Economic Update:  Mixed Results for Louisville Metro Employment

03.19.2010

The Bureau of Labor Statistics released the monthly Metropolitan Employment report, and once again we find mixed results for Louisville Metro. On the plus side, year over year employment losses continue to decelerate from the trough that occurred in the middle of last year. Year over year employment losses now stand at a negative 16,000, marking an improvement from the 16,900 December total. This contrasts to May of 2009 when Louisville Metro recorded year over year job losses of 32,900.

On a month over month basis, the picture is less impressive. From December to January, employers shed an additional 5,800 jobs. This is not a surprise as we had anticipated an ugly report due to the last state-wide report showing additional job losses for Kentucky. For example, Kentucky’s employment losses ranked 3rd in the country during the last state employment report. As a result of this additional decline in non-farm payrolls, total non-farm payrolls for Louisville Metro, on a seasonally-adjusted basis, now stand at 587,000. We have to go back to July of 1997 to find an equivalent number of total non-farm payroll jobs for Louisville Metro. Total jobs peaked at 628,000 in the middle of 2007, just before the Great Recession.

The metro area’s unemployment rate increased to 11.2% in January, an increase from the December rate of 10.1%. I had originally suspected that we could see some small increases in the unemployment rate due to an expanding labor force, as discouraged workers begin joining the workforce again. However, the data in this report indicate that the labor force declined from December to January. This component of the survey is not seasonally adjusted. So this decline could be attributed to seasonal variations. If we look at the change in the labor force on a year over year basis (partially controlling for the non-seasonal variation), we actually see a steeper decline in the labor force compared to last year. The Louisville Metro labor force in January 2009 stood at 631,000, and for January 2010, Louisville’s labor force is down to 627,000. Therefore, the increase in January’s unemployment rate rests with an increase in the number of unemployed. Louisville Metro’s unemployed increased from December’s 63,400 to 70,400 for January. The increase in the metro unemployment rate can also be linked to declines in the number of employed. Month over month, the number of employed declined by almost 8,000. Taking non-seasonality of the data under consideration, we see that employment also declined on a year over year basis of 11,800.

On the plus side, sector employment losses continue to decelerate on a year over year basis. For example, manufacturing losses are down to 2,200 on a year over year basis. This contrasts sharply with the 11,000 losses we had seen earlier in 2009. We suggested we would likely see improvement in manufacturing earlier last year due to what was happening to inventory levels. We’ll continue to see an improvement in manufacturing. But as we’ve mentioned several times here, a sustained recovery will rest with consumer demand, and not solely inventory restocking. The nation’s unemployment rate and dampened consumer confidence will continue to place pressures on the consumer.

Retail and transportation and utilities continued to register decelerating losses as consumers gradually return. The professional and business services sector was flat over the year, and I view this as a positive. As this number resumes sustained positive changes year over year, Louisville Metro will turn the corner and see positive changes in non-farm payrolls.

We first suggested last year that the recession had likely ended during the middle of last year, maybe even the 3rd quarter. I continue to believe that we are going through a recovery, and GDP changes help show that. But as we have repeated many times here, it will be a slow recovery. Have you heard from the V shape advocates lately? We now have the Federal Reserve and White House economists suggesting that the nation will see high unemployment rates throughout the year.

Suggestions

If you have any suggestions on future columns or research about specific industries or other economic data, please send me an email at udufrene@ius.edu.

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Uric Dufrene.

Uric Dufrene, Ph.D. holds the Sanders Chair in Business in theSchool of Business at Indiana University Southeast. He conducts research on local and regional economic trends, and teaches corporate finance at the undergraduate and graduate levels. He previously served as dean of the School of Business.