Gary.

• Author: Coffin, Donald A.
• Position: Economic overview - Statistical Data Included

In the past year, employment growth in Northwest Indiana (Lake and Porter Counties) has slowed significantly. As a result, the unemployment rate in the region has increased from a low of about 3.2 percent in mid-1999 to about 4.5 percent at the end of 2000. A continuation of current growth patterns both in Northwest Indiana and in the nation should lead to employment growth in Northwest Indiana of 1 percent to 1.5 percent over the next year, with declines in local manufacturing (including steel), and increases in services and trade. This relatively slow growth in employment is also likely to result in slightly higher unemployment rates by the end of 2001.

The declines in manufacturing are offset by significant gains in service employment. This marks a continuation of a past trend. Steel, in particular, has experienced a reduction in employment levels and in the average work week. Many steelworkers have some degree of job security as per their union contract. However, there can still be a reduction in average hourly wages steel through a reduction in average weekly hours. This reduction brings about a proportionately greater reduction in earnings, since the hours lost are overtime hours. The protection that the steel industry sought from foreign imports has not been fully achieved. As a result, both domestic and foreign steel producers are competing for a shrinking market.

The possibility of a downturn in the Northwest Indiana economy remains substantial. If slower car sales persist, or should the national economy slow, manufacturing (and particularly steel) in Northwest Indiana could decline even more than our baseline forecasts suggest. There exists a substantial possibility of employment declines in 2001, rather than continued growth.

Employment and Unemployment

After four years of 2 percent to 3 percent employment growth, the local economy added jobs at about a 1.5 percent rate over the past year, with (trend) employment growing by about 2500 (see Figure 1). Indeed, for the first time since 1996, the year-to-year growth in employment was negative in late 1999. Manufacturing employment fell by about 2000 jobs between late 1999 and late 2000, and only continued relatively strong growth in the service sector (a gain of about 5000 jobs; nearly 40 percent of the job gain in the service sector was in retail trade) allowed any growth in total local employment. The shift in employment from manufacturing to services also leads to lower earnings...