2005 Kentucky Annual
Economic Report
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Contents
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This article reviews the path of recovery for the national economy and for Kentucky and makes forecasts for 2005. Though growing, the economy is recovering somewhat slower than many expected. Compared to the recoveries from the recessions of the 1990s and the 1980s, the present recovery displayed a longer delay in the start of job growth. Events and policies that may have influenced the path of recovery, including terrorism, oil prices, and monetary and fiscal policy, are discussed. With this as background, forecasts are made. The forecast is reasonably good, based in part on the strong performance of the economy in the last several quarters. Nationally, solid growth in GDP and employment, modest manufacturing job growth, a decline in the unemployment rate, and low inflation are expected. For Kentucky, I forecast good overall job gains, but not in manufacturing, and a decline in unemployment.
(121 kb)
We examine changes in participation in welfare (AFDC before 1996 and TANF after it) from 1995 to 2001 a period coinciding with welfare reform, the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996. In addition, we examine how participation in two other important transfer programs, Food Stamps and Supplemental Security Income (SSI) changes during the period. We find large and fairly uniform reductions in welfare participation from 1995 to 2001 throughout the state. Reductions in Food Stamps are smaller and less uniform. While SSI participation decreased in some regions of the state, it increased in other regions with changes in SSI participation negatively related to changes in Welfare participation, that is, those counties with the greatest reductions in Welfare participation had the largest increases (smallest decreases) in SSI participation
(1.8 mb)
Over the previous decade the United States economy added on net over 17 million jobs, while losing over 3 million in the manufacturing sector. Much of the growth occurred in business and professional services sector, where jobs on average paid over $60,000 per year. These lucrative office economy jobs emerged primarily in large cities, where firms have access to other knowledge-based firms, good air connections, and university programs. Unfortunately, Kentucky captured relatively few of these jobs and its major cities are struggling to compete with their peers around the region and the nation. I examine here some of recent evidence on urban economic development and suggest that Kentucky state fiscal policies need to be modernized so the state can better participate at the high end of the service sector.
(335 kb)
The AIK Manufacturing Business Confidence Survey is an annual joint effort between the Associated Industries of Kentucky and the Center for Business and Economic Research. The survey asks businesses to report on their actual performance over the past year and to make predictions for the next year in areas such as employment, sales, profits and capital expenditures. While actual performance in the manufacturing sector has continued to improve since the trough of the last recession, optimism about performance in 2005, while remaining positive, is not quite as strong as it has been in recent surveys.
(512 kb)
The primary purpose of this section is to provide some baseline demographic and economic information about the state of Kentucky and its position relative to neighboring states and the U.S. The primary sources of data are the 2000 Census, the 2003 Census population projections and the U.S. Bureau of Economic Analysis’ REIS. Topics covered include population, income, employment and employment share by industry.
(120 kb)