Lexington economy experiencing 'anemic recovery,' experts say

ctruman@herald-leader.comFebruary 5, 2013 

The Lexington economy is recovering very slowly from the recession that began in 2008, about 300 area business leaders were told Tuesday at the annual Economic Outlook Conference at the Lexington Center.

Kenneth Troske of the Center for Business and Economic Research at the University of Kentucky titled his presentation: "Why Are We Experiencing Such an Anemic Recovery?"

The "anemic recovery" mirrors national trends, he said, in which growth has been below what would have been expected coming out of a recession, unemployment remains above pre-recession levels, and businesses and households remain "risk averse" — meaning they aren't spending as much money as before.

Real gross domestic product in Kentucky is similar to pre-recession levels, Troske said.

That means that although the recession is ending, the economic pace hasn't fully picked up, Troske said: "The end of a recession does not always mean rapid growth."

He said Kentucky's economy is recovering more slowly than it has the potential to do. Typically, he said, the post-recession economy will heat up enough to make up the growth it would have had without a recession.

But this time, it didn't.

"What we haven't really seen is that catch-up," he said.

Nonetheless, he said, "I don't think there's a sign of going back into a recession."

Lexington unemployment, about 6 percent, remains higher than it should be, but Troske said Lexington "saw a pretty good growth in employment" in 2012.

Kentuckians have to realize that the traditional manufacturing sector is not coming back and has been on a decline since the 1980s, he said.

"Manufacturing got hammered in the recession, just hammered," Troske said. "It fell off a cliff."

Other areas, including health care, are where the job growth is, he said.

Troske said he is optimistic about home building. "Housing typically leads us out of recessions," he said, "and we're seeing some evidence that they are."

That theme was echoed by Christopher Bollinger, the director of the UK Center for Business and Economic Research.

He said Lexington did not see the same dramatic recession-era drop in housing starts that the Cincinnati area did, but its recovery is flatter and appears to be trailing that of the larger Louisville market.

Bollinger said that even though Lexington saw less of a drop in home prices, it is recovering the fastest of the three cities on those prices.

He said that neither Lexington, Louisville nor Cincinnati saw the dramatic run-up of housing prices that some other cities saw just before the recession hit.

Housing starts "will lead a recovery," Bollinger said, "and will lead a recession."

Cheryl Truman: (859) 231-3202. Twitter: @CherylTruman.

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