Lexington MSA GDP Over $28.5 Billion

The Lexington MSA GDP totaled over $28.5 billion in 2015, the most recent year for which data is currently available.

The largest contributor was manufacturing at $5 billion, followed by real estate, rental, and leasing at $4.1 billion, and professional and business services at $3 billion.

Durable goods manufacturing made up 75% of manufacturing, such as motor vehicle parts, computer and electronics products, machinery manufacturing, and fabricated metal products. Half of the business and professional services GDP was professional, scientific, and technical services such as legal occupations, accounting, engineering, and veterinary services.

Over the past five years, Lexington MSA’s top five industry areas have all seen increases (health care and social assistance data not available for 2011 and 2012). Professional and business services had the largest growth of 26%, followed by manufacturing at 23%. Retail increased by 16%, indicating that the overall economy has been growing stronger and that residents have more discretionary income to spend. In dollar terms, manufacturing saw the largest increase, $928 million.

The Lexington MSA is home to 13.3% of Kentucky’s population, but contributes a higher percentage of the state’s GDP, particularly in educational services, health care, and social assistance (36.2%), real estate and rental and leasing (20.6%), and professional and business services (19.1%).

Note: The Lexington MSA does not include Franklin County.

 

“Robust Growth” Expected for Kentucky

The University of Kentucky Center for Business and Economic Research (CBER) released the 2017 Kentucky Annual Economic Report earlier this week.

The report includes economic inputs and outputs and offers a comprehensive review of Kentucky’s economy organized into twelve areas: Agriculture, Community, Economics, Economic Security, Education, Energy, Environment, Health, Infrastructure, Innovation, Population, and Public Finance. There are nearly 170 sub-topics, meaning that a complete review is beyond the scope of this blog. Let’s review a few aspects of Kentucky’s economy covered during the Economic Outlook Conference, attended by two members of the Commerce Lexington Economic Development team.

Unemployment Rate – Kentucky’s unemployment rate has steadily decreased since the recession, averaging around 4.9% in 2016, and seems to be leveling. Between May 2016 and October 2016, Kentucky’s unemployment was around 5%, the first time in over fifteen years that the unemployment rate has been so low for six consecutive months, indicating a recovery from the recession.

Goods and Services – Kentucky’s economic activity is increasingly being driven by service-provision industries. In the 1960s, Kentucky’s GDP was about 50% goods production and 40% services provision, but this began to change in the 1980s and today services contribute about 59% of Kentucky’s GDP and outputs and goods production contributes around 27%.

Manufacturing Establishments and Outputs – Although manufacturing employment is growing at a slower pace due to technology improvements, manufacturing output is growing in Kentucky.

Health Firms – Establishments and employment in the healthcare industry are growing and account for more jobs than manufacturing in Kentucky.

Golden Triangle – Lexington, Louisville, and Northern Kentucky continue to be strong contributors to Kentucky’s overall economy and have recovered better than the state as a whole. Unemployment in all three cities was below 4.2% and each experienced higher job growth than the country.

Introducing the 2017 report, Dr. Chris Bollinger writes: “We expect robust growth in Kentucky’s gross domestic product this year. Increases in both hourly warnings, as well as weekly earnings, suggest a strengthening labor market, which potentially bodes well for workers during the coming year.”

The 2017 Kentucky Annual Report is available here.

BEAM International 2.0 Export Promotion Grant Program

We’re excited to introduce the BEAM International 2.0 Export Promotion Grant! Companies may apply for grants up to $5,000 for export development services:

  • Prepare for exporting
  • Identify best markets
  • Participate in trade shows and trade missions
  • Find the right international business partner

Ideal companies are small businesses with ten or more full-time employees and an exportable product or service, who are operating profitably, and are ready to find new international customers. Minimum criteria:

  • Produces a product or service that has been exported successfully, or could be exported successfully.
  • Meets the sector-specific SBA definition of a small business detailed in 13 C.F.R. Part 121
  • Has been registered to do business in Kentucky or Indiana for no less than 1 year.
  • Is operating profitably based on operations in the United States.
  • Is registered to do business in Kentucky or Indiana (preference given to companies located in the BEAM region)
  • Has a minimum of 10 full-time employees.

FUTURE EXPORTERS
Grant funds help qualified future exporters purchase business development services to prepare them for the international marketplace. Funds can be used for an export readiness assessment, market research, market strategy development, analysis of supply chain, cash flow, operations and more.

CURRENT EXPORTERS
Grant funds help current exporters to identify and execute new international sales opportunities. Awards can be used for market research, business to business matchmaking services, strategic planning assistance, financial and cash flow analysis and planning, improvement of web presence, education, translations, trade shows and more.

The submission deadline is March 10, 2017. Complete application and guidelines can be found here. To learn more about the Bluegrass Economic Advancement Movement, check out the BEAM page on our website.

