By Ronnie Ellis
CNHI News Service
November 29, 2008 07:28 pm
—
Some things about the economy are actually better in Kentucky, but as usual, it’s a good news-bad news scenario.
Two university economics professors told the General Assembly’s Banking and Insurance Committee Tuesday that Kentucky banks are sounder than many across the nation and there are fewer families losing their homes.
Dr. Paul Coomes of the University of Louisville said housing markets in Louisville, Cincinnati and Lexington are steady.
”So, don’t worry. Your home is not falling in value,” Coomes said. “It may take a little longer to sell it, but the value is not falling. (Kentucky) did not have the housing bubble and we do not have the burst.”
He said there were 3,700 foreclosures in Jefferson County last year, sharply up from average years. But that’s misleading.
“It sounds like a lot, but it’s a mistake to think 3,700 families have been forced out of their homes,” Coomes said. “A lot of those are investment properties, not single-families driven from their homes.” He said between half and 70 percent of the foreclosures involve investors in multiple properties.
Coomes said much of the nation’s economic woes are tied to a housing boom which encouraged far too many who had too few resources to purchase homes. Kentucky is seeing only about half the number of new homes under construction it saw three years ago.
But, Coomes said, Kentucky has seen slow job growth over the past seven years, increasing new jobs by only 2 percent since 2001. “We used to add 2 percent a year.” Since 2000, Kentucky has lost 55,000 manufacturing jobs. Surprisingly, he said, Kentucky is not adding retail jobs, mostly because of automation, self-service and plastic transactions done by the customer. The same is true in service industries like travel and hotels.
Kentucky’s adjusted unemployment rate for October is 6.8 percent.
Most job growth has occurred in health care. “We’re relatively unhealthy and we’re relatively old,” in Kentucky, Coomes said. Other areas of job growth have been in government at all levels: state, county, municipal, education and in business technical services. The last represent relatively good, well-paying jobs.
And University of Kentucky economist Dr. Donald Mullineaux said Kentucky’s banks are relatively healthy, because most are community banks which “have been extremely prudent in their lending practices.” Unlike many banks across the nation, most Kentucky banks didn’t enter the sub-prime housing market or exotic mortgage packages.
In fact, Mullineaux said, Kentucky’s banking system ranks 11th out 52 (the 50 states plus the District of Columbia and Puerto Rico).
“Kentucky banks are performing well, well above the national effort,” Mullineaux said. Nationally, banks have been plagued by poor management, unreasonable risk taking and inadequate government controls.
Both Mullineaux and Coomes think things may get worse before they improve.
“Week by week, I’m getting more pessimistic,” said Coomes, who went on to say he thinks the recession will be worse than the one in 2001 and maybe longer than the one in 1992, but, “I don’t think as bad as the one we had in 1980-1982.”
That may not be much comfort for those who lose homes through foreclosure or lose their jobs. But overall, the economy will recover.
“We’ll get through this. The sky is not falling,” Coomes said.
Ronnie Ellis writes for CNHI News Service and is based in Frankfort. He may be reached by e-mail at rellis@cnhi.com. The Richmond Register is a CNHI newspaper.
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