Indiana industry: On the rebound or permanent shifts?

• Author: Zheng, Ping "Claire"

Introduction

The pandemic arrived like a slow-moving train wreck in Spring 2020. And from our own unique vantage points, we were able to witness parts of it, but never really got a 30,000-foot view. Because it takes time for the official record keeping to be tallied and released (which we rely on in order to get the "whole picture"), we were not able to get a wider, more comprehensive view until most recently.

Our view of how the various sectors of the Indiana economy and its industries suffered from the combination of stay-at-home orders, remote work arrangements and the illness itself affecting thousands is a bit like looking in the rearview mirror. Using the Quarterly Census of Employment and Wages (QCEW) counts that are based on payroll employment for each quarter through the second quarter of 2021 (the most recent available at the time we conducted this analysis), we can see back to the quarters leading up to the fateful second quarter of 2020 up through the spring of 2021 (see Figure 1).

What we found affirms many assumptions made throughout the spring and summer of 2020, notably that retail, food services, entertainment and hospitality were among the hardest hit by job losses. In fact, nearly all service sector industries were hit hard. But we also learned how deep the job cuts were in certain manufacturing industries, which for Indiana generates billions of dollars in earnings-based productivity.

Indiana's employment levels dropped by 13% between March and June 2020. While many sectors have rebounded, by the spring of 2021, we hadn't yet returned to our pre-pandemic jobs level. Two sectors, hospitality (i.e., accommodation and food services) and manufacturing, were the hardest hit with combined losses of 160,000 jobs. Within manufacturing, the transportation equipment industry lost 30% of its jobs. Retailers, such as clothing, department and hobby stores, as well as performing arts, saw job losses of more than 50% during the stay-at-home (aka lockdown) period of the pandemic. Two sectors were either not impacted or actually grew: logistics (i.e., transportation and warehousing) and professional, scientific and technical services.

Compared to the nation, Indiana's transportation equipment manufacturing is showing greater competitive advantage during this pandemic. This sector quickly recovered its job losses from the lockdown and continues faster-than-average job growth. The pharmaceutical industry also exhibits above-average growth. On the other hand, medical equipment and supplies and the aerospace industries experienced a slower-than-average recovery.

Changes in total employment and establishments

Let's first take a look at the state's overall jobs picture from 2018 to 2021. Figure 2 shows Indiana's employment growth closely following the national trend at a rate of 2% prior to 2019. That growth rate began to fall below the nation during 2019 and was exacerbated by the statewide COVID-19 lockdown during the second quarter of 2020. [1] Both Indiana and the U.S. overall saw job losses of 13%. During the recovery phase, however, Indiana began regaining jobs at a faster pace, although job levels for both haven't yet returned to their pre-pandemic levels. [2]

Establishment growth rates reveal a different picture (see Figure 3). Positive growth rates, at both the state and national level, suggest the number of new establishments continued to grow, even during the COVID-19 lockdown. Indeed, the pandemic created new opportunities for...