Louisville forecast 2009.

• Author: Dufrene, Uric

October 2008, updated December 2008

How will Louisville weather the current financial crisis? Based on current readings of data in the Louisville metro, trends over the past year, and the historical relationship between Louisville and the U.S. economy, the outlook for Greater Louisville is an overall decrease in nonfarm payroll jobs. Unemployment could reach 8 percent, and the region will see decreases in manufacturing, construction, retail, leisure and hospitality, financial services, and professional and business services.

Labor Markets

The Louisville metro, including its four southern Indiana counties (Clark, Floyd, Harrison, and Washington), is showing significant increases in the number of people unemployed. An increasing labor force and a decrease in the number employed are interacting to produce a significant spike in the unemployment rate (see Figure 1). As of August, the Louisville metro's 6.6 percent unemployment rate was at its highest in the past 18 years. (1) Southern Indiana's portion of the metro had a 6.1 percent unemployment rate--lower than the metro area, but considerably higher than the rate of 4.3 percent observed in 2007.

[FIGURE 1 OMITTED]

Unemployment claims for the southern Indiana portion of the metro increased significantly compared to last year. (2) The August year-over-year increase represents the largest percentage increase in unemployment claims since the recession of 2001, and the percentage change in claims exceeds the change for Indiana (see Figure 2). Does this increase represent a peak or the beginning of slower growth in the near- to intermediate-term?

Nonfarm Payrolls

As of September, the Louisville metro lost approximately 5,000 jobs compared to the previous September. (3) Recently released October data indicate job losses have accelerated with an overall decline of 8,200 nonfarm payroll employment. No doubt, slower national economic activity is beginning to affect the Louisville metro. The largest losses were registered in manufacturing and in professional and business services. Health and educational services showed a smaller increase than previous years, while the government sector registered strong gains (see Figure 3).

Manufacturing

The Louisville metro lost approximately 4,600 manufacturing jobs from September 2007 to September 2008. The majority of these losses were in durable goods, symptomatic of consumer issues nationally. Weaker domestic consumer activity, slower global growth, declining...