Indiana's outlook for 2014.

• Author: Slaper, Timothy F

When looking into our economic crystal ball last year, about the only thing we could see was a dense mist of =certainty for 2013. The nation was heading for the fiscal cliff and, with the exception of the Federal Reserve's continuing policy to provide financial liquidity, all the effects of the stimulus package from four years ago had run their course. Whether they knew it or not, workers were going to feel a hit in their 2013 take-home pay as the 2 percent payroll tax holiday expired January 1.

The payroll tax holiday and the continued uncertainty about the fiscal cliff, the early 2013 debt ceiling negotiations and the mandatory across-the-board cuts in government spending, a.k.a. "the sequester," resulted in our outlook for economic growth in Indiana going from subpar in 2012 to below subpar in 2013.

And below-sub-par is what we got.

Employment and Growth

As the economic recovery gained traction, the Indiana economy regained about half of the jobs lost during the recession (2008 and 2009), gaining 57,000 jobs in 2011, and 56,000 jobs in 2012. Sub-par for a recovery bounce-back, but better than the alternative. Unfortunately, by the end of 2013, Indiana is expected to have added only 37,200 jobs.

Gross domestic product (GDP) growth followed a similar pattern. Indiana's GDP took a bigger hit than the nation's in 2008 and 2009, as Figure 1 shows. Output growth rebounded more quickly in the Hoosier state and has since run a tick above the national growth rate. The year 2013, however, is a departure. The year is expected to close out with a growth rate about 1.3 percent (compared to the United States at 1.7 percent).

Before the September 2013 moderation in auto sales, the auto sector was on track to sell about 16 million units, an annual rate not attained since November of 2007. Considering the buoyant auto sales and the importance of motor vehide manufacturing in the state, the disappointing growth in 2013 may be something of a head-scratcher. But consider this, while the state is a manufacturing powerhouse relatively speaking, all manufacturing represents 28.6 percent of state output. As a result, even though manufacturing GDP increased about 7.2 percent in 2012, when averaged with the 2.3 percent growth of private services, state output grew 3.3 percent. All this to say is that Indiana's auto sector may be close to having a banner year in 2013. Auto output in the state may grow well over 10 percent when the tallying is done, but this is not...