Forecast Optimistic for Wichita Regional Economy

Jeremy Hill, executive director for the Center for Economic Development and Business Research at Wichita State University, gave an optimistic picture of Wichita’s economy at a Chamber Sunrise Scrambler February 15.

Employment and labor are up, durable goods and wheat prices are up. These economic drivers are what’s fueling the growth the Wichita economy is seeing, Hill said.

“These drivers did not do as well in the previous decade,” Hill said. “That’s why our growth was stagnant. Kansas is on a growth track, and Wichita is going to lead that growth.”

It’s an optimistic view considering Wichita has previously lagged in growth indicators.

“I’m anticipating about 1-percent growth in Wichita in 2023,” Hill said. “And I expect we’ll do better in 2024.”

Hill said the national focus on a recession may have held Kansas back a bit, even though the state’s economy grew in 2022. Inflation, wage disparities, shifts in demand, supply chain issues and consumer hesitation in light of that national focus on a possible recession were hurdles Kansas businesses had to overcome.

“From talking with manufacturers over the past few weeks, I’m hearing that the supply chain lag is shrinking,” Hill said.

The Federal Reserve has been slowly increasing interest rates to slow the economy and reduce inflation. Hill maintains that the inflation experienced in 2022 was supply-chain driven, and has already started to level out. Now factors outside the control of the Federal Reserve – the availability of energy as Russia and the Ukraine continue to battle – are driving inflation.

“Costs to farmers increased because energy costs increased,” Hill said. “That’s driving increases in food costs. Those increase are hardest on those in the lowest income households. If that’s your primary customer, they’re going to be struggling.”

Hill said we’re not back to normal after the pandemic, but he is optimistic about business conditions after touring the state for the past couple of weeks.

The tight employment market continues to be a concern, with more open positions than candidates. Kansas’ employee to population ratio shows that households are fully employed.

There are several ways that employers are filling the gap. More high school students are entering the workforce. Another solution is employers are adding more technology to streamline processes. Businesses are also outsourcing parts of their business that they can’t do efficiently and redirecting their labor force to areas where they are more efficient.

“There are going to be layoffs, but those employees are going to move to other sectors where the demand is greater,” Hill said. That will mean that employers will have more qualified candidates.

An area where Hill said Kansas continues to lag behind is in gross wages. The average inflation-adjusted gross wage in the US is $67,610, but in Kansas, it’s $53,422.

“In Kansas, we don’t have a labor problem, we have a wage problem,” Hill said.

The state has already experience out-migration as people moved out of state to work in other locations. Now, employers have to be looking for ways to compete with employers offering the same jobs in other states.

“We have opportunities – soak them up,” Hill said.

He acknowledged there are some national and international factors that could derail his projections. “There’s always some uncertainty,” he said.

Those factors include inflation, federal policy errors, the federal debt crisis and debt ceiling, market corrections, global slowdown and cyberattack. Hill also said growing tension with China could be a big factor if those tensions worsen.

The next Sunrise Scrambler will be March 22. Register here.