Preference will be given to companies in the BEAM counties:

  • Kentucky: Bourbon, Bullitt, Clark, Fayette, Franklin, Hardin, Henry, Jefferson, Jessamine, Madison, Meade, nelson, Oldham, Scott, Shelby, Spencer, Trimble, Woodford
  • Indiana: Clark, Floyd, Harrison, Washington

Lexington’s Innovative Population

Lexington earned a 106.2 on StatsAmerica’s Innovation 2.0 index, indicating a “very high relative capacity for innovation” and ranking among the top 10% in the country.

The overall score is based on five equally weighted component indexes.

Lexington performed particularly well on the Human Capital and Knowledge Creation Index, which measures a region’s ability to innovate based on population characteristics and knowledge infrastructure, using factors such as educational attainment, knowledge creation, technology diffusion, and STEM education and occupations. In fact, Lexington’s score of 148.1 ranks the city first in Kentucky and among the top 3% in the country!

The Human Capital and Knowledge Creation Index is made up of three components.

Educational Attainment – As expected, Lexington performed well here in bachelor’s degree and advanced degree attainment. According to the latest Census Bureau data, 41.6% of Lexington residents over age 25 have a bachelor’s degree, ranking Lexington 11th in the country among cities with 300,000+ people, and 18.9% have an advanced degree, ranking Lexington #9 in the country.

Knowledge Creation and Technology Diffusion – This measures the spread of knowledge and creativity through networks and support structures, specifically patent technology, university-based knowledge spillovers from ongoing research and development, and business incubators. Although data was not disclosed, we can guess at factors that helped Lexington score highly in this area. In 2016, there were 215 patents issued to Lexington inventors, and in 2015 the University of Kentucky’s R&D expenditures were over $330 million. Also, entrepreneurs can find guidance and support from many sources in Lexington. To name a few, the Kentucky Innovation Network, the Bluegrass Business Development Partnership, the Bluegrass Small Business Development Center, Awesome Inc., SPARK, 5Across, and Lexington SCORE have helped many entrepreneurs build their startup business.

STEM Education and Occupations – STEM fields produce new technology and drive innovation, and this measures looks at both the existing and future STEM workforce. Again, although the actual data used by StatsAmerica is not available, let’s look at several influencing factors. In 2015 alone, the University of Kentucky contributed to the STEM workforce by graduating over 1,100 students in the STEM degree majors identified by Innovation 2.0, including 567 engineering degrees (441 bachelor’s degrees, 79 master’s degrees, and 45 doctorates) and 322 biological and biomedical sciences (249 bachelor’s degrees, 30 master’s degrees, 10 post-grads, and 33 doctorates). As for the current STEM workforce, Innovation 2.0 looks at an area’s technology-based occupations and the high-tech industry. About 10,000 Lexingtonians work in the STEM industry areas identified by Innovation 2.0, and another 6,700 work in a similar field. In total, about 11% of Lexington’s workforce is in the STEM industry or related employment.

 

Measuring Innovation in Lexington

Last January we looked at StatsAmerica’s Innovation Index, a measure of an area’s innovation capacity and output. The updated Innovation 2.0 incorporates new research and 50 new variables that better measure innovation, such as knowledge spillovers, technology diffusion, and foreign direct investment.

Last year, Lexington scored a 101.8 on the Innovation Index. This year, Lexington has scored a 106.2!

The Headline Index is the overall innovation score, made up of five equally weighted component indexes, with an optional Social Capital Index. In total, over 80 variables go into the Innovation Index. There are three measures of innovation inputs and two measures of innovation outputs.

Innovation Inputs promote innovation and create knowledge:

  • Human Capital and Knowledge Creation – the population and labor force’s ability to innovate, based on educational attainment, knowledge creation, technology diffusion, and STEM education and occupations. Specific measures include patent technology diffusion, university-based knowledge spillovers, business incubation, STEM degrees, technology-based occupation clusters, and high-tech industry employment share.
  • Business Dynamics – the region’s competitiveness and the entry and exit of individual firms, based on establishment formation, dynamics, and venture capital dollars and deals.
  • Business Profile – local business conditions and resources available to entrepreneurs, based on FDI attractiveness, connectivity, industry profiles, and proprietorship. Specific measures include FDI employment and investment, high-speed internet connection of residents and farms,  young high-tech firms, proprietor rate, and capital availability.

Innovation Outputs are the direct outcomes and economic improvements.

  • Employment and Productivity – measures economic growth, regional desirability, and direct outcome of innovation based on industry performance, GDP, and patents.
  • Economic Well-Being – the population’s standard of living, including personal income and growth, income inequality, poverty rate, unemployment, and other measures.

Additionally, the Social Capital Index measures the regional benefits of collaborative networks that help a community meet challenges, based on measures of altruism, formal organizational membership and participation, information interaction, shared norms, and trust.

The Index is configured so that the national average is 100. Scores lower than 100 indicate performance lower than the national average and scores higher than 100 indicate performance better than the national average.

Lexington’s 106.2 Headline Index indicates “very high relative capacity for innovation,” according to StatsAmerica, and ranks Lexington #265 out of 3,110 counties. This means that Lexington is in the top 10% of innovative counties in the country!

Check back next week for more in-depth information about Lexington’s Innovation!