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Economic Development

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by David Knight

It's that time of year when people stop and give thanks for the many blessings that have been bestowed upon them. Likewise, there are many reasons to give thanks for the economy.

Low, low interest rates.

People wishing to buy that first home or move up to their dream home are thankful for the historically low interest rates. A 30-year mortgage is 6.93 percent and a 15-year fixed rate is 6.61 percent. This has had a very positive impact on residential construction, sales and finance.

Year-to-date residential building permits in Springfield/Greene County are up 16.5 percent, and permit valuation is up 7.9 percent. Real estate transfers in September were 931 vs. just 730 a year ago, and recorded mortgages were 1,748 vs. 1,307 the previous year.

The low interest rates have helped sustain the nonresidential development activity. Commercial permits are up 5 percent over last year with a slight increase in permit valuation. According to the Kiplinger Report, "get ready for a slowdown in commercial real estate construction. Around the country lenders are beginning to tighten up, remembering what happened with over building in the '80s."

Cheap gas.

We must be thankful for the reasonable cost of living in Springfield. Springfield's cost of living index is 93 compared to 98.4 for Kansas City and 98.5 for St. Louis. As always, New York and Los Angeles indexes are the nation's highest at 226.2 and 117.6, respectively.

A gallon of gas in Springfield will cost you about $1 when in Los Angeles that same gallon of gas will cost you $1.28. Over the last five years, our gas prices are actually 1.7 percent below the rate of inflation.

Direct flights to Chicago.

We are blessed to now have direct flights to Chicago. I know the folks at First Card wish this service was available when they were seeing if Springfield was the right choice for their next new facility. First Card has proved itself to be a tremendous asset to the community, living up to all the hype that came with its commitment to Springfield.

The daily non-stops to Chicago have been filling up and profitable for United Airlines. This new carrier has helped increase competition and decrease airfares for all of us.

Employee's market.

Competition for quality employees has never been greater than in today's market. The current unemployment rate is still only 3 percent.

Pressure to keep and attract new employees has forced the cost of labor up and put the bargaining edge clearly in the hands of the employee.

Average weekly earnings for employees in the manufacturing of durable goods are up 8 percent, and the average number of hours worked is up 2.3 per week over the previous year. The cost of labor for nondurable goods is up, as well. At some point, this should start to affect the costs of goods sold and put some pressure on inflation.

An active stock market.

Thirty days ago the market was at 8,400. It gained 759 points to close at 9,159 Nov. 20. People have got to be pleased with the continued performance of the market. The people in charge will surely sell to capture the year-end gains, but signs are that the market has weathered the storm and should react well to the fundamental economic indicators. It is the only thing keeping our leadership in Washington from getting thrown out of office. As long as the economy is strong and people are making money in the market, then no one sees any need to rock the boat.

Springfield has been blessed this year and has many reasons to be thankful for our strong local economy. If anyone wishes to comment I can be reached at dkni@brpae.com.

(David Knight is an economic planner at Butler, Rosenbury & Partners and former economic development coordinator for the city of Springfield.)

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