(NEW ALBANY, Ind.) – The Bureau of Labor Statistics released the monthly employment report today, and the report was about as positive as it can get. The nation’s unemployment rate declined to 8.3%, and this decline came with an increase in the labor force and employment, and a decline in the number of unemployed.
Non-farm payroll jobs increased by 243,000, and this number was well above the expected number of approximately 150,000. There was strong growth across all sectors. Manufacturing added 50,000 jobs, perhaps evidence that the 2011 slowdown in manufacturing is past. Durable goods growth was quite favorable, a positive indicator for Louisville Metro and Kentucky and Indiana economies.
Professional and business services added 70,000 jobs, another positive barometer of subsequent employment gains, and an indication of an overall improving economic and business environment. Similar gains have also been observed for Louisville Metro. The fastest growing sector for Louisville Metro last year was professional and business services, recording 12 percent growth. As you can see from Figure 1 below, professional and business services growth far exceeded total job growth for Louisville Metro. This recent strong growth for Louisville Metro and today’s national report provides further justification for the positive outlook this year.
Leisure and hospitality also showed strong gains. 44,000 jobs were added in January, and this is also consistent with the pattern for Louisville Metro. Louisville Metro’s leisure and hospitality sector was the second strongest sector last year. Business travel and entertainment continues to improve, and the consumer continues to gain confidence.
Private sector jobs actually increased by 257,000. Government employment registered another decline, and this reduced the overall non-farm payroll number. Federal employment declined by 6,000 jobs, and state employment increased by 3,000. Local government employment again was the largest shedder of jobs, losing 11,000 jobs in January. Almost 10,000 of these jobs occurred in education.
In one of our last columns, my outlook suggested that regional job growth would continue to show improvement, and that job growth for Louisville Metro would now move to the upside. The outlook for Indiana and Kentucky job growth had also turned upward. The Jan. 6 note indicated:
My November outlook for Louisville Metro was continued payroll growth, with a question mark on manufacturing. Today’s report suggests that the nation may have moved past the slow-down in manufacturing. Hence, the outlook for Louisville Metro now has more upside potential.
We now have moved past this slow down, and I anticipate stronger employment growth for both Indiana and Kentucky.
Today’s national report continues to point toward a positive year for the regional economy. Last year, Louisville Metro added 20,200 jobs, for a 3.4 percent. December year over year, and the largest since the 1990s. In fact, the change for Louisville Metro exceeded the percent change for all metro areas in Kentucky, and was second in Indiana, behind Columbus, Ind., at 6.4 percent. The total change in jobs for Louisville Metro even exceeded total job growth for the entire state of Indiana (+16,700). The strong favorable growth during the last quarter also exceeded the percent change for the nation, as evident in the graph below. This growth is due primarily to professional and business services, a sector that Louisville Metro has consistently lagged other peers in the past.
As mentioned in my Jan. 6 note above, and in our November annual outlook, the wild card for our regional economies was manufacturing. Recent data now point to further expansion in the manufacturing sector, and today’s national manufacturing number is consistent with that trend. The key to manufacturing is not what will happen in Europe, but what will happen to domestic demand. This week, auto sales were favorable, and this is going to help sustain some of the growth in regional manufacturing.
On the services side, Louisville Metro’s fastest growing sector was professional and business services. This is indicative of continued improvements in the underlying business environment.
Despite today’s positive report, challenges do remain. The number of unemployed in the Louisville Metro area continues to hover at the mid 50,000 level. This well exceeds the 35,000 level that existed prior to the recession. Housing continues to provide challenges, and the overall housing sector will continue to serve as a major headwind for overall economic growth. The improving labor market and growth in non-farm payrolls will provide support to the housing situation, but problems will remain.
Today’s report was perhaps the most favorable since the last quarter of 2010. It was a solid report, and another indication that overall growth in 2012 will exceed most expectations.