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 2020


Community Development Regional Extension Educator, Purdue University

The Lafayette Metropolitan Statistical Area (MSA) had its Greater Lafayette region ranked among the top 100 fastest-growing metropolitan areas since 2010. While the population does continue to grow, a tight housing market and other economic indicators provided surprising numbers in 2019 that opposed the projected trajectory. Comparison of 2018 and 2019 figures showed a significant amount of churn in the labor market, which yielded fewer individuals employed, declines in the number of unemployed individuals and a smaller labor market. Likewise, the number of jobs declined modestly, weekly wages were virtually stagnant, yet per capita personal income rose. This article will explore these data points a bit further.

The Lafayette MSA (which includes Tippecanoe, Benton and Carroll counties) has experienced steady population growth over the past 20 years. The MSA’s strong and diverse economy, in addition to the economic activity associated with Purdue University, drives much of the growth for the region. Thus, the Lafayette MSA remains a region to watch since its ranking as #2 on Forbes’ 2018 list of “the best small places for business and careers.”

Since 2000, the MSA has expanded by 44,000 residents, a sustained growth of nearly 2,320 individuals per year (see Figure 1). The Indiana University Center for Econometric Model Research (CEMR) anticipates a smaller growth in the region in 2020 with 1,150 residents, pushing the total population count to 224,215 individuals.

Figure 1: Annual Lafayette MSA population

Line graph from 2007-2021 (projections for 2019-2021) showing population steadily increasing.

Note: Data for 2019 through 2021 are projections.
Source: U.S. Census Bureau and Indiana University Center for Econometric Model Research


The Lafayette MSA labor market has witnessed a subtle ebb and flow of individuals working or looking for work (i.e., the labor force). Between September 2018 and September 2019, the MSA had a range of 106,221 to 113,795 individuals in the labor force, with roughly 97 percent employed. The unemployment rate reflects this full employment phenomenon, which often was lower than the state and nation’s rate (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 3.7 percent in January and February. In 2020, pending any major market disruptions, the local unemployment rate will likely mirror 2019. All signs point toward a continued strong demand for workers; however, wages will need to increase to entice more workers to enter the labor force.

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
2018 August  109,808  105,956  3,852 3.5% 3.6% 3.9%
September  111,868  108,864  3,004 2.7% 3.1% 3.6%
October  113,795  110,221  3,574 3.1% 3.3% 3.5%
November  112,984  109,631  3,353 3.0% 3.3% 3.5%
December  111,910  108,594  3,316 3.0% 3.4% 3.7%
Annual  112,531  108,967  3,564 3.2% 3.4% 3.9%
2019 January  113,141  108,957  4,184 3.7% 4.1% 4.4%
February  113,015  108,885  4,130 3.7% 4.1% 4.1%
March  111,997  108,200  3,797 3.4% 3.9% 3.9%
April  111,924  109,050  2,874 2.6% 3.1% 3.3%
May  107,599  104,637  2,962 2.8% 2.9% 3.4%
June  106,221  102,780  3,441 3.2% 3.3% 3.8%
July  107,201  103,583  3,618 3.4% 3.6% 4.0%
August  106,690  103,323  3,367 3.2% 3.2% 3.8%
September*  108,185  105,465  2,720 2.5% 2.8% 3.3%

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

The year-over-year comparison between September 2018 and 2019 shows a 3,683 drop in the labor force and a reduction of 284 workers from the unemployment rolls. Additionally, over the same time frame, the Lafayette MSA saw employment levels fluctuate by around 7,400, which is puzzling given the strong demand for 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 still poised to experience job growth through 2021; thus, the tight labor market trend will continue.

Table 2 looks specifically at regional employment between 2018 and 2019 in the Lafayette MSA. During 2019, the MSA experienced a 2.9 percent drop in employment, or nearly 3,100 jobs. The losses came from the government sector, namely state and local government positions. A few other service-providing sectors experienced employment drops, such as retail trade, professional and business services, and financial activities. The goods-producing industry sector gained nearly 1,000 jobs—mostly in manufacturing—but it was not enough to offset the losses from the service-producing industry sectors.

