Louisville forecast 2024

Uric Dufrene, Ph.D.

Sanders Chair in Business and Professor of Finance, Indiana University Southeast, New Albany

Last year’s outlook called for a “mild recession,” with a relatively “minor” impact on the Louisville metro, defined here as Clark, Floyd, Harrison, Scott and Washington counties. The forecast predicted another 10,000 jobs for the Louisville metro by the end of 2023, and an unemployment rate that peaks near 4.5%.¹ Let's see if that held true and what we forecast for 2024.      

The unemployment rate for the Louisville metro hit 4.1% in July and has hovered around the 4% mark since, putting the metro area within proximity of a 4.5% unemployment rate at the end of the year. The metro added about 9,200 jobs as of September year-over-year and is on track to hit 10,000 for the year.²  

This year’s outlook expects a year like 2023. Above normal growth in jobs is not expected, and the nation’s economy will hit a soft patch. This may not be sufficient for the country to enter a recession, but 2024 will see some moderation in growth from 2023. We can expect Louisville’s unemployment rate to be about 4.5% and the region to add 8,000 jobs, representing some deceleration from 2023. The odds favor payroll gains to the downside. 

Louisville payrolls

As of September 2023, the Louisville metro added 9,200 jobs from September of the previous year, and year-to-date, payrolls are up 11,000. Since February 2020, the start of the COVID-19 shock, the metro area has added 14,000 jobs.

Sector changes

Last year’s outlook did not expect any slowdown in manufacturing, despite national indicators pointing to contraction. The outlook expected automobile inventories nationwide to improve, and this would serve as a tailwind for area manufacturing. The pent-up consumer demand in automobiles would serve as a boost to Louisville manufacturing. Over the past 12 months, Louisville-area manufacturing added about 5,000 payrolls, making it one of the best-performing sectors for the metro region.³ It will be difficult to match the gains of 2023, and the outlook is predicting Louisville-area manufacturing will decelerate from 2023. 

Last year’s outlook expected the leisure and hospitality industry to decelerate from the gains of 2022. Even though the outlook called for a continued shift in spending from goods to services, the Louisville metro had two previous strong years in leisure and hospitality growth, and so deceleration for 2023 was likely. To date, the region has added 1,900 jobs year-over-year, marking a noticeable slowing from 2021 and 2022. The sector finally surpassed the level of payrolls that existed at the start of the pandemic, by approximately 1,000.⁴ 

Last year’s outlook forecasted declines in the professional and business services and transportation and warehousing industries, with small changes in retail employment. The professional and business services industry saw a decline, while the transportation and warehousing and retail industries saw a very slight increase in employment.⁵ We will likely see additional declines in all three sectors, as there is an overall decline in economic growth predicted for 2024. 

Labor force, employment and unemployment

A challenge facing both the Indiana and Kentucky economies is labor force growth. Over the past 20 years, the labor force of both states has been well under the national average, and significantly less than states like South Carolina, Georgia and Tennessee.⁶ Over the past year, the Louisville metro economy has not fared well with respect to labor force growth. In fact, the size of the labor force is slightly less than the level that existed a year ago. Employment is down by more than 10,000, and unemployment is up by almost 5,000.⁷ This explains the overall increase in the unemployment rate for the metro area. We will likely see additional increases in the unemployment rate for the remainder of the year, taking it closer to the estimated 4.5%. Moving into next year, the region’s unemployment rate will fluctuate around the 4.5% range, with potential to the upside.

Job postings in the region have been on a precipitous decline since late last year. Since September 2022, job postings have declined from 18,000 to 14,000 in September 2023.⁸ We can expect additional declines in job postings for 2024, as the overall economy softens from 2023.

Southern Indiana

Over the year, Southern Indiana⁹ has continued to notch impressive economic gains. The region is at the highest level of payrolls on record for a first quarter, surpassing the level that existed prior to the pandemic by approximately 4,000. Almost half of all job gains (between 2022 Q1 and 2023 Q1) occurred within the health care and social services industry, with 1,342 jobs added. Construction and retail trade followed with gains of 524 and 415 jobs, respectively. With higher interest rates and uncertainty around the consumer, we will likely see a deceleration in both retail and construction jobs. Manufacturing job changes were just about flat, and the transportation and warehousing industry lost 168 payrolls.¹⁰  

Looking at more timely data, we see that Southern Indiana is now experiencing an overall decline in both employment and labor force growth from 2022.¹¹ Given the decline in employment across the Southern Indiana counties, the outlook is expecting some deceleration in payroll growth across 2024.

Outlook for 2024

The year of 2023 was supposed to be one of recession. Last year’s outlook expected a very mild recession with a limited impact on jobs. In fact, last year’s outlook described it as a “jobful recession.” A recession chance is eliminated for 2023, but slower growth is only delayed to 2024. The impact of higher interest rates will weigh on consumers and eventually, we will see a pullback in consumer spending and business investment. Slower growth will occur in 2024, but the economy may escape a full-blown recession. If any recession is declared, we are not expecting it to be severe. For the Louisville metro, we will see unemployment rates around the 4.5% level and the metro area will add about 8,000 jobs, representing a slight slowdown from 2023. Southern Indiana payroll growth is also expected to decelerate from the strong payroll growth of 2022 and early 2023.

Notes