Lafayette Forecast 2010
Economic Research Analyst, Indiana Business Research Center, Kelley School of Business, Indiana University
A turbulent economy characterized 2009. As we look to the future to determine how 2010 will treat the Lafayette Metropolitan Statistical Area (MSA), it appears that we may have a slow recovery. A quick recovery is likely to be hampered by additional job shedding through the beginning of 2010 before businesses begin to slowly re-hire and thaw out pay freezes.
Despite the prediction of a slow recovery and its consequences, there is a sense of optimism in the Lafayette MSA due to the mixture of science and technology that Purdue’s Research Park is bringing to the area. This sense of optimism may be reflected in the continuous population growth in the Lafayette MSA since 2000 (see Figure 1). This population growth has been particularly strong in Tippecanoe County, home to Purdue University and its Research Park. It is expected that the population growth will continue in 2010 with around 0.7 percent growth, or an additional 1,300 residents in the MSA.
Figure 1: Annual Population Change in the Lafayette MSA and Tippecanoe County, 2001 to 2008
Overall, the Lafayette MSA, which includes Tippecanoe, Benton, and Clinton counties, has weathered the recession fairly well compared to Indiana and the United States. As seen in Table 1, except for June and July 2009, the Lafayette MSA has had lower unemployment rates (8.9 percent in August) than Indiana (9.7 percent) and the United States (9.6 percent). The variance seen in June and July may have been related to the school year or to the substantial layoffs announced in May from Caterpillar, Wabash National, Inc., and Fairfield Manufacturing Co.
Table 1: Labor Force and Unemployment for the Lafayette MSA, 2008 to 2009
|Year||Month||Labor Force||Unemployed||Unemployment Rate|
Table 2 compares the employment between 2008 and 2009 in the Lafayette MSA. As of September 2009, total nonfarm employment declined by 1,556 jobs (-1.6 percent) over the 2008 average. In particular, the goods production sector experienced most of the job losses thus far in 2009 (-8.2 percent or -1,653 jobs). The majority of these job losses (-1,369) can be attributed to manufacturing, which accounts for 20 percent of the Lafayette MSA jobs. In contrast to the goods-producing sector, the service-providing sector had a slight improvement (0.1 percent) in employment from 2008 due to the private educational and health services and leisure and hospitality industries. These trends suggest that the service-providing sector will continue to grow in 2010, yet its rate of growth will be dependent on the goods-producing sector. The goods sector is anticipated to continue to struggle, but may grow slightly. If the recovery is slow as expected, its impact will be felt in the trade, transportation, and utilities; professional and business services; and financial activities industries.
Table 2: Lafayette MSA Employment, 2008 to 2009
|Industry||2009*||Change since 2008||Percent Change 2008–2009|
|Mining, Logging, and Construction||3,200||-283||-8.1|
|Professional and Business Services||5,567||-158||-2.8|
|Trade, Transportation, and Utilities||14,244||-131||-0.9|
|Leisure and Hospitality||8,767||67||0.8|
|Private Educational and Health Services||10,456||197||1.9|
Source: IBRC, using Bureau of Labor Statistics data
Although the Lafayette MSA has experienced an overall decline in employment in 2009, average weekly wages by workers only slightly declined (-0.1 percent). Eleven out of the seventeen major sectors had a wage increase from the first quarter of 2008 to the first quarter of 2009 (not adjusted for inflation), as seen in Table 3. This increase may be due to increased productivity or the deflation seen in 2009 that led to the elimination of jobs, thus affecting the weekly wage average. In 2010, wage and salary earnings may slightly decline again (less than 1 percent) until employment regains its momentum.
Table 3: Average Weekly Wages in Lafayette MSA, 2008:1 to 2009:1
|Industry||2009:1||Change since 2008:1||Percent Change|
|Management of Companies and Enterprises||1,215||-377||-23.7|
|Transportation and Warehousing||702||-49||-6.5|
|Health Care and Social Services||705||-15||-2.1|
|Other Services (Except Public Administration)||435||-6||-1.4|
|Professional, Scientific, and Technical Services||885||6||0.7|
|Administrative, Support, and Waste Management||428||3||0.7|
|Accommodation and Food Services||227||2||0.9|
|Finance and Insurance||945||19||2.1|
|Real Estate, Rental, and Leasing||546||20||3.8|
|Arts, Entertainment, and Recreation*||256||30||13.3|
Note: Utilities data are not available due to nondisclosure requirements.
Sources: IBRC and the Bureau of Labor Statistics, using QCEW data
The Lafayette MSA’s per capita personal income (PCPI) continues to lag behind the United States with the 2008 PCPI only 75.6 percent of the national figure. This difference can be attributed to the loss of well-paying jobs in the area, especially in manufacturing. In 2010, the local PCPI is estimated to increase roughly 2.5 percent, a stronger growth than the expected 2009 figures.
Residential construction peaked in 2003 with 1,519 permits issued for single- and multi-family building permits. More recently, the number of permits issued dropped 28.2 percent in 2008 and data for 2009 (January to August) indicate that building permits are down nearly 60 percent in 2009 (see Table 4).
Table 4: Lafayette MSA Residential Building Permits, 2001 to 2009
Source: IBRC, using U.S. Census Bureau data
Comparison of 2008 to January through September 2009 real estate activity in the Lafayette MSA finds the market relatively soft, as the number of units sold in the three counties declined by 12.1 percent (see Table 5). The median sales price declined in Tippecanoe (-2.0 percent) and Carroll counties (-22.8 percent), but increased in Benton County (14.3 percent). In 2010, it is anticipated that the real estate market will see an increase in home sales, yet prices will continue to decline slightly in the soft market. Permits issued are expected to increase a little over 2009.
Table 5: Lafayette MSA Residential Real Estate Sales, 2008 to 2009
|County||Units Sold||Median Sales Price|
|2008||2009*||Percent Change||2008||2009*||Percent Change|
Source: IBRC, using Indiana Association of Realtors data
Overall, the Lafayette MSA outlook is expected to show a slight growth in population, employment, PCPI, and housing activity, but experience minor downturns in wages and earnings and home sale values. Hopefully, the recovery is stronger than predicted, but that will depend on the consumer’s confidence in the economy and their willingness to secure loans and acquire debt, as well as increased demand for U.S. goods and services.
Also in this Issue…
- Outlook for 2010
- International Outlook for 2010
- U.S. Outlook for 2010
- Financial Outlook for 2010
- Housing Market Outlook for 2010
- Indiana's Outlook for 2010
- Indiana's Agricultural Outlook for 2010
- Anderson Forecast 2010
- Bloomington Forecast 2010
- Columbus Forecast 2010
- Evansville Forecast 2010
- Fort Wayne Forecast 2010
- Gary Forecast 2010
- Indianapolis-Carmel Forecast 2010
- Kokomo Forecast 2010
- Lafayette Forecast 2010
- Louisville Forecast 2010
- Muncie Forecast 2010
- Richmond Forecast 2010
- South Bend and Elkhart Area Forecast 2010
- Terre Haute Forecast 2010