Gary forecast 2009.

• Author: Coffin, Donald A.

November 2008, updated December 2008

The performance of the northwest Indiana economy in 2008 has been, in a number of ways, a surprise. Historically, northwest Indiana has lagged the nation in employment growth (see Figure 1), but that has not been the case in the last year (1) Our expectation a year ago was for total employment to grow by 0.3 percent, (2) in the context of a national economy experiencing moderate employment growth. Indeed, employment in northwest Indiana did grow by 0.5 percent, but, nationally, instead of 1.5 percent to 2 percent employment growth, (3) the U.S. economy lost jobs--falling 0.3 percent during 2007 and decreasing employment each month during 2008. That rate of national employment growth would almost always be associated with declining employment in northwest Indiana.

Furthermore, national data from the Current Population Survey show employment declining slightly between September 2007 and September 2008, down a little more than 1 million (a 0.8 percent decline), while data for northwest Indiana show an increase of about 2,500 people with jobs (a 0.8 percent increase). And while northwest Indiana's unemployment rate increased (from 4.5 percent in September 2007 to 5.5 percent in September 2008), (4) that increase was substantially smaller than the national unemployment rate increase (up from 4.5 percent to 6.0 percent). (5)

Specific industries also provided some major surprises. For the past decade, the local construction sector has lagged behind the nation in terms of employment growth (see Figure 2). As is generally well-known, the construction industry has experienced a severe decline nationally--down 6 percent from September 2007 to September 2008. (6) In northwest Indiana, however, construction employment has increased 4.2 percent over the last year. Meanwhile, residential building permits in Lake and Porter counties fell from 1,782 (January to September 2007) to 869 (January to September 2008)--a decline of 51 percent. (7) Nationally, employment in iron and steel mills fell by 2.6 percent from September 2007 to September 2008 (8) but rose nearly 2 percent (300 jobs) in northwest Indiana.

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The northwest Indiana economy has not outperformed the national economy in a long, long time. That it has done so in the past year is surprising; that it will do so in the coming year is unlikely. And the coming year looks like a difficult one nationally. The Indiana Center for Econometric Model Research forecast for the 2009-2010 period shows slower than normal output and employment growth for the United States; and, if historical patterns persist, slower than normal growth for the U.S. economy means extremely slow growth, perhaps even declines, for the northwest Indiana economy.

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