Kentucky is entering what reliably looks to be the best economic time in its history. The commonwealth has nailed the landing on the front end of fundamental change in the global vehicle manufacturing industry, and our signature bourbon sector is on a dizzying boom that has no ceiling in sight. Economic developers say the pipeline of projects planned by state, national and global businesses is bursting.
The outlook for 2023 is as bright or brighter than … ever.
The problems the state has now are the ones everyone wants. Kentucky’s public and private sector are working to improve workforce training and the education system to put it more closely in sync with high-demand skills. Homebuilders are trying to figure out when they will be able to meet demand. With the state’s help, the development community is rolling out the most in-demand “product” of all: sites for new and expanded business.
State and local economic development offices and programs in many cases have more prospects than sites to show them, but the Kentucky General Assembly wisely provided $200 million last year to take on upgrading a prioritized list of properties that will offer the best bang for those bucks.
The Lane Report solicited comments from business and public-sector leaders across the state for our annual Kentucky Economic Outlook presentation. It is overall the most optimistic we have seen.
We suggested comments addressing three things:
• On a scale of 1-10, where do you expect the Kentucky/U.S. economy to be as we move through 2023?
• What about within your sector? Any trends there: pent up demand, activities/revenues that took a big hit or maybe are up?
• Will your company’s capital spending and staffing be up, down, unchanged?
The cautious commonwealth business community isn’t counting its chickens yet, but the road ahead looks lucrative and preparations for the trip are underway.
Ongoing capital spending by businesses and consumers plus a tight labor market have kept the economy from going into recession, especially in Kentucky. The past two years have been the best ever for investment and job creation in the state, and ongoing conditions are very promising.
Kentucky opens 2023 with two multibillion-dollar electric vehicle battery manufacturing plants under construction—three counting the fact that the largest will be side-by-side twin operations—as well as a lithium battery recycling facility that might also turn out to be a billion-dollar project and one that yields in-demand raw materials for EVs. Members of the economic development community talk about the land along I-65 becoming wall-to-wall with projects from Elizabethtown to Bowling Green.
Bankers are optimistic, but as the closest watchers of interest rates and inflation they advise due diligence. They spent late 2022 focused on risk mitigation and feel they generally have good loan quality. Kentucky bankers say business clients need to have a solid foundation to withstand whatever 2023 might bring financially and suggest workforce is an absolute cornerstone. Companies with strong teams will have a good year, so they are urging clients to pay special attention to their staffing retention and recruitment.
Accountants expect high interest rates to have an ongoing braking impact, but they foresee higher demand for their services and advice, and they are looking to hire.
Agribusiness has a positive feeling about 2023. After working through a 2022 that included avian flu—poultry is Kentucky’s largest dollar “crop”—drought and flooding, record yields brought in record gate receipts for farm operators.
Driven by automotive, metals and health care expansion, the construction sector is experiencing its best era ever and expects 2023 to set new records. Companies reported their best business numbers ever in 2022—some doubling the previous year’s revenue, which itself was their highest ever. Backlogs of projects are fat, and they see more and more projects in the pipeline. Affordable-housing builders expect acute demand for their sector to drive more hiring and investment in technology
Health care has the most intense staffing challenges and thus the most difficult outlook in 2023. Personnel costs have exploded due to a nursing shortage; hiring all support staff is hard and at least 15% of all positions are unfilled as of the latest reports. Some rural hospitals could close; the ones that don’t will likely have to strike deals to become part of larger systems with more resources. However, those larger systems are in an active expansion mode that will make 2023 the biggest year ever for health care construction while improving access to care for Kentuckians.
The tourism and hospitality sectors expect better conditions in 2023 as they continue to recover from a very difficult downturn caused by the COVID-19 pandemic, which limited gatherings and close personal interactions. Lexington and Louisville both improved and expanded their primary convention facilities during and before the pandemic and like the jump in bookings this is bringing. Meanwhile, bourbonism—as tourism surrounding the bourbon industry has come to be known—is bringing rapidly increasing revenue into Kentucky.
Higher education in Kentucky is managing to buck the national trend of declining enrollments. In fact, a Lane Report examination of Kentucky business colleges this past fall found most schools had record freshmen classes. Today’s students are more transactional than their parents and grandparents, and they see business degrees as a ticket to a lucrative career over the next several decades in Kentucky.
