Indiana.

• Author: Marcus, Morton J.

Old truths seem to have been verified again. Indiana went into the recent recession before the rest of the nation and has had a harder time emerging from the recession than other states.

In May 2000, Indiana reached its employment peak at 3,013,700 jobs (see Figure 1). The low for this business cycle was in June 2002 at 2,891,400, a decline of 122,300 jobs or 4.1 percent. During the same twenty-five-month period, the nation lost only 0.9 percent of its jobs. As of October 2002, Indiana's employment was 112,600 (3.7 percent) below the peak of May 2000.

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The recession of 2000-01 seemed very similar to the recession of 1991-92 when it started (see Figure 2). Seven months from the prior employment peak both cycles were down 2.0 percent to 2.5 percent in jobs. But, where the 1991-92 cycle began to reverse and head up from the eighth month onward, the more recent cycle has continued down. By the twentieth month, the 1990-91 cycle had reached the recovery point, where the number of jobs were once again at the previous peak. After twenty-nine months, this recession remains 122,600 jobs below the prior peak.

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During 1999 and the first few months of 2000, employment growth in Indiana and the U.S. seemed to be identical. But as the nation continued to expand jobs, Indiana's growth slowed and began to decline in mid-2000 (see Figure 3). When national employment topped out in March 2001, Indiana had been in decline for ten months. The nation reached its low point in jobs in April 2002, with Indiana's low being recorded two months later in June.

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The Indiana and U.S. economies were advancing harmoniously in 1999. In the first quarter of 2000, that pattern came apart. From January 2000 to October 2002 Indiana's employment declined by 3.6 percent while the nation's employment crept up a miniscule 0.1 percent. Table 1 shows the changes for each major industrial sector.

Why Did Indiana Diverge from The Nation So Sharply?

The problem was not particularly in manufacturing. Although Indiana's manufacturing firms lost nearly 77,000 jobs during this thirty-four-month period, this was consistent with Indiana's share of U.S. manufacturing employment. (Indiana had 3.8 percent of the nation's manufacturing jobs in January 2000 and 4 percent of the decline in manufacturing jobs.) Figure 4 shows that Indiana's manufacturing employment may have led the nation in decline, but lately it has been advancing relative to...