Category Archives: Economy

Kentucky’s Aerospace Industry is Taking Flight!

Kentucky’s aerospace industry is taking flight! According to the U.S. Census Bureau, Kentucky exported $27.6 billion in 2014, an increase of 9% from 2013. Although Kentucky is traditionally known for horses and bourbon, aerospace parts and products were the largest export category in 2014 at $7.7 billion, while other transportation (i.e., motor vehicles, parts, bodies, and trailers) totaled almost $6 billion. Furthermore, Kentucky exported more aerospace and aviation products than every other state in the country, except California and Washington. Clearly, aerospace is Kentucky’s up-and-coming industry.

Three notable aerospace companies in Lexington are Belcan Corporation, Space Tango, and Lockheed Martin. Each has made significant or unique contributions to aerospace and aviation.

Belcan Corporation is a leading engineering services, design center, and technical staffing company for the aerospace industry that opened its Lexington office in 2005. Today, Belcan serves over 600 clients in the automotive, aviation, energy, marine, and medical industries. Belcan’s engineering services include automation design and build, engineering analysis, project management, and software and systems engineering. Last month, the company announced it will be expanding in downtown Lexington with an investment of $1.2 million, creating 100 new engineering jobs and growing by an additional 15,000 square feet in the Vine Center, a necessary increase for Belcan’s expanding customer base.

Lexington is also home to Space Tango, the first business accelerator for space startups. Through a 12-week program, Space Tango gives entrepreneurs the opportunity to access advisors, sales and marketing professionals, investors, experienced mentor expertise, clean room facilities, and test equipment to help innovative businesses create novel applications and successfully access diverse markets.

Lockheed Martin is an international leader in the aerospace and defense industries. As a global security and aerospace company, Lockheed Martin specializes in aeronautics, information systems and global solutions (IS&GS), mission systems and training, and space systems, among others, with facilities and employees worldwide. Lexington’s Lockheed Martin office is a contractor and logistics support services facility, offering repair, maintenance, and modification of equipment, such as helicopters damaged in service. Lockheed Martin is also one of the Bluegrass Region’s major employers with over 1,000 employees.

As with other industries, Lexington is able to provide the aerospace industry with a skilled and well-educated workforce and a central location. However, Lexington and the Bluegrass Region are particularly appealing to the aerospace industry because of the extensive network of colleges, universities, and other educational institutions with aerospace and aviation programs working to develop the region’s workforce. More about educational opportunities for the Bluegrass Region’s developing aerospace workforce next week!

Lexington’s June 2015 Unemployment Rate Lower Than Pre-Recession

June unemployment rates were recently released and the Bluegrass Region continues to show relatively low unemployment levels, averaging 4.4%.

This June marks the sixth anniversary since the end of the most recent recession, which began in December 2007 and ended in June 2009 according to the U.S. National Bureau of Economic Research.

Before the recession, Kentucky’s unemployment rate was 5.4% in June 2007. Six months after the recession began, Kentucky’s unemployment rate had increased to only 6.5%. However, by the end of the recession Kentucky’s unemployment had increased to a whopping 11% in June 2009, more than double pre-recession levels in every Bluegrass county. Clark County experienced the highest unemployment rate at 11.3% while Fayette experienced the lowest at 8.8%. 

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Kentucky was not alone in 2009. Sixteen states had unemployment rates over 10% (including Kentucky), seventeen states were between 9.9% and 7% unemployment, and only three states were below 6.5%.

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A year after the recession ended, the unemployment rate had decreased in all Bluegrass counties but was still an average of 3.9 percentage points higher than pre-recession levels, with the exception of Clark County (only .3 percentage points higher than its June 2007 level).

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Fayette County maintained lower than average unemployment rates throughout the recovery period and continued to receive praise for its workforce, economy, and business environment. When the country was suffering extremely high unemployment rates in 2009, Lexington was ranked #6 Best Mid-Size Metro to Launch a Business by CNN Money and in 2010 when the country was beginning to recover Lexington was ranked #9 Best Place for Business and Careers by Forbes and  #14 Best City for Job Growth Among Mid-Size Cities by New Geography. This year, Lexington was ranked #16 Best City for Business and Careers by Forbes.

