2003 Kentucky Annual Economic Report 

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Contents

Note: initially only abstracts and PDF (click the icon) version of individual articles.
  When web versions of the articles are ready the article title will be underlined (hyperlink).

As labor markets tightened in the late nineties, communities looked to the underemployed to support the workforce needs of expanding industries. Part-time workers seeking full-time jobs, and full-time workers seeking jobs that better fit their credentials are all considered underemployed, and represent a form of excess capacity. There are no publicly available estimates of the number of underemployed, either nationally or around Kentucky. Using a new survey of households combined with detailed results of the 2000 Census, we have produced estimates of the number and type of underemployed residents in each of Kentucky's counties. These are now available on a web site hosted by the state Cabinet for Workforce Development.

     (81 kb)

The U.S. economy has struggled this year to recover from the recession of 2001. In this article I review the events of 2002 and their effects on macroeconomic variables. I then conjecture scenarios for how the U.S. economy will behave in 2003. I am cautiously optimistic that the U.S. economy will grow at 'normal' rates but sliding back into recession in 2003 is a realistic possibility. If so, then tax cuts remain the only tool to revive the economy.

     (62 kb)

Economic growth is forecast to rebound in Kentucky during most of 2003 as the national economy recovers from the recent recession over the course of the year. Economic growth is then expected to accelerate further in 2004, before moderating in 2005. In 2003, real gross state product in Kentucky is forecast to grow at a 3.2 percent rate, while nominal total personal income is forecast to grow by 5.4 percent (real, inflation adjusted, income growth is forecast at 2.6%), total employment by 2.2 percent, and total population by 0.6 percent.

For the entire 2003 to 2005 period, real gross state product is forecast to average 3.4 percent growth each year, compared to 5.9 percent annual growth for nominal total personal income, and 2.0 percent annual growth in employment. The rate of income growth forecast for the next three years is substantial, and is fueled by strong gains in wage and salary earnings.

Annual employment growth over the three-year period is forecast to average 36,500 jobs each year. The services industry, forecast to add 17,100 jobs each year, is expected by itself to account for nearly half of this employment gain. The retail trade sector is forecast to add 4,500 jobs per year, while the manufacturing sector is forecast to gain 4,700 jobs per year on average from 2003 through 2005.

These forecasts for the Kentucky economy are based on baseline expectations for the national economy as presented in the October 2002 U.S. Economic Outlook prepared by DRI-WEFA. These baseline forecasts assume a steady recovery in the national economy during 2003, but not the rapid growth frequently observed after recessions. The national unemployment rate is expected to peak during the first quarter of 2003. These baseline forecasts represent the most likely path for the national economy. As for alternative forecasts, DRI-WEFA places a roughly one in three chance of a very weak recovery during the year 2003.

         (67 kb)

In this article, the availability and general characteristics of employer sponsored health insurance for working Kentuckians are examined. Using recent survey data of Kentucky businesses, individual health insurance coverage, dependent health insurance coverage, and retiree health insurance coverage offered by employers are explored. All are examined at the State, Area Development District (ADD) and industry levels for both salaried and hourly full-time employees. In general, there are notable differences in health insurance availability for workers in Kentucky by both ADD and industry group for individual insurance. This variability increases substantially when looking at the percent of plan cost covered by employers and employee participation rates. Further, for both dependent and retiree health insurance, this finding is magnified. In all, this article offers a snapshot of the world in 2002 and demonstrates the differences in employer sponsored health insurance that exist throughout Kentucky

   (414 kb)

The U.S. Census Bureau's estimates of e-commerce sales reached $10.2 billion in the second quarter of 2002; a 24.2% increase over the second quarter of 2001; proof that e-commerce sales are still burgeoning despite the relatively slow economy. This article provides state-level data concerning electronic commerce for Kentucky from a recent survey conducted by the University of Kentucky Center for Business and Economic Research. Survey results indicate that while the percentage of large businesses in the state using the Internet to conduct online sales continued to grow, albeit at a significantly slower pace, the percentage of small business conducting online sales actually shrank over the previous year. Based on the results of the survey, 26.5% of large Kentucky businesses and 11.2% of small Kentucky businesses are involved in e-commerce. The characteristics of Kentucky firms currently selling online are considered as is these firms' experiences with e-commerce. Finally, the effects of online sales on revenues and profits of Kentucky firms are addressed.

     (52 kb)

There has been a substantial decline in manufacturing employment in the State of Kentucky over the past two years. In particular, manufacturing employment in Kentucky declined by 6.2% in 2001. Such a decline is not unprecedented during a recession period, but is a large enough to merit further examination, particularly since recessions are a crucial period for industrial reallocation, and recession-period trends may persist beyond the recession. The principal finding was that the decline in Kentucky manufacturing during the recent recession, while it was large, was less than the national decline. There were three additional findings of note: 1) the relative performance of Kentucky manufacturing was not as strong as it was during the recession of the early 1990s; 2) Kentucky did not substantially outperform northern states, which have been an important source of relocating manufacturing plants for Kentucky; and 3) the job losses in the non durable goods manufacturing industry were more severe in Kentucky than nationally.

     (149 kb)