Commerce Lexington

A bit of a respite in unemployment terms. The official unemployment rate for Fayette County dropped .5% to 7.7%. This is along seasonal change lines (there is often a drop between Aug and Sept) but it was also a bit more than expected. This means two things to me: one, employment following seasonal trends is a good thing. When employment is following seasonal trends, it often means that it there are no other major forces acting on it. Two, if I expected unemployment to drop around .2% and it dropped by .5%, that gives me hope that we may have eliminated some of that excess unemployment that we have racked up during the recession. Here is a visual view of what I am talking about:

From February when we were about 3% above normal, to June/July/August when we were about 4% above normal, Lexington still managed to follow it’s normal seasonal trends. From the averages of the rest of the years in this decade, one would expect September unemployment to drop around .2%. So it is definitely good news that it dropped farther than that.

So you may be asking yourself, “Self, what about the labor force? Is this drop in unemployment due to a large number of people dropping out of the labor force (i.e., no longer looking for work)?”

Well I’m glad you asked, because I did the same thing with the labor force that I did with the unemployment rate – with one caveat. Because Lexington is a population growth city, the labor force naturally grows as well. So I had to normalize it by using the average percent change instead of the raw number. Here is what I found:

It does look like that a contraction in the labor force may have played a role in the greater than anticipated drop in the unemployment rate. The average percent change from August to September is a positive .08%, whereas this year, it was a negative .26%. I still stand by my statement that a drop in the unemployment rate is a good thing. However, like most things, it has to be taken with the grain of salt that the labor force contracted. I’ll continue to keep an eye on the trends and keep my fingers crossed that our nagging unemployment problem will eventually subside.

At Commerce Lexington, we are no stranger to people asking how Lexington compares to other cities. Cities can be compared on many different attributes, from their size to demographics, economics to culture. These questions probably won’t go away any time soon, but we do have some tools at our disposal to help get some answers.

Because every city is different, some criteria had to be established on which cities would be included. Rather than use a definite criteria, such as population, we chose the cities that are picked yearly for Commerce Lexington’s Leadership Visit. Each of the cities contain some attributes that Lexington aspires to have and most of them also contain some common thread with Lexington, such as being a college town. Going back 20 years, there were 19 different cities at our disposal (CLX visited Austin twice). Of the group, only one, Greenville, SC couldn’t be included. The technical boundary of Greenville city is actually pretty small, only about 55,000 people live there, 5,000 people short of the threshold the US Census Bureau uses for being included in yearly updates. That left 18 Leadership Visit cities plus Lexington, so we included Pittsburgh, the site of next year’s Leadership Visit to make an even group of 20.

The next hurdle was picking out the criteria to rate each city on. we settled on three commonly available measures that could be found from a single source: the US Government. Often, city governments, chambers of commerce, and economic development organizations use numbers in marketing materials. More often than not, the way these numbers are assembled varies greatly from place to place. For instance, some organizations only report the jobs they had a hand in attracting (such as Commerce Lexington), while others report the entirety of jobs created in a certain area (such as Opportunity Austin). Neither of these approaches is any more correct than another, but it makes it extremely difficult to compare apples to apples. By using a single source, we can be assured that the differences between the cities will not simply be differences in reporting methods.

The three measures we chose to use are: population growth, employment growth, and median household income growth. These are three high-level measures that should give some good indication as to the differences between the cities. Note that we calculated the Compound Annual Growth Rate (CAGR) for each city over a consistent time period. Calculating the total growth over a time period (e.g., 10% overall from 2000 to 2007) really only tells you about that specific time period. Whereas calculating the CAGR will give us a sense of what is happening on a yearly basis for each of the cities.

Without further ado, the results of our research:

Lexington and Leadership Cities: A Comparison

Lexington and Leadership Cities: Data Table

*Note that no adjustments were made to income figures to account for cost of living differences in different cities. As of now, there are no reliable sources that calculate these differences for the entire population of the size cities included in this research. The closest, ACCRA, measures the cost of living in most of our target cities, however, their index is specifically designed to measure a certain segment of the population. Their target is the top 20% of young professional earners. Attempting to adjust a measure of an entire population (i.e., median household income) with an index derived from much smaller and non-representative subset (i.e. ACCRA) doesn’t pass statistical muster.

Lexington’s official population count now stands at 282,114. The total population of our 8-county Bluegrass Alliance is 583,460.

The Kentucky State Data Center is providing these estimates as part of the Census Bureau’s Federal-State Cooperative Program for Population Estimates. I also included the 2010 and 2020 projections in the table above. As you can see, in about 10 years, Fayette County is projected to be joined by Madison County in the 6-digit population club. The region is an interesting mix of both slower population growth (Bourbon, Clark, Fayette, Franklin, and Woodford) and explosive growth (Jessamine, Madison, and Scott). Undoubtedly, many border communities are increasing because of Lexington’s limited residential growth potential. It will be interesting to see if this leads to a growth of independent economies in these counties, or if they will continue to mainly feed off of Lexington’s established economic success.