99 years of economic insights for Indiana

The IBR is a publication of the Indiana Business Research Center at IU's Kelley School of Business.

Executive Editor, Carol O. Rogers
Managing Editor, Brittany L. Hotchkiss

Lafayette forecast 2019


Community Development Regional Extension Educator, Purdue University

The Lafayette Metropolitan Statistical Area (MSA) enjoyed another year of continuous growth. In 2018, most industries experienced both employment and wage increases, and the region maintained low unemployment rates. The tightening housing market may cause affordability to be an issue within the region if relief does not occur via new construction. Likewise, economic growth could be hampered by lack of labor as area employers continue to expand.

The Lafayette MSA (which includes Tippecanoe, Benton and Carroll counties) has experienced steady population growth since 2000. The MSA’s strong and diverse economy fuels much of the growth and shows no signs of stopping anytime soon. These strengths coupled with its geographic location have made this MSA an attractive area to live and work.

Since 2000, the MSA population has gained roughly 42,200 residents, a sustained growth of nearly 2,300 individuals per year (see Figure 1). The Indiana University Center for Econometric Model Research anticipates annual population growth of about 1,900 in the region through 2019, with the MSA experiencing a 2019 population of 223,063 individuals.

Figure 1: Annual Lafayette MSA population


Note: Data for 2018 through 2020 are projections.
Source: U.S. Census Bureau and Indiana University Center for Econometric Model Research


The sustained population growth coupled with a strong economy is producing a metro area that is eager to employ workers, as reflected in its low unemployment rate. The Lafayette MSA’s unemployment rate remained lower than the U.S. and Indiana rates between September 2017 and September 2018 (see Table 1). Last year’s outlook predicted the MSA would see unemployment rates hovering around 3 percent. The rate did dip below 3 percent several times and topped out at 3.6 percent in June and August. In 2019, the local unemployment rate will likely mirror the 2018 activity as individuals moving/commuting to the area are able to find jobs and employer demand has no signs of abating. Thus, the Lafayette MSA labor market will continue to be very competitive.

Table 1: Labor force and unemployment for the Lafayette MSA

Year Month Labor force Employment Unemployed Lafayette MSA unemployment rate Indiana unemployment rate U.S. unemployment rate
2017 September 110,200  106,998  3,202 2.9% 3.3% 4.1%
October 110,550  107,463  3,087 2.8% 3.1% 3.9%
November 110,690  107,340  3,350 3.0% 3.2% 3.9%
December 107,356  104,391  2,965 2.8% 3.1% 3.9%
Annual 108,757  105,229  3,528 3.2% 3.5%  4.4%
2018 January 108,188  104,707  3,481 3.2% 3.6% 4.5%
February 111,449  107,654  3,795 3.4% 3.7% 4.4%
March 111,308  107,952  3,356 3.0% 3.3% 4.1%
April 112,806  109,785  3,021 2.7% 2.9% 3.7%
May  113,160  109,719  3,441 3.0% 3.2% 3.6%
June  110,607  106,670  3,937 3.6% 3.6% 4.2%
July  112,483  108,712  3,771 3.4% 3.5% 4.1%
August  111,819  107,842  3,977 3.6% 3.7% 3.9%
September*  114,652  111,725  2,927 2.6% 3.0% 3.6%

*Preliminary data
Source: U.S. Bureau of Labor Statistics

The year-over-year comparison between September 2017 and 2018 reflects a 4,452 increase in the labor force and a reduction of 275 workers from the unemployment rolls. Compared to the 2016-2017 changes, this past year had very strong labor market growth—signaling the MSA’s ravenous appetite for new workers. Last year’s Lafayette outlook expressed a need for the region to attract new workers as signs were pointing to a very tight labor market. The region is likely still needing additional workers as new economic development growth announcements occur on a regular basis in a wide array of sectors.

Table 2 looks specifically at regional employment between 2017 and 2018 in the Lafayette MSA. During 2018, the MSA experienced a 2.0 percent uptick in employment, or nearly 2,100 jobs. The bulk of the gains came from goods-producing industries, with manufacturing adding 878 workers (or 4.9 percent growth). Four industries experienced minor declines: information; trade, transportation and utilities; financial activities; and private educational and health services.

