Business Climate and Economic Conditions
Kansas City is living up to its billing as a center of economic stability.
Nationally, it’s been The Recovery Without a Recovery—or about as close to that formulation as we could get. And yet, more than five years after the onset of the Great Recession, there are indicators of fresh economic blood coursing through the veins of the KC economy. Consider:
The decline in housing prices has stabilized and the balance between home buyers and sellers has become just that—a balance. In fact, the spring of 2013 heralded the first indicator in years that we were, technically speaking, in a seller’s market for residential realty.
Construction companies have seen revenues climb, although not yet to the levels of 2007.
Year-over-year sales tax receipts were up in most counties of the metropolitan area this spring.
And Kansas City’s unemployment rate, over the decades consistently a full percentage point or two below the national average, has dipped as low as 6.5 percent. Put that into a national context: If the U.S. rate stood at 6.5 percent, the Federal Reserve could shut off the cash spigot that has flooded the economy trying to stimulate consumer spending since 2012.
Overall, the business fundamentals of Greater Kansas City suggest a soundness that many larger cities, particularly those on the costs, would envy.
And not all of the pillars underlying that soundness have to do with recent economic improvements. There is a historical basis at work. Chief among those are the region’s central location, a cost of living sharply below national and major-metro levels, an unmatched transportation infrastructure and the quality and commitment of its work force. Another is the well-known economic diversity that frames the local economy, the cornerstone of which is a strong agricultural sector—among the largest private companies with multibillion-dollar revenues, agribusiness interests dominate.
The roster of Kansas City’s leading businesses, based on revenues, features some of the nation’s biggest names in grain shipping and handling, beef and pork production and distribution of packaged groceries. And the means to move those goods to market, by rail and truck, fuel a strong transportation/logistics sector. Truly, this region is the nation’s breadbasket, and because people are going to eat regardless of the national economic figures, the Kansas City metropolitan area enjoys something of a buffer from wide economic swings.
Meanwhile, the region continues to benefit from significant growth in a rapidly emerging life-sciences sector. It is a sector with two prongs specific to this region: One is the animal-health sciences corridor, a 250-mile belt stretching from Manhattan, Kan., to Columbia, Mo. At each end is a land grant university with major a research function, Kansas State and Missouri. The other prong
focuses on human health, and the University of Kansas and the University of Kansas Hospital are both at the fore of research advances there, with a number of start-up companies spinning off from that research focus.
Those developments reflect another, broader intangible factor that runs throughout the community: Its collective roll-up-the-sleeves approach to moving forward, which was elevated to iconic status in artist Norman Rockwell’s “Kansas City Spirit” commissioned by Hallmark Cards founder Joyce Hall nearly 60 years ago.
That no-nonsense approach to doing business pervades the region. Take banking, for example. One reason that Kansas City, as a region, experienced less fallout during the run-up to the Great Recession, and the national stagnation that has followed it, has been a shared sensibility in lending strategies by banks in the region. Forbes magazine, in fact, dubbed the 10th Federal Reserve District a “zone of sanity” in 2009, noting the stability that followed from conservative lending practices in this region.
Following the financial crisis of late 2008, banks across the country were required to upgrade their financial fundamentals. In doing so, those in this region have been criticized for paying more attention to shoring up their balance sheets than to priming the construction and development pump so vital to long-term economic vitality.
But in general, banks locally are flush with cash and are better prepared today to lend on projects that make sound fiscal sense. That is a quality that will frame business conditions in this region for years to come. 