Lafayette forecast 2023
Community Development Regional Extension Educator, Purdue University
The Lafayette Metropolitan Statistical Area (MSA) is a vibrant region with demonstrated economic resiliency. For the second year in a row, the greater Lafayette area was named the best metro in the nation for career opportunities by SmartAsset.1 According to 2021 data, the region has grown economically, despite tight labor markets and housing inventory. Looking ahead to 2023, current economic conditions are signaling a more tepid growth due to pressures from inflation and rising costs for both goods and labor.
The vast majority of the population in the Lafayette MSA (defined in this article as Tippecanoe, Benton and Carroll counties unless otherwise noted)2 resides in Tippecanoe County (187,076 residents or 86.5% of the metro population), followed by Carroll County with its 20,444 residents.3 Despite the strong population contraction during 2020 and 2021 (likely related to COVID-19), the Lafayette MSA grew by 11,441 people (+5.6%) between 2011 and 2021.
The presence of Purdue University and its related economic activity, in addition to the region’s strong economic base, has allowed the MSA to grow over the years. Most of this growth has occurred in Tippecanoe County, as evidenced by the smaller surrounding counties experiencing minimal growth or declining population numbers. Looking forward, the Indiana University Center for Econometric Model Research (CEMR) projects 0.9% growth in the region in 2023.
As of September 2022, the Lafayette MSA was averaging nearly 110,000 individuals participating in the labor force (January through September, not seasonally adjusted). Those in the labor force have been able to find work, as is evidenced by the 2.0% unemployment rate, which is lower than both the Indiana rate (2.2%) and the national rate (3.3%). Table 1 displays how as the year progressed, more individuals entered the labor force and became employed, thus the continuous drop in unemployment figures. For perspective, the peak number of labor force participants was 115,210 in November 2019. The peak employment occurred in December 2019 (111,989 workers), thus the MSA is missing 3,754 workers as of September 2022. The low unemployment rate emphasizes the need for more individuals to participate in the labor force, which is a common story throughout Indiana.
Table 1: Labor force and unemployment for the Lafayette MSA
|Year||Month||Labor force||Employment||Unemployed||Lafayette MSA unemployment
* Preliminary data
Note: Data are not seasonally adjusted
Source: U.S. Bureau of Labor Statistics, Local Area Unemployment Statistics (LAUS)
Looking forward to 2023, if the economic trends continue, then the MSA will maintain a tight labor market, with employers competing for workers in a limited pool of candidates. It is predicted that the labor force will continue to slowly grow and unemployment rates will stay in the upper 1% to lower 2% range – which indicates full employment. However, at the time of this writing, strong headwinds of inflation, rising labor costs and worker shortages are affecting markets and causing nationwide firms to begin layoffs. Thus, there is a chance that similar activity occurs in the Lafayette MSA, resulting in fewer employed individuals and rising unemployment rates in the 3% or 4% range.
Table 2 examines regional employment between 2021 and 2022 in the Lafayette MSA. In the first nine months of 2022, the MSA saw an increase of 3,022 jobs, or 3.0% growth, from the 2021 annual average. All sectors either grew or maintained their employment. In percentage terms, both the goods-producing and service-providing sectors had similar job increases, yet the leisure and hospitality sector had the largest job growth since 2021 with 800 additional employees (+8.2%). This is the continued reversal of pandemic job losses and high demand for these services as travel increases. Manufacturing remains the largest sector in the Lafayette MSA, comprising 19% of all nonfarm jobs. It also saw a 2.1% gain (+411 workers) as of September 2022.
Table 2: Lafayette MSA employment
|Industry||2022*||Change since 2021||Percent change, 2021-2022|
|Mining, logging and construction||4,067||167||4.3%|
|Private educational and health services||13,433||333||2.5%|
|Trade, transportation and utilities||14,811||211||1.4%|
|Leisure and hospitality||10,500||800||8.2%|
|Professional and business services||8,211||111||1.4%|
* January through September data annualized for 2022. September data are preliminary.
Source: U.S. Bureau of Labor Statistics
The CEMR has employment projections using two different sources of data: QCEW and LAUS.4 Interestingly, they have differing forecasts, but both point to a slowdown in (or negative) employment growth in the first part of 2023 relative to 2022. The forecast with QCEW data projects a few quarters with drops in year-over-year employment (-1.61% in 2023 Q1, -0.61% in 2023 Q2 and -0.01% in 2023 Q3) followed by growth of 0.27% in Q4 of 2023. The forecast with LAUS data points to a modest employment growth rate of 1.41% in 2023 Q1, 1.08% in 2023 Q2, 2.56% in 2023 Q3 and 2.54% in 2023 Q4 as compared to 2022 year over year. This tepid growth is likely to be found in all sectors within the Lafayette MSA.
First quarter 2022 wage data is the most recent information we have at the time of this writing. Since 2021 Q1, there has been a 6.2% change in total jobs and an astounding 7.7% increase in average weekly wages (see Table 3). This strong increase in weekly wages represents the strong demand for workers, which often leads to increased wages to make employment attractive for the prospective worker. Sectors that had the largest wage growth in percentage terms were professional, scientific and technical services (18%); manufacturing (16.2%); and information (16.0%). Looking forward into 2023, given the projected slowing down of the labor market, it is projected that the average weekly wage will increase marginally, perhaps in the 1% range.