This June, Fayette County boasts the second lowest unemployment rate in Kentucky at 4.1%. (The lowest unemployment rate is in Woodford County at 3.7%, which is great news for the Bluegrass Region.) Of the 120 counties in Kentucky, seven of the eight Bluegrass counties — Bourbon, Fayette, Franklin, Jessamine, Madison, Scott, and Woodford — are among the top 20 lowest unemployment rates for June 2015 (i.e., in the top 10%) and three — Fayette, Scott, and Woodford — are among the top 10 lowest unemployment rates.

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Jobs in Lexington — Mapped!

Job creation, expansion, and retention are at the core of economic development. Numbers and an accompanying narrative are usually used to explain the economic state of Lexington and the Bluegrass Region, but an exciting new format has just been released.

Robert Manduca, a PhD student at Harvard University, used data from the U.S. Census Bureau Longitudinal Employer-Household Dynamics database to create an interactive map of jobs, modeled after Dustin Cable’s Racial Dot Map.

Every job in the United States is plotted on this map–or at least all of the jobs enrolled in state unemployment insurance programs and some federal jobs. In total, 96% of civilian wage and salary jobs are included.

Each dot represents one job and is color-coded by industry.

  • Red — Manufacturing and Trade
  • Blue — Professional Services
  • Green — Healthcare, Education, and Government
  • Yellow — Retail, Hospitality, and Other Services

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The job clusters of the Golden Triangle between Lexington, Louisville, and Northern Kentucky/Cincinnati are fairly sizable and easy to see, even zoomed out far enough to view the entire continental country. This high concentration of jobs is good news for our region and demonstrates our competitiveness.

Take a look at the Bluegrass Region and the surrounding area:

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A few details that reflect the region’s major employers pop out:

  • Frankfort is mostly green, which is expected from the state capitol.
  • The red area north of Lexington (around Georgetown) is Toyota Motor Manufacturing in Scott County, the second largest employer in the region with 7,900 employees.
  • The red grouping to the east of the city is Lockheed Martin, another major employer with around 1,100 employees.
  • The red grouping near Berea is Tokico (USA) Inc. (Hitachi) in Madison County with 1,350 employees.
  • The red area near Versailles consists of Osram Sylvania Glass Plant, Quad/Graphics, Pilkington North America, Inc., and Yokohama Industries America Inc. in Woodford County. Together these companies employ almost 2,400 people.
  • The red south of Lexington is the Enterprise Industrial Park in Jessamine County.

Lexington has a mix of all four colors and industries, illustrating the city’s healthy economic diversity.

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Healthcare, education, and government jobs (green dots) and manufacturing and trade jobs (red dots) are clearly prominent in Lexington.

Education is one of Lexington’s strengths. Just over 40% of Lexingtonians have a bachelor’s degree or higher and 17.2% have a graduate or professional degree, far above the national and state averages. Not surprisingly, the University of Kentucky is the region’s largest employer with 12,430 employees and is primarily represented by a solid block of green in the near-center of the city. Fayette County Public Schools is also a major employer with 5,427 employees spread throughout the city boosting the number of green dots.

Healthcare facilities also sustain a sizeable portion of the workforce in Lexington. Theses jobs appear throughout the city, with large concentrations in the south-center, center, and south-east. In addition to providing an abundance of quality patient care, these centers conduct cutting-edge research and help attract biotech and high-tech companies. Below are a few of the highest healthcare employers:

  • KentuckyOne Health: 3,000 employees
  • Baptist Health: 1,924 employees
  • Veterans Medical Center: 1,565 employees
  • Cardinal Hill Rehabilitation Hospital: 1,000 employees

Manufacturing is another major part of Lexington’s economy. The majority of manufacturing and trade jobs are concentrated in the north area of Lexington and include some of the city’s major employers: Lexmark (2,145 employees), Amazon.com (1,200 employees), Trane (1,000 employees), Link-Belt Construction Equipment Co. (750 employees), Webasto Roof Systems (720 employees), Big Ass Solutions (550 employees), and Schneider Electric (500 employees), among others.

