State's economy improving, but still down

14 February 2021 - Keith Lawrence (Messenger-Inquirer)

The Kentucky Chamber of Commerce recently released the first of a series of quarterly reports, “Kentucky’s Economic Recovery: A Quarterly Update of Workforce, Employment, State GDP, and Exports,” in a partnership with the University of Kentucky Center for Business and Economic Research.

It traces what the coronavirus pandemic, which hit in March, did to the state’s economy and how the recovery is coming.

The report says the pandemic has “shaken the economy to its core.”

“Very quickly, Kentucky set a record for the number of unemployment claims with more than 591,000 claims filed in six weeks, small businesses were closing, and our workforce participation rate plummeted to the lowest in the nation,” it said.

Highlights include:

  • Kentucky’s Gross Domestic Product bounced back during the third quarter of 2020, but was still below pre-pandemic levels.
  • While employment was still down 5.2% in December compared to a year ago, Kentucky has recovered 65% of jobs lost during the initial months of the pandemic.
  • As of December 2020, Kentucky’s unemployment rate stood at 6%, down from 16.6% in April 2020.
  • Kentucky’s labor participation rate, which was 59.6% just before the pandemic, dropped to 57.5% in December 2020.

Ashli Watts, president of the Kentucky Chamber, said, “Our economy will look different post-recovery, as business sectors have shifted and consumer habits have evolved. In a time of such transition, we must make sure Kentucky is a place that attracts growth, talent, and the job creators that will lead us into the future.”

But, she said, “In order to achieve this, we must have a strong, educated and skilled workforce and a competitive economy. With federal and state aid helping keep the economy afloat, the extent of damage occurred over the last 11 months is still yet to be seen.”

Prioritize recovery

Watts said, “We must prioritize our economic recovery. We are hopeful these quarterly reports will keep our eye on the ball as we work toward a post-pandemic economy.”

“While the state’s economy is improving, there is still a high degree of uncertainty associated with the pace of recovery,” said Michael W. Clark, associate professor of economics and director of the Center for Business and Economic Research at the University of Kentucky’s Gatton College of Business and Economics, in a news release.

He said, “Kentucky’s economy is still operating below pre-pandemic levels. The rate of continued recovery will depend on the vaccine roll-out and strengthening consumer confidence.”

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‘Screeching halt’Watts said, “In February 2020, Kentucky’s economy was strong. We had a record number of job investments, record low unemployment and job creators were charging full-speed ahead as we entered a new decade. Of course, all of that came to a screeching halt in March when the COVID-19 pandemic paralyzed our economy.”

Clark said Kentucky lost more than 326,000 jobs last spring.

He said employment growth fell in December after several months of increases “as cold weather and reduced capacity for indoor dining caused restaurants and other hospitality businesses to reduce their payrolls again.”

In 2019, the report said, Kentucky exports totaled $33 billion, accounting for 15% of the commonwealth’s GDP.

April’s exports fell 55% from a year earlier.

And in November, they were still 18% lower than in November 2019.

The report said Kentucky’s unemployment rate has declined in recent months because companies are hiring again and because fewer people are in the workforce.

Before the pandemic, 59.6% of Kentuckians were in the workforce.

In December, it was 57.5% — the sixth-lowest rate in the nation.

Many people have become discouraged and quit looking for jobs, the report said.

Employment in the state was still down by 100,900 jobs in December from a year earlier, it said.

The state’s leisure and hospitality sector saw the largest employment losses — down 92,700 jobs between December 2019 and April 2020.

But the report said, “Historically low mortgage rates and a growing desire for more living space has fueled housing demand in Kentucky. However, supply has not kept up with demand as families have been reluctant to list their homes, possibly due to the heightened uncertainty with the pandemic and recession.”