Monday Business Briefing: The economic outlook edition

Welcome to the May 28 Monday Business Briefing, your business intelligence digest from Insider Louisville. This week, we examine some key economic indicators.

More new companies, fewer new jobs

The rooms new finishes and furnishing are inspired by food, bourbon and horses. | Courtesy of The Al J. Schneider Co.

The number of companies that plan to make investments in Jefferson County has doubled from a year ago — but the money they plan to spend declined, as did the number of expected new jobs.

According to data provided to Insider by the Kentucky Cabinet for Economic Development, 37 companies announced investments in Jefferson County for the first five months of the year, more than double the 18 businesses that announced investment plans during the same period last year.

The 37 projects include 19 in the manufacturing sector and 17 in service/technology, according to the report.

However, the total projected investment this year, $256 million, was down 33.6 percent from the $353 million companies planned to invest last year — though that included a $273 million investment from Grainger, which planned to build a Louisville distribution center and create 431 jobs.

The single largest investment this year was $80 million, for the Galt House Hotel renovation.

The projects from the first five months of this year are projected to create nearly 1,500 new jobs, down 42 percent from the investments a year earlier. Nearly a third of the jobs this year are to come from a planned TopGolf entertainment complex at Oxmoor Center. Last year’s jobs total, of nearly 2,600, included 1,000 jobs from the debt collection agency Diversified Consultants.

Another set of KEDFA data, focused solely on four state incentive programs, including the Kentucky Jobs Development Act, showed that business investment in the first five months of the year fell to a four-year low in Jefferson County.

That data set shows that through May 24, the state agreed to provide incentives for eight Jefferson County projects, totaling investments of nearly $21 million, which was down 30 percent from 2017 and down 70 percent compared to the same period in 2016.

TopGolf has 40 locations in the United States and United Kingdom. | Photo by Michael Baxter

Both data sets provide a snapshot of local economic development efforts — although they exclude many private investments that do not receive state support.

While the number of projects in the first five months of the year was at a four-year high, none of the projected investments exceeded $5 million. During the same time last year, two projects exceeded $5 million — though none exceeded $10 million. In the first five months of 2015 and 2016, three projects exceeded $20 million. In 2016, for example, Evolent Health planned to spend nearly $42 million in Louisville.

The most expensive project in Jefferson County for this year so far is the planned $4.4 million relocation to Louisville of the regional headquarters of ALTOUR, a full-service travel agency. The state agreed to provide a tax incentive of $350,000.

ALTOUR plans to create 20 jobs, with average hourly wages, including benefits of $36, or about $75,000. U.S. businesses generally spend about one-third of employee compensation on benefits.

Jessica Wethington, a spokeswoman for Louisville Forward, the city’s economic development arm, said that investment totals would look different as the city transitions to a knowledge-based economy.

“When you’re hiring more people to work in an office setting, that investment is less than when building an expansive manufacturing facility,” Wethington told Insider via email.

“Our unemployment rate has consistently been below the national unemployment rate for the last several years. Louisville Forward continues to work with many promising expansion and attraction projects, with 73 projects in the pipeline, representing $291 million investment and 3,600 jobs.”

Gasoline prices spike

Courtesy of the U.S. Department of Energy

Motorists in Louisville are paying about 56 cents more per gallon of regular unleaded gasoline now than they were a year ago, according to AAA.

Louisvillians pay an average $3.02 per gallon of regular unleaded, according to the nonprofit’s website, up from $2.46 a year ago. Kentucky’s average is $2.87, and Louisville’s prices are the highest among nine Kentucky cities tracked by AAA.

The U.S. Department of Energy said this month that oil prices were at their highest level since late 2014. Oil prices averaged $72 per barrel in April, up $6 from March.

Oil prices have risen in part because of worries about deteriorating relations between the U.S. and Iran, as well as political instability in Venezuela and rising global demand.

The DOE said it expected gasoline prices during the summer driving season to average $2.90 per gallon, up 49 cents from last summer.

Economists worry that the higher prices will curb economic growth: As consumers have to spend more on gasoline, they have less money for other purchases. Analysts in a recent MarketWatch story suggested that the higher prices could negate as much as half the projected stimulus from the recent federal income tax cut.