Table 2: Lafayette MSA employment

Industry 2019* Change since 2018 Percent change, 2018-2019
Total nonfarm  102,733 -3,067 -2.9%
Total private  77,878 678 0.9%
Goods-producing  23,778 978 4.3%
Manufacturing  20,167 867 4.5%
Mining, logging and construction  3,611 111 3.2%
Service-providing  78,956 -4,044 -4.9%
Private educational and health services  12,944 244 1.9%
Trade (wholesale and retail)  11,522 -644 -4.0%
Transportation, warehousing and utilities  2,600 0 0.0%
Leisure and hospitality  10,211 111 1.1%
Professional and business services  7,711 -389 -4.8%
Financial activities  3,400 -100 -2.9%
Information  722 -78 -9.7%
Other services  4,989 189 3.9%
Government  24,856 -3,744 -13.1%

*January through September data annualized for 2019. September data are preliminary.
Source: U.S. Bureau of Labor Statistics

Data from the Indiana Department of Workforce Development shows that as of the first quarter of 2019, 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). All three of these industries experienced growth when looking at a year-over-year comparison from first quarter 2018 to first quarter 2019.

A number of investments, expansions and attraction announcements were made in 2019 within the Lafayette MSA, fueling the region’s growth. Examples include the following:

  • Southwire plant is expanding by 15 employees and secured a seven-year tax abatement.
  • Completion of West Lafayette’s $120-million State Street project.
  • Duke Energy will construct a 1.6 megawatt solar power plant in the Discovery Park District.
  • Saab announced it would plant 300 jobs and a $37 million facility to build fighter jet fuselages in West Lafayette.
  • Purdue Research Foundation officials announced plans to develop a subdivision of homes, townhomes, cottages, condominiums and apartments near State Street and Airport Road.

The CEMR forecasted employment growth of 2,300 in the Lafayette MSA for 2019 with an additional 2,200 jobs in 2020. 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 2018 and 2019, average weekly wages dropped slightly by 0.1 percent within the Lafayette MSA. This drop was not expected since the economy is showing signs of full employment. Given that wages did not increase, this may help explain why individuals left the labor market and the sizable amount of churn among employed workers. Half of the major sectors had positive wage increases (two were nondisclosed), ranging from 0.9 percent (public administration) to 10.6 percent (management of companies and enterprises), as seen in Table 3. As the economy continues to expand, wages will need to increase to entice individuals into the labor force. While a 5 percent wage increase would be ideal, a more likely figure may be around 3.5 percent for 2020.

Table 3: Average weekly wages in the Lafayette MSA

Industry Average weekly wage, 2019 Q1 Change in jobs since 2018 Q1 Change in average weekly wage since 2018 Q1
Total  $942 2.8% -0.1%
Management of companies and enterprises $1,557 -0.5% 10.6%
Manufacturing* $1,448 5.4% -3.1%
Finance and insurance $1,379 -6.8% 7.3%
Professional, scientific and technical services $1,288 3.9% 4.3%
Educational services* $1,177 3.0% -1.9%
Wholesale trade $1,124 5.7% -3.5%
Construction $995 5.4% -0.2%
Public administration $871 3.1% 0.9%
Transportation and warehousing $866 3.5% 4.7%
Health care and social services $841 2.7% -1.1%
Real estate and rental and leasing $783 3.3% 2.4%
Information $778 -0.4% -1.1%
Agriculture, forestry, fishing and hunting $757 8.8% -1.7%
Other services (except public administration) $651 4.6% 3.0%
Administrative, support, waste management and remediation $520 3.1% 3.0%
Retail trade $512 -0.5% 2.4%
Accommodation and food services $311 -0.2% 1.6%
Arts, entertainment and recreation $267 1.5% 0.0%

* 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’s per capita personal income (PCPI) was $37,309 in 2017 (the most current data available at the time of this writing), a 2.7 percent growth from the prior year. The region lags behind the nation’s PCPI of $51,885, due to a different occupational mix and lower pay scales at the highest-earning tiers. This explains why the Lafayette MSA’s PCPI is 71.9 percent of the national figure, falling short by $14,576. The region’s PCPI has grown by 21 percent since 2010. The 2018 through 2021 projection for the MSA’s income shows annual growth of 4.2 percent. In order to meet this projection, the MSA will need to see wages increase.


