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January 24, 2003

Is Indiana Job Growth As Bad As They Say?

One of the biggest mistakes God made when he created the universe was to give economists two hands. As every business person knows, when you give one of us a microphone you always seem to get two answers to every question. We don't just disagree with other economists -- we seem to disagree with ourselves.

On the other hand -- whoops -- that uncertainty sometimes just reflects the constant change in the economic environment that we try to understand. The facts about the economy have a way of changing under our feet.

A prominent case in point is the recent performance of the Indiana economy. In years past, the best way of communicating to the general public how well the state's economy was doing was to cite the unemployment rate. When we described the recessions of the early 1980's, we talked about the unemployment rates that went as high in some Indiana counties as 20 percent. We all understood that was very bad, and that when jobless rates fell during the subsequent recovery, that was good.

But unemployment rates just don't track the economy that simply anymore, at least in Indiana. Throughout this entire recession, unemployment rates have been lower in our state than the national average -- by at least a full percentage point. Are we really better off than everyone else? Not at all. But what kind of data can we provide to support that?

Employment growth seems like a natural choice. Tallying job gains and losses not only provides important insights into our economic performance, but it also figures prominently in the revenues that flow into the state and local treasuries via the income tax. But when you look behind the numbers, you find that job growth can be computed many different ways, yielding potentially different results. How should we do it, and how do we interpret what we get?

The Indiana Fiscal Policy Institute, in support of the O'Bannon administration's Energize Indiana initiative, has put forth one method, and it’s a perfectly reasonable one. Their central finding is that over the period January 2000 through October 2002, the Indiana economy suffered a larger percentage job loss than any other state in the country. Payrolls shrank by 109,100 jobs during that 34-month period, a 3.6 percent decline.

Comparing our employment growth to other states helps put these less familiar numbers into perspective. And comparing our job totals now to the pre-recession peak of January 2000 measures exactly how much pain this recession has inflicted on our economy.

But now the "other hand." The simple story of Indiana's recession told by the job loss rankings of IFPI is incomplete. That's because most of those painful employment declines occurred before the summer of 2002. For the last five months, the state economy has hung onto its payrolls, and has even managed a bit of growth.

Let's compute job growth a slightly different way -- by comparing the job totals in any given month to the monthly payroll exactly one year earlier. As recently as January 2000, the Indiana economy was faring pretty well on that score. Growth for that month was a heady 2.8 percent, 16thbest in the country. Then the recession hit us full force, and for fourteen consecutive months between October 2000 and November 2001, Indiana's job growth was among the three worst in the country.

But we appear to have bottomed out. Slowly, but steadily, our job growth ranking has improved, to the point where our last observation -- for November 2002 -- puts us in 33rdplace among all states in terms of job growth.

When it comes to the economy, we've certainly dug ourselves a good-sized hole. But at least we've stopped sinking.

Link to this commentary: https://commentaries.cberdata.org/386/is-indiana-job-growth-as-bad-as-they-say

Tags: jobs and employment, unemployment and the labor market


About the Author

Pat Barkey none@example.com

Patrick Barkey is director of the University of Montana Bureau of Business and Economic Research. He served previously as Director of the Bureau of Business Research (now the Center for Business and Economic Research) at Ball State University, overseeing and participating in a wide variety of projects in labor market research and state and regional economic policy issues. Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.

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