Churchill Downs shares gallop, CafePress gets squished

Year-to-date stock charts of Churchill Downs, the S & P 500 and CafePress. | Courtesy of Yahoo! Finance

Shares of half the 16 locally based companies and those of importance to Louisville fared better than the S & P 500 so far this year, with four outperforming the index by a factor of at least 10.

That also means, though, that about half of the companies tracked by Insider fared worse than the S & P, with one company, CafePress, trailing far behind.

The S & P closed at about 2,728 on Thursday, up nearly 1.7 percent for the year. The Dow Jones industrial average was essentially flat. Worries about rising inflation had rocked markets in February, with the Dow losing more than 1,800 points in two trading days.

While shares of many local companies are faring much better than the broader indexes, one is the clear winner so far this year: Churchill Downs, thanks to profits and projected profits.

Shares rose 8.4 percent after the Louisville-based gaming company said that first-quarter revenue rose 13 percent and net income from continuing operations increased more than sixfold.

In the week after the U.S. Supreme Court legalized sports betting, shares rose 11 percent. Two days after the ruling, Churchill Downs announced that it had reached agreements with partners to enter the online gaming and sports betting markets in New Jersey, Pennsylvania and Mississippi.

Louisville-based manufacturer Sypris Solutions, tobacco products company Turning Point Brands and Humana all have outperformed the S & P by a factor of 10, with each netting share price gains of more than 17 percent.

While Kindred Healthcare, Apellis Pharmaceuticals, Papa John’s and Ford Motor Co. all are down around 7 percent for the year, CafePress has plunged more than 25 percent, as the online retailer continues to struggle with tough competition, an aging website and reduced web traffic.

The company’s shares traded for $1.85 at the end of last year, and closed at $1.45 on Thursday.

The share price fell most recently when the company reported that first-quarter revenue had fallen 28 percent, and that it had lost $3.6 million in the quarter, which was worse than a year earlier.

Local companies fall on Fortune 500 list

Fortune recently released its 500 list of America’s largest companies by revenue, and all three of the Louisville-based companies on the list fell compared to last year.

Humana was ranked 56th, down three spots, while Kindred Healthcare, in which Humana soon will take a stake, ranked 416th, down 40 spots. Yum Brands came in at 472nd, down 50 spots. Yum’s sister company, Yum China Holdings, which is based in China and Texas, rose two spots, to 397.

Walmart ranked first, with revenue of $500 billion, more than double those of second place Exxon Mobil. Berkshire Hathaway, Apple and UnitedHealth Group rounded out the top 5, each with revenue exceeding $200 billion.

Robust job creation

Jefferson County employers added jobs at twice the rate of the rest of the state in the last year, according to the latest unemployment statistics.

Local businesses, government agencies and nonprofits in April employed nearly 386,000, up nearly 12,000, or 3.12 percent compared to April 2017. For comparison, the state as a whole during the same period added about 31,000 jobs, up 1.56 percent, according to data from the U.S. Bureau of Labor Statistics.

Jefferson County’s labor force, defined as all people who are either employed or unemployed and actively seeking work, rose by 8,700, or 2.2 percent. The state as a whole added 12,100, up 0.6 percent. An increasing labor force generally indicates improving economic conditions as it reflects that people are moving to an area because they expect to find work there.

The number of people reported jobless in Jefferson County, at 14,400 in April, was down nearly 3,000, or 17 percent compared to a year earlier. For the state as a whole, the number dropped by 18,600, or nearly 19 percent.

Jefferson County’s unemployment rate in April was 3.6 percent, down 0.8 percentage points. The state’s rate was 3.9 percent, down 0.9 percentage points, while the nation’s, at 3.7 percent, was down 0.4 percentage points.

According to KentuckianaWorks, employers in online postings have indicated that they have 9,200 open jobs in the Louisville Metropolitan Statistical Area, with about a quarter of those requiring at least a bachelor’s degree.

Unemployment rates for April. | Courtesy of the Kentucky Center for Education and Workforce Statistics