Shipping, health care thriving parts of Louisville-area economy

By Patrick Howington • phowington@courier- • December 13, 2010, an online textbook-rental company, has its headquarters in Santa Clara, Calif. But its millions of textbooks are stored and shipped from a warehouse in Shepherdsville, Ky., a few miles from Louisville International Airport.

Chegg chose the Louisville area for its central location and one thing it couldn’t find anywhere else — UPS’ main global air hub, Worldport.

Being near Worldport lets Chegg speed textbooks to customers, company co-founder Aayush Phumbhra said.

“If UPS picks it up by midnight that day, it can be with the student the next day,” Phumbhra said. “Having a facility in Louisville helps us tremendously.”

Chegg is among the “logistics sector” jobs that have helped keep Louisville’s economy going during the past 10 years, as the overall number of Louisville-area jobs fell by 4 percent.

Logistics is one of two sectors that economic development officials targeted for growth in the late 1990s — the other was health care, another bright spot in an otherwise stagnant decade for jobs.

Officials decided to focus on the two sectors to leverage existing strengths — UPS and, in the case of health care, Louisville’s thriving medical center, research at the University of Louisville, and the corporate headquarters of health insurer Humana and other firms.

Package-handling jobs such as those at Chegg have provided opportunities for Louisville workers who, without a college education, might have found their way to manufacturing jobs a generation ago.

The pay — at Chegg the average is $13 to $14 per hour — still falls short of the $28 hourly pay for UAW members at Ford.

The health-care sector relies more heavily on workers who, regardless of education level, are skilled in such areas as billing codes and information technology.  Louisville’s bustling medical center and companies such as the Fortune 500 members Humana and Kindred Healthcare have provided a pool of well-trained workers and managers to help offshoot businesses get started, growing the sector further.

It’s often been the health-care headquarters that have brought the better paying jobs that economic development officials seek.

For example, Signature HealthCare’s decision this year to move from Florida to Jeffersontown could create 120 jobs with salaries typically between $60,000 and $95,000.

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According to the U.S. Bureau of Labor Statistics, the metropolitan area recorded a 24 percent growth in “educational and health services” jobs between 2000 and 2009 — by far the largest growth of any category.

The 13-county area gained 15,600 jobs in that category in the nine-year span. (Much of that growth was in health, because public school jobs are grouped in the government category.)

The next-largest gain came in the financial activities category, which includes insurers and white-collar companies serving the health-care industry.

A 13 percent gain translated into 4,800 jobs.

Firm figures for local logistics employment aren’t available. But a list maintained by Greater Louisville Inc., the metro chamber of commerce, shows that 93 companies have set up or expanded logistic operations in Louisville since 2000, mostly to be near UPS.

They include the makers of time- and temperature-sensitive medications such as biotechnology companies Genentech and Amgen, which established distribution centers in Louisville in recent years.

HEALTH INDUSTRY | Louisville area scores significant increases

Logistics “has certainly been the biggest single sector of growth,” based on job gains at UPS and the rise of distribution businesses along Interstate 65 and at Riverport, University of Louisville economist Paul Coomes said.

But he said the health-care sector scored more impressive gains in recruiting corporate headquarters such as Signature HealthCare.

Since 2000, Louisville also has beaten out other cities to land the headquarters of pharmacy PharMerica and other health-related corporations including RecoverCare, Healthland and Achieve CCA, which helps consumers get out from under medical debt.

Louisville is now home to eight companies in the long-term care business — more than any other city, local officials said. They include Fortune 500 company Kindred Healthcare and companies spun off from it, including PharMerica.

But the biggest headquarters success story in the decade was Humana, Coomes said. Since 2005 Kentucky’s largest corporation has more than doubled revenue, to $31billion — creating several thousand local jobs, many at Humana’s office buildings on Main Street.

Humana’s Louisville employment jumped from about 4,000 to more than 10,000 in the past 10 years, the company said.

The gain was caused by its growing Medicare business, spokesman Tom Noland said. Capitalizing on the federal program’s 2006 expansion, Humana became one of the nation’s largest providers of Medicare health plans.

Although the company shed about 750 local jobs this year, Noland said Humana sees more growth in Medicare business ahead as the baby boom generation begins turning 65.  Employment also has surged since 2000 at Norton Healthcare, Louisville’s largest health-care provider. Norton had 10,826 employees at the start of this year, 4,432 more than a decade earlier.

But hands-on care providers aren’t the main target of economic development officials. Their focus is on getting health-related corporations that could operate anywhere to choose Louisville.

ZirMed, whose software helps medical providers get paid more quickly and accurately, has grown from 30 employees in 2004 to about 300 today. The company moved into a new 12-story headquarters tower in downtown Louisville last year.

Jim Lacy, chief financial officer, said ZirMed’s growth is fueled by a combination of innovative products, a highly trained work force and booming national demand for health-care information technology.

“Our plans are to continue to grow at this pace,” he said.

In the logistics sector, many companies that flocked around UPS started with only a few employees, then added more.

That was the case with Genentech’s distribution center, which started with six employees in 2006. The site recently expanded to be the main U.S. distribution center of Genentech and its parent, Swiss drug maker Roche, and now employs 38.

Chegg started with 10 local workers. But it expects to employ about 500 during the peak textbook season in January and February. And more jobs likely are in store, Phumbhra said.

Of course, local logistics employment is led by UPS itself. The package carrier is Louisville’s largest private employer with 20,125 full- and part-time workers.

Despite recession-related cutbacks, UPS’ overall Louisville employment rose 19 percent since 2000, partly because of an expansion of Worldport.

Logistics jobs typically don’t match the pay levels of headquarters positions, but Greater Louisville Inc. officials said some pay better than others.

Jobs handling medications or medical devices require more highly skilled workers who draw higher wages than the $14 per hour or so that’s typical of package-handling jobs, GLI officials said.  Also, they said, Louisville needs jobs of all types and for all education levels, including manual jobs that don’t require a degree.

“Are we attracting and creating the right jobs? The answer would be yes,” said Joe Reagan, CEO of GLI.

Reporter Patrick Howington can be reached at (502) 582-4229.