Economy’s decline causing job losses

by David Reed

April 17,2009

Bank executive Jeff MacLellan, who’s been collecting data and charting the local economy for more than 20 years, was startled when he saw a state agency’s estimate of Columbia’s unemployment for February – 6.7 percent.
There had been no announcements of major layoffs. But then again, First National Bank had recently been deluged with about 70 applications for a single teller’s job.
Still, 6.7 percent would be more than twice as high as any month before the economic downturn began three years ago and a big jump from the previous few months. So the chairman of First National Bank’s parent company, the Landrum Co., double-checked the number himself.
The Department of Economic Development’s research arm confirmed the estimate, and MacLellan included the number in the presentation of his annual economic review to the Columbia Board of Realtors earlier this month.
“The weather was a bit raw that night, and I told them, ‘You all have been a hardy group for about three years, and I know that because of the market, and you further proved your hardiness by braving this inclement weather. I’m glad you’re hardy because you’re not going to like what you’re going to see.”

Bank executive Jeff MacLellan, who’s been collecting data and charting the local economy for more than 20 years, was startled when he saw a state agency’s estimate of Columbia’s unemployment for February – 6.7 percent.
There had been no announcements of major layoffs. But then again, First National Bank had recently been deluged with about 70 applications for a single teller’s job.
Still, 6.7 percent would be more than twice as high as any month before the economic downturn began three years ago and a big jump from the previous few months. So the chairman of First National Bank’s parent company, the Landrum Co., double-checked the number himself.
The Department of Economic Development’s research arm confirmed the estimate, and MacLellan included the number in the presentation of his annual economic review to the Columbia Board of Realtors earlier this month.
“The weather was a bit raw that night, and I told them, ‘You all have been a hardy group for about three years, and I know that because of the market, and you further proved your hardiness by braving this inclement weather. I’m glad you’re hardy because you’re not going to like what you’re going to see.”
MacLellan projected a series of charts that basically showed the inverted ‘V’ of the local economy – a steep rise for several years followed by an even steeper decline. But at the end of his presentation to the realtors, he predicted that the economy is about to hit its bottom, and the turnaround will take place later this year.
Here’s what falling off the housing market cliff looked like: The number of houses sold dropped from a peak of 2,900 in 2005 to 2,301 in ‘06, 2,079 in ‘05, 1,715 in ‘08 and, if the first quarter sales are annualized, 1,351 this year.

MacLellan

“That would take us back to levels we haven’t seen since the early 1990s,” MacLellan said during his presentation for the CBT. “We had three years of double-digit declines in real estate sales and it looks like we’re working on a fourth.”
MacLellan pointed out that the local housing industry had an “abysmal” start of the year, with first-quarter sales 30 percent lower than the same quarter last year.  He said realtors see activity “really picking up” this spring, though, and he added that the low interest rates, a big tax credit for first-time home buyers and the federal government’s monetary and fiscal stimulus should help pick up the pace.
While the housing market “took the brunt of the downturn” for the first two years of the downturn, “the rest of the economy seems to have joined the real estate sector,” he said.
The most dramatic statistic was the loss in jobs – The overall number was 95,100 in ‘07 and 92,700, a drop of  2,400.

Highlights of MacLellan’s summary of economic activity in 2008:

• The unemployment rate rose from 3.5 percent in 2007 to 5.2 percent in 2008, the highest in decades but still two percentage points below the national rate. (While the city’s rate continued rising, the DED researchers in mid-April revised the February unemployment rate in Columbia to 5.9 percent)
• Enrollment at the University of Missouri rose by 1,691 students to 29,761 and enrollment at Columbia public schools rose by 224 students to 17,307. Counting the other colleges and private schools, the city now has about 50,000 students.
• MU’s enrollment is expected to rise again, by 700 to 1,000 students.
• Commercial building dropped 73 percent, from $86.4 million worth of construction to $23.6 million
• Foreclosures increased from 231 to 367, an all-time high. However, the number in the first quarter of this year is below 1Q ‘09, and if the trend continues there would be 304 foreclosures in 2009.
• The number of licensed businesses, after averaging a net gain of about 100 every year since the 1980s, fell by about 100 in 2007 to 4,902 and went down again to 4,807 in ‘08.
• Retail sales were flat in 2008 and are running behind in 1Q ‘09.

“Growth at MU and the steadiness of the health care and insurance industries should keep Columbia relatively more stable than other communities,” McLellan said. “We should begin to turn around sooner than other communities.”