The Fayette Mall and Hamburg Pavilion shopping centers are also easily distinguishable.

Maps like this are an excellent tool when planning transportation, housing, emergency routes, city services provision, zoning, and events. By showing the spatial patterns, clusters, and concentrations of industries and jobs, maps offer another way to understand the community’s economy and compare to other cities.

For data nerds, the NAICS codes used are:

  • Red, Manufacturing and Trade – 11 (Agriculture and Forestry), 21 (Mining), 22 (Utilities), 23 (Construction), 31-33 (Manufacturing), 42 (Wholesale Trade), 48-49 (Transportation and Warehousing)
  • Blue, Professional Services – 51 (Information), 52 (Finance and Insurance), 53 (Real Estate), 54 (Professional, Scientific, and Technical Services), 55 (Management of Companies and Enterprises)
  • Green, Healthcare, Education, and Government – 61 (Educational Services), 62 (Health Care), 81 (Other Services – largely Religious, Grantmaking, Civic, Professional, and Similar Organizations)
  • Yellow, Retail, Hospitality, and Other Services – 44-45 (Retail Trade), 56 (Administrative and Support Services), 71 (Arts, Entertainment, and Recreation – largely Amusement, Gambling, and Recreation), 72 (Accommodation and Food Services)

Note: Data represents 2010. 

Kentucky’s Automotive Industry, Part 2: Economic Contribution

The Kentucky Automotive Industry Association‘s report discussed last week also examined the contribution of Kentucky’s automotive industry to the state and regional economies through direct, indirect, and induced effects.

Direct effects created by automotive industry companies themselves, such as automotive jobs, production, exports, and payrolls. Indirect effects are caused by inter-industry activities, or business-to-business spending on goods or services used to create automobiles such as trim and engine parts. induced effects are caused by auto industry employees’ household spending. In other words, auto businesses spend money at other businesses (indirect effects) and auto employees spend money (wages) in the regional economy (induced effects). Both create jobs and tax revenue.

To estimate direct, indirect, and induced effects, the researchers used a model of Kentucky’s economy containing data on 536 industries, imports, output, employment, payroll, and other variables specific to Kentucky.

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Kentucky’s automotive industry supports over 136,000 jobs with a total payroll of $6.13 billion. However, the automotive industry is a hierarchy and it is more informative to analyze the levels separately.

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Kentucky’s four auto assembly plants employ over 16,000 people, with an average annual pay of $84,000. The Lexington Region has the highest concentration (49%) of automotive assembly plant jobs, but the Louisville Region is a close second with only 380 fewer jobs than the Lexington Region. Not surprisingly, the automotive industry supports mostly (28%) wholesale trade jobs (9,194 jobs) and jobs in eight motor vehicle manufacturing industries (3,609 jobs), such as engine parts manufacturing. The researchers found that assembly plants get most of their inputs (i.e., parts) from outside of Kentucky and that Kentucky parts manufacturers export between 10% and 70% of their products out of state.

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Unlike auto assembly jobs, employment in automotive body and parts manufacturing is not concentrated in only a few regions of the state. Regardless, the Lexington Region has the second-highest concentration of automotive body and parts manufacturing jobs (23%) behind Louisville. The average pay of automotive body and parts manufacturing is just below $48,000 per year, much lower than average annual wages at auto assembly plants, primarily due to the level of expertise and sophistication required in those positions. The largest share (14%) of jobs supported by these facilities are in wholesale trade (3,148 jobs).

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The researchers used country-level effective tax rates over the past three years to estimate Kentucky income and sales tax receipts from the automotive industry and associated revenue.

The automotive industry and all jobs supported by it contributed $488 million in state tax revenue in 2013. That’s $1 of every $14 in state taxes. The Lexington Region contributed 38% of direct state income tax revenue, 33% of all state income tax revenue, 36% of direct state sales tax revenue, and 31% of all state sales tax revenue associated with the automotive industry in 2013.

