Indiana's 2OO4 outlook? Economic forecast from the Indiana Business Research Center.

• Author: Conover, Jerry N.
• Position: Viewpoint

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 to 2,855,800 in September 2003. Employment at the national level continued to grow for nearly a year after Indiana employment began its downhill slide, and since Indiana's peak, U.S. jobs have declined by only 1.5 percent. Moreover, in the past 14 months, national employment has been relatively flat, slipping by only 0.3 percent, while Indiana's payrolls have shrunk an additional 1.8 percent.

The largest portion (56 percent) of the jobs lost since Indiana's employment peak has been in manufacturing--a drop of more than 100,000 jobs. The manufacturing sector now accounts for 20 percent of all non-farm 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 not expected in the near term.

Other sectors that have lost substantial numbers of jobs include professional and business services (25,300 jobs, or 14.0 percent of the total decline since May 2000) and retail trade (22,400 jobs, or 12.4 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 brighter side, employment in educational and health services actually increased by...