Lafayette Forecast 2015
Regional Community Development Extension Educator, Purdue University
Nationally, the economy continued to send mixed signals in 2014; however, Indiana and the Lafayette Metropolitan Statistical Area (MSA) have seen steady (although timid) growth. Unemployment rates are down, job numbers are rising, and firms are expanding both in capital and human investment.
The Lafayette MSA (which includes Tippecanoe, Benton and Carroll counties) has always been an outlier of sorts in regard to employment and other economic statistics. It rebounded nicely and sustainably since the Great Recession—surpassing many other areas of the state. As we look to the future, there is little doubt that the area will continue growing, thanks to its diverse industry portfolio and strong university connection. Purdue University and the MSA’s proximity to Indianapolis and Chicago make it an attractive area to live and work. The 2014 Lafayette population is projected at 211,195, a 1.0 percent growth since 2013, as shown in Figure 1. The Indiana University Center for Econometric Model Research anticipates annual population growth of 0.8 percent in the region through 2017.
Figure 1: Annual Lafayette MSA Population
Note: Shaded area showing data for 2014 through 2017 are projections.
Source: U.S. Census Bureau and Indiana University Center for Econometric Model Research
Historically, the Lafayette MSA has had a lower unemployment rate than Indiana and the United States. Between August 2013 and September 2014, the Lafayette MSA consistently outperformed both of the larger geographies (see Table 1). The spread in unemployment rates reflects the improved economy in the MSA—especially in 2014. The preliminary September unemployment rate puts the Lafayette MSA tied with four other Indiana MSAs for the second-lowest rate. In 2015, the unemployment rate could dip into the upper 3 percent range, mirroring rates seen in 2006 and 2007; however, it is more likely to hover around 4.3 percent based on historical spread terms between the MSA, state and nation.
Table 1: Labor Force and Unemployment for the Lafayette MSA
|Month||Labor Force||Employment||Unemployed||Lafayette MSA Unemployment Rate||Indiana Unemployment Rate||U.S. Unemployment Rate|
Source: U.S. Bureau of Labor Statistics
More people in the Lafayette MSA labor force are finding work as there were, on average, approximately 1,800 fewer unemployed workers per month in 2014 compared against the same time frame in 2013.
Table 2 looks specifically at the employment picture between 2013 and 2014 in the Lafayette MSA. Last year, it was predicted that employment growth would moderately pick up the pace—fueled by the professional and business services sector, manufacturing and private health and educational services. Thus far in 2014, half of the industries have experienced modest employment growth. The professional and business services industry continues to lead the way with an additional 433 workers followed by manufacturing (189) and leisure and hospitality (111).
Table 2: Lafayette MSA Employment
|Industry||2014*||Change since 2013||Percent Change, 2013-2014|
|Mining, Logging and Construction||2,844||44||1.6%|
|Private Educational and Health Services||11,800||-100||-0.8%|
|Trade, Transportation and Utilities||14,022||-178||-1.3%|
|Leisure and Hospitality||9,011||111||1.2%|
|Professional and Business Services||8,133||433||5.6%|
*January through August data annualized for 2014. August data are preliminary.
Source: U.S. Bureau of Labor Statistics
As of mid-2014, the greater Lafayette area had attracted 20 new high-tech/life sciences establishments—a testament to the value of Purdue University and its research connections. In total, the Lafayette MSA has 120 businesses in the high-tech and life sciences sectors. Many of these are startups located in the Purdue Research Park and employ fewer than five people. These small startups have the potential to become major employers; thus, it is critical that the Lafayette MSA help nurture these businesses for continued economic development benefits.
Manufacturing continues to be an important sector, employing approximately 15 percent of the workforce. Statewide in 2015, manufacturing is expected to have a pullback in employment, yet several businesses in the Lafayette MSA recently announced expansion plans for equipment, plants and employees (Copper Moon World Coffee, GE Aviation, Heartland Automotive, Jessup Paper Box, Nanshan, Subaru of Indiana, Tate and Lyle, TRW and Wabash National).
The two industries with the largest numeric declines thus far in 2014 are government and trade, transportation and utilities. In percentage terms, government and the information industry saw the largest declines, continuing their downward direction as first evidenced in 2012. The drop in state and local government jobs at the MSA level reflects continued cuts due to budget reallocations.
In 2015, it is expected that employment growth will be modest, potentially gaining an additional 3,600 workers. However, a pullback in the manufacturing sector may occur, which would have a ripple effect in the Greater Lafayette economy.
Between the first quarter of 2013 and the first quarter of 2014, average weekly wages increased 1.5 percent within the Lafayette MSA. Twelve out of the 18 major sectors (two were non-disclosed) had positive wage increases, ranging from 0.1 percent (finance and insurance) to 17.8 percent (information), as seen in Table 3. In particular, the information and wholesale trade sectors saw large wage increases (17.8 percent and 9.5 percent, respectively), despite a decline in jobs in those sectors.