The real estate market in the Lafayette MSA had drops in three main categories: fewer listings (-6.1 percent), quantity of closed sales (-3.5 percent) and inventory of homes for sale (-14.2 percent), as shown in Table 4. Two of the three counties in the Lafayette MSA experienced higher median sales prices, with Carroll County being the exception (-2.1 percent). Each county has a slightly different housing story. Tippecanoe County had a slight dip in quantity of listings and closed sales, but a 10 percent increase in median sales prices. Likewise, the county’s supply of housing continues to have less time on the market (2.4 months) with a supply of 452 homes (-12.4 percent). Tippecanoe County’s housing market remains tight and prices are being pushed upward due to lack of supply of homes.

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*
  2018 2019 Change 2018 2019 Change 2018 2019 Change 2018 2019 Change
New listings 2,591  2,432 -6.1% 88 79 -10.2% 181 172 -5.0% 2,322 2,181 -6.1%
Closed sales 2,094 2,020 -3.5% 68 60 -11.8% 124 155 25.0% 1,902 1,805 -5.1%
Median sales price  n/a  n/a n/a  $75,500  $92,750 22.8%  $129,700  $127,000 -2.1%  $166,500  $183,000 9.9%
Months supply of inventory n/a n/a n/a 5.4 4.2 -22.2% 7.1 4.9 -31.0% 2.6 2.4 -7.7%
Inventory of homes for sale 655 562 -14.2% 42 29 -31.0% 97 81 -16.5% 516 452 -12.4%

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 and Realtor.com Economic Research

Benton County’s housing market has tightened considerably with fewer listings (-10.2 percent), fewer months supply of inventory (4.2 months, or -22.2 percent), as well as a sizable drop in inventory of homes for sale (-31.0 percent). Median sales prices increased by 22.8 percent, indicating buyers are either paying more to purchase highly sought-after homes or the homes being sold are attractive and quality homes.

Carroll County’s housing story shows an increasing number of homes being bought and sold, thus limiting the available real estate. The county had a 5 percent drop in new listings, a slight decrease in median sales price (-2.1 percent) and lower inventory of homes for sale (-16.5 percent). Homes in Carroll County had a 31 percent drop in the length of time they were on the market, as well as a 25 percent increase in closed sales. Given the slight drop in median sales prices, the county may be experiencing a situation where less desirable homes are being purchased for residency or repair.

Nationally, Freddie Mac has forecasted the housing markets will continue to thrive due to lower interest rates. The demand for affordable homes remains brisk. Unfortunately, the lack of supply of housing stock is artificially pushing up sale prices and encroaching on housing affordability. It is projected that builders may have a hard time meeting demand for new housing construction for the next five years. Concerns about a housing crash persist; however, a housing-hungry millennial middle class and powerful economic performance is projected to outweigh housing crash indicators.

The Lafayette MSA is experiencing several of the national trends and is expected to see little change for 2020. Housing inventory across all three counties will remain tight, likely pushing up median sales prices and reducing the amount of time existing homes are on the market.

Given the gradually tightening existing-housing market, one would expect to see more housing permits issued. In 2018, the MSA had 1,818 permits issued (+86.3 percent over 2017)—a number not seen since 2000 (see Figure 2). Over 70 percent of the permits were for large housing units (5-or-more-family units), which would represent the flurry of apartment and condominium housing units being built in the Purdue University housing market area. Between 2013 and 2018, the MSA has seen approximately 3,000 permits issued to build single-family homes and a comparable number for the 5-or-more-family units. As of September 2019, housing permit issuances are at about half of 2018 figures (859 permits, most for 5-or-more-family units). In 2020, as the inventory of homes keeps dropping—coupled with rising median sales prices—housing permit issuances should remain strong.

Figure 2: Lafayette MSA residential building permits

Line graph from 1990 to 2019 showing fluctuations in building permits (total units).

* 2019 reflects year-to-date figures through September 2019 for the MSA.
Source: STATS Indiana, using U.S. Census Bureau data


Economic growth pressed a pause button in 2019 while the region continued to invest in long-term infrastructure projects for future gains. In the last economic outlook, optimism was high for continuing its strong employment, wage and population growth. While some of the projections were validated, other results were surprising. As the Lafayette MSA continues to attract and expand its industries, demand for workers and housing options will remain. The region will need to raise wages to attract individuals back into the workforce and to the area; otherwise, the data will show that the region has reached full employment, which could deter continued business growth in the three-county area.


  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.