Table 2: Lafayette MSA employment

Industry 2018* Change since
Percent change,
Total nonfarm  104,956 2,056 2.0%
Total private  75,833 1,133 1.5%
 Goods-producing  22,411 911 4.2%
 Manufacturing  18,878 878 4.9%
 Mining, logging and construction  3,533 33 1.0%
 Service-providing  82,544 1,244 1.5%
 Private educational and health services  12,289 -11 -0.1%
 Trade, transportation and utilities  14,744 -156 -1.0%
 Leisure and hospitality  10,244 244 2.4%
 Professional and business services  7,878 78 1.0%
 Financial activities  3,678 -22 -0.6%
 Information  733 -67 -8.3%
 Other services  3,856 156 4.2%
Government  29,122 922 3.3%

*January through September data annualized for 2018. September data are preliminary.
Source: U.S. Bureau of Labor Statistics

As of September 2018, the top three employing industries in the Lafayette MSA were manufacturing (19 percent), educational services (18 percent) and health care and social services (14 percent). While manufacturing remains as the top employing industry, Purdue University’s presence continues to grow and may eclipse manufacturing in the next several years.

A number of expansion announcements have been made in the Lafayette MSA, fueling the region’s growth. The expansions range from equipment/production, employee or other investment growth. Examples include the following:

  • Schweitzer Engineering Laboratories is building a 100,000 square-foot facility for electric power research and plans to employ 300.
  • Caterpillar Inc. is renovating Lafayette facilities via a $73.6 million investment and bringing in 125 new high-paying jobs.
  • Target plans to build a small-format store in the West Lafayette area.
  • The Purdue Research Foundation is paying $106 million over the next 30 years to develop the Discovery Park District on West State Street.

In 2019, sustained economic growth will continue, as there are no signs pointing toward contraction in the Lafayette MSA. The Lafayette MSA may gain an additional 2,140 workers, distributed throughout the various industries. Most of the job growth will likely stay in the manufacturing sector, with several service-providing sectors also experiencing growth in response to the uptick in employees.

Between the first quarters of 2017 and 2018, average weekly wages again increased 5 percent within the Lafayette MSA. This sizable wage growth was also experienced in the 2016-2017 comparison and is a welcome return to wage growth. Most major sectors had positive wage increases (two were nondisclosed), ranging from 1.5 percent (transportation and warehousing) to 11.3 percent (arts, entertainment and recreation), as seen in Table 3. Two sectors had average wage declines: finance and insurance, as well as the agriculture, forestry, fishing and hunting sector. The wage growth exceeded expectations for the 2018 forecast. As the economy continues to grow combined with a tight labor market, wage increases will occur in 2019. Whether the wage increase will be another 5 percent, is yet to be seen and may be a bit too optimistic, but is certainly not unattainable.

Table 3: Average weekly wages in the Lafayette MSA

Industry Average
weekly wage, 2018 Q1
in jobs since 2017 Q1
Change in average weekly wage
since 2017 Q1
Total $943 1.4% 5.2%
Arts, entertainment and recreation $267 2.4% 11.3%
Real estate and rental and leasing $765 -4.3% 10.7%
Construction $997 3.2% 8.8%
Manufacturing* $1,494 5.0% 8.3%
Other services (except public administration) $632 10.4% 7.3%
Professional, scientific and technical services $1,235 6.8% 6.8%
Wholesale trade $1,165 2.1% 5.4%
Accommodation and food services $306 2.8% 4.1%
Educational services* $1,200 -1.7% 3.5%
Retail trade $500 -3.3% 3.5%
Management of companies and enterprises $1,408 0.5% 3.4%
Information $787 1.0% 2.9%
Health care and social services $850 2.0% 2.7%
Public administration $863 1.6% 2.5%
Administrative, support, waste management and remediation services $505 -0.4% 2.2%
Transportation and warehousing $827 2.4% 1.5%
Finance and insurance $1,285 -8.1% -0.7%
Agriculture, forestry, fishing and hunting $770 11.3% -1.5%

* Indicates that some county data were nondisclosable.
Note: Data for mining and utilities were nondisclosable.
Source: STATS Indiana, using Quarterly Census of Employment and Wages data

The Lafayette MSA 2016 per capita personal income (PCPI) was $36,334, a 3.5 percent growth from 2015. Unfortunately, research shows that PCPI in Indiana historically lags behind the United States, due to a different occupational mix within the state (and 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 This explains why the Lafayette MSA’s PCPI is 72.9 percent of the national figure, falling short by $13,497. The region’s PCPI has grown over time, with a 2 percent average from 2011 to 2016; however, it is projected to grow at a stronger pace (at an average of 4.7 percent annually) between 2017 and 2021.


The real estate market in the Lafayette MSA saw fewer listings (-3.2 percent), little change in the quantity of closed sales and a slight dip in inventory of homes for sale (-6.3 percent), as shown in Table 4. Two of the three counties that make up the Lafayette MSA experienced higher median sales prices, with Benton County being the exception (-26.3 percent). Each county has a slightly different housing story.

