State of the State Economy: July 2025
Nathan Kessler | August 20, 2025
The Kansas economy, as with any economy, is a complex system consisting of many moving parts, but understanding the basics is critical for informed decision making. Whether you are a consumer, a policymaker, or a businessowner (or maybe all three!), you will benefit from having a better understanding of the current health of the state’s economy.
That is why we are producing this new series that brings together the most important monthly data and puts it into perspective. Each month, we will cover revenue, inflation, and employment reports to offer you a big picture look at how Kansas is doing.
State Revenues
In the first month of the fiscal year, Kansas has collected 6.7% of the expected $10.06 billion in revenue so far for FY 2026.
Kansas collected $670.2 million in total, beating estimates by $21.2 million. This extra 3.3% was driven by individual income tax collections, since corporate income and sales tax collections were below expectations by 47.1% and 1.4%, respectively.
Compared to July 2024, total collections were 1.5% higher. The driving force of this was individual income taxes. Sales taxes were lower than a year ago, coming in about 7% lower than last July, at least partially reflecting the full elimination of the state sales tax on groceries earlier this year.
Regional Inflation
The Midwest region is following the rest of the nation’s lead in seeing inflated prices on consumer goods. Prices in the Midwest rose by 2.6% over the year in July, compared with 2.7% for the United States overall, according to the Consumer Price Index (CPI). Costs for food at home were up by 1.6%, while the price of gas declined by about 12% compared to July 2024.
Because food and energy prices can be volatile, the “core” CPI offers a better look at underlying inflation. In July, core prices rose by 3.0% in the Midwest and 3.1% in the nation over the past 12 months. Much of this is driven by the cost of housing, which rose by 4.1% in the Midwest compared to July 2024.
Inflation has been picking up in recent months, as the impact from tariffs begins trickling down to consumers. The first major sign of what’s to come was in July’s other inflation report, the Producer Price Index (PPI). The PPI is a measure of the prices that domestic manufacturers, farmers, and other producers receive for their goods – you can think of this as wholesale inflation.
Typically, the PPI doesn’t get a lot of attention, but July’s report is an exception because of a sharp 0.9% increase in wholesale prices. This was the biggest increase since March 2022 and a significant jump from readings of 0.4% and 0.0% in May and June, respectively. Because much of the increase was attributed to trade-related services and the price of fresh vegetables, it’s safe to say there was a strong tariff effect in this report.
As a leading indicator of consumer prices, the PPI report for July points to even higher costs for Kansans in the coming months.
Employment
The Kansas unemployment rate was unchanged at 3.8% in July, while the U.S. unemployment rate increased to 4.2%. But despite the steady unemployment rate, Kansas nonfarm jobs declined by 4,300 in July, as government jobs fell by 5,000 and private sector employment increased by 700.
The drop in public-sector employment was driven by a seasonally adjusted decline of 4,900 local government jobs, indicating a higher-than-usual reduction in educational services employees for this time of year. In the private sector, trade, transportation, and utilities employment gained the most jobs at 1,300, while leisure and hospitality saw the largest decline in employment at -900.
While an over-the-month decline in jobs is not unusual or inherently concerning, the recent revisions to the U.S. employment figures showing much slower job growth than previously thought adds some significance to the July job numbers.
The Big Picture
While nothing in the data is overly alarming at this time, July can hardly be seen as a good month for the Kansas economy. State tax revenues beat expectations, but at least some of that can be attributed to higher wages and prices that lifted individual income and sales tax receipts. While that’s not inherently bad, it also doesn’t inspire the kind of confidence that would come from exceeding expectations in a less inflationary environment.
Speaking of inflation, prices are once again on the rise and could be in store for sharper increases in the coming months. If anything in this month’s economic data rises to the level of a red flag, it is the PPI report that shows a sharp increase in wholesale prices that will likely be filtering through to consumers in the second half of the calendar year.
With prices shooting up, the hope is that July’s employment report showing a net loss of jobs in Kansas is an outlier rather than the beginning of a trend. While the private sector added jobs, it was nowhere near enough to offset the unusually large decline in local government educational services employment.
That’s all for the July analysis! Be on the lookout for future editions of economic update every month.
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