Labor scarcity continues to plague our region

Nov 04, 2022
| Posted in
Economy & Housing
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September’s workforce data suggests that employment growth continues despite the Federal Reserve’s actions to slow the economy to reduce inflation.

Employment growth added 1,400 jobs in September, adding to the 2,500 jobs added in August. Job posting data saw a decline of 3,068 postings to 91,506, though this decline seems to be a largely seasonal pattern. Compared to last year at this time, the number of job postings is nearly identical, indicating that hiring demand from area employers remains strong.
 
The seasonally adjusted unemployment rate declined to 2.6%, a sign that the labor market remains tight in the region. With the newly added employment, Kansas City has now recovered 89% of the 139,300 jobs lost in the COVID-19 recession. Kansas City needs to recover another 15,500 jobs to return to the pre-pandemic peak of January 2020.

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Peer metro comparison

Kansas City ranks 10th overall in annual employment growth out of our 11 benchmark metros, maintaining the same position as last month. Kansas City is far behind the leaders like Nashville (6.1%) and Charlotte (5.9%). Annual growth increased by 2% over the 12-month period ending in September. Although last month’s low growth rate reflected a particularly high growth period from the previous year, this month’s results are more representative of Kansas City’s overall growth post-pandemic. While 2% may seem low compared to other metros, it is still nearly double the region’s job growth in the year before the pandemic. 

Like last month, the region’s unemployment rate is among the lowest in the peer metro group. Kansas City’s unemployment rate of 2.6% is second only to Minneapolis’ 2.0% unemployment rate.

Specific industries

Four industry sectors provided most of the employment growth over the past 12 months: Leisure & Hospitality (5,800 jobs), Professional/Technical Services (5,600 jobs), Health Services & Private Education (5,000 jobs) and Mining, Logging, & Construction (4,700 jobs). 

Job growth differed among industry sectors showing growth. Mining, Logging, and Construction along with Transportation largely grew even during the low points of the pandemic recession. Professional/Technical Services and Health Services & Private Education began to accelerate over the last year and have joined Mining, Logging and Construction in exceeding their pre-pandemic employment levels. Leisure & Hospitality’s large growth still reflects their continuing rebound from the large losses caused by pandemic shutdowns. 

On the other end of the spectrum, four industry sectors lost jobs over the past 12-month period: Local Government (down 400 jobs), Administrative Support & Waste Management (down 800 jobs), Federal Government (down 900 jobs), and Financial Services (down 2,900 jobs). 

Employment growth continues in the Kansas City region but at a rate slower than many of our peer metros. As a result, the region’s job levels still have not fully recovered from the COVID-19 recession. One likely contributor to this is labor scarcity given the low unemployment rate relative to our other peer metros. Employers continue to seek workers at a high rate but the supply simply isn’t there. As a result, the labor market is still running very hot, despite the Federal Open Market Committee (FOMC) of the Federal Reserve Board raising interest rates from near 0% to near 4% between March and November of this year. While the housing market is showing signs of cooling as 30-year fixed mortgage rates increase to 7%, so far this cooling has not spread to the labor market. 

It appears it will take hard data showing dramatically slower national employment growth before the FOMC changes course. Unfortunately, there is a very fine line between low employment growth and no or negative employment growth. If the FOMC is unable to walk that line, the result will be a recession sometime in 2023. Such a recession would mean that the Kansas City Region won’t recover all the jobs lost during the pandemic until 2024.

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