By Dr. Uric Dufrene, Sanders Chair in Business and Professor of Finance, Indiana University Southeast
The Bureau of Labor Statistics released the monthly report on Metropolitan Employment and Unemployment last week. The report showed additional progress in one of the major challenges over the past couple of years. The latest BLS metropolitan March estimates show that the region’s labor force is higher than the level that existed in February 2020, and higher than the March 2019 number. Since the trough of June 2020, the region has added about 40,000 workers.
As a comparison to the Great Recession, the region’s labor force showed almost no increase from 2010 to 2015. In March of 2010, just after the Great Recession, the Louisville Metropolitan area labor force was approximately 626,000. By March 2015, the labor force had only increased to 629,000. Starting in 2016, the metro labor force then began an upward trajectory, adding another 38,000 workers until the Covid plunge of February 2020.
The most impressive decade of labor force growth occurred in the 90s. In February 1993, the metropolitan labor force was at 538,000 and then peaked in February 1999 at 592,000, representing a gain of 54,000 workers. In the following decade, the region then only added about 10,000 workers.
On the employment side, Louisville employment now exceeds the level that existed in February 2020, even though it is only by about 2,000. In the past year, Louisville employment has grown by about 20,000. This rate of growth exceeds labor force growth observed from 2017 to 2019. Mid 2016 showed the strongest year over year labor force growth, except for one month in 2010, and the outsized Covid related growth.
On the payroll side of the report, Louisville Metro is down about 5,000 payrolls from the level that existed in March 2020. The BLS report showed a small uptick in payrolls but declined on a seasonally adjusted basis. Over the year, the metro area is up about 12,000 payrolls. On a percentage basis, metro area payroll growth trails Kentucky, Indiana, and the US. Durable goods manufacturing is down about 6,000 payrolls since last year, and overall manufacturing is negative year over year. While overall payroll growth is under state and national rates, there continues to be a demand for hiring. Job postings on the labor market website, Burning Glass, are about 1,000 higher for the metro region compared to last year.
The manufacturing payroll numbers likely explain the overall subdued payroll numbers for the metro region. There are potential explanations for this, including supply chain challenges and the chip shortages that have adversely impacted auto manufacturing. For the readers of this column, I’ve been very optimistic about manufacturing in general. The latest Beige Book (St. Louis Fed section) captures this sentiment precisely.
Manufacturing activity has strongly increased since our previous report. Firms in both Arkansas and Missouri reported moderate to strong upticks in new orders and production. Demand has continued to remain strong despite significant price increases, exceeding production capacity and creating order backlogs. Some firms are concerned demand may soon soften due to these continued price increases. Labor inputs and wages also remain high due to worker shortages. One contact in trailer manufacturing noted that they “could double their sales if they had the workers.” Firms continue to invest in process automation to reduce their reliance on human labor.
–Beige Book, April 2022
Perhaps the last sentence can also partially explain the overall change in Louisville Metro payrolls. Demand has been strong, but fewer employees in manufacturing may be needed, and we’ve written about this several times in the past.
The latest ISM Report on Manufacturing did show a deceleration in growth. The 55.4 reading is consistent with expansion in manufacturing, but this number was lower than the previous month’s reading of 57.1, and lower than the readings in the 60s we were seeing last year. We need the ISM to get to the lower 40s before we enter a recession.
Data sources: Burning Glass, BLS Report on Metropolitan Employment and Unemployment