Kansas City's economy likely to cool in the near term
Despite the dramatic impact of the post sub-prime tightening of credit conditions on single-family housing demand, Kansas City's year-over-year employment growth in January was 2%, more than twice the 0.7% rate for the country as a whole.

By far the major contributor to this solid job growth in January was professional and business services, a sector that added over 6,000 new jobs in the past 12 months.

Other sectors with significant job gains were: government services (+4,500 jobs), education services (+4,200); trade, transportation and utilities (+3,300); and financial services (+1,500). Consistent with most other major metro areas across the country, Kansas City's manufacturing sector continued to shrink in January (-1.7% year-over-year employment) as did its construction sector (-1.0%). Sustained growth of professional, scientific and technical services — due in part to the growth of the expanding animal health sciences sector, including the expansion of the Fort Dodge Animal Health facilities — has been a major contributor to the healthy increase in office-based employment over the past year. As a result, the office vacancy rate in the Kansas City metro area has fallen to a four-year low and office rents are up by 3.8% year over year.

Looking forward, in the near term, the prospects for Kansas City are likely to be hobbled by the general slowdown of growth in the country as a whole. This view is supported by the "modest" hiring outlook for the city reported in the latest Manpower Employment Outlook.

As a result, consumers in Kansas City, just like their counterparts across the country, will probably rein in their spending. Reduced consumer spending is likely to cause a major slowdown in retail construction, one that could last into 2010.

However, ongoing investment in the redevelopment of the Power and Light District and the area adjacent to the Sprint Center should act as a catalyst to new commercial and residential building and thereby help sow the seeds for a local economic recovery beginning late in 2008 or early in 2009.