Table 3: Average Weekly Wages in the Lafayette MSA
|Industry||Average Weekly Wage, 2014 Q1||Change in Jobs since 2013 Q1||Change in Average Weekly Wage since 2013 Q1|
|Management of Companies and Enterprises||$1,388||-5.2%||0.3%|
|Professional, Scientific and Technical Services||$1,117||-0.5%||6.2%|
|Finance and Insurance||$1,045||-4.2%||0.1%|
|Health Care and Social Services||$817||-2.1%||1.0%|
|Transportation and Warehousing||$788||14.0%||-1.4%|
|Agriculture, Forestry, Fishing and Hunting||$674||3.4%||-3.3%|
|Real Estate and Rental and Leasing||$598||3.2%||2.9%|
|Other Services (Except Public Administration)||$570||-3.0%||6.9%|
|Administrative, Support, Waste Management and Remediation Services||$449||2.1%||-2.2%|
|Accommodation and Food Services||$258||4.6%||-0.8%|
|Arts, Entertainment and Recreation*||$231||-5.0%||2.2%|
* Indicates that some county data were excluded due to confidentiality restrictions.
Note: D indicates data were nondisclosable. Data for mining were nondisclosable.
Source: STATS Indiana, using Quarterly Census of Employment and Wages data
Moving into 2015, the average annual wage may experience a marginal growth due to the gains made in the professional and business sector, despite an expected pullback in manufacturing growth.
The Lafayette MSA’s per capita personal income (PCPI) historically lags behind the United States due to a different occupational mix in the MSA and the fact that Indiana’s highest-earning tier of occupations tend to be paid less than similar occupations elsewhere, regardless of cost of living factors.1 The most recent data from the U.S. Bureau of Economic Analysis for the Lafayette MSA was for 2012 at the time of this writing, and it showed the MSA’s PCPI being 85.3 percent of the national figure. The PCPI increased by 3.3 percent in 2012 and is projected to have grown by 2.3 percent in 2013 and by another 3.2 percent in 2014.
The Lafayette MSA has an annual yo-yo trend when it comes to issued housing permits. Since 2012 was a contraction year, 2013 followed suit to become an expansion year with 1,085 issued permits, a 99.8 percent increase over 2012 (see Figure 2). Typically, the vast majority of issued permits are for single-family homes; however, in 2013, 56.6 percent of issued permits were for five or more family home structures. Thus far in 2014, 696 permits have been issued in Tippecanoe County, which is approximately 20 percent less than the estimated housing units (estimates with imputation) in the first nine months of 2013. If the trends hold true, 2014 will end up with a pull back on issued housing permits, but the MSA ought to expect an increase in building interest in 2015.
Figure 2: Lafayette MSA Residential Building Permits
Note: 2014 reflects year-to-date figures through September 2014 for Tippecanoe County only
Source: STATS Indiana, using U.S. Census Bureau data
The comparison of year-to-date (January through September) 2014 figures with 2013 in Table 5 finds that the Lafayette MSA real estate market has tightened slightly with fewer listings (-5.9 percent) and closings (-3.1 percent). Carroll County had the largest change in new listings (-14.1 percent), whereas Benton County had a 38.3 percent jump in closed sales.
Table 5: Lafayette MSA Residential Real Estate Sales, Year-to-Date Comparison
|Lafayette MSA||Benton County||Carroll County||Tippecanoe County|
|Median Sales Price||n/a||n/a||n/a||$57,000||$66,500||16.7%||$89,500||$104,800||17.1%||$129,700||$131,750||1.6%|
|Months Supply of Inventory||n/a||n/a||n/a||11.6||6.6||-43.1%||12.9||10.2||-20.9%||5.1||5.0||-2.0%|
|Inventory of Homes for Sale||1,110||1,039||-6.4%||60||51||-15.0%||174||140||-19.5%||876||848||-3.2%|
Note: Data reflect January to September for both years. Months supply of inventory and inventory of homes for sale are September values.
Source: Indiana Association of Realtors data
As of September 2014, the metro has fewer homes for sale and a lower months supply of inventory in all three counties relative to September 2013. Of the sold houses, median sales prices were up in all three counties with the most notable increases being in Carroll (17.1 percent) and Benton (16.7 percent) counties.
Nationally, housing trends have been disappointing with a slight decline in existing home sales and a marginally positive increase in new home sales. In 2015, the Lafayette region’s smaller housing inventory coupled with fewer housing permits granted in 2014 may lead to increases in median sales prices and continued shortening in the months supply of homes. Hesitancy of builders to construct large numbers of homes still exists, contributing to the tightening housing market.
Overall, economic activity in the Lafayette MSA did pick up steam in 2014—greatly improving its outlook for future years. The MSA’s forceful steps toward more jobs, increased wages, and new businesses makes one wonder how much the forecasted 2015 statewide slowdown in manufacturing will impact them. Preliminary analysis points to slower growth in manufacturing during 2015, which would subsequently affect wages and demand for goods and services, which then trickles down to influence PCPI, retail trade and the housing industry. However, the Lafayette MSA may be insulated from this slowdown—thus we will have to wait and see what the future brings.
- For more research on differences between the U.S. and Indiana PCPI, see “Occupational Hazard: Why Indiana’s Wages Lag the Nation” and Finding New Cheese: Why Indiana’s Per Capita Personal Income Lags (and How to Fix It) in the Indiana Business Review.