Louisville forecast 2023.

• Author: Dufrene, Uric

Last year's outlook for the Louisville metro called for another year of solid payroll gains, an expanding labor force and an overall outlook that was quite favorable.

The data through October 2022 show that the Louisville metro did indeed have a favorable year. Looking ahead to 2023, we can expect growth to slow from 2022. As the nation's economy enters a recession in the next year, we don't expect Louisville payroll growth to exceed 2022 levels. While we can expect to see an overall deceleration in economic activity, the impact of a national recession will be relatively mild on the Louisville metro. Our 2023 outlook is the addition of 10,000 jobs and an unemployment rate that will approach 4.5%.

Louisville payrolls

The Louisville metro added 30,000 jobs from September 2021 through September 2022. Excluding the abnormally large changes that occurred in 2021 due to the COVID recession, an addition of 30,000 jobs represents the largest absolute year-over-year change in the past 30 years. Louisville payrolls now exceed the February 2020 level by approximately 10,000. Since the payroll trough that occurred in 2020, the Louisville metro has added approximately 113,000 jobs. (1)

Payroll gains will decelerate into 2023, and the total change in payrolls will be approximately one-third of the change for 2022. However, our outlook does not expect an overall decline in job growth.

Sector changes (2)

The 2022 outlook called for manufacturing payroll changes to exceed 2,300 jobs. Manufacturing indicators, such as unfilled orders and a lean inventory-to-sales ratio, pointed in the direction of strong payroll growth for regional manufacturing. As of September, year-over-year growth in manufacturing was at 2,400 jobs, about the same as last year. National manufacturing has decelerated from earlier in 2022, as evidenced by the decline in the ISM Report on Business, and slower growth in 2023 is likely. However, this outlook does not expect any significant slowdown for area manufacturing. Nationally, automotive sales remain depressed due to lean inventory-to-sales ratios. As inventories improve, sales should also follow due to pent-up demand. This will serve as a tailwind for Louisville-area manufacturing.

Leisure and hospitality increased by 5,700 jobs year over year, consistent with an expected deceleration from last year's change of 6,700. The continued shift from goods to services spending is expected to continue through 2023. An expanding labor force...