Table 4: Lafayette MSA residential real estate sales

Lafayette MSA Benton County Carroll County Tippecanoe County
Year to date* Year to date* Year to date* Year to date*
2017 2018 Change 2017 2018 Change 2017 2018 Change 2017 2018 Change
New listings 2,676  2,591 -3.2% 91 88 -3.3% 191 181 -5.2% 2,394 2,322 -3.0%
Closed sales 2,083 2,094 0.5% 67 68 1.5% 131 124 -5.3% 1,885 1,902 0.9%
Median sales price  n/a  n/a n/a  $102,500  $75,500 -26.3%  $95,000  $129,700 36.5%  $152,000  $166,500 9.5%
Months supply of inventory n/a n/a n/a 6.9 5.4 -21.7% 7.2 7.1 -1.4% 2.8 2.6 -7.1%
Inventory of homes for sale 699 655 -6.3% 46 42 -8.7% 100 97 -3.0% 553 516 -6.7%

* Year-to-date data reflect January to September for both years. Months supply of inventory and inventory of homes for sale are September values only.
Source: Indiana Association of Realtors and Realtor.com Economic Research (median sales price and months supply of inventory)

Tippecanoe County saw little to no change in quantity of listings, closed sales and a 10 percent increase in median sales prices. Likewise, the county’s supply of housing continues to have less time on the market (2.6 months) with a supply of 516 homes (-6.7 percent). Seeing this trend over the past several years indicates that the housing market remains tight and demand for existing homes is driving up median prices.

Benton County is also encountering a tightening housing market with fewer listings (-3.3 percent), fewer months supply of inventory (5.4 months, -21.7 percent drop), as well as a drop in inventory of homes for sale (-8.7 percent). Despite these changes in the marketplace, median sales prices also dropped (-26.3 percent), going the opposite direction than one would predict. It could be that individuals are purchasing smaller or lower-quality homes in order to secure housing, as the median sales price in 2017 was much higher.

Carroll County’s housing story is similar to Tippecanoe County with the drop in new listings (-5.2 percent), an increase in median sales price (+36.5 percent) and lower inventory of homes for sale (-3.0 percent). Of the three counties, Carroll County’s housing inventory remained on the market the longest and was the only one with a marginal drop in closed sales.

Nationally, Freddie Mac has noted that the main headwinds affecting the housing market are inventory shortages and rising prices, resulting in a squeeze on housing affordability. Despite a national rise in home sales fueled by first-time homebuyers (namely millennials), the construction of new housing is barely above the recession level. Home construction is not keeping up with demand despite being out of the recession for nearly a decade. As home prices rise at a rapid clip—outpacing income gains—affordability of existing homes may force individuals to overextend themselves financially, something which occurred in the last housing crisis.

Within the Lafayette MSA, glimpses of the national trends are evident and give us no reason to believe it will change in 2019. Tippecanoe County will likely continue to have inventory with a shorter amount of time on the market and rising median sales prices with fewer listings. The two more rural counties’ real estate markets are more volatile, but will likely follow the same trajectory as Tippecanoe County.

Given the gradually tightening existing housing market, one would expect to see more housing permits issued. In 2017, the MSA had an increase in permits issued (976 permits, +55.7 percent) from the prior year (see Figure 2). Thus far in 2018, housing permit issuances are up considerably and are at a level not seen since 2001. The large uptick in permits reflects the growth and interest in building multifamily units, as 80 percent of the 2018 permits fell into this category.

Figure 2: Lafayette MSA residential building permits


* 2018 reflects year-to-date figures through September for the MSA.
Source: STATS Indiana, using U.S. Census Bureau data

In 2019, if the reduction in inventory of homes for sale continues, we ought to anticipate stronger demand to build homes. However, rising costs to build a home, coupled with high demand, may make affordability an issue—a topic worth keeping an eye on in the upcoming years.


Economic growth was evident in nearly all areas within the Lafayette MSA in 2018. In the last economic outlook, concerns were expressed about the region reaching full employment in light of the expansion announcements occurring throughout the region. In 2018, employers were able to find workers, yet the labor market remains tight. The attraction of workers to the area will put a strain on the housing market as existing inventories are limited and new construction is not happening fast enough. This mix of activity, coupled with the economic activity associated with Purdue University, keeps the Lafayette MSA a region to watch and the reason it ranks #2 on Forbes’ 2018 list of “the best small places for business and careers.”


  1. 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.