Indianapolis-Carmel-Anderson forecast 2022.

• Author: Anderson, Kyle

The Indianapolis-Carmel-Anderson Metropolitan Statistical Area (MSA) continues to lead the state in economic growth during the long pandemic recovery. This recovery should continue throughout 2022, even though there are significant risk factors.

The potential is there for strong economic growth in the region. The Indianapolis economy has survived the pandemic pretty well, and it has a number of good things going for it as 2022 approaches. Households have a good amount of cash and some pent-up demand from consumers who have held back spending. The Indianapolis population is growing, and the area has a stronger labor force than other parts of the state. Indianapolis will benefit greatly from increased travel and tourism in 2022, due to its reliance on conventions and other large events.

Of course, there are potential headwinds in this recovery as well. A tight labor market means that businesses will struggle to find workers --and will need to pay higher wages when they do. Supply chain disruptions will also hinder growth in an area that is heavily reliant on manufacturing and transportation and logistics. These two factors are contributing to higher inflation readings and suggest that the economy may be overheating in a way that could threaten future economic growth. While these risks are significant, the most likely scenario is that they will slow growth rather than lead to a recession.

Employment and wages Last year, we forecast that the Indianapolis MSA would fully recover its pre-pandemic employment levels by the end of 2021. This appeared to have been optimistic, as the area is still at a lower level of employment compared to February 2020. As of September 2021, there were approximately 34,000 fewer nonfarm workers in the Indianapolis MSA relative to before the pandemic. While good job growth in the fourth quarter of 2021 will likely close this gap somewhat, we will still finish the year lower than pre-pandemic levels.

Even though employment is lower than pre-pandemic levels, the unemployment rate is still quite low. Unemployment is 3.4% at the time of this writing and falling. (1) This is still higher than two years ago (when unemployment was 2.6%), but the job market is reflecting a full employment level. Last year, we forecast that the unemployment rate would be between 4.0% and 4.5% by the end of 2021, so we can see that the economy has improved faster than expected.

The primary challenge facing managers, business owners and the...