Dan Voorhis

    It’s been a long gloomy downturn, but Wichita’s economy will see a few rays of sunshine in 2012, according to a forecast by Wichita State University.

    The forecast, to be delivered at today’s 32nd annual Wichita Area Economic Outlook Conference, calls for 3,800 more jobs in the metro area next year – a gain of 1.3 percent.

    Most sectors of the economy will add jobs, said the study’s chief author, Jeremy Hill, director of WSU’s Center for Economic Development and Business Research.

    The biggest gainer will be business and professional services, which includes temp workers, with about 1,900 new jobs. Manufacturing and restaurants and hotels will also experience substantial gains.

    Sectors that will see continued losses next year are information, financial services and wholesale trade.

    Despite the negative economic and political news from this summer, Hill said that he’s encouraged. Almost 80 percent of local employers in the center’s recent survey said they would maintain or add more jobs over the next three months.

    “I’m optimistic,” he said. “We’ve been way more negative in the last few months, way more negative than was deserved.”

    More jobs would be welcome news for Tammy Jones of Wichita, who is unemployed and this week searched for work at a job fair at Century II.

    A long-time medical assistant, Jones tried to better her family’s future a few years ago by going to work at Hawker Beechcraft as a sheetmetal mechanic. Her husband was also a sheetmetal worker there.

    Both got laid off a year and a half ago. It’s been very tough to make ends meet since then, especially after unemployment benefits ran out, she said.

    She had started classes at Brown Mackie College in Salina to become an licensed practical nurse but quit when she could no longer afford the gas for her trips there.

    Her oldest son, DeAndre, who was on football scholarship at Butler Community College, also quit to look for work to support the family, she said. He was with her at the job fair.

    “Some days you have to choose between eating and putting gas in the car,” she said.

    Slow, but upward

    Much of what has waylaid Wichita’s economy is the troubled U.S. and European economies, but Hill downplays much of the recent barrage of bad news.

    Political bickering in Congress, the downgrade of the nation’s credit rating, the fight over the debt ceiling, the Fed’s quantitative easing – all of that is more smoke than fire, he said.

    “What was the real effect on the actual consumer? Very little, but it drove down both consumer and business confidence,” he said. “That’s an irrational concern.”

    All of that “irrational” concern, he speculates, helped depress sales and hiring in August, despite indications that companies want more workers.

    Hills said he expects to see a bounce in hiring nationally in September when employers start to relax and look ahead.

    However, Hill does caution that the European debt crisis and trade protectionism could have real impacts if they are not resolved correctly because of the impact of exporting on everyday lives in Wichita.

    Wichita is one of the most export-dependent areas in the U.S., whether it be jets, farm machinery or outsource computer monitoring.

    Schizophrenic aircraft

    First among those export industries, aircraft manufacturing, is facing three quite different outlooks, said aircraft industry analyst Richard Aboulafia, of the Teal Group.

    Commercial jets are seeing a strong and growing outlook, he said, particularly with the slow ramp-up of production of the 787 now that the first one has been delivered.

    The depressed corporate jet side might start to recover in 2012, he said. But that’s a big “might.”

    The early indicators are there. Corporate profits have been hitting new records. And the sale of used jets in 2011 is up 11 percent over 2010, as is the price of those jets. As the inventory of used jets is cleared out, more customers will choose to buy new.

    “All the indicators say we should see more jobs in 2012, but it’s too early to declare victory,” Aboulafia said.
    “Everybody is concerned about a double dip (recession),” he added. “Corporations have $2 trillion in cash, but they just aren’t spending it.”

    A third market, for military aircraft, will remain solid next year, he said, although there will likely be plenty of defense cuts in coming years.

    The forecast calls for more than 500 new jobs among companies that make durable goods, such as aircraft.

    The winners

    The biggest growth is expected to come from the business and professional service category.

    The category includes temp agencies, traditionally a source of labor for companies that are feeling unsure about the future, but it also includes a host of small and medium-sized businesses such as law offices, janitorial services and ad agencies.

    These firms tend to gain business only after the local economy’s major engines, such as the aircraft companies, start to rebound.

    One such employer is Alex Nivison, who co-owns the local franchise of Computer Troubleshooters, a company that specializes in emergency computer repair for businesses and people.

    He bought the franchise in January after working for the previous owner. 2011 was going well, he said, until the summer, when people stopped calling.

    But since the weather has cooled, business has warmed up a bit, he said.

    “Honestly, I foresee that if things continue on the current trend I could be looking at hiring somebody in the next month or two.”

    Other factors

    The local economy won’t get as much help from the agricultural sector next year, as prices fall and the drought threatens the amount of crops and beef harvested. Farmers are already saying that the drought is threatening next June’s wheat crop, which is just being planted now.

    Hill said he expects some employment growth in the oil and gas industry, which is on the cusp of a sizable boom across southern Kansas caused by new technology.

    In other sectors, Hill said:

    * Retailers will see some job gains because upper-income shoppers are returning. But middle-class consumers aren’t.

    “They are cash-strapped,” Hill said.

    * Health care will continue to add jobs as baby boomers age and need more medical care.

    * Construction isn’t expected to grow much because of continued overcapacity.

    * Banks say they will keep trimming jobs to maintain profits in face of federal regulation.

    2012 may be a mixed bag, but for Jones, the job seeker, it’s already promising to be a better year.

    Her husband recently got on at Spirit AeroSystems, so they no longer face destitution. At this point, she’s just hoping to bolster the family income.

    She is planning to trade the family’s Ford Expedition for a more fuel-efficient car and transfer her Brown Mackie College credits to Wichita Area Technical College to restart her career change to nursing.
    “It’s getting better,” she said.

    Date: 2011-10-06