By Dan Adkins

The forecast indicates a healthy state economy, although the rate of growth will not be as impressive as during the last few years.  The economy should maintain the 2.5 percent growth rate during 2001 and 2002 as well, economist Mark Berger said.

Mark Berger, director of the center, said the forecast indicates a healthy state economy, although the rate of growth will not be as impressive as during the last few years.  The economy should maintain the 2.5 percent growth rate during 2001 and 2002 as well, he said.

The moderate growth will come after a year in which both the state and national economies grew at rapid rates, Berger noted.  Preliminary estimates indicate Kentucky’s employers added 35,300 jobs during 1999 for a growth in employment of 2 percent.  The strong performance was due in part to a growing manufacturing sector, while the coal mining industry defied earlier expectations and maintained employment levels.

During 2000, total employment is forecast to grow at a lower rate of 1.5 percent, while personal income should grow at 2.3 percent.  As in previous years, most of the increase in jobs should be traced to the service and retail trade sectors.  Service industry employment will grow by 2.4 percent, adding 11,100 new jobs, while retail trade jobs will increase by 1.6 percent by adding 5,600 new positions.  Manufacturing employment will rise slightly, while job losses in the coal industry will be moderate.

Over the three year period from 2000 through 2002, the forecast calls for employment reductions in the manufacturing and coal-mining sectors.  Manufacturing jobs will grow by 0.4 percent in 2000 before declining by 0.3 percent in 2001 and by 0.2 percent in 2002. The most severe losses can be expected in the manufacturing subsectors of tobacco products and apparel.  Meanwhile, the coal industry can expect to see the loss of more than 450 jobs in each of the three years.   Overall, eight of the state’s 20 manufacturing subsectors are expected to add jobs – a rate that will still outpace the performance of the manufacturing sector nationally.

In terms of real total personal income, Kentuckians can expect to see average growth of 2.1 percent per year from 2000 through 2002, compared to 2 percent nationally.  The rate of growth in wage and salary income will average 2.5 percent each year, and will translate into nearly $760 million in real income growth in each year.

Regarding the national economy, UK economist Christopher J. Waller said the U.S. enjoyed a growth rate of more than 5 percent during 1999, exceeding expectations and fueling a march toward the nation’s longest sustained period of peacetime economic growth.

Waller noted the economy grew at a juggernaut’s pace throughout the year, despite concerns in late 1998 about the potential impact of the Asian economic crisis.  The strong pace continued in spite of a second-quarter slowdown that included fears that inflation would hamper growth.

Waller said the U.S. stock market continued to rise despite efforts by the Federal Reserve to slow what some officials called an “irrational exuberance.”  When the Fed hiked interest rates three times this fall, the market actually rallied rather than collapsing.

Meanwhile, the nation’s economy has unexpectedly enjoyed continued growth in productivity.  Waller noted the U.S. labor market is tighter now than at any time in the last 30 years.

Waller predicts the U.S. economy will continue to grow at a rate of 3 percent in 2000, despite increases in oil prices during 1999.  He pointed out that while oil prices derailed the national economy during the 1970s, the world is now more efficient in its energy use and the nation should not see the same devastating effects that were experienced two decades ago.