Lafayette forecast 2024

Tanya Hall

Community Development Regional Extension Educator, Purdue University

The Lafayette Metropolitan Statistical Area (MSA) has become an attractive market to live and work with a relatively resilient economy. The region has attracted attention due to past rankings about career opportunities and real estate hot markets coupled with the prestige of Purdue University. The 2023 data show the region’s goods producing sector has experienced growth both in employment numbers and in wage levels, despite tight labor markets and housing inventory. Looking ahead to 2024, current economic conditions are signaling more tepid growth due to pressures from inflation and rising costs for both goods and labor.

The Lafayette MSA (defined in this article as Tippecanoe, Benton and Carroll counties unless otherwise noted)¹ boasted a 2022 population of 217,991 individuals. Nearly 87% of this population is found in Tippecanoe County (188,717 residents), followed by Carroll County with its population of 20,555. Over the last decade (2012-2022), the Lafayette MSA has grown by 9,874 residents. Since 2000, the region has gained approximately 39,000 residents, with the vast majority of this growth occurring in Tippecanoe County. This growth underscores the attraction of Purdue University and its related economic activity. Looking forward, the Indiana University Center for Econometric Model Research (CEMR) projects an increase of nearly 1,900 residents (0.8% growth) in the region in 2024, pushing the total population count to 221,820 individuals (see Figure 1).

Figure 1: Annual Lafayette MSA population

Note: Data for 2023 through 2025 are projections.
Source: U.S. Census Bureau and Indiana University Center for Econometric Model Research

Labor

In the 2023 forecast, it was noted that the strong headwinds of inflation, rising labor costs and worker shortages had the potential to affect the Lafayette MSA, causing fewer employed individuals and unemployment rates in the 3% or 4% range. Table 1 reinforces the impact of those headwinds, as the U.S. Bureau of Labor Statistics September 2023 preliminary data noted a year-over-year drop of more than 2,100 workers in the labor force. Compared to Indiana and the nation, residents are largely able to find work as noted by the consistently lower unemployment rate in the Lafayette MSA. Despite the region continuing to grow its population, the labor force has not returned to its November 2019 peak of 115,210 workers. Admittedly, not all population growth equates to working-age individuals, but the low unemployment rate emphasizes the ability of individuals to participate in the labor force.

Looking forward to 2024, it is anticipated that a slight uptick of employment may occur in comparison to the 2023 data. The MSA will likely maintain a tight labor market, with employers competing for workers in a limited pool of candidates. It is possible for the unemployment rate to stay steady in the 3% or 4% range as the economy continues to slowly grow with the persistently higher inflation rates, increased labor costs and costs of goods. 

Table 2 examines the regional employment between 2022 and 2023 in the Lafayette MSA. In the first nine months of 2023, the MSA saw a drop of 2,200 jobs (-2.1%). The service-providing sector experienced the job losses, namely the government (-3,911 jobs) and the trade, transportation and utilities (-178) sectors. Demand for the goods producing sector (+578), leisure and hospitality (+711) and private educational and health services (+400) was evident by the increased number of jobs. Manufacturing remains the largest sector in the Lafayette MSA, comprising 20% of all jobs, and it also experienced a gain in jobs (+367). 

The CEMR has employment projections using two different sources of data: QCEW and LAUS.² Interestingly, they have differing forecasts, with the LAUS data showing minimal year-over-year employment growth in the first half of 2024 and an improved outlook in the second half of the year (-0.10% in Q1, +0.55% in Q2, +2.17% in Q3 and +1.79% in Q4). Conversely, the QCEW forecast anticipates a year-over-year decline in employment in all four quarters of 2024, yet follows a similar pattern as the LAUS data. In essence, it is anticipated the Lafayette MSA can expect a continued downturn in employment through 2024 Q3 followed by modest employment growth in the final quarter of 2024 (+1.3% between Q3 and Q4).

