Gary.

• Author: Coffin, Donald L.

Employment in the northwest Indiana economy (Lake and Porter counties) has remained fairly constant during 2003 (252,100 in January and 252,400 in September), a development comparable to the nation as a whole. Nonetheless, the local economy experienced a sharper decline during the most recent recession, with an employment decline of about 8 percent from the cyclical peak in the fourth quarter of 2000 (compared with a decline in total U.S. employment of about 1.5 percent to 2 percent from the cyclical peak, also in the fourth quarter of 2000).

The projected rapid growth in the national economy, which, given the continuing robust increases in productivity, is likely to produce only modest gains in employment (or reductions in unemployment), will likely lead to some expansion in the local economy as well. However, here that expansion will occur almost, if not entirely, as output, not employment growth. It seems unlikely that local employment will increase noticeably or that the local unemployment rate will fall.

Output and Employment

Establishment employment in northwest Indiana has shown considerable volatility over the past thirteen years (see Figure 1), but little long-term growth (employment at the end of 1990 was about 250,000, compared with 252,400 in September 2003). Household employment has shown somewhat more growth (rising from about 270,000 in early 1993 to about 284,000 in September 2003). (1) Figure 2 provides a comparison between northwest Indiana and the nation, in terms of growth in total employment. Clearly, employment in northwest Indiana has been much more volatile throughout the 1991 to 2003 period than has employment nationally. Equally clear, growth in employment nationally has been much more rapid, totaling more than 20 percent during this period, compared with less than 5 percent growth in local employment.

[FIGURES 1-2 OMITTED]

Both for the nation and the local economy, output growth has been considerably more rapid than has employment growth. Productivity growth has averaged more than 2 percent per year nationally over the past twelve years, and has averaged more than 5 percent per year for the past two years. As a consequence, total real output (GDP) nationally has increased by about 46 percent in the past thirteen years. Assuming that productivity growth in northwest Indiana has kept pace with the national trends, this suggests that total local output has increased by about 30 percent over the past thirteen years. (2)

If the relationship between national and local growth remains as it has apparently been in the past, 4 percent growth in output nationally would suggest 2.6...