100 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 2025

Author photo

Associate Professor of Economics and Finance, University of Indianapolis

The Lafayette Metropolitan Statistical Area (MSA) has experienced several challenges in 2024, but remains a vibrant and attractive market with some positive indicators heading into the new year. While issues exist, the overall market remains resilient, anchored by Purdue University and a robust collection of businesses and industries. Job growth in 2024 has been soft and unemployment nudged higher in the latter parts of 2024. Inflation has been a focal concern in 2024 due to its negative impact on household finances and rising business costs, but Federal Reserve policy pulled the rates of inflation down. Wage growth is strong and the housing market remains tight.

Looking ahead to 2025, more uncertainty awaits. Businesses and households are adjusting to higher costs for goods, services and labor. Additionally, the results of the November 2024 elections will impact both domestic fiscal policy and international trade policy in yet unknown ways. On the upside, it appears Federal Reserve policy in 2025 should further reduce interest rates and ease credit, which will reduce financing costs for businesses and households.   

Population trends

The population of the Lafayette MSA maintains a slightly positive trend. Yearly growth is modest, but the trend remains positive (see Figure 1). The population is concentrated in Tippecanoe County to take advantage of the economic and social benefits afforded by Purdue University and the surrounding symbiotic industries.  

Figure 1: Annual Lafayette MSA population

Line graph showing Lafayette MSA population from 2010 to 2023. The population peaked in 2019 and decreased in both 2020 and 2021 before starting to trend back up.

Source: U.S. Census Bureau

Labor market trends

The Lafayette MSA labor market has experienced challenges in 2024. Inflation, higher interest costs, rising labor costs and labor shortages have converged to stress the labor market. Unemployment rates increased in 2024 to between 4% and 5%, which is slightly higher than the past several years. As noted in Table 1, the number of people unemployed in 2024 has increased as a result. Labor force and employment numbers have remained relatively unchanged over the last several years. The aforementioned slight increases in population have not yet translated into increases in the labor force. The labor force in 2025 should continue to build strength as the year progresses, remaining stable at the beginning of the year and eventually returning to growth. The unemployment rate should retreat from the recent high of 5% and ease down during the year closer to 4% if the Federal Reserve is successful in creating a soft landing for the economy while subduing inflation.

Table 1: Labor force and unemployment for the Lafayette MSA

Year Month Labor force Employment Unemployed Unemployment rate
2022 January 110,728 107,224 3,504 3.2
February 111,232 107,669 3,563 3.2
March 112,060 108,605 3,455 3.1
April 111,905 109,393 2,512 2.2
May 111,364 108,285 3,079 2.8
June 109,124 105,441 3,683 3.4
July 108,374 104,471 3,903 3.6
August 108,874 105,584 3,290 3.0
September 110,441 107,927 2,514 2.3
October 113,446 110,163 3,283 2.9
November 114,225 111,038 3,187 2.8
December 112,402 109,942 2,460 2.2
2023 January 112,654 109,169 3,485 3.1
February 114,707 110,905 3,802 3.3
March 115,511 111,977 3,534 3.1
April 115,387 112,763 2,624 2.3
May 114,591 111,009 3,582 3.1
June 110,997 107,403 3,594 3.2
July 111,098 107,184 3,914 3.5
August 111,170 107,766 3,404 3.1
September 114,451 111,522 2,929 2.6
October 115,680 112,424 3,256 2.8
November 115,905 112,613 3,292 2.8
December 113,639 111,122 2,517 2.2
2024 January 111,389 107,712 3,677 3.3
February 113,542 109,161 4,381 3.9
March 114,009 109,606 4,403 3.9
April 114,417 110,975 3,442 3.0
May 115,189 110,795 4,394 3.8
June 111,594 106,465 5,129 4.6
July 113,059 107,452 5,607 5.0
August* 112,511 107,845 4,666 4.1

*Preliminary data
Note: Data are not seasonally adjusted.
Source: U.S. Bureau of Labor Statistics, Local Area Unemployment Statistics (LAUS)

Total nonfarm employment in 2024 is nominally higher compared to 2023. A net of 63 jobs have been added to the Lafayette MSA (using annualized not seasonally adjusted data). As noted in Table 2, most sectors added employment in 2024, with natural resources, mining and construction (+6.3%) and leisure and hospitality (+3.8%) leading the employment gains in terms of percentage increase. The sectors of professional and business services (-4.3%), manufacturing (-1.2%) and government (-1.2%) show continued weakness and employment declines. With decreasing interest rates in 2025, employment should continue to strengthen, with positive job gains in sectors such as manufacturing and construction.

