ARTICLE
CAA members embraced the season of giving at the final General Meeting of the year on Thursday, November 16 at the Wells Barn at Franklin Park Conservatory. The meeting featured keynote speaker and local economist, Bill LaFayette and recognized the generosity of the membership by recognizing this year’s recipients of the CAA Community Assistance Foundation. CAA Executive Director Laura Swanson welcomed members to the meeting and asked them to join her in welcoming the 2024 CAA Community Assistance Foundation Recipients to receive their donations. The recipients included Families Flourish, Huckleberry House, Patches of Light and the Red Cross of Central Ohio. Following the introduction of new members and honoring the Past Presidents and Hall of Fame members in attendance Swanson introduced LaFayette. “Many times, I point out how much better the Central Ohio economy is than the national average, this is not one of those times,” LaFayette began. “We were doing a whole lot better than the national average until last fall. Our employment went above its pre-pandemic peak in December 2021, US employment accomplished that feat in June 2022. But Ohio employment didn’t exceed its February 2020 peak until this past May.” Noting that the 10 County Central Ohio Metropolitan Statistical Area (MSA) employment trend flattened in mid-2022 and employment growth has been much weaker than average since. Between April 2022 and September US employment grew 3.4%. Columbus MSA employment grew .4%, only 4300 net new jobs in a 1.1 million job economy. LaFayette noted that the recession that was forecast to start about now and continue into early 2024 due to the war on inflation has not happened as the economy has been doing better than expected and economists have steadily increased their growth forecasts for GDP and employment, now expecting the odds of recession starting within the next 12 months at less than 50%. However, employment growth in the forecast drops to near nothing. Breaking down the problem by industry sector, he stated that construction employment has been a rare bright spot for Central Ohio, current employment in construction is almost 16% higher than it was in February 2020 and up 8% since April 2022, almost twice the national average. That surge translates to a net gain of 4,000 jobs. “The rest of my news, unfortunately, is less cheerful,” LaFayette continued. “Business and Professional Services, this is our largest sector with around 190,000 jobs the sector tracked the national average through 2022. Although the national trend flattened, the Columbus trend was worse. Comparing Central Ohio to the US average, it was 3.2% above year over year, however the US grew at 7.4%.” Next, LaFayette moved to Government employment, with around 185,000 jobs locally, doing better than average with State government being weaker than average, but local government being stronger. Both numbers include public education. The healthcare industry accounts for over 140,000 jobs in the area and like business has underperformed in early 2022. US employment is 4% higher and locally it’s 2% lower. Finally, the finance and insurance industries, including real estate, just shy of 70,000 jobs is a standout for the wrong reasons shedding 3,600 jobs through 2022. It does seem to have stabilized. Insurance is a larger share of the sector in Central Ohio than nationally and is a key driver of the economy. Insurance is 13% less than it was in February 2020. “This weak growth is begging an important question and that’s ‘what’s going on?’ and it is population growth that I think holds the answer,” LaFayette said. “Our region is definitely growing up. Our population last year totaled 2.16 million. In 2000 it was less than 1.7 million. That’s a gain of 28.5% compared to 18% nationally. My concern though is what’s been happening lately.” Local growth has been consistently higher than the national average, however growth over the last couple of years is only a quarter of what it was a decade ago. The past two years growth is the slowest growth we’ve seen in Central Ohio since the 1970s. More than one quarter of the total net increase over the last decade was driven by people moving to Central Ohio from other countries. The natural increase per year is down 45% over the past two years. Net migration is down by almost half. “Here’s how the population trend relates to our slowing economic growth, the trends are really bouncy, but they’re clear enough to see what’s going on, coming out of lockdown our labor force growth was equal to or better than the national average, but labor force slowed around the same time employment growth slowed,” LaFayette said. “I do not think that’s a coincidence. It’s a particular problem for us because our unemployment rate is so much lower than average, we’re right around 3%, there are fewer people available to fill open positions, so those positions go vacant. This is going to work itself out in time.’ The Mid-Ohio Regional Planning Commission (MORPC) projects that the MSA will grow from 2.6 million to three million by 2050. The 15-county region will grow to 3.5 million. The labor force growth will resume. However, people moving here need affordable places to live. Beginning in 2016 Columbus home prices started increasing faster than the national average. Since 2016, prices nationwide are up 76%, while Central Ohio prices are up 90%. Rents have also been climbing faster. Local rents are seven to nine percent less than the national average, but Franklin Country rents have increased nearly 18% after inflation since 2010 compared to 13% nationally. Rents are lower than average, but so are incomes. A renter cost burdened household is one that spends more than 30% or more of its total income on housing, this defines two thirds of households locally and nationally. One quarter of households, locally and nationally, spend half or more of their income on rent. “Heaven help these houses if their transmission falls out or someone gets sick, they’re in deep trouble. In danger of losing their housing,” LaFayette pointed out. “The problem, really, is this. We have been underbuilding housing units ever since the housing bubbles started bursting in the mid-2000s when the recession hit.” The overall vacancy rate in the Columbus MSA fell from 10.7% in 2010 to 6.6% in 2022. The US vacancy rate was consistently higher falling from 13.1% to 9.7%. Housing unit increases picked up in 2020 as household growth slowed. Slowing household growth cannot be attributed to higher costs, as the population growth has slowed. The difficulty of finding housing at a reasonable price must have had an impact on relocations. The negative domestic immigration may have been caused in part by the high cost of housing and people no longer being able to afford to live here. The bigger increases in housing units still aren’t enough, if it were we would see the vacancy rate stabilize instead of fall. Gross units have increased have been just under 20,000 units per year since 2020. The increase in the early 2000s before the bubble burst was 16,000 with a population nearly 20% less than it is now. A report from Vogt Strategic Insights states we should be building double the number of housing units, which is problematic given the construction workforce. Finishing with Intel and its impact on housing, LaFayette stated that the first 3,000 jobs will come online early 2025 and hiring has already started, ultimately, it could next 12,000 new manufacturing jobs by the mid-2030s. In addition, there would be supplier jobs and support jobs with the total regional impact being as many as 54,000 jobs. “What kind of housing are these households going to need,” LaFayette questioned? “Intel has, unhelpfully, promoted an average pay of $100,000 to $135,000, but that includes benefits, which nobody can spend on anything. Even apart from that they way they calculated that average is quite a bit higher than what the typical worker will earn in annual pay.” Even if Intel pays above market, as many as one-third will pay less than $50,000, while another third will pay between $50,000 and $100,000 and the final third will pay over $100,000. The need will be for a lot of workforce housing and a lot of apartments. “This is going to be a problem in the short term, no doubt about it,” LaFayette concluded. "But, given the option of this problem or the blocks of boarded up houses and vacant lots that you see in some other Ohio cities, I’d take this problem in a heartbeat, and I’d be willing to be you would too.” Swanson ended by thanking everyone for their attendance and inviting them to the Installation of Officers dinner on December 12. Click Here to download a copy of Dr. LaFayette's slides.
CAA members embraced the season of giving at the final General Meeting of the year on Thursday, November 16 at the Wells Barn at Franklin Park Conservatory. The meeting featured keynote speaker and local economist, Bill LaFayette and recognized the generosity of the membership by recognizing this year’s recipients of the CAA Community Assistance Foundation.
CAA Executive Director Laura Swanson welcomed members to the meeting and asked them to join her in welcoming the 2024 CAA Community Assistance Foundation Recipients to receive their donations. The recipients included Families Flourish, Huckleberry House, Patches of Light and the Red Cross of Central Ohio.
Following the introduction of new members and honoring the Past Presidents and Hall of Fame members in attendance Swanson introduced LaFayette.
“Many times, I point out how much better the Central Ohio economy is than the national average, this is not one of those times,” LaFayette began. “We were doing a whole lot better than the national average until last fall. Our employment went above its pre-pandemic peak in December 2021, US employment accomplished that feat in June 2022. But Ohio employment didn’t exceed its February 2020 peak until this past May.”
Noting that the 10 County Central Ohio Metropolitan Statistical Area (MSA) employment trend flattened in mid-2022 and employment growth has been much weaker than average since. Between April 2022 and September US employment grew 3.4%. Columbus MSA employment grew .4%, only 4300 net new jobs in a 1.1 million job economy.
LaFayette noted that the recession that was forecast to start about now and continue into early 2024 due to the war on inflation has not happened as the economy has been doing better than expected and economists have steadily increased their growth forecasts for GDP and employment, now expecting the odds of recession starting within the next 12 months at less than 50%. However, employment growth in the forecast drops to near nothing.
Breaking down the problem by industry sector, he stated that construction employment has been a rare bright spot for Central Ohio, current employment in construction is almost 16% higher than it was in February 2020 and up 8% since April 2022, almost twice the national average. That surge translates to a net gain of 4,000 jobs.
“The rest of my news, unfortunately, is less cheerful,” LaFayette continued. “Business and Professional Services, this is our largest sector with around 190,000 jobs the sector tracked the national average through 2022. Although the national trend flattened, the Columbus trend was worse. Comparing Central Ohio to the US average, it was 3.2% above year over year, however the US grew at 7.4%.”
