Indiana.

• Author: Conover, Jerry N.

After a long period of uncertainty fed by mixed economic signals, more and more economists are dancing to the tune that the jobless recovery of the U.S. economy is finally turning around. In Indiana, however, clear support for a change in the song's key from minor to major has yet to emerge.

From its May 2000 peak at 3,014,400, total employment in Indiana has fallen by 5.1 percent (154,600 jobs) to 2,859,800 in September 2003. As shown in Figure 1, employment at the national level continued to grow for nearly a year after Indiana employment began its downhill slide; since Indiana's peak, U.S. jobs have declined by only 1.4 percent. Moreover, in the past fourteen months, national employment has been relatively flat, slipping by only 0.2 percent, while Indiana's payrolls have shrunk an additional 1.6 percent.

[FIGURE 1 OMITTED]

Losers and Gainers

The largest portion (61.3 percent) of the jobs lost since Indiana's employment peak has been in manufacturing--a drop of nearly ninety-five thousand jobs. The manufacturing sector now accounts for 20 percent of all nonfarm jobs in Indiana, down from more than 22 percent in early 2000. Two factors are largely responsible for this shrinkage: manufacturers moving production to places where labor is cheaper (largely overseas) and improvements in productivity. Although much attention has been paid to the outsourcing issue, significant increases in productivity have enabled many factories to hold, or even increase, production volumes without having to replace laid-off workers. In this environment, substantial growth in Indiana factory payrolls is unlikely in the short term.

As shown in Figure 2, other sectors losing substantial numbers of jobs include professional and business services (21,600 jobs, or 14.0 percent of the total decline since May 2000) and retail trade (19,800 jobs, or 12.3 percent). Both losses reflect the general impact of a sluggish economy, as businesses and consumers cut out discretionary spending when money and jobs are scarce. On the bright side, employment in educational and health services has actually increased by 17,300 jobs during Indiana's general employment downturn; this sector now accounts for 12.2 percent of all Hoosier jobs. Government was another sector showing significant growth during this period, adding a total of 3,100 workers to payrolls that now account for 14.7 percent of all jobs in the state.

[FIGURE 2 OMITTED]

It's All Relative

As...