Table 3: Average weekly wages in the Lafayette MSA
|Industry||Average weekly wage, 2022 Q1||Change in jobs since 2021 Q1||Change in average weekly wage since 2021 Q1|
|Management of companies and enterprises||$1,583||-15.9%||6.0%|
|Finance and insurance||$1,555||1.1%||3.6%|
|Professional, scientific, and technical services||$1,488||3.7%||18.0%|
|Health care and social services||$1,033||2.6%||11.9%|
|Transportation & warehousing||$920||8.5%||10.8%|
|Real estate and rental and leasing||$888||6.2%||13.1%|
|Agriculture, forestry, fishing and hunting||$791||-7.2%||-0.8%|
|Other services (except public administration)||$724||2.3%||3.9%|
|Admin. & support & waste mgt. & rem. services||$552||46.5%||1.1%|
|Accommodation and food services||$337||16.1%||5.6%|
|Arts, entertainment and recreation||$297||10.9%||5.3%|
Note: Data for mining and utilities were nondisclosable.
Source: STATS Indiana, using Quarterly Census of Employment and Wages data
The Lafayette MSA had a per capita personal income (PCPI) of $46,968 in 2021, a 6.8% growth since 2020. Nationally, the 2021 PCPI was $64,143 (a jump from $59,765 in 2020); the region consistently lags behind the nation’s PCPI due to a different occupational mix and lower pay scales at the highest-earning tiers. Additionally, the greater Lafayette area is a college town, with large quantities of individuals generating minimal amounts of income—which pulls down the PCPI figure. The PCPI gap between the Lafayette MSA and nation decreased between 2020 and 2021 to 73.2% of the national figure, a difference of $17,175. Compared to statewide figures, the MSA lags Indiana’s PCPI of $56,497 by $9,529. Despite these gaps between national and state figures, the region’s PCPI has grown by 49.8% since 2010. The CEMR forecasts average annual growth of 5.82% in the MSA’s personal income between 2021 and 2025, with a sizable jump of 11.33% in 2021.
As of September 2022, the year-to-date figures for the real estate market in the Lafayette MSA reflected decreases in three areas: housing inventory (-5.9%), new listings (-7.5%) and closed sales (-4.2%), as shown in Table 4. As a reflection of tight housing inventory, all counties in the Lafayette MSA had higher median sales prices than 2021. The data reflects Benton County had a spurt of new home listings and closed sales in 2022 relative to 2021, which decreased the months supply of inventory and quantity of homes available for purchase. As predicted in Tippecanoe County, limited supply has affected the number of new listings and closed sales, yet existing homes are selling at higher prices. Carroll County also had fewer new listings, but had slightly more closed sales with higher median sales prices and more housing inventory since 2021. These trends are following predictions and future expected trends. The Lafayette MSA’s housing market will keep tightening and prices will be 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|
|Median sales price||n/a||n/a||n/a||$117,000||$150,000||28.2%||$172,250||$185,000||7.4%||$218,000||$250,000||14.7%|
|Months supply of inventory||n/a||n/a||n/a||2.6||1.8||-30.8%||1.1||1.2||9.1%||0.9||0.9||0.0%|
|Inventory of homes for sale||219||206||-5.9%||22||18||-18.2%||18||20||11.1%||179||168||-6.1%|
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
Nationally, the rapidly increasing interest rates are impacting borrowing activity. Currently, the housing market is slowing down and this is expected to continue in the near future. The need for additional inventory of homes within the Lafayette MSA and throughout the nation still exists, and it will be interesting to see how the construction market will respond to the economic headwinds. Optimistically, the pressures on volatile costs (lumber, steel, drywall, etc.) and skilled labor may alleviate, yet financial pressures may cause a stagnation in new housing developments or renovations within the region.
Despite the strong need for increased housing inventory in the Lafayette MSA, the number of housing permits issued in 2021 declined from 2020 (-13.5%). This is likely due to the increase in construction costs. The preliminary 2022 housing permits data also show a decreased number of permits issued. In total, the MSA had 1,182 permits issued in 2021 (see Figure 1). Over the past decade (2011 to 2021), 5,838 housing permits have been issued to build single-family homes relative to the 5,703 housing permits issued for 5-or-more family units. Given the rapid increase in interest rates and inflation, the quantity of 2022 and 2023 issued housing permits will likely be lower than recent years as the costs of building will increase.
Figure 1: Lafayette MSA residential building permits
*Note: 2022 reflects year-to-date figures through September 2022 for the MSA.
Source: STATS Indiana, using U.S. Census Bureau data
In 2022, the Lafayette MSA experienced growth in employment, average weekly wages and income, despite drops in population and housing inventory. The low unemployment rates are signaling a fully employed economy and the need for additional workers to enter the labor force is evident. Looking forward to 2023, predictions are signaling a slowdown in activity in the first several quarters before regaining strength. Many economists are paying close attention to the Fed to see what monetary policies will be enacted to tamp down inflation, which also carries over into the economy. In 2023, growth in the Lafayette MSA will likely be challenged by these external factors, similar to many other MSAs throughout the country.
- Christopherson, Margaret. “SmartAsset again names greater Lafayette best place in nation for career opportunity; Fort Wayne places 9th.” Lafayette Journal and Courier, August 2, 2022.
- Warren County was added to the Lafayette MSA in the 2018 metro delineations. However, federal databases still mostly report data based on the older delineation.
- Between 2019 and 2021, the MSA experienced a population decrease of 7,600 people, likely attributed to the rapid shift to remote learning and work, thus allowing individuals to live elsewhere. Population estimates are defined as July 1 of a given year.
- A quick primer on the differences between QCEW, LAUS and CES data can be found here: https://www.dws.state.nm.us/Portals/0/DM/LMI/So_Which_Employment_Numbers_Do_You_Use.pdf