Next, LaFayette moved to Government employment, with around 185,000 jobs locally, doing better than average with State government being weaker than average, but local government being stronger. Both numbers include public education. The healthcare industry accounts for over 140,000 jobs in the area and like business has underperformed in early 2022. US employment is 4% higher and locally it’s 2% lower. Finally, the finance and insurance industries, including real estate, just shy of 70,000 jobs is a standout for the wrong reasons shedding 3,600 jobs through 2022. It does seem to have stabilized. Insurance is a larger share of the sector in Central Ohio than nationally and is a key driver of the economy. Insurance is 13% less than it was in February 2020.
“This weak growth is begging an important question and that’s ‘what’s going on?’ and it is population growth that I think holds the answer,” LaFayette said. “Our region is definitely growing up. Our population last year totaled 2.16 million. In 2000 it was less than 1.7 million. That’s a gain of 28.5% compared to 18% nationally. My concern though is what’s been happening lately.”
Local growth has been consistently higher than the national average, however growth over the last couple of years is only a quarter of what it was a decade ago. The past two years growth is the slowest growth we’ve seen in Central Ohio since the 1970s. More than one quarter of the total net increase over the last decade was driven by people moving to Central Ohio from other countries. The natural increase per year is down 45% over the past two years. Net migration is down by almost half.
“Here’s how the population trend relates to our slowing economic growth, the trends are really bouncy, but they’re clear enough to see what’s going on, coming out of lockdown our labor force growth was equal to or better than the national average, but labor force slowed around the same time employment growth slowed,” LaFayette said. “I do not think that’s a coincidence. It’s a particular problem for us because our unemployment rate is so much lower than average, we’re right around 3%, there are fewer people available to fill open positions, so those positions go vacant. This is going to work itself out in time.’
The Mid-Ohio Regional Planning Commission (MORPC) projects that the MSA will grow from 2.6 million to three million by 2050. The 15-county region will grow to 3.5 million. The labor force growth will resume. However, people moving here need affordable places to live.
Beginning in 2016 Columbus home prices started increasing faster than the national average. Since 2016, prices nationwide are up 76%, while Central Ohio prices are up 90%. Rents have also been climbing faster. Local rents are seven to nine percent less than the national average, but Franklin Country rents have increased nearly 18% after inflation since 2010 compared to 13% nationally. Rents are lower than average, but so are incomes.
A renter cost burdened household is one that spends more than 30% or more of its total income on housing, this defines two thirds of households locally and nationally. One quarter of households, locally and nationally, spend half or more of their income on rent.
“Heaven help these houses if their transmission falls out or someone gets sick, they’re in deep trouble. In danger of losing their housing,” LaFayette pointed out. “The problem, really, is this. We have been underbuilding housing units ever since the housing bubbles started bursting in the mid-2000s when the recession hit.”
The overall vacancy rate in the Columbus MSA fell from 10.7% in 2010 to 6.6% in 2022. The US vacancy rate was consistently higher falling from 13.1% to 9.7%. Housing unit increases picked up in 2020 as household growth slowed. Slowing household growth cannot be attributed to higher costs, as the population growth has slowed.
The difficulty of finding housing at a reasonable price must have had an impact on relocations. The negative domestic immigration may have been caused in part by the high cost of housing and people no longer being able to afford to live here. The bigger increases in housing units still aren’t enough, if it were we would see the vacancy rate stabilize instead of fall. Gross units have increased have been just under 20,000 units per year since 2020. The increase in the early 2000s before the bubble burst was 16,000 with a population nearly 20% less than it is now. A report from Vogt Strategic Insights states we should be building double the number of housing units, which is problematic given the construction workforce.
Finishing with Intel and its impact on housing, LaFayette stated that the first 3,000 jobs will come online early 2025 and hiring has already started, ultimately, it could next 12,000 new manufacturing jobs by the mid-2030s. In addition, there would be supplier jobs and support jobs with the total regional impact being as many as 54,000 jobs.
“What kind of housing are these households going to need,” LaFayette questioned? “Intel has, unhelpfully, promoted an average pay of $100,000 to $135,000, but that includes benefits, which nobody can spend on anything. Even apart from that they way they calculated that average is quite a bit higher than what the typical worker will earn in annual pay.”
Even if Intel pays above market, as many as one-third will pay less than $50,000, while another third will pay between $50,000 and $100,000 and the final third will pay over $100,000. The need will be for a lot of workforce housing and a lot of apartments.
“This is going to be a problem in the short term, no doubt about it,” LaFayette concluded. "But, given the option of this problem or the blocks of boarded up houses and vacant lots that you see in some other Ohio cities, I’d take this problem in a heartbeat, and I’d be willing to be you would too.”
Swanson ended by thanking everyone for their attendance and inviting them to the Installation of Officers dinner on December 12.
Click Here to download a copy of Dr. LaFayette's slides.