Gary.

• Author: Coffin, Donald A.
• Position: Indiana Metro Areas - Economic indicators

The northwest Indiana economy has not performed well over the past three years. Establishment employment (1) peaked in September 1999, a level that was maintained with little change until September 2001. Since September 2001, establishment employment has declined by about 7 percent (see Figure 1). (2) It stabilized at about 264,000 throughout 2003 but has declined again in 2004. Household employment (3) peaked nearly two years earlier and was, in fact, roughly stable throughout 2001 and 2002, rose somewhat during 2003, and recently began to decline. The difference in the patterns of establishment employment and household employment mirrors, although not precisely, similar developments at the national level. (4)

[FIGURE 1 OMITTED]

The unemployment rate fell steadily throughout the 1993 to 1998 period and began to rise noticeably near the middle of 2001 (see Figure 2). It has been mostly stable (between 5.5 percent and 6 percent) during the past year.

[FIGURE 2 OMITTED]

The recent monthly changes in employment and the unemployment rate do not suggest that robust growth will occur in the immediate future. While establishment employment was higher in September than in July and August, that has occurred largely because of the return of elementary and secondary teachers to the classroom (they are not counted as employed during the summer), and employment remains below its September 2003 level by about 1 percent. (Employment has been lower than the year-earlier level in most months in 2004.) The unemployment rate has continued its usual pattern of rising in January and falling through the spring. The normal pattern has been for the unemployment rate to "bottom out" in September or October and rise during the holiday season (as people seek seasonal employment).

It seems unlikely that the local economy will experience rapid employment growth over the next twelve months. Indeed, a further decline appears more likely than any substantial growth. Over the past twelve months (to September 2004), establishment employment has averaged about 261,000. That seems a likely average over the next twelve months as well (my sector-by-sector analysis suggests a gain of perhaps 700 to 1,000 jobs). Household employment has averaged about 287,000, but has been trending slightly downward. Again, stability at about 287,000 seems more likely than growth, although the recent downward trend should be a concern. The unemployment rate has averaged about 5.9 percent over the past twelve months. A stable unemployment rate also seems likely over the next year.

The Goods-Producing Industries

Construction: Construction has been a local bright spot. Despite strong seasonal fluctuations, employment in construction has increased by nearly 2,000 jobs since the middle of 2001 (about 12 percent total, or about 4 percent per year). This increase seems plausible in light of the continued...