Indianapolis.

• Author: Powell, Philip T.
• Position: Indiana Metro Areas - Economic indicators

Recent performance of the Indianapolis economy (1) fell short of expectations, especially in terms of employment. During the twelve months before September 2004, total employment shrank 2.2 percent from 868,690 to 849,830. This sharply contrasts with the U.S. employment growth of 1.4 percent during the same period. As of September 2004, the local unemployment rate was 4.7 percent, which was less than the national rate of 5.1 percent (not seasonally adjusted).

There is reason to believe, though, that measurement of the local unemployment rate understates the impact of job loss on the Indianapolis economy. The unemployment rate is the percentage of the labor force who cannot find a job. A citizen is no longer counted as part of the labor force if he or she stops looking for a job. When local jobs are scarce and acquisition of new jobs requires an unexpected wait, many discouraged individuals stop searching altogether and statistically remove themselves from the labor force. During the twelve months before September 2004, the local labor force shrank by 20,200--from 912,000 to 891,800. Nationally, the labor force grew by 0.7 percent over the same period. If the size of the local labor force had remained at 912,000 individuals, adding 20,200 back to the rolls of the unemployed, the local unemployment rate for September 2004 would be adjusted upward to 6.8 percent.

Local retrenchment in employment was not concentrated in just one or two industries. For example, between the fourth quarters of 2002 and 2003, metropolitan Indianapolis lost 3,434 jobs in manufacturing, 1,181 jobs in retail trade, 918 jobs in wholesale trade, and 746 jobs in transportation and warehousing. Growth in finance and insurance generated only 280 jobs. The most pronounced job growth occurred in educational services and health care, with gains of 1,768 and 2,215 jobs, respectively. Given the high rate of new facility construction and slower growth in hiring at Eli Lilly, most job growth in health care is occurring in the services delivery area instead of bioscientific research and life science enterprise creation. Economic research has established advanced manufacturing, logistics, and life sciences as the leading sectors of long-term job growth in Indianapolis. Recent performance suggests that economic and employment takeoff has not yet occurred in these areas.

Income growth in Indianapolis has lagged national performance. Total wages earned by Indianapolis workers between...