Gary.

• Author: Coffin, Donald L.
• Position: Gary, Indiana, economic forecast - Statistical Data Included

In 2001, northwest Indiana (Lake and Porter Counties) experienced a noticeable decline in total employment and in manufacturing employment (especially in steel); clearly, the recession that we believe has hit the U.S. economy arrived here some time ago. Before LTV's filing in bankruptcy court, seeking permission to cease steel making operations, it appeared likely that 2002 would bring more of the same, with total employment likely to fall by 1 percent to 1.5 percent (2500 to 3500 jobs), with virtually all the decline coming in manufacturing (with more than half the employment decline in manufacturing coming in steel). If LTV closes, employment may fall by an additional 4,000 to 6,000 jobs, for a total decline in employment of 6,500 to 9,500, transforming a moderate downturn locally into a reasonably severe recession.

Service employment seems likely to continue to rise modestly, as the casinos experience a strong year; however, retail employment may decline modestly, or, at best, remain unchanged. If LTV continues operations, the unemployment rate is likely to rise, peaking at 6.5 percent to 7 percent in 2002; if LTV does close, look for the local unemployment rate to peak at 8.5 percent to 9 percent.

The causes for continued difficult economic times in northwest Indiana are not hard to identify. National forecasts suggest declining automobile and truck sales (down from about 16 million in 2001 to around 15 million in 2002--and the 2001 sales already mark a decline from 2000). The continued reliance of Northwest Indiana on steel suggests that this will translate into declining output and employment locally. A national recession, if it extends into the second half of 2002, is likely to reduce the demand for gasoline and other fuels, also with predictable local results. Even if the national economy recovers more quickly, or more strongly, the local economy's recovery is likely to depend on developments in the steel industry. If LTV ceases operations and the property is not acquired and operated by another steel producer, then the local economy is likely to recover slowly, if at all, during 2002.

Total Employment and Unemployment

Total establishment employment has declined since late 1999 by about 1.5 percent, a loss of about 4,000 jobs (see Figure 1). That decline has come entirely in manufacturing (where about 4,400 jobs have been lost); more than 80 percent of the decline in manufacturing jobs (about 3,600) has occurred in the steel mills. The year-to-year change in total employment actually slowed somewhat in 2001 compared with 2000, falling by 0.5 percent to 1 percent in the first half of 2001 compared with year-earlier data. (Household employment data show smaller declines. The distinction is important, since establishment employment is an estimate of the number of jobs available at northwest Indiana employers. Household employment includes northwest Indiana residents working outside Lake and Porter counties, mostly in Chicago.)

[FIGURE 1 OMITTED]

While local unemployment rates are notoriously unreliable measures of local economic activity, the unemployment rate estimated for Lake and Porter counties has also begun an upward trend, to about 4.6 percent recently. (This follows declining unemployment rate estimates for most of 2000--from about 5.6 percent to less than 3 percent--a decline that seems somewhat at variance with the observable changes in employment during 2000).

The northwest Indiana economy remains more heavily concentrated in manufacturing (about 17 percent of total employment is in manufacturing...