Columbus forecast 2018.

AuthorBrewer, Ryan M.

Columbus GDP fell in 2016 from 2015 levels by 3.6 percent, marking the first decline for the Columbus Metropolitan Statistical Area (MSA) since 2009, when the community sustained a 14 percent drop in total output. Indicators relevant to the local economy suggest GDP levels going forward for the coming months will likely be relatively flat--increasing by approximately 2 percent, as Columbus is poised to continue at or near full employment. The Columbus MSA (which consists of Bartholomew County) boasts the region's lowest unemployment rate and the best average wage rate. Indeed, the pressure on increases in wages may fuel any slight GDP expansion for the area, mitigating the possibility of job losses that could materialize if the automotive industry would peak before 2018 is over. The 2 percent GDP increase forecast for Columbus includes a combination of population growth, jobs, technology-driven outputs and wage growth.

Key Measures

Unemployment: With a current unemployment rate of 2.7 percent, upward wage pressure is on employers who seek to expand business in Columbus. Businesses around the Columbus MSA are now struggling with a deficit of available employees during the holiday retail season, a time when employment opportunities for service jobs tend to peak.

Local area weekly wages have risen by more than 20 percent over the past seven years, from $800 in 2009 to nearly $1,000 in 2016. In the last three years of data, local wages have risen by 15.6 percent, or an annual rate of 5.0 percent--or 500 percent in excess of the consumer price index (CPI), which was measured at 1.0 percent per year over the same period (see Figure 1). (1)

Unemployment rates across America and throughout Indiana have continued to trend lower over the past year, with the U.S. rate as of September at 4.1 percent and Indiana at 3.6 percent (the latter now considered to be at "full employment"). The rate for Columbus is an impressive 25 percent lower at 2.7 percent, reflecting conditions that would make any mayor very proud, while simultaneously frustrating area human resources managers. Without population growth able to keep pace with job demands and with labor force participation throughout the region at levels not seen since before the Great Recession, it would now appear that the conditions are set for wage increases over the coming year. See Table 1 for unemployment rates among selected Indiana metros and micros.

Employment and labor force: Columbus has been creating job growth over the past eight years with remarkable efficiency. During this period, Columbus has produced about 13,100 jobs. As of September 2017, Columbus area employers provided 54,300 jobs to a local labor force of 45,274 (see Figure 2). (2) These numbers are up from 53,200 and 45,114, one year ago, respectively. For the past five years, Columbus employers consistently have provided a net 8,000-10,000 jobs to citizens outside of the Columbus MSA. As of September 2017, the net labor import number is 9,026 in Columbus. Job growth over the prior 12 months was 1,100, or 2.1 percent, while labor force growth over the prior 12 months was only 160, or 0.4 percent. This slowing growth in labor force participation combined with an ultra-low 2.7 percent unemployment rate implies that future job growth in Columbus without further population growth will be a challenge.

The labor force participation rate (LFPR) in Columbus has been tremendous and improving. For instance, in 2012, the Columbus LFPR was 68 percent, while Indiana was 62.5 percent and the U.S. LFPR was 63.2 percent. Then, in 2014, the Columbus rate grew to 69.7 percent, while the Indiana LFPR grew to 62.9 percent and the U.S. rate dropped to 62.3 percent. The most recent population and thus LFPR numbers are from June/July 2016. In that reading, Columbus was at 70.5 percent, Indiana's LFPR had grown to 64.3 percent and the U.S. LFPR measured at 62.4 percent (see Figure 3).

Job growth, wage growth, a skilled workforce, an impressively highly productive population and high-tech GDP growth earned Columbus, Indiana, national recognition as the second-best small city overall in America in 2014 for attracting additional capital investment. (3) Area Development magazine has included Columbus as one of its "leading locations" for new and expanding businesses each year from 2012 to its most recent publication in 2017. (4)

Investments continue to drive into Columbus in 2017, with consistent investment flowing into the community over the past several years. Between 2008 and 2016, businesses invested over $550 million in the Columbus MSA. The Columbus Economic Development Board reports that more than $100 million in additional capital investments have been announced in Columbus in 2017 and for 2018 (see Table 2). (5,6)

As an example of what is known as "the Columbus way" (disparate groups coming together to provide solutions to challenging community problems), the State of Indiana, the City of Columbus, Louisville & Indianapolis Railroad, CSX and Cummins, Inc. have come together to develop a plan for a $30 million railroad overpass along the western entrance into the downtown area, at State Road 46 and State Road 11, saving considerable time for the 40,000 vehicles per day traveling through that intersection. (7)

Leading indicators

State leading index and consumer sentiment: These numbers relate to Indiana and the United States, respectively, yet they also impact Columbus--particularly since Columbus is dependent on capital investment (manufacturing) and consumer spending (transportation). Since 2009, both of these measures had been generally increasing through June 2016.

However, from July-August 2017, the leading index for Indiana dropped to -0.25, its lowest number since 2011, which could indicate concern statewide. (8) But the drop is likely the result of Hurricane Harvey, which may have been expected to initially chill demand for durable goods made in Indiana. The number rebounded to 0.17 in September, and the end result of the hurricane was additional demand on durable goods because 500,000 light vehicles were destroyed in Texas, shifting demand curves temporarily in Indiana to the right. (9) It is believed the state leading index will continue to show signs of general health in 2018.

Consumer sentiment remained high with readings over 100.7 at the October survey, the highest reading since before the Great Recession (see Figure 4). (10)

Purchasing Manager's Index (PMI): In October 2017, the PMI measure came in at 58.7, well above 50, and is a good indication that manufacturing remains healthy from the perceptive of purchasing managers. This suggests that the manufacturing economy will continue to be strong in manufacturing-heavy states like Indiana and manufacturing-heavy towns like Columbus (see Table 3).

Yield curve: The yield curve for U.S. treasuries remains in normal form, although it has flattened over the past year (see Figure 5). Last year (Nov. 4, 2016) the 10-year/2-year spread ratio was 2.25, while this year (Nov. 8, 2017) it measured 1.44, which is 36 percent flatter now than it was last year at this time. Short-term rates...

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