First quarter 2023 wage data is the most recent information we have at the time of this writing. Since 2022 Q1, there has been a 4.2% change in total jobs and an astounding 10.0% increase in average weekly wages (see Table 3), which builds upon the previous year’s 7.7% growth in average weekly wages. This wage growth in the past two years has been unusually strong compared to the past decade. This strong increase in weekly wages represents the strong demand for workers and the necessity of employers to offer increased wages to make employment attractive for the prospective worker – who is experiencing their own economic headwinds with higher inflation affecting living expenses. Sectors that had the largest wage growth were manufacturing (+17.9%), construction (+14.9%) and wholesale trade (+13.5%). Looking forward into 2024, given the rapid wage growth in the past two years, the average weekly wage growth will likely begin to cool to coincide with slower economic growth. Growth will likely hover around the 2% to 5% range and be varied across industries, depending on business demand.

In 2021, the Lafayette MSA per capita personal income (PCPI) increased to $46,968, a gain of $3,013 since 2020 (+6.9%). The latest data covers the brunt of the COVID-19 pandemic time frame, thus some of this growth is likely propped up by the distribution of government funds to families and businesses during the economic distress. Nationally, the 2021 PCPI was $64,430 (and it jumped to $65,470 in 2022); 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 the nation improved between 2020 and 2021 to 72.9% of the national figure, a difference of $17,462. Compared to statewide figures, the MSA lags Indiana’s PCPI by $9,966. Despite these gaps between national and state figures, the region’s PCPI has grown by 41.1% since 2011, equivalent to $13,685. The 2022-2026 projection for the MSA’s personal income shows a 3.91% annual growth with a sizable jump in 2022 (+4.42%) and 2024 (+4.21%).

Housing

In February 2023, the Wall Street Journal/Realtor.com Winter 2023 Emerging Housing Markets Index put Lafayette-West Lafayette as the No. 1 emerging market in America.³ The data continue to show that not only is this MSA a hot market, but it is also one with limited inventory. As of September 2023, the year-to-date figures for the real estate market in the Lafayette MSA reflected drops in three areas:  housing inventory (-8.7%), new listings (-19.6%) and closed sales (-20%), as shown in Table 4. The limited number of homes for sale caused 2023 to remain as a seller’s market, as median sales prices ticked upwards in all three counties, ranging from up 2.4% in Carroll County to up 10% in Tippecanoe County since 2022. The story is similar in each county – fewer listings resulting in fewer sales. Benton County was the only county in the MSA that had a slight growth in inventory of homes for sale, but all counties only have between one and two months of supply of homes that can be bought/sold. These trends are following predictions and future expected trends. The Lafayette MSA’s housing market will keep tightening and prices may continue to be pushed slightly upward due to lack of supply of homes.

Nationally, the highest interest rates in 20 years have impacted borrowing activity. The housing market has slowed 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. The construction industry in the Lafayette MSA is still growing and builders will continue to fulfill housing projects, but the pool of clientele who can afford to undertake new housing projects will likely contract.

Surprisingly, despite the strong economic headwinds affecting the housing industry in 2022, the number of housing permits issued in the four-county MSA region (including Warren County) increased 28.4% over 2021, totaling 1,518 permits. The preliminary 2023 housing permits data also reflect a 9.4% increase in issued permits (see Figure 2). Looking closely at the data, much of this growth is driven by permits issued for units with five or more families rather than single-family homes, accounting for approximately 75% of the issued permits. Over the past decade (2013-2023), 5,500 housing permits have been issued to build single-family homes and another 7,554 housing permits were issued for 5-or-more-family units. Several of these multi-family units have been built in the Lafayette and West Lafayette areas, changing the skyline and look of the Purdue University campus. Looking ahead to 2024, if interest rates improve, building permits for single-family homes will likely increase due to pent-up demand. Thus, it is anticipated that the number of housing permits issued will remain steady.

Figure 2: Lafayette MSA residential building permits

Note: 2023 data are year-to-date figures through September. The MSA region shown includes Benton, Carroll, Tippecanoe and Warren counties.
Source: STATS Indiana, using U.S. Census Bureau data

Conclusion

Despite increases in average weekly wages, per capita personal income and population, the Lafayette MSA experienced declines in employment, labor force participation and housing inventory in 2023. Projections for 2024 are signaling a slowdown in the first half of the year before regaining strength. The region may experience higher wage levels, per capita personal income growth and increased housing development, but at a slower pace dependent on the Federal Reserve’s inflation monetary policies. The Lafayette MSA's 2024 growth will likely be challenged by these external factors, similar to many other MSAs throughout the country.