Indianapolis.

• Author: Kirk, Robert
• Position: Economic overview - Statistical Data Included

The outlook is for a moderating rate of employment growth for the metropolitan (nine county) Indianapolis area. This outlook is based on the national consumption growth rate slowing to a rate closer to the national disposable personal income growth rate. From 1995 to 2000, consumers had the best of times--low unemployment and inflation, and growth in household wealth. However, an uncertain stock market, due to rising costs and slowing profit growth, will result in more moderate growth in consumer spending.

Also, at the national level the ratio of household debt service to disposable income has risen to a high level of 13.6 percent. Although this high level has not been accompanied yet by rising mortgage, credit card, or installment loan delinquencies, it does raise a question about the strength of consumption in 2001.

Capital spending, which has contributed to 35 percent of the growth of real GDP in 2000, but represents only 10 percent of nominal GDP, is expected to slow after the capital goods backlog is reduced. Large increases in federal and state spending to improve highways and mass transit, authorized by the Transportation Emergency Act21 (TEA-21)in 1998, will continue in 2001 in the Indianapolis area. Also, increased defense spending may have some modest local impacts later in the year.

Recent Performance

How has the Indianapolis metropolitan area done over the past year (3rd quarter, 1999 to 3rd quarter, 2000)? Based on nonfarm payment employment, Indianapolis is compared to other areas in our region and others outside our region of similar size in Table 1. Indianapolis was third in our region. How will a slowing rate of consumer spending affect the Indianapolis metropolitan area economy? Let's look at the sources of growth in employment in the past year in Table 2.

Table 1 Employees on Nonfarm Payrolls for Seleted Metropolitan Areas, 1999 (3rd quarter) to 2000 (3rd quarter)

Change in Total Employment Total 1999 Employment (3rd Quarter) 2000 --2000 Percent Metropolitan Area (3rd Quarter) (3rd Quarter) Change(*) Indianapolis 887,200 15,500 1.8 Cincinnati 894,900 15,100 1.7 Columbus, OH 870,700 10,500 1.2 Louisville 595,100 12,700 2.2 St. Louis, MO 1,339,300 13,200 1.0 Detroit, MI 2,179,400 40,400 1.0 Chicago, IL 4,248,200 40,500 1.0 Austin, TX 666,200 31,500 5.0 Raleigh/Durham, NC 679,000 10,500 1.6 San Jose, CA 993,500 17,100 1.8 Source: U.S. Bureau of Labor Statistics, http://stats.bls.gov

(*) These data are subject to revision

Table 2 Indianapolis Metropolitan Area Employment Change by Major Sector, 1993 (3rd quarter) to 2000 (3rd quarter)

Percent Sector Change Construction 5.3 Manufacturing 1.9 Transportation Equipment 2.9 Chemicals 4.1 Transportation, Communication, Public Utilities -0.9 Wholesale and Retail Trade 2.4 Finance 1.5 Services 1.3 Federal Government 8.0 State Government -0.4 Local Government 0.6 Source: Indiana Department of Workforce Development

Chemicals, a nondurable manufacturing component, reflects, in part, the publicly-announced Eli Lilly expansion plans that will continue. The large federal government increase was the extra hiring for the 2000 U.S. Census enumeration, and will not be reoccurring in 2001.

Construction has been a primary contributor to employment growth for the past several years. Single-family building permits were down about 6 percent for 2000 through September compared to the same period in...