Gary forecast 2020.

• Author: Pollak, Micah R.

In 2019, Northwest Indiana (1) grew slower than the state of Indiana and the nation overall, and this will likely be the case again in the coming year. Despite this lack of substantial economic growth, in recent years, Northwest Indiana has shown evidence of a healthier industry mix of employment. This evidence, coupled with positive growth in population for the first time in years, suggests improving economic fundamentals that may support greater economic growth in the coming years. At the same time, economic growth has been held back by the ongoing international trade war as tariffs, which were designed to boost manufacturing and the steel industry, have begun to harm more than help. With stronger fundamentals, the economic growth for Northwest Indiana over the next few years will depend more on national issues, such as the trade war and a threatening recession, than on regional issues. The following sections will outline recent trends in economic growth, employment and population for Northwest Indiana and identify areas of potential economic challenges in the next year.

Northwest Indiana economic growth

During 2019, the Northwest Indiana Coincident Economic Index, (2) which measures the economic health of Northwest Indiana, rose from 114.1 in December 2018 to 115.2 in September 2019, growing at an annualized rate of 1.3 percent. This is substantially slower than the growth of the national economy (+3.0 percent) and the economy of the state of Indiana (+2.1 percent) measured by similar coincident indices during this same period. (3) Figure 1 shows the Northwest Indiana Coincident Economic Index from 2008 to 2019.

Growth during 2019 was also slower than the 1.9 percent growth the region experienced in 2018, but slightly above the average annual growth rate of 1.2 percent per year for the previous five years (2012-2017). Inflation in 2019 was also unusually high, with prices rising at an annualized rate of 1.4 percent in Midwest urban areas during the last four quarters (2018 Q3 to 2019 Q3), compared with an inflation rate of 1.9 percent in 2018 and an average annual inflation rate of 0.9 percent between 2015 and 2017. (4) While the economic output of Northwest Indiana, measured by gross metropolitan product (GMP), (5) rose during the first three quarters of 2019 to $30.9 billion (up $446 million or 1.5 percent from one year before), when adjusting for inflation, the economy of Northwest Indiana grew little. Table 1 shows the growth rate of real GMP/GDP per capita for Northwest Indiana compared with the state and the nation in recent periods.

Between the second quarter of 2018 and the second quarter of 2019, real (adjusted for inflation) GMP per capita grew by just $34 per person in Northwest Indiana. This growth was substantially slower than the gain of $353 per person for the state of Indiana and $974 per person nationally over the same period. Despite being small, this period (and 2018 overall) was the first four-quarter period of positive real income growth per person Northwest Indiana has experienced in some time. Between 2012 and 2017, real GMP per capita declined on average by $51 per year. This numerically small--but symbolically important--growth is likely due, at least in part, to a strengthening industry mix in employment.

A strengthening industry mix in employment

Following the official end of the Great Recession in June 2009, much of the United States recovered quickly. Northwest Indiana was no exception. Between 2009 and 2013, economic output in Northwest Indiana (6) rose 8.1 percent (2.0 percent per year), while total employment rose 5.4 percent. (7) However, following this period of recovery, economic growth slowed substantially. During 2014 and 2015, economic output grew at only 1.1 percent per year.

One of the primary reasons for this slowing growth was structural changes in employment. In 2013, the $4.2 billion BP-Whiting modernization project began to approach completion. At its peak, this private project employed as many as 14,000 union ironworkers, boilermakers and other specialty trade...