The Missouri Economy:In Transition or Decline?

David M. MitchellAssociate Professor –Dept. of Economics

Director—Bureau of Economic Research and the Center for Economic Education

Missouri State University

The Missouri Economy in Brief Missouri United States

Population 1990 5,117,073 248,709,873 Population 2000 5,603,553 282,124,631 Population 2009 5,911,605 304,059,724

Personal Income (thds) $216,546,820 $12,225,589,000

Personal Income per capita $36,631 $40,208 Average Earnings per job $45,230 $50,259

Employment Jan 2000 2,876,695 136,559,000

Employment Nov 2007 2,867,391 146,665,000 Employment October 2009 2,718,303 138,275,000

Jobs lost in recession 149,088 8,390,000

Jobs gained in current decade -158,392 1,716,000

2009 Industry Employment (Percent)

Missouri United States LQ

Construction 4.7 4.8 0.98 Finance 6.0 5.9 1.01

Government 16.5 17.0 0.97 Information 2.3 2.2 1.07

Leisure 10.1 10.0 1.01 Durable Manufacturing 5.7 5.6 1.02

Manufacturing 9.7 9.1 1.06 Nondurable

Manufacturing 4.0 3.5 1.13 Professional/Business

Services 12.2 12.7 0.96 Other Services 4.3 4.1 1.05

Trade, Transportation, and Utilities 19.5 19.2 1.02

Missouri Regions and Major MSAs

United States and Missouri Housing Price Comparison

50

100

150

200

250

300

350

400

1980 1985 1990 1995 2000 2005

United States Housing Price Index (1980:1 = 100)Missouri Housing Price Index (1980:1 = 100)

Housing Price Index for Major Missouri Cities(1995:1 = 100)

80

100

120

140

160

180

200

1996 1998 2000 2002 2004 2006 2008

Springfield MSA St. LouisKansas City

Missouri SA Employment (HH survey)

1800000

2000000

2200000

2400000

2600000

2800000

3000000

1980 1985 1990 1995 2000 2005

Missouri Employment (SA)

1800000

2000000

2200000

2400000

2600000

2800000

3000000

1980 1985 1990 1995 2000 2005

May 1996

Missouri SA employment Jan 00 to Oct 09

2700000

2750000

2800000

2850000

2900000

00 01 02 03 04 05 06 07 08 09

Missouri Employment SA Jan 00 to Oct 09

2700000

2750000

2800000

2850000

2900000

00 01 02 03 04 05 06 07 08 09

Employment by City/Rural (Jan 1990 = 100)

90

100

110

120

130

140

90 92 94 96 98 00 02 04 06 08

St. LouisKansas City

Minor MSARural

Which MO Industries have lost jobs? Percent of job losses by Industry

Job Loss Comparison (Dec 07-Oct 09)

Mo Professional and Business Employment

200

220

240

260

280

300

320

340

360

90 92 94 96 98 00 02 04 06 08

Missouri Construction Employment

80

90

100

110

120

130

140

150

160

90 92 94 96 98 00 02 04 06 08

Missouri Manufacturing Employment

240

260

280

300

320

340

360

380

400

90 92 94 96 98 00 02 04 06 08

Change in Missouri Employment (Nov 2007 to Oct 2009)

Missouri Employment

Employment

-28,436 to -20,000

-20,000 to - 5,0000

-5,000 to - 2,500

-2,500 to -1,000

-1,000 to 0

0 to 500

500 to 1,060

US and Missouri Employment (Jan 2000 = 100)

94

96

98

100

102

104

106

108

00 01 02 03 04 05 06 07 08 09

Missouri US

Missouri Employment (Long Run)

Missouri Unemployment Rate by County

Missouri

Rate

5.0 - 6.0

6.0 - 8.0

8.0 - 10.0

10.0 - 12.0

12.0 - 14.0

Missouri Unemployment Rate by County

Missouri

Rate

5.0 - 6.0

6.0 - 8.0

8.0 - 10.0

10.0 - 12.0

12.0 - 14.0

Missouri Unemployment Rate (SA)

