Category Archives: Economy

Bluegrass Region’s Recovery from the Recession

Over the past few years, the Bluegrass Region has shown progress in recovering from the recession, with increases in jobs and weekly wages, according to the most recent data released by the U.S. Bureau of Labor Statistics Quarterly Census of Employment and Wages.

Job and Wage growth rates

Since July 2009, the Bluegrass Region has added 36,115 job, an increase of 12.7%. Most job growth was concentrated in Fayette County, which added 19,064 new jobs. However, this represents only a 12% increase from the number of jobs in 2009. Madison County and Scott County both grew by almost 30% and together added 13,116 jobs. Only two counties—Clark County and Woodford County—saw a decrease in the number of jobs, but neither lost more than 2% and the combined loss was only 321 jobs. On average, the Bluegrass Region recovered better than the state of Kentucky and represents 21% of all new jobs created in Kentucky.

BluegrassJobs

On average, weekly wages in Kentucky rose by $58, representing an 8% increase since 2009. Five counties in the Bluegrass Region had a growth rate that was equal to or higher than the state average. Clark County and Woodford County experienced the highest growth rate in weekly wages, with Jessamine trailing close behind at 9.9%. However, 2014 average weekly wages were highest in Fayette County at $844 per week, although this represents only an 8% increase from 2009. Scott County had the lowest growth rate (3%), but previously had the highest average weekly wages at $870 per week in 2009. Overall, September 2014 average weekly wages in the Bluegrass Region were lower than state average, but individual counties outperformed the state and offered higher wages.

BluegrassWages

Two Gallup polls published in April 2014 provide additional support for the economic and overall wellbeing of the Bluegrass Region. According to Gallup, 67% of Lexington-Fayette MSA residents are optimistic about the future of their community and believe that their city and area is getting better, well above the national average of 59.7%. Furthermore, 89.9% of Lexington-Fayette MSA residents are satisfied with the area and their community.

Kentucky’s Exports at an All-Time High

The value of Kentucky’s exports of goods more than doubled in the last decade, setting a state-record of $27.5 billion in 2014, the state’s fourth straight record breaking year. The new record represents a 9 percent growth in exports since 2013. By comparison, the average export growth rate nationwide was just over 2 percent. In 2013, Kentucky’s exports totaled $25.3 billion.

Kentucky Exports of Goods, 2000 – 2014, billions

Source: Office of Trade and Industry Information (OTII), Manufacturing and Services, International Trade Administration, U.S. Department of Commerce
Source: Office of Trade and Industry Information (OTII), Manufacturing and Services, International Trade Administration, U.S. Department of Commerce

 

Kentucky exported to almost 200 different countries in 2014, but the top 5 countries accounted for nearly 58% of the total value of exported goods. Most of Kentucky’s exported goods go to Canada, which accounted for 27.6% of the total value of exported goods. Mexico and the United Kingdom were second (8.4%), followed by France (7.3%), and China (6.2%). Notably, Kentucky experienced a significant jump in exports to France. Exports to France grew 93 percent. The increase in exports to the region is attributable to aerospace products and parts (up from $832 million in 2013 to $1.8 billion in 2014).

Leading Kentucky’s export growth is aerospace. In 2014, we shipped out $7.8 billion in aerospace parts and products, a 38% increase from 2013. Kentucky’s other top exports include motor vehicles, parts, and bodies and trailers ($5.9 billion), synthetic rubber and resin ($1.4 billion) and pharmaceuticals ($1.3 billion). Kentucky’s fastest growing major export in 2014 was motor vehicle bodies and trailers, up nearly 2,100 percent from the previous year.

The latest data for Kentucky’s metropolitan exports are from 2013. Louisville leads with $8.9 billion in exports (including four Indiana counties), followed by Lexington ($2.3 billion), Bowling Green ($537 million), Elizabethtown ($223 million), an Owensboro ($81 million).

The Bluegrass Economic Advancement Movement (BEAM), launched in 2011 by Mayors Greg Fischer of Louisville and Jim Gray of Lexington, brought together 22 counties through a strategic partnership to develop a joint regional business plan supporting the growth of high-quality jobs in advanced manufacturing. In 2012, the Mayors followed BEAM with the “Build it Locally/Sell it Globally” initiative to increase export successes by 50 percent in five years. This focus on exporting is a key aspect of BEAM’s broader goal to promote growth among the region’s businesses.

Lexington Exports

The International Trade Administration recognized BEAM in 2014 as unique among regional export promotion programs in that “it is a collaborative effort between two leaders. The mayors’ approach exemplifies their belief that sharing economic growth rather than competing for it, is the best way to build the future for the region. Research shows that exporting firms – whether in manufacturing or services – grow faster and can afford to pay their workers better than non-exporting firms. By promoting exports, Mayors Fischer and Gray are taking a key step to support better jobs and stronger growth in the region.

