We are now three full years past the worst month of the COVID recession, so it is helpful to assess how Indiana’s employment has rebounded. To examine some of the details on industry growth and educational attainment, I must rely on data that extends through last summer. For total employment and manufacturing jobs, I have more recent data. So, excuse me for jumping back and forth on these numbers.

To begin, it is good to recollect where we were in January 2020, the last month of the previous expansion. That month marked a year of declining employment, as Indiana hovered on the brink of a recession. The major culprit was the massive tariff tax increase levied on American consumers by the Trump Administration in 2018. So, Indiana entered COVID with an already weakening economy.

During the brief COVID downturn, Indiana shed some half-million jobs and then began a strong recovery. By Fall 2020, Indiana’s economy was recovering much better than the nation as a whole. In the year after COVID, Indiana’s employment rebounded one-third faster than the nation as a whole.

Part of our rapid recovery was due to the composition of our economy. Manufactured goods saw demand growth during the pandemic, while tourism-based economies languished. But, much of the credit for a strong post-COVID recovery was due to an extraordinarily adept government response to the disease. The Holcomb Administration did a superb job balancing the risks to public health with concerns for economic stability.

The data for that conclusion rest on strong data. The economic recovery was very good, and through Summer 2020, Indiana’s COVID deaths were lower than the national average. Among working age Hoosiers, the data is even starker. Only 9.4 percent of COVID deaths among those age 20-60 years old occurred before Fall 2020, when Indiana’s economy was fully open. A monstrous three out of four working-age adults who died of COVID did so after the vaccine was fully available.

Altogether, more than half of all Hoosiers who died of COVID did so after the miracle of vaccines were universally available. Their deaths weren’t attributable to lax public health measures or poor vaccine distribution. Indiana excelled in both areas. It was something else altogether.

Indiana’s recovery slowed a bit after the first year post-COVID recession, but, as of the end of March 2023, the state has seen job growth at a full 0.7 percent ahead of the nation. That is the strongest three-year stretch in which we have outperformed the national economy in 30 years. What is behind some of these changes?

We have seen fairly significant changes to our industrial structure. Employment in the sector arts, entertainment, and recreation is down more than 13 percent, and information is down 9.2 percent, while government and education employment are down 4.9 percent and 4.2 percent, respectively. As of last summer, employment in mining, accommodations, retail, real estate, and healthcare were all modestly lower than in the beginning of the pandemic.

Job growth was concentrated in professional and scientific services and in transportation and warehousing, with both seeing growth over 12 percent. Finance, construction, and wholesale all saw job growth just over 4 percent, while administrative services and waste management, agriculture, management services, and manufacturing each added 2 percent or less.

All these data are from last summer. The only industry that has changed substantially since then is manufacturing, which peaked last autumn, and is now back below 2018 levels. These changes suggest an economy in which the private sector is becoming more like the national economy. However, Indiana’s public sector is becoming less like the national economy, with most of the job losses concentrated in local government and education. These are two sectors where quality outcomes lead to very different economic conditions over the long run.

Interestingly, the educational composition of jobs changed dramatically in the post-COVID period. Over most of the past 20 years, Indiana has significantly lagged in job creation for college graduates. At the same time, nationwide, more than 8 in 10 new jobs went to college graduates. This vast difference in job composition explained much of Indiana’s lagging economy through the 21st century.

In the post-COVID period, Indiana’s job growth polarized. We saw job growth among adults with a college degree as well as those without a high school diploma. In these two categories, the state saw an increase of almost 2 percent, or more than 17,000 jobs. Of these, 66 percent went to workers who had completed a four year degree or higher.

Among high school graduates and workers with some college or an associate’s degree, employment declined by 2.6 percent and 0.7 percent respectively, or almost 28,000 jobs. Interestingly, the strongest growth came among workers age 24 or younger. This group saw employment gains of almost 21,000 workers. Strong demand and better wages have propelled more young people into full-time work.

Job growth among young workers is almost identical to the decline in college attendance that the state has suffered over the past several years. Jobs are good for young people, but not if they aren’t followed by more educational attainment, as wage data make clear.

In percentage terms, wage growth was heavier for those at the lower end of the educational distribution. Adjusting for inflation, new college grad hires were paid roughly $240 more per month in 2022 than in 2020, while those with only a high school diploma had starting wages averaging $249 more per month. The college wage premium for new hires dipped from 35.6 percent in 2020 to 32.7 percent in 2022. But, this masks more important wage dynamics.

For stable workers, education matters much more over a career than as a new hire. The wage premium for all college graduates, not just new hires, was 61 percent over high school graduates. This rose from 2020 when it was only 58 percent. This reveals that post-COVID wage growth has mostly come to newly hired employees at the lower end of the pay scale. Long-term employees with high school degrees are not seeing that wage growth, at least not yet.

Three years of COVID have changed Indiana’s economy. There are reasons to suspect that more changes are in the offing. If Indiana’s economy continues to become more like the national economy, we could anticipate a far better decade than the 2010s. Of course, the one dramatic risk to continued progress is that to be more like the nation in growth and wages we must better educate a much larger share of our young adults. Sadly, the prognosis for doing so is very, very poor.