August 19, 2002
No Sign Yet of Recession's End in Indiana
Strictly speaking, there's no such thing as a region or state-specific recession. Indiana, like every other corner of the country, is suffering through the aftershocks of a national recession that officially began in the spring of last year. Recessions stem from different causes, but ultimately boil down to the same thing -- a contraction in the total level of spending, income, and production.
But the up-down cycle of the general economy can cause more pain in some places than others. The industrial Midwest was so devastated by the recessions of the 1970's and the early 1980's that the term "rust belt" was coined to describe the uncompetitive state of our manufacturing infrastructure. The huge cutbacks in national defense spending that occurred in the wake of the 1991 recession caused such turmoil in southern California that cars started heading east instead of west on Route 66.
Now we must squarely face the fact that the recession of 2001 has been disproportionately harsh to the economy of the state of Indiana. Given that ours is the most manufacturing-intensive economy in the nation, and that the recession has had the industrial economy in its cross-hairs from the very beginning, that is not a complete surprise. Yet, even among our similarly blue collar neighbors around us, Indiana's experience in this economic downturn stands out.
Consider these facts. In the twelve month period ending in July, the state's payroll employment averaged about 2,918,000 jobs. That's down by 51,300 jobs from the same period one year earlier, and by a cumulative total of 81,100 jobs from the twelve months ending in July 2000, which is when the downturn in the manufacturing Midwest began.
How does that compare to neighboring states? Our more populous neighbors to the north, east, and west actually registered slightly lower job losses over the last two years. Michigan, Ohio, and Illinois suffered a cumulative downturns of 79,100, 70,700, and 52,300 jobs, respectively, while Kentucky actually gained 12,200 jobs over the same period. The bottom line is that, in percentage terms, the 2.7 percent job loss in Indiana during the course of this recession has been significantly worse than the 1.7 percent job decline experienced in Michigan, the next worst state.
That pattern of decline should be a concern for state leaders. Research reports of recent years have revealed differences between Indiana and its Midwest neighbors, in terms of occupational mix, educational attainment, and prevalence of corporate headquarters. If indeed we are a more production-oriented, branch-plant economy, then the downturn of 2001 has proven to be particularly rough for our niche.
Another harsh lesson of this recession has been the inability of our most familiar economic indicator, the unemployment rate, to reveal any useful information on the severity of our downturn. The state's jobless rate, currently resting at a seasonally adjusted 5.1 percent, has remained comfortably lower than any its neighbors, as well as the national average. Yet virtually every other economic indicator, from state tax receipts, to manufacturing income, to payroll job tallies, tells us the state economy is performing worse, not better, than our neighbors.
There's been no sign of an end to that downturn yet. Given the fact that new hiring usually trails the actual economic recovery, and that data reports lag behind economic activity, that is not especially alarming. But even though we can expect the state economy to recover along with that of the nation, the problems that this recession has revealed will remain.
About the Author
Educational Attainment, the 21st Century Fund and the Future of SchoolingIndiana ranks 42nd in educational attainment.
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