– CLX Economic Development Team

Innovation Index

To innovate means literally to renew or change something. Innovation is about coming up with a better process, creating a new product, improving an existing one, opening a new market, finding a new source of supply or creating a better way to organize ourselves. Innovation may be technology-driven today but it is just as likely to focus on a new and better way for people to work together.

Why is innovation such a hot topic right now?

Quite simply, we believe it to be the primary drive of economic growth – and after years of recession across the industrial world, growth is a top priority. However, innovation turns out to be surprisingly hard to measure, since it flows through ideas and experiments into services and products.

An initiative of the U.S. Department of Commerce Economic Development Administration, Purdue University, and Indiana University is working to provide a deeper understanding of where innovation is taking place.  StatsAmerica  has produced an “innovation index” for every county in the United States. Kentucky’s county-level results are illustrated on the map below, with the highest innovation index values anchoring the three angles of the urban triangle—the Louisville area, Northern Kentucky, and Fayette County. The index is based on four broad categories and includes 22 different variables. The four broad categories include Human Capital, Economic Dynamics, Productivity and Employment, and Economic Well-Being. Some of the variables include educational attainment, high-technology employment, broadband adoption, venture capital investments, patent creation, worker productivity, proprietor income, the poverty rate, and per capita income.

The index is scaled so that 100 is the U.S. average. The highest ranked Kentucky county is Fayette at 101.8. Santa Clara County, California—which is Silicon Valley—and Broomfield County, Colorado—which is the Denver area—have the highest values in the United States at 125.4 each; Hancock County, Tennessee, which is located along the Kentucky-Tennessee border in the eastern region has the lowest index value in the country at 61.7.

Kentucky Innovation Index by County

Innovation Index
Source: www.statsamerica.org, funded in part by the U.S. Department of Commerce Department’s Economic Development Administration. Work was conducted by the Purdue Center for Regional Development, the Indiana Business Research Center at Indiana University’s Kelley School of Business, and other research partners.

Efforts by the Von Allmen Center for Entrepreneurship within the Gatton College of Business and Economics, the Innovation Network for Entrepreneurial Thinking (iNET) within the College of Communication and Information at the University of Kentucky, as well as Kentucky’s Innovation Network, a partnership between the Kentucky Cabinet for Economic Development and Kentucky Science and Technology Corporation, are designed to stimulate entrepreneurialism, foster commercialization, and improve the state’s innovation capacity – essential elements for our collective future.

To read more about innovation in Kentucky, check out the 2015 Kentucky Annual Economic Report, recently released by the Center for Business and Economic Research at the Gatton College of Business and Economics at the University of Kentucky.

– CLX Economic Development Team

Commerce Lexington Update

  • Piramal Enterprises Limited, an Indian firm based in Mumbai, has acquired Coldstream Laboratories  for $30.6 million. Coldstream was founded in 2007 and controlled by the University of Kentucky research foundation.  Coldstream is a contract development and manufacturing organisation (CDMO) focused on the development and manufacturing of sterile injectable products.  Coldstream currently employs 91 people.

2014 Cost of Living Index

Driven by plunging energy prices, the U.S. Consumer Price Index decline .04% in December, after falling .3% the previous month, leading to the biggest decline in the cost of living in six years, as recently reported by the U.S. Bureau of Labor Statistics.  While the Consumer Price Index is a helpful nationwide metric to help with consumer decision making – imagine that you needed help in deciding whether a new job offer in another city is actually better than what you have now? Who would you turn to for reliable cost of living comparisons?

Produced by the Council for Community and Economic Research, the Cost of Living Index (COLI) is recognized as the most reliable source of city-to-city comparisons of key consumer costs available in the nation. The Index is based on more than 50,000 prices covering almost 60 different items, representing the cost of consumer goods and services for professional and managerial households in the top income quintile. The composite index is based on six components – housing, utilities, grocery items, transportation, healthcare, and miscellaneous goods and services.

Interpreting the Index

The Cost of Living Index measures relative price levels for consumer goods and services in participating areas. The average for all participating places, both metropolitan and nonmetropolitan, equals 100, and each participant’s index is read as a percentage of the average for all places.

The Index does not measure inflation (price change over time). Because each quarterly report is a separate comparison of prices at a single point in time, and because both the number and the mix of participants changes from one quarter to the next, Index data from different quarters cannot be compared.

Among the 281 urban areas that participated in the 2014 Cost of Living Index, the after-tax cost for a professional/managerial standard of living ranged from more than twice the national average in New York (Manhattan), to almost 20 percent below the national average in Harlingen, TX.

How to Use the Cost Of Living Index

We’ve added a few neighboring cities to the chart below for comparison.  For 2014, Lexington had a composite index of 91.9 and Kansas City (the location of Commerce Lexington’s 2015 Leadership Visit) has a composite index of 100.0. If you live in Lexington and are contemplating a job offer in Kansas City, how much of an increase in your after-taxes income is needed to maintain your present lifestyle?

