Wednesday, January 24, 2001

Report: Ky. lags in online business

By Patrick Crowley
The Cincinnati Enquirer

        FRANKFORT — The “New Economy” is still news to us.

        Kentucky's economy will continue to grow over the next three years, but it will continue to lag far behind the nation in the number of companies selling products over the Internet, according to an economic forecast released Tuesday.

        Though the report, prepared by University of Kentucky and state economics experts, predicts increases in the number of service-sector jobs and in amount of gross state and regional product, the study warns that a key area where Kentucky is not growing is in e-commerce.

    The authors of a statewide economic forecast released Tuesday surveyed Kentucky businesses not selling products on the Internet and asked why they were not taking part in e-commerce.
    The top concerns were:
    • It is too difficult to sell their particular product or service on the Internet.
    • Security.
    • It takes too much time and money to begin selling on the Internet.
    • Uncertainty about how to use the Internet to sell products.
        UK economics researcher Jonathan Roenker said that at the end of 2000, 56 percent of U.S. companies were selling products online, up from 24 percent in 1998.

Just 15% selling on Web

        But in Kentucky just 15 percent of businesses with 100 or more employees were selling on the Internet at the end of last year, Mr. Roenker said.

        While that figure is up from 10.1 percent in 1998, it is virtually stagnant compared to the 14.7 percent selling on the Internet in 1999, perhaps a signal of a slowdown in the growth of online sales, he said.

        And only 20 percent of Kentucky's businesses plan to sell products online in the future, the forecasters found.

        "The explosive growth in businesses selling online has appeared to slow in Kentucky, placing the state further behind the national trend,” Mr. Roenker said.

        Northern Kentucky's economy will continue to remain strong because of its diverse work force and the positive quality of life, said James Ramsey, the state budget director and one of the authors of the forecast.

        “You've got a great quality of life, a good education system, great transportation and you've had some good leadership ... in Northern Kentucky,” Dr. Ramsey said in an interview.

        “To us it's an engine of diversity, of different kinds of economic activity. Northern Kentucky is very important ... to the overall state economy.”

        Northern Kentucky jobs span many different sectors of employment: transportation and distribution (via The Cincinnati/Northern Kentucky International Airport), financial services, manufacturing, tourism and health care.

        The Kentucky Annual Economic Report 2001 was put together and presented by The University of Kentucky's Center for Business and Economic Research, the Department of Economics, and the Gatton College of Business and Economics. Contributions from state budget and other officials, including Gov. Paul Patton, were also included.

Regional, statewide figures

        The forecast looks at the state as a whole and does not break down economic growth and other numbers by region. However, last week Northern Kentucky Chamber of Commerce economist Tom Zinn, of the University of Cincinnati, forecast that the gross regional product for Northern Kentucky's three main counties will grow more than 5 percent next year.

        Gross regional product, like gross state and gross national product, measures the total output of goods and services in an economy.

        According to the statewide forecast, gross state product will grow 3.4 percent in 2001, 3.8 percent in 2002, and 3.9 percent in 2003. Total employment growth will tick up 1.2 percent in 2001, 1.7 percent in 2002 and 1.8 percent in 2003.

        “Growth in the Kentucky economy is forecast to match or slightly exceed growth in the national economy for most employment and income measures,” said Eric C. Thompson, a UK economics professor.

        The main driver of the economy is a three-year increase in wages, Dr. Thompson said.

        “The Kentucky economy is forecast to see strong income growth during each of the next three years ... due to a rapid increase in wage and salary income,” Dr. Thompson said, adding income will grow an average of 3.6 percent over the next three years.

        Employment will grow by about 29,000 jobs a year through 2003, with almost 15,000 jobs created annually in the services industry and another 5,900 coming each year in retail.

        That won't stop the state's unemployment rate, measured at 3.6 percent in November, from reaching 4.4 percent in 2001, 4.3 percent in 2002 and 4.1 percent in 2003.

        Manufacturing is the sector expected to lose jobs, which are forecast to drop by 2,100 jobs in each of the next three years.


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