2

3

4

5

6

7

8

9

10

11

1980 1985 1990 1995 2000 2005

United States and Missouri Unemployment Rates Compared

2

3

4

5

6

7

8

9

10

11

1980 1985 1990 1995 2000 2005

US MO

Change in Real Taxable Sales 2006-2009 (YTD)

Missouri Taxable Sales

Dollar

-1.7 billion to -150 million

-150 million to -25 million

-25 million to - 10 million

-10 million to 0

0 to 10 million

10 million to 20 million

20 million +

Change in Real Taxable Sales (2006-2009 YTD)

Missouri Taxable Sales

Percent

-17.1 - -10.0

-10.0 - -5.0

-5.0 - 0.0

0.0 - 10.00

10.0 - 27.1

• Every lost job in Missouri diminishes taxable sales by $16,435 or decreases in sales tax revenue of approximately $1,477.

• Every job lost in Missouri diminishes total tax collections (income and sales tax) by about $3,600—therefore, we see a decrease of approximately $570 million. This does not include the decrease in gas tax, alcohol, etc. or the increase in costs for greater AFDC, food stamps, Medicaid, unemployment compensation, etc.

• Also, consider what employment would be at if we didn’t have the ‘bowl effect’ and had grown at the rate in the 1990s. Assume no recession, and employment would be 3,427,000 today—an additional 700,000 jobs or $2.5 billion in the state budget or an increased $11.5 billion in taxable sales compared to today.

• With the same percentage drop in the current recession? Employment would be 3,058,000 or an increase of 325,000 jobs compared to today—an additional $1.2 billion in the state budget or an increased $5.3 billion compared to today

Missouri Real Taxable Sales (SA)

1.00E+10

1.10E+10

1.20E+10

1.30E+10

1.40E+10

1.50E+10

1.60E+10

1.70E+10

1.80E+10

1.90E+10

90 92 94 96 98 00 02 04 06 08

Forecast of Missouri for 2010

• Based on US GDP growing at 2.1% and US unemployment rate of 9.6%

• Mo Employment will decline another 5,040 to 2.713 million

• Mo Unemployment Rate of 10.1%• Missouri Taxable Sales—flat• Missouri Tax Revenue—down 4%

Actual vs. Projected Missouri Personal Income(Sept. 2007 dollars)

Cumulative percent actual MO PI is below Projected PI

Growth of Missouri PI less Growth of US PI

-3

-2

-1

0

1

2

3

1970 1975 1980 1985 1990 1995 2000 2005

Missouri Gross State Product as a percent of US GDP

Missouri GSP (Real and Projected)

Cumulative percent actual MO GSP is below Projected GSP

Growth of Missouri GSP less Growth of US GDP

-5

-4

-3

-2

-1

0

1

2

3

65 70 75 80 85 90 95 00 05

US and Mo Employment Comparisons

90

100

110

120

130

140

150

160

170

1980 1985 1990 1995 2000 2005

US Employment Index (Jan 1976=100)Mo Employment Index

Actual and Projected Missouri Employment

1500000

2000000

2500000

3000000

3500000

4000000

4500000

5000000

1980 1985 1990 1995 2000 2005

Actual MO EmploymentProjected MO Employment

Difference between Projected and Actual Jobs

0

400000

800000

1200000

1600000

2000000

1980 1985 1990 1995 2000 2005

"Lost Jobs"

Growth of Missouri Employment less Growth of US EmploymentSeasonally Adjusted Year over Year

-3

-2

-1

0

1

2

1980 1985 1990 1995 2000 2005

Understanding the Problem

• The Missouri economy has been in a state of decline for over 50 years

• Had the Missouri economy grown at the same rate of the nation, its Gross State Product would be 35% larger than today.

• Furthermore, had the Missouri economy grown at the same rate as the nation, its Personal Income would be 20% larger than today