November 28, 2003
Is the Indiana Economy Getting Better?
If there is anyone still out there who thinks the U.S. economy is sick, direct them to the Bureau of Economic Analysis's report on third quarter Gross Domestic Product. The BEA took an already-high estimate of overall economic growth and made it even higher. The newly revised 8.2 percent growth rate in the economy during the July-September period easily eclipses anything we've seen in the past nineteen years.
But many of us in Indiana aren't breaking out the party hats quite yet. Economic news in our state is still dominated by reports of tax revenue shortfalls, shuttering manufacturing facilities, and poor grades on economic report cards. The change in tone, if anything, when one changes subjects from the national to the state level economy, suggests that we are following a different path than the rest of the country.
The truth is a little more complicated than that. We're not seeing anything like 8.2 percent growth in the Indianaeconomy right now, that's for sure. But that's because the data on Gross Domestic Product -- which make the national economy look so good -- aren't available for states and regions. Gross State Product, which comes closest to capturing the same concept for states as GDP does for the nation, becomes available only after a lag of almost three years.
If those data were available today, what would it show? For Indiana , there's every reason to believe that it would show strong growth in the state economy, happening right now under our feet. That's just a guess, of course, but it's probably a pretty good one. That's because two segments of the national economy that are catching fire right now -- business investment and exports -- are the bread and butter for our state's major industries.
By growth I mean growth in output, not employment. Here, also, Indianais undoubtedly on the same path as the national economy. Two consecutive quarters of galloping growth in labor productivity at the national level has helped the economy produce more output with only modest increases in the labor force. Some have called it a jobless recovery, although the recent surge in hiring should soon put this term to rest.
If we had that same kind of data for the state economy, it would undoubtedly show the very same thing. If anything, the productivity increases in the Indiana labor force might even be higher, given the highly competitive markets our state's manufacturers operate in. These are "good news" stories about the Indianaeconomy -- growth in output and growth in productivity -- that we are unable to tell because we don't have the data to back them up.
The most timely and relevant data we do have for the state of Indiana are for payroll employment. And those data have shown some improvement in recent months. For three of the last four months, job counts reported byIndiana employers have shown modest increases. On a seasonally adjusted basis, payroll employment is up by almost 40,000 jobs from the low point of July of this year.
But making the call on Indiana 's economic recovery based on employment data is a little like finding your way driving by looking at your rear-view mirror. By the time we see it, it will already be history. That's the way it is for those of us who track state and regional economies.
There's a larger point in this as well. Whenever and however the Indianaeconomy recovers from the 2001 recession, there will still be problems to solve. The job gains we all look for to tell us that the downturn is over will, in reality, just help get us back to where we were. As the last twenty years have demonstrated, we need to get "better" when we are well just as badly as when we are sick.
About the Author
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