Almost 40% of all direct local occupational tax revenue derived from the auto industry went to the Lexington Region, totaling almost $20 million.  When tax revenue from indirect and induced jobs are included, the total local occupational tax revenue received by Lexington jumps to $41.6 million.

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Kentucky’s Automotive Industry, Part 1: Kentucky, Lexington, and Competition States

Earlier this month, the Kentucky Automotive Industry Association (KAIA) released “The Economic Impact of the Automotive Industry in Kentucky.” This report comprehensively detailed Kentucky’s growing automotive industry, compared Kentucky to competition states, and analyzed the industry’s economic and fiscal impact on the state economy, including jobs and taxes.

Competition states included states that border Kentucky (Illinois, Indiana, Missouri, Ohio, Tennessee, Virginia, and West Virginia) and five southeastern states (Alabama, Georgia, Mississippi, North Carolina, and South Carolina). These states comprise almost all of the auto manufacturing corridor and house the majority of the country’s auto assembly facilities.

Some key findings from the report include:

  • Kentucky ranks 5th for number of full- and part-time automotive industry employees (2013). Over 85,000 Kentuckians are directly employed by an automotive-related business at one of the 470+ establishments in Kentucky and 136,500 jobs are supported by the automotive industry, including 41,705 in the Lexington Region.
  • Automobile manufacturing pays the 4th highest wage in Kentucky’s manufacturing sector at $58,280, behind computer and electric products manufacturing ($79,490), electrical equipment and appliance manufacturing ($65,180) and primary metals manufacturing ($63,040).
  • Of the 44 automobile assembly plants in the United States, 4 are in Kentucky. These facilities actually put vehicles together and send out the finished product for purchase.  Kentucky produced 1.28 million cars and light trucks in 2014, which is 11.2% of all passenger vehicles produced in the United States and makes Kentucky the third largest automobile producer behind Ohio (13.5%) and  Michigan (20.4%).
  • Although almost all of Kentucky’s finished automobiles were for domestic consumption, Kentucky’s motor vehicles, bodies, trailers, and parts exports totaled $5.9 billion in 2014 and were 21.5% of all Kentucky exports.
  • The Bluegrass Region has 97 auto manufacturing facilities, representing over 20% of all auto-related businesses in Kentucky.

The report also explains how Kentucky has cultivated such a thriving auto industry. Kentucky and Lexington are ideal for auto manufacturing companies and facilities for several reasons. Both have lower overall costs of doing business, easy access to skilled labor, an array of incentives, and Kentucky has the 4th lowest utility costs in the nation at 5.67 cents per kWh. However, the report states that the primary reason is a strategic location.

Kentucky and Lexington are positioned in the center of an auto manufacturing corridor containing 38 of the country’s 44 automobile assembly plants and the hundreds of supporting auto manufacturing facilities. Interstates, highways, and two major rail systems (CSX Transportation and Norfolk Southern) enhance Kentucky auto manufacturers’ ability to quickly and easily reach both inputs (parts) and markets.

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Measuring from the center of the state, Kentucky has the shortest driving distance to each automotive assembly plant in the eastern United States, averaging 327 miles. Importantly, Lexington is the approximate center of Kentucky (the researchers used Richmond), meaning that Lexington and the Bluegrass Region are the best location for auto manufacturing facilities to minimize transportation costs and quickly reach nearly every actor in the national auto industry.

Clearly, Kentucky’s automotive industry is competitive and among the best in the nation. Next week’s blog will address the fiscal and economic importance of the automotive industry for the state and Lexington.

Note: The KAIA considers the Lexington Region to be the following counties: Anderson, Bath, Bourbon, Boyle, Clark, Fayette, Franklin, Garrad, Harrison, Jessamine, Lincoln, Madison, Mercer, Montgomery, Nicholas, Owen, Robertson, Scott, and Woodford. As always, Commerce Lexington includes eight counties in the Bluegrass Region: Bourbon, Clark, Fayette, Franklin, Jessamine, Madison, Scott, and Woodford.