'Decent' year nudges local economy in right direction
Wednesday, January 2, 2013
Several key indicators are trending in the right direction after a year of slow, but steady economic recovery in 2012.
Unemployment rates are down, housing sales and new construction are up and more new businesses are opening, according to local data sources.
Dr. Bruce Domazlicky, director of the Center for Economic and Business Research at Southeast Missouri State University, described 2012 as a "decent" year economically on both the national and local level.
Last year saw expansions at Nordenia and Procter & Gamble, the opening of the Isle Casino Cape Girardeau, and the opening of several new retailers including mega-home improvement store Menards. New construction jobs were added in the area in 2012 as work was completed on these projects and others including a $127 million expansion at Saint Francis Medical Center is underway.
Local unemployment figures declined slightly nearly every month of 2012. The most recent local data available for the month of November shows unemployment down in most counties by about one percent compared to January 2012.
"We have several very strong local sectors. Our health care continues to do extremely well and we've had some major manufacturing expansion announcements in the past year. Then we have new retail developments from big with Academy Sports to little with four or five new retailers opening downtown," said John Mehner, president and CEO of the Cape Girardeau Area Chamber of Commerce.
Mehner said he has seen more optimism in 2012 among the local business community.
There were 171 new business licenses issued in the city of Cape Girardeau during 2012, that's about the same as 2011 which saw 169 new licenses. But the last two years both showed growth compared to 2010 when 156 new business licenses were granted in Cape Girardeau.
In Jackson, 34 new business licenses were issued. Numbers for previous years were unavailable.
The numbers indicate more interest in entrepreneurship, said John Mehner, president and CEO of the Cape Girardeau Area Chamber of Commerce.
"Nationally and here, some folks who may have been in a certain position long term and now find that position is no longer around are being forced to make other decisions are choosing to start their own businesses," Mehner said.
Supporting entrepreneurship will be a focus of the chamber in the next couple years, he said.
Dr. James Stapleton, executive director of the Center for Innovation and Entrepreneurship at Southeast Missouri State University, earlier this year prepared a study finding that from 1992 to 2010, locally owned small businesses with nine or fewer employees created 91 percent of net new jobs in the Delta region. This area includes Missouri, Illinois, Kentucky, Alabama, Arkansas, Louisiana, Mississippi and Tennessee.
Overall in the U.S., economic growth will come in at around 2 percent for the year, Domazlicky said.
While progress has been made in the area of unemployment nationally, Domazlicky said it's not enough.
"The unemployment rate will fall another few tenths of a percent, but still be around 7 percent by the end of the year," he said.
Interest rates will remain low in 2013, given current Federal Reserve Bank policy, and this will lead to continued improvement in the housing sector, he said.
"We started to see some improvement and that is likely to continue into 2013, but the housing sector still has a way to go until it has fully recovered," Domazlicky said.
Bill Cole, president of the local Multiple Listing Service and broker/owner of Realty Executives in Cape Girardeau, is pleased with the trends he's seeing in the area's housing market.
The number of homes sold in Cape County is up 8.1 percent over last year, and the median price is up 2.3 percent, according to MLS data.
"This marks the second straight year of increased units sold," Cole said.
Jackson saw a significant jump in residential construction in 2012 with building permits issued for 64 new single family homes -- an increase of 26 homes from the previous year. These 64 new homes were valued at $14.4 million. More building permits were issued for duplexes and apartments in Jackson in 2012. Construction began on eight new duplexes four new multifamily residences, up from seven in 2011.
More people are in the market looking for a new house these days, motivated in large part by historically low interest rates, said Brandon Williams of Brandon O. Williams Construction Co.
New businesses opening and existing businesses expanding are also have more people looking for homes in the area, he said.
In Cape Girardeau, the number of new single family homes held steady with 48 building permits issued in 2012, compared with 49 last year. These homes were valued at $9.3 million. There were no building permits issued for apartment buildings in 2011, but in 2012 there were three, valued at $3.4 million. There were also permits issued for 13 duplexes valued at $4.3 million issued in 2011, up from eight the pervious year.
"I think we're going to be at the same level, maybe a little higher than this year. That's what's I'm anticipating," Williams said. "With our political climate and some uncertainties there, it's still up in the air what could happen."
He's anticipating continued slow, steady growth, which he says is what he wants.
"We're not going to see a big spike. You don't want that because when you have big spikes, then you have big dips too," he said.
Domazlicky said if the U.S. could get back to building at least 1 million new homes a year, it would be a big help to the economy. Currently, about 700,000 new homes are built annually, he said.
Both Domazlicky, Williams and Mehner said what the government does to address the fiscal cliff will have an effect on the economy.
"Deep cuts in government spending or significant increases in taxes could very well push the economy into a recession," Domazlicky said. "I think that the federal government will muddle along and do enough to prevent such a scenario."
Mehner said changes in income and inheritance tax laws that could occur if congress doesn't act will cause major problems for many small- and family-owned businesses.
What changes occur related to health-care reform will also impact business growth and the health-care sector in 2013, he said.
Cape Girardeau, Mo.