June 15, 2001
Indiana's Economic Growth a Matter of Perspective
An influential economic monograph of some years back began with a little parable about people living on scattered islands who trade with one another. When the price of bread goes up, it was asked, how do they know whether it is a sign of inflation or just a bad year for wheat? Or when sales of what one island produces go flat, is it a sign that it has lost its competitive edge or simply a general economic downturn?
Despite the much-heralded connectedness of our technological society, this little tale still fits our economy surprisingly well. We who live today in Indiana in the midst of a manufacturing-led economic downturn must ask ourselves the difficult question: are the jobs the state economy has lost in the last six months going to come back? Or has the path of the national economy moved permanently in a direction that is not to our advantage?
Without a crystal ball, we can't say for sure what the answers are. But our "island perspective" of the Indiana economy may be clouding our notion of what is, and what is not, reasonable to expect for both the immediate, and the longer-term future.
When it comes to manufacturing employment, Indiana and the U.S. have been on separate tracks for more than two decades. The 17.9 million people with manufacturing jobs nationwide in May 2000 are about 3.3 million fewer , or 15.5 percent, than existed in June of 1979. Aside from the disruptions of the early 1980's, it's been a steady decline as factories became more capital intensive, and lower value-added jobs moved offshore.
Indiana's decline over that same period has been much less severe. As of June of 2000, the state economy had only 55,000 fewer factory jobs than the heady days of 1979, a 7.3 percent difference. Job losses since then have widened the disparity, but for much of the 1990's manufacturing statewide bucked the national trend and registered growth in its payrolls.
The relative vitality of the motor vehicle industry in central Indiana is even more dramatic. Thanks to a trend of reconcentration of vehicle assembly in the Midwest, central Indiana's employment in vehicle and parts assembly rose by an average of 8.5 percent per year in the decade of the 1990's. That kind of growth enabled communities like Kokomo to largely escape the painful transformation brought on in other parts of the country when factory doors were shut.
What will the future bring? That also is a matter of perspective. The Bureau of Labor Statistics makes projections of every major industry in the economy, nationwide, out to the year 2008. BLS is quite pessimistic about some of the industries with a major presence in central Indiana, including motor vehicles, pharmaceuticals and fabricated metals manufacturers. For the motor vehicle industry, the nearly 1 percent per year expected shrinkage in payrolls out to 2008 is quite a contrast to the go-go expansion of the 1990's.
About the Author
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