No one wants the job of being a canary in a coal mine. As important as it is for us to be warned of dangers ahead, the act of keeling over in the cage when noxious gases are present is tough on the bird. So it is that the next few months are going to be difficult for the Indiana manufacturing economy, as it stands first in line to bear the brunt of the slowdown that is rapidly snowballing through the U.S. economy. 

The data on activity in the Indiana economy will soon reflect the changing circumstances that are unfolding in the manufacturing sector of the national economy. Indeed, given the long spell of relative success enjoyed by the state economy, the changes will seem especially abrupt. 

The most dramatic signal of that impending change comes in the weekly reports on unemployment claims throughout the state. The weakness in fourth quarter consumer spending on durable goods, coming on top of the six month long slowdown in business spending on equipment, has taken a toll on the state's manufacturers, who have had to resort to slowdowns and layoffs in response to empty order books.

Furloughs began in earnest at the mid-point of December, when claims by laid-off workers on the unemployment insurance system pushed total claims to more than 70,000, more than double the count at this same point one year earlier. About a quarter of those new claims were filed in Kokomo, whose economy is dominated by GM and Daimler-Chrysler. But virtually every city in the state has seen significantly more layoffs in the last few weeks. 

Conditions are especially harsh for Indiana's motor vehicle manufacturers and their suppliers. Even the record sales volumes of the first two thirds of year 2000 couldn't hide the warts and moles appearing in the original Big Three automakers' bottom lines, but with the steam coming out of sales of late, things could get downright ugly, especially for Chrysler and GM. With bungled mergers, poor profitability and tire recalls, each company has had its own flavor of pain even before softening sales gave them this new shared misery. 

For the last several years, many Midwest manufacturing facilities have been running at or near capacity to meet the demand of the then-surging national economy. This led many observers to hope that a mild downturn could be accommodated without resorting to the sort of closures and permanent layoffs that wreaked such havoc on the region's economy twenty years ago. 

That promise will now be put to the test, because the manufacturing sector is at ground zero in the general economic slowdown that is unfolding. After stumbling in the spring, the manufacturing component of the Federal Reserve's Industrial Production Index began to retreat in earnest in November of last year, slipping by 0.5 percent in that month alone.