–With a surge in business establishments
By Dr. Uric Dufrene, Sanders Chair in Business Professor of Finance, Indiana University Southeast
New data are out at the county level, and it shows that Southern Indiana continues to see strong job expansion. For the first quarter of 2022, the five Southern Indiana counties that comprise Louisville Metro added another 2,982 jobs from the previous year. How does this gain compare to previous years? Since 2001, quarterly gains exceeding that number have only occurred on five separate occasions, excluding the outsize changes connected to Covid. So, a gain of almost 3,000 jobs is significant.
The highest number of job changes occurred in the accommodation and food services industry, adding 1,682 jobs from the previous year. One of the challenges facing this industry has been labor availability. As consumers shift spending from goods to services spending, food and drinking places, along with accommodation establishments, have faced challenges in meeting demand. The added jobs reflect the strong demand for food and accommodation and an expanding regional labor force. The expanding labor force is providing the labor for payroll gains, and this is reflected in this large increase.
The second largest gain occurred in the “administrative and support and waste management and remediation services” industry, adding 886 jobs. While this includes everything from garbage pickup to custodial services (BLS states “office administration, hiring and placing of personnel, document preparation and similar clerical services, solicitation, collection, security and surveillance services, cleaning and waste disposal services), the large gains usually reflect changes in temporary labor services.
Strong gains also occurred in wholesale and retail trade. Retail added another 367 jobs compared to the first quarter of 2021. Retail trade establishments have also faced significant challenges in hiring. Despite some of these hiring challenges, retail trade employment is higher than in the first quarters of 2019 and 2020. The death of brick-and-mortar stores has been greatly exaggerated! Yes, more shoppers continue to rely on the convenience of online shopping, but it is still possible to succeed in physical retail.
The most significant aspect of the data relates to the number of establishments. The number of establishments across the five counties increased by 260 compared to the previous year. This is the largest gain since 2001. The previous high occurred during the first quarter of 2020, the same quarter of the Covid-related shutdowns. Nation-wide, there was also a significant increase in business formations. The most recent quarter, however, is perhaps reflective of the attractive environment for business formation and expansion across Southern Indiana.
Average weekly wages increased by $76, representing a 9.1% change from the previous year. The average weekly wage of $913 for the first quarter is the highest on record for first quarter wages. Driving these gains were transportation and warehousing and wholesale trade, increasing by $145 and $143 respectively.
In our last column, we talked about the wild ride that we could expect on September 13th. As we have discussed in this series, the Consumer Price Index (CPI) is now the most important economic indicator, larger than the almighty monthly employment report. We saw that play out this past September 13th; unfortunately, that was not a wild ride of enjoyment. The CPI report showed that the core rate (CPI less food and energy) of inflation increased by an amount that was more than anticipated, and at a rate that was double the monthly change in July. The equity markets threw a major fit, with the Down losing more than 1,000 points. An increase of 75 basis points by the Fed is just about guaranteed, and there is now an outside chance of 100 basis points (1 percentage point).