Michael Stellern
Department of Economics, Rockhurst University
Overall Forecast: MOSTLY SUNNY

“I am more optimistic for 2011 than what I’ve seen for the last few years because of the possibilities for growth in a number of different areas.” There: Somebody has said it. In this case, Michael Stellern. His optimism may not
be wholly unbridled, but it’s an upbeat take on the economy at a time when many of us have forgotten what upbeat sounds like. Stellern looks for growth this year particularly in the service industries.

“That includes health services, which of course because of the Baby Boomers will be a growth industry for the next decade,” Stellern says. “I tell my students that if they want a career that’s relatively stable, you want a degree or to start pursuing work with the hospitals. And when the Boomers retire, they’ll need all kinds of help.”

Administrative and support services in that sector will perform well, he said, as will lower-wage sectors as Americans rediscover disposable income and head for the restaurants and bars. “As soon as the economy picks up, people will start going out more,” he said. Hiring also should pick up with both the federal employment and manufacturing sector, Stellern said. Other gains specific to the region are the life sciences. “We’re gaining a reputation in the animal-health corridor,” Stellern said. “There are 206 life-science companies with nearly 20,000 employees in 24 area counties; 85 of those are in Johnson County and 50 in Jackson County.”

And those in export-related industries should do well. “The dollar is relatively weak, so ag exports should remain strong,” he said.

He’s cautious about the lingering drag of the foreclosure mess, and finds rays of hope in the pent-up demand, still unrealized, for new homes. “That will turn around,” Stellern said, “but I don’t see anything imminent for Kansas City or the nation.”

His advice to business owners? “Prepare for a much stronger growth period than we’ve seen in two years. If you’re not prepared, you will lose out.”

Rajeev Bhattacharya
Olin School of Business, Washington University
Overall Forecast: MOSTLY SUNNY

If you want a true sense of where the two-state region is headed, look beyond the statistical indicators of month-to-month economic health, says Rajeev Bhattacharya. Focus instead on underlying fundamentals.

“I think the indicators are quite positive,” he says. “And fundamentally, I group
those for this region into the bucket of great value. One is the lower cost of living, and the other is our great universities and the high skill-based workers they produce. Those two categories put together give Missouri and Kansas great value in terms of human resources.” That, he says, will shape the regional prospects for recovery, which he says savvy business owners should be factoring in. “Plan for growth; growth is coming,” says Bhattacharya. The burgeoning consumer markets of China and India, he said, will generate demand for products and services that can be provided by Americans. What kinds? Tax services, he said, are a good example of white-collar work that will be in high demand as those overseas economies mature.

His other counsel to business decision-makers is to look closely at the quality of new workers coming out of school. “They are high quality, and you want to hire and train them quickly, so that by 2012 and 2013, when the
economy has increased and export markets have been targeted, these people will be ready to step into the breach. Earlier, it may have taken eight or more years of training for them to be ready to step into a management role, but with the quality we’re seeing, these kids can be in senior leadership positions in a much shorter period of time.”

The only downside he sees is the economic drag created by opposition to free trade, which he senses is stronger in the Midwest than in larger regional economies. China and India are creating wealth, not pulling it away from other nations. U.S. companies that are ready to assist in that process will thrive in the coming years, he says.

Ernie Goss
Department of Economics, Creighton University
Overall Forecast: PARTLY SUNNY

It may seem counter-intuitive, at a time when many businesses are sitting on cash, but Ernie Goss says they need to be talking to their bankers about loans. Right. Now. “Businesses should be borrowing at the current very favorable interest rates,” he says, and locking in rates for the maximum terms available. “I expect interest rates and borrowing costs to increase dramatically in the second half of 2011.”

In tandem with that, Goss says businesses should also prepare for rising inflationary pressures when they consider multi-year contracts, and he said that companies that can do business overseas need to cultivate those prospects: “Increasingly, domestic businesses must turn to international customers to insure higher rates of growth,” Goss says. “Growth among the BRIC nations (Brazil, Russia, India and China) will continue to outpace that of the U.S. Businesses that expand internationally will be rewarded with higher growth in sales as well as with greater ability to hedge risks.”

Goss noted that companies had been doing exceptional work cutting costs while maintaining their unit sales, leading to higher margins and profits—even as those businesses have done little new hiring. “Based on our monthly surveys, I expect 2011 to top 2010 for the U.S., Kansas and Missouri,” he said. Nonetheless, he still expects businesses to hire more briskly in 2011. “This will mean that we’ll see higher employment growth, slight dips in unemployment rates, and solid profits,” even as productivity growth slumps.

But not all is rosy. Three factors, he says, will threaten full recovery, and two could originate in Washington: Potential rejection of the recently negotiated South Korean trade pact, which he says “is critical for the U.S., Kansas and Missouri economies,” and continuing uncertainty facing businesses as Congress rides a policy teeter-totter on health-care reforms.

Factors beyond our control are those that could increase the value of the dollar. Sovereign debt default by Spain for example, would push global investors to sell European debt and buy U.S. debt. That would boost the dollar and place U.S. goods at a disadvantage in global markets. “This would negatively affect Kansas than Missouri. Kansas depends more heavily on exports than Missouri via Kansas’ international sale of aircraft and agricultural commodities.”