Gary.

• Author: Coffin, Donald A.
• Position: Northwest Indiana

Northwest Indiana continues to lag both the state and the nation in terms of growth. From September 1990 through September 2007, payroll employment (1) in northwest Indiana grew at an average annual rate of 0.6 percent, while U.S. employment growth was 1.4 percent per year, and the state's employment grew at an average annual rate of I percent. (2) Household employment in northwest Indiana grew even more slowly, averaging only 0.4 percent, compared with 1.2 percent growth for the nation and 0.8 percent for Indiana. Perhaps surprisingly, the unemployment rate in northwest Indiana has not been exceptionally high, falling from 5.1 percent in 1990 to 4.2 percent in September 2007. During that same time, the nation's rate declined from 5.1 percent to 4.5 percent, and Indiana saw a smaller drop from 4.5 percent to 4.1 percent. (3)

The last year has been more of the same for northwest Indiana, with payroll employment growth (0.5 percent) continuing to lag the nation (1.8 percent), but atypically leading the state (0.3 percent).

In this case, the past is almost certainly prologue. We can anticipate generally slow employment growth for the region, with more downside risks than upside opportunities. We anticipate growth in total employment of about 0.3 percent, with a net addition of about 1,000 jobs to the local economy. Given a continuation of the labor force growth of the past two decades, this should result in a roughly stable unemployment rate.

The risks, however, are quite real. As we will see, building permits for housing have declined sharply in northwest Indiana, but construction employment has not followed. There is a clear risk here that the slowdown in housing permits will eventually result in declining construction employment. In addition, U.S. automobile sales (and production) in 2007 declined 1.6 percent compared to 2006 levels. Sales by GM, Ford, and Chrysler were down even more (4 percent), and inventories of unsold cars have declined. (4) With sales and inventories falling, production cutbacks have certainly occurred. Should auto sales continue to fall, the steel industry may see lagging demand for its products, which would negatively affect employment.

[FIGURE 1 OMITTED]

The Overall Economy: Employment and Population

The northwest Indiana economy will continue to add jobs, but at a very slow rate. Overall, we can look for about 0.3 percent growth in employment, or about 1,000 new jobs (see Figure 1). Given the slow growth in the region's population and labor force, this may be enough to hold the local unemployment rate at or near its current 4.3 percent level--although a moderate increase (to the 4.5 percent to 4.9 percent range) is not impossible. The slow growth in employment means that there should be little upward pressure on wages. Overall, growth in nominal (money) wages should keep pace with inflation, leaving real wages, on average, roughly unchanged. Most of the employment growth is likely to be in Porter County (with Lake County likely even to lose jobs) as businesses continue to relocate toward the counties with more rapid population growth. Note, however, that population growth is not likely to be robust between now and 2010 anywhere in northwest Indiana.

The Indiana Business Research Center (IBRC) projects average annual population growth in the region of 0.3 percent between...