Starting in late 2008, Gross Domestic Product, employment and consumer spending all plummeted. Housing, construction, manufacturing and the financial sectors were among the hardest hit. In late 2009, though, forecasters began predicting a national economic turnaround for 2010.
In Northern Kentucky, it appears the local economy is at or near the bottom and is showing signs of recovery, but the economy is not moving quickly from recession to expansion. To date, economic recovery has been largely due to the various government stimulus policies. The question now is: When will recovery be sustained by the private sector – consumer and business spending and investment?
In 2007, Northern Kentucky had total personal income (TPI) of $14.2 billion. The region accounted for 11 percent of Kentucky TPI in 2007, up from 10 percent in 1997. Boone County’s 7 percent TPI growth led the region, substantially outpacing the state’s 4.7 percent.
Personal income growth is expected to be relatively flat in 2010. Continued wage decreases should be offset by increases in government transfer payments (primarily unemployment benefit extensions) and increases in interest and dividends from an improving stock market.
In November, Northern Kentucky’s jobless rate was 10.2 percent, compared to 10.1 percent statewide. Unemployment in Northern Kentucky is expected to remain high through 2010, averaging just below 10 percent for the year.
For 2009, total region employment is expected to have declined 3.7 percent with job losses totaling nearly 7,000. Additional employment declines are forecast in 2010 (a 0.75 percent decline for net job losses of close to 1,400).
Northern Kentucky’s housing market declined in 2009 but was improving as the year concluded. For the year, home sales declined 345 units or 6.9 percent.
Median sales price dropped in six of the seven counties, remaining unchanged in Campbell County. Average days on market remained in the three-month range for most counties, up slightly from 2008.
However, a comparison of fourth quarter 2008 to fourth quarter 2009 shows the market starting to stabilize. Sales (145) were up 14.4 percent compared to Q4 2008. And Congress extended the popular first-time homebuyer tax credit to next June 30. The first-time homebuyer credit should continue to fuel sales growth and prices into 2010.
2010 forecast summary
It appears the greatest recession since the Great Depression is coming to a close. Real GDP increased 2.2 percent in Q3 2009, signaling the U.S. economic cycle’s turn back to growth. However, growth in 2010 is expected to be slow and uneven. On the strength of an improved stock market and rising average hours worked per week, personal income trends in 2010 are likely to outperform 2009. Expect population growth in 2010 to be modest. The first-time homebuyer tax credit extension means the residential housing market should continue to improve in 2010.
On balance, the local economy in 2010 will outperform 2009, but growth will remain very modest and unevenly distributed across industries.