December 15, 2009
Forecast Grim for 2009
In a typical three-month period in Indiana somewhere between 12 and 15 percent of the workforce changes jobs through a combination of job creation or destruction and turnover. So, during even a good quarter perhaps 450,000 Hoosier workers change jobs.
We are now in a recession that in its first year claimed about 0.42 percent of the state’s job base. From October 2007 through September 2008 job churning continued at about the same rate. But, for every 1,000 jobs that were lost, only about 965 were created.
This process will now accelerate. Ball State University’s, Indiana Econometric Model predicts that through the first quarter, 2009, earnings in all of Indiana’s major economic sectors except healthcare will decline. The steepest declines will be in the financial services sector (a 4.5 percent decline) and manufacturing (a 3.3 percent decline). Wholesale trade will experience a 0.7 percent decline in personal income, which is our measure of earnings. The remaining sectors experiencing income losses of less than one half percent.
We forecast a very modest rebound for most sectors in the 2nd Quarter of 2009 with only manufacturing earnings continuing to decline through the quarter, dropping an additional 8/10ths of a percent. Information Technology and construction will continue to lag in the recovery. This represents lagging business investment, primarily in new plant and equipment.
Employment will also decline steeply. Our forecast model predicts net job losses for the first three quarters of 2009. The most significant job losses will occur now through the end of the 2nd Quarter 2009 when Indiana will lose more 25,000 jobs, or almost one percent of its labor force. During the summer months of 2009, the State’s economy will continue to lose jobs, but at a much slower rate. Total job losses from this quarter through the end of 3rd Quarter 2009 will total roughly 27,500 workers.
This forecast doesn’t include job losses in 4th quarter 2008, which could well exceed those of the preceding recessionary year. This will cause the state’s unemployment rate to rise from its current level to between 7.5 and 8 percent by the end of summer 2009.
So, the steepest job losses, and declines in earnings are happening right now, and will continue through the first three months of 2009. By fall the entire Hoosier economy should be in visible recovery (though the technical definition of a recession ends when the economy hits bottom in the first or second quarter).
This forecast is a good bit less optimistic than that of my colleagues at Indiana University who are predicting a little more than half the job losses we envision. They were closer to the mark than me last year, and I hope that is again the case.
Unanticipated events, for good or ill can alter this prediction significantly. But, as it stands right now this looks a lot like the 1990-1 recession in depth, and the 1981-2 recession in length.
About the Author
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