100*[(Kansas City – Lexington)/Lexington] = 100*[(100.0 – 91.9)/91.9] = 100*(.0881) = 8.81%, or nearly a 9% increase.

2014 Cost of Living Index,  Council for Community and Economic Research
2014 Cost of Living Index, Council for Community and Economic Research

 

– CLX Economic Development Team

 Commerce Lexington Update

  • 26th Annual Economic Outlook Conference: The event, hosted by the University of Kentucky’s Gatton College of Business and Economics, provides an overview of economic issues currently facing Kentuckians, with a view toward the economy future. Speakers include Dr. Chris Waller, Federal Reserve Bank of St. Louis; Dr. Jennifer Hunt, U.S. Department of Treasury, Washington D.C.; Dr. Ken Troske and Dr. Chris Bollinger with the Gatton College of Business & Economics at the University of Kentucky. Click here to learn more.
  • Commerce Lexington Inc.’s 2015 Annual Dinner: Presented by Kentucky Employers’ Mutual Insurance will be held on Thursday, February 5, at Lexington Center’s Bluegrass Ballroom. Join us for great networking, good food, and a little business, as we take a look back at 2014 and highlight the organization’s focus for 2015. Click here to learn more.

LBAR announces $1.8 billion in Bluegrass real estate sales in 2014

Overall real estate sales activity in Lexington and the surrounding Bluegrass Region remained steady in 2014, with a very slight decrease in residential sales, according to the Lexington-Bluegrass Association of Realtors (LBAR).

LBAR members reported 10,741 real estate sales closed in 2014, totaling $1,836,291,390. The organization reported 10,691 sales closed in 2013. Residential sales fell roughly one percent for the year, with 9,926 residential sales reported closed in 2014 as compared to 9,997 in 2013. The median residential sales price remained relatively unchanged at $140,000 in 2014, as compared to $139,900 in 2013.

Locally, LBAR members reported 4,527 residential real estate sales in Lexington, totaling $918,154,765. During the year to date residential sales decreased five percent from 4,763 sales reported for 2013 to 4,527 sales reported for 2014. The median sales price rose two percent from $159,500 in 2013 to $162,000 in 2014. The average days on the market increased 10 percent to 62 days in 2013 to 68 days in 2014. A recent report from the Fayette County PVA found that the number of Fayette County home sales that closed in December 2014 increased 30% over December 2013 resulting in the best December performance since 2007, prior to the recession that most experts believe began in the third quarter of 2008.

According to a report from the Federal Reserve Bank of Cleveland, Lexington’s housing recovery continues apace (though fairly muted), largely due to the fact that Lexington experienced smaller declines in housing prices than did the nation during the recession. Likewise, the recovery has not been as strong. Prices are rising at an approximate rate of 4 percent annually.

Housing demand and prices are expected to continue to improve, albeit at a moderate pace as area population expands and residential real estate construction growth lags. According to the Fed’s report, despite increasing through much of the first quarter of 2014, new housing permits in the Lexington-Fayette metro are nearly 40% below pre-recession levels. Indeed, construction remains highly volatile as builders hesitate to replenish a tight housing stock due to tight credit and shifts in underlying housing demand.

“The market outlook for 2015 is bright as the residential housing market remained stable in 2014,” said 2015 LBAR President Larry Freels in a media release. “Realtors are encouraged by the growth in sales during 2014 and the extremely low interest rate environment.” We here at Commerce Lexington expect that the housing market will likely face increased pressure as growth in key sectors such as professional and business services and skilled manufacturing continue to occur.

 CLX Economic Development Team

 Commerce Lexington Update

  • Global Game Jam 2015: On Friday, January 23rd, RunJumpDev, BCTC, and the Bluegrass Business Development Partnership are sponsoring the 2015 48-hour Global Game Jam at BCTC’s Newtown Pike Campus. Click here to learn more.
  • 26th Annual Economic Outlook Conference: The event, hosted by the University of Kentucky’s Gatton College of Business and Economics, provides an overview of economic issues currently facing Kentuckians, with a view toward the economy future. Speakers include Dr. Chris Waller, Federal Reserve Bank of St. Louis; Dr. Jennifer Hunt, U.S. Department of Treasury, Washington D.C.; Dr. Ken Troske and Dr. Chris Bollinger with the Gatton College of Business & Economics at the University of Kentucky. Click here to learn more.
  • Commerce Lexington Inc.’s 2015 Annual Dinner: Presented by Kentucky Employers’ Mutual Insurance will be held on Thursday, February 5, at Lexington Center’s Bluegrass Ballroom. Join us for great networking, good food, and a little business, as we take a look back at 2014 and highlight the organization’s focus for 2015. Click here to learn more.