Table 2: Lafayette MSA employment by industry

Industry 2023 2024* Change since 2023 Percent change, 2023-24
Total nonfarm 109,700 109,763 63 0.1%
Total private 83,900 84,275 375 0.4%
Goods producing 25,600 25,625 25 0.1%
Manufacturing 21,200 20,950 -250 -1.2%
Natural resources, mining and construction 4,400 4,675 275 6.3%
Service-providing 84,100 84,138 38 0.0%
Private educational and health services 14,000 14,025 25 0.2%
Trade, transportation and utilities 15,200 15,375 175 1.2%
Leisure and hospitality 11,100 11,525 425 3.8%
Professional and business services 9,800 9,375 -425 -4.3%
Financial activities 3,600 3,613 13 0.3%
Information 700 700 0 0.0%
Other services 4,000 4,038 38 0.9%
Government 25,800 25,488 -313 -1.2%

*January through August data annualized for 2024. August data are preliminary.
Note: Data are not seasonally adjusted. 2023 data are annual averages.
Source: U.S. Bureau of Labor Statistics, Current Employment Statistics (CES)

While employment gains in 2024 remain modest, wage growth over the year is a point of strength. Overall, average weekly wages in the Lafayette MSA grew 6.8% year-over-year in the first quarter of 2024. This significant wage growth helps ease the burden of inflationary pressure on households. While most sectors saw increases, as noted in Table 3, wage gains were strongest in the following industries: administrative support (14.6%), information (9.2%), manufacturing (8.9%), construction (8.5%), public administration (7.4%) and management of companies and enterprises (7.0%). It is likely wage growth in these same sectors will remain strong throughout 2024.

Table 3: Average weekly wages in Lafayette MSA

Industry Average weekly wage, 2023 Q1 Average weekly wage, 2024 Q1 Change in average weekly wage since 2023 Q1
Management of companies and enterprises $1,652 $1,767 7.0%
Finance and insurance $1,671 $1,717 2.8%
Professional, scientific and technical services $1,560 $1,645 5.4%
Manufacturing $1,613 $1,757 8.9%
Educational services $1,408 $1,486 5.5%
Wholesale trade $1,504 $1,490 -0.9%
Mining $1,082 $1,138 5.2%
Construction $1,254 $1,361 8.5%
Health care and social services $1,058 $1,116 5.5%
Public administration $1,023 $1,099 7.4%
Transportation & warehousing $1,026 $1,094 6.6%
Information $998 $1,090 9.2%
Internet publishing and broadcasting $921 $936 1.6%
Real estate and rental and leasing $969 $1,002 3.4%
Agriculture, forestry, fishing and hunting $827 $854 3.3%
Other services (except public administration) $818 $854 4.4%
Retail trade $660 $657 -0.5%
Admin. & support & waste mgt. & rem. services $601 $689 14.6%
Accommodation and food services $377 $393 4.2%
Arts, entertainment and recreation $319 $303 -5.0%

Source: STATS Indiana, using Quarterly Census of Employment and Wages (QCEW) data

Housing trends

The Lafayette MSA housing market remains hot, as seen in Table 4. Overall, the supply of homes and number of listings remained stable in 2024, compared to the significant declines experienced in 2023. New listings remained steady for the 12-month period from October 2023 to September 2024. Sales have increased by 5% during the period, following declines in 2023. Higher interest rates and the effects of inflation on household incomes pulled back housing demand and limited activity in 2023, but 2024 has shown signs of market stabilization and increased activity. Home prices over the period have risen by 7%, indicating strong appreciation and a continuation of tight markets.

Table 4: Lafayette MSA residential real estate sales

Indicator 12-month average Change
New listings 2,143 0.0%
Sales 1,876 5.0%
Average price $271,638 7.0%

Note: Data are a 12-month average from October 2023 to September 2024. Change data compares the latest 12-month average to the prior 12-month average.
Source: Indiana Association of Realtors (IAR Data Hub)

In response to the tight housing market and perhaps in anticipation of lower interest rates, building permit activity in the Lafayette MSA continues to increase, as noted in Figure 2. Total building permits filed have reached a high point since 2010. While this construction will not immediately aid a tight housing market (as it will take time to become available), it does suggest health in the long-term housing market and strong employment in construction.

Figure 2: Lafayette MSA residential building permits

Line graph showing total residential building permits filed in the Lafayette MSA between 2010 and 2023.

Source: STATS Indiana, using U.S. Census Bureau data

Conclusion

The economic environment of the Lafayette MSA is uneven heading into 2025. The labor market has welcomed significant wage growth, but employment and job creation remain very sluggish, leading to higher unemployment. Inflation and interest rates have remained high most of the year, with reprieve only coming in the last few months. Population growth remains resilient, likely a reflection of the desirability of the area. While there is evidence of increased building in the future, the housing market remains tight and residential real estate prices continue to rise.

Projections for 2025 will likely remain uneven. The prospects of lower inflation and interest rates are certainly welcome and will likely grow the economy as the year progresses. However, the national election and the speed of the Federal Reserve to lower interest rates remain substantial unknowns that will impact the local economy both in the short and long term. Businesses and households will continue to adjust to higher costs due to inflation, but rapidly dropping interest rates could mitigate this influence. If interest rate declines are gradual, the economic benefits could be pushed into late 2025 or beyond.

Changes in fiscal and trade policy resulting from the election will impact the local economy as significant portions of the economy are tied to agriculture and heavy construction equipment used in infrastructure projects. This link to the infrastructure sector also ties the local economy to the global economy, as countries either alter infrastructure spending to reduce budgets or increase spending as a product of fiscal stimulus. While the prediction for 2025 sees the potential for continued improvements over 2024, significant uncertainty remains which could alter the outcome.