Economic Overview

Jeremy Hill from the Center for Economic Development and Business Research at Wichita State University speaks Friday at the 2021 community outlook event regarding the Kansas economy in 2020 and predictions for 2021.

Business and government leaders in Parsons gathered Friday to gain insight on the economic outlook for Kansas and Labette County.

Speakers were Parsons Economic Development Director Jim Zaleski and Jeremy Hill, Center for Economic Development and Business Research at Wichita State University.

Hill said the last year has been somewhat like a disaster action movie — before the storm. First, there was a nerd who knew what was coming, but everyone else was oblivious. Second, disaster hits, and everyone is trying to scramble and third, everyone is in survival mode the rest of the year.

According to the center’s applied research, Kansas has done fairly well compared to the rest of the nation in many aspects, and Labette County has rebounded exceptionally well where people have been more engaged in returning to work and social activities, like eating out at restaurants.

Manufacturing was the hardest hit by COVID-19.

“There are sectors that were doing fine before that are struggling today and sectors that are absolutely taking off,” Hill said, noting the nondurable side of manufacturing, such as food, has been growing.

He attributed that to the fact people have been eating at home a lot more, taking in lots of comfort foods, which Kansas happens to make, from chips and candy to Twinkies and beef. He said there has been lots of demand, so industries have been expanding, shifting to meet the demand.

He said where farmers were struggling last year on the grain side, this past year soybeans and corn overtook wheat production as the biggest producing crops and it has been financially flushing farmers who were struggling, as they are taking in good gains.

Transportation and energy have suffered. Cost per barrel of oil is down, and Hill said it is anticipated it will be around three years before prices reach the profitability mark of $85 a barrel again. Part of this is due to the glut of oil, producing large surpluses with vastly reduced demand due to the pandemic.

Labette County’s retail sales while impacted, have done better than other areas like urban and bedroom communities, given it is smaller, more self-contained and residents don’t have to travel far to work.

Zaleski said Parsons has had some losses like Super 8, Burger King and Cato, but in those instances they are specific losses due to poor management or absentee management from what he has learned in exit interviews. He believes it would have been different with local ownership, which really underscores the need for local entrepreneurship in which there is a vested interest and the owner is known in the community. While those businesses have gone out, some new ones have come in, like Dominoes, Dollar Tree, Taco Bell and Frieghtliner.

“We will continue to focus on retail and continue to stress the 400/59 intersection,” Zaleski said, talking about Parsons’ new “front door.”

He added, “We are growing faster than 51 counties in retail sales across the state.”

Moving back to last year at a glance, Hill said unemployment has been staggering, with urban areas harder hit early in the year, however the labor force has stayed up in Kansas.

Asked about the impact of federal stimulus on unemployment insurance, Hill said admittedly he thought $600 on top of state unemployment would not be good for Kansas. The reason, he said, is he ran the numbers, and 73% to 75% of Kansans were better off un unemployment than their current job. However, he said, because of fear of COVID and not having a job later, the labor market has stayed very active and people got reemployed whenever they could.

Zaleski said Labette County has returned to pre-COVID unemployment levels, and is within 0.2% of where it was in December a year ago, though he said that is a double-edged sword because employment rates are still below the desirable level.

This raised some questions regarding how to turn those numbers around. 

Hill said there always seems to be a huge fear that trying to get a new employer to move in would cause a labor shortage. On the economic development side, there is always a question of an adequate workforce in place to fill the jobs. Hill said it really doesn’t matter.

The center has studied the long history across the U.S. of when counties grow, when they decline and where people came from when they migrated in. He said neither of those fears hold any legitimacy based on the facts.

“If you have the job, it’s just all about the wage,” Hill said. 

There are very rural places that have massive growth because they have an employer that is growing and increasing wages, which attracts labor and encourages people to move in.

“The real issue is we weren’t generating jobs over the last decade .. and that is why we had outward migration in Kansas,” Hill said. “We just weren’t creating the jobs and wages were really low.”

He has seen the opposite when elsewhere in the U.S. jobs and pay were stagnant or declining, but increasing in Kansas and people moved in.

“We have a little too much fear driven by ‘They’re not going to come,’ when history shows differently, but you have to increase wages,” Hill said.

Hill said it is not a “Field of Dreams” principle, but simply wages are why people come and why they leave Kansas.

“It is just the price mechanism within the market,“ Hill said. 

Such could help prevent the brain drain that occurs, where Kansas’ well-educated students leave. The fact remains global competition has depleted jobs in the U.S. Less productivity and downward wages make it less effective to keep people. Hill said markets switch, and Kansas must allow for change. Jobs with good pay are what will draw people and keep people local. Quality of life comes in after that, helping people choose one community over the other, but it is marginal to the decisions.

Asked about the political confidence toward governments spending money, Hill said local governments are struggling because of the tax structures over the last several years. Local governments are even more dependent on the local sales tax, and that means it is a much more volatile tax. Retail sales, while declining the last year, have surprisingly come up more than expected. Impacts are still drastic for some cities. He did say, however, because of the current bond financing, now is the time to spend on big projects if possible.

“It is a great time to spend, but it depends where and if it is feasible or not, and there are risks associated with that,” Hill said. 

Zaleski said Labette County fortunately has neighborhood revitalization agreements, which allows the county to offer tax incentives to business and industry.

Asked about potential impacts of an increase in federal minimum wage on small businesses, Hill said if it is done incrementally, allowing businesses the opportunity to adjust over a period of several years, they should survive and with a more minimal impact on price inflation. He said some inflation is actually good for the economy. There is also the benefit of increased wages going back into the community, supporting businesses and local government. At the same time, Hill said, if the minimum wage were to be raised all at once, it could be devastating to businesses. 

An overall perspective of Kansas economic trends and a Kansas economic review in addition to information on Labette County specifically are available at www.cedbr.org.

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