July 16, 2004
Indiana Economy at Mid Year
It’s been a good first half for the Indianaeconomy. Thanks to a surge in business spending and industrial activity in the national economy, most of the economic indicators for our state have been pointing up this year. That’s welcome news in the wake of the most painful recession we’ve experienced since 1982.
The most persuasive evidence of this rebound comes in the payroll employment statistics for the state and its metropolitan statistical areas, or MSAs. Unfortunately, the most recent data we have on job growth are fragile, since they are always revised, in some cases substantially. One of those recent rounds of revisions, for example, told us that Indiana ’s recession-related job decline ended in early 2002, and did not carry into 2003 as we had previously thought.
That’s why the intensity of political and media attention to each new monthly tally of state payrolls is a little bit scary. The news these days is good, at least, and as such it is certainly welcome. But forming firm conclusions based on the last few months worth of employment reports is risky, to put it mildly.
But even discounting the last few months, there is no mistaking the turnabout in hiring in the Indiana economy. Since June of last year, the state has been slowly building up payrolls, which now stand about 1 percent higher today than they were at that time. That has not been the case for many of our Midwest neighbors. Illinois , Michigan , and Ohio have still been losing jobs, with our neighbor to the north still very hard hit by the recession and manufacturing upheaval.
Some segments of the Indiana economy cannot be said to have rebounded, simply because they never really stopped growing. The education and health services industries, for example, have been adding about 10,000 jobs a year for the past three years, which is roughly 3 percent growth. Governmentshave also slowly added about 20,000 jobs to their payrolls in the last three years.
Manufacturing is another sector that has failed to rebound, at least in terms of employment levels. But the fact that the free-fall of the previous three years in factory jobs came to an end in 2003 has been a big factor in the state’s overall recovery since then. Indiana ’s 573,400 manufacturing workers in June numbered almost exactly the same as a year earlier, mirroring the national pattern, where productivity improvements have allowed significant output increases with little movement in payrolls.
On the other hand, the growth in payrolls for the professional and business services sector of the state economy has been pronounced. Almost one in every ten jobs statewide is found in this rapidly growing group of industries, whose job growth this year is on a 3 percent annual clip.
The modest turnaround in the state’s job totals is echoed in some, but not all, of its maj or cities. The Evansville and MuncieMSAs, in particular, have seen continued job loss into 2004, while the Bloomington andTerre Haute MSAs are on the opposite page, recording stronger than average job growth. Outside of the last two months, when the data showed a significant drop, the trend ofIndianapolis MSA payrolls has also been up.
There are other good indicators for theIndiana economy as well. Unemployment rates are generally coming down, and unemployment claims for most regions of the state are running below where they were at this time last year. Residential building has been reasonably healthy, and tax receipts are coming in at or above expectations.
This rebound doesn’t solve all the state’s problems, but it certainly eases some of them.
About the Author
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