Skip to Content
  • Economic Development

Economic Outlook for 2021

Note:  IU Southeast held the annual economic outlook on November 16.   Professor Uric Dufrene, the Sanders Chair in Business at IU Southeast, provided the regional outlook.  Click the button below for excerpts from comments he provided at the annual forum. 

The year 2020 will go down as a year that observed both the steepest job losses and largest gains for the Louisville metro area. In the late first quarter and early second quarter, Louisville metro saw unprecedented job losses due to pandemic-induced shutdowns. In months following, job gains have been strong relative to normal economic conditions, but have yet fully recovered the massive job losses in the first half of the year. The year 2021 will see additional job gains, and the region is expected to fully recover job losses by late 2021.

Louisville Metro Payrolls

The region’s economy hit a bottom in April. Louisville metro saw job losses of 123,000. The Louisville region went from a high of 682,000 jobs in February to a low of 559,000 jobs in April, equivalent to the level of jobs that existed in April of 1996. From May to June, the area quickly recovered 41,000 jobs, the largest gain going back to 1991, and perhaps the largest ever.

Since that time, month over month job gains have been decelerating, but remain higher than historical month over month gains. During the Great Recession, the deepest year over year job losses came in around 32,000. Currently, Metro area year over year job losses stand at negative 36,000.

Sector Growth

Job losses and subsequent gains were primarily concentrated in manufacturing, leisure and hospitality, retail, professional and business services, and education and health services. In April, these five sectors had combined year over year job losses of 91,300, with more than a third of total losses occurring in leisure and hospitality. As of September 2020, these four sectors had year over year combined losses of 23,600, a considerable improvement from April.

Manufacturing has gone from being down 20,000 in April to down 5,000 jobs in September. With a drop in inventories nationwide, and anticipated increases in demand, manufacturing should see a solid year in Louisville Metro. The last time we observed a similar drop in nation-wide inventories was in 2009, the Great Recession. Manufacturing job growth in Louisville Metro then saw double-digit percentage growth in subsequent years, reaching as high as 18 percent year over year growth. We will not necessarily see year over year gains as high as 18 percent, but we will continue to erase some of the job losses from earlier in the year.

Professional and business services was down 8,000 jobs in April. As of September, jobs in this sector are now at minus 3,600. After exiting a recession, the region generally sustains growth in professional and business services. For example, the last recession saw six consecutive years of growth, and the two recessions prior to the Great Recession saw several years of sustained growth, with only a couple exceptions in two respective years. We should see solid growth in professional and business services over the coming year, and this will likely erase the 3,600 jobs deficit.

Retail jobs were down 8,300 in April, and now stand at approximately negative 1,400. With all the disruptions taking place in retail, this is an impressive recovery. This sector is somewhat a wildcard. Will consumers increase in-store shopping or rely on online shopping? Some consumers will want to venture out, and retail will also erase these losses by the end of next year.

Leisure and hospitality jobs were down 35,000 in April, and the most recent data shows job losses stand at negative 8,000. As the regional economy continues to reopen and people begin to travel again, we should anticipate gains in leisure and hospitality over 2021, making additional progress in the 8,000 job losses.

Job Postings

Job postings data from Burning Glass allow us to examine real time data in local labor markets.

Hiring across Southern Indiana hit a recession low in the month of April, with job postings running approximately 25 percent below levels that existed in January 2020. Postings in October were higher by a small amount than pre-pandemic levels in January and compared to last year, job postings are running slightly higher. The top three occupations emerging after summer 2020 were all transportation and logistics related – laborers and freight; stock and material movers; heavy and tractor-trailer truck drivers; and stock clerks. Just prior to the pandemic, the top three occupations with the highest demand were retail salespersons, heavy and tractor-trailer truck drivers, and registered nurses. For the Louisville metro, the top occupation in demand is a registered nurse.

Summary and Outlook

The nation will likely see another round of fiscal stimulus after the November elections.  The size of the stimulus rests on what political party that controls both houses of Congress. As of today, it does appear that we will have a split government. Regardless of that outcome, any fiscal stimulus will provide additional support for growth. Fiscal stimulus, in addition to improving unemployment rates and the overall financial strength of the household, will result in positive job gains for Louisville metro.

There are two primary reasons to be optimistic about job prospects in Louisville Metro.  

One is the financial strength of the national household. Household net worth is in a better position now compared to the Great Recession. Heading into the Great Recession, household net worth values were declining, and the household balance sheet was in a weakening state. This time, household net worth is in a better position, and has not declined to levels that we saw during the Great Recession.

Savings rates are down compared to a pandemic all time high but remain elevated compared to historical levels. The current savings rate is double the rate that existed coming into the recession. If you go all the way back to the 1950s, there is only one year when the savings rate was higher, and that is 1975. Household debt to income is also at lower levels compared to the Great Recession. Delinquency rates have actually declined during the pandemic.

Why is this important for Louisville Metro?    There is a link between the regional economy and the national consumer. Durable goods, automobiles, transportation and warehousing, and leisure and hospitality are all industries that depend on the strength of the consumer, and all are important to the regional economy.

The second reason for optimism is the state of manufacturing. Manufacturing suffered deep losses in the pandemic but has been returning with robust growth. National indicators such as the ISM Mfg. Index, and lower inventory levels point to strong growth for area manufacturing.

I anticipate that the region will fully recover lost jobs by the end of 2021. Growth is expected across all sectors, with strength in manufacturing, professional and business services, leisure and hospitality, and transportation and warehousing. Strong household balance sheets nation-wide, coupled with favorable manufacturing indicators, imply an above average year for job growth in Louisville Metro. Uncertainly with respect to fiscal and tax policy and a different regulatory structure, in addition to virus-related impacts on travel, could provide strong headwinds to the outlook.

Jun 16, 2020
Economic Development

Northwest Ordinance Distilling Announces Nearly $40 Million Expansion Plan

Expansion projected to bring up to 50 new jobs to area NEW ALBANY, IND. (May 27, 2020) Northwest Ordinance Distilling,...

read more
Economic Development

ETS Jet Engine Stands Inc. Brings 30 New Jobs to New Albany

NEW ALBANY, IND. (May 15, 2020)– ETS Jet Engine Stands Inc., with the assistance of One Southern Indiana, the chamber...

read more