Kokomo.

• Author: Parkison, Kathy
• Position: Indiana Metro Areas - Economic indicators

Kokomo's economy remains heavily weighted toward manufacturing. Employment in manufacturing industries peaked statewide in June 2000, and while recent losses have been much less than before (and some months have even posted gains), employment has still not regained anywhere close to its peak. Like the rest of the state, individuals and firms in the area remain apprehensive about the economy and what it holds for them personally. While unemployment in the area peaked during 2002 and has since dropped, Kokomo had the dubious distinction of achieving the second highest unemployment rate in the country in July 2004 at 14 percent. Obviously, those numbers are way up from the pre-recession lows of about 2.5 percent, and July in Kokomo always seems to give horrible unemployment numbers. The unemployment rate did drop in August to the 5 percent to 6 percent level.

Many of the recent job losses nationally have been in transportation equipment manufacturing (vehicle parts), which is one of this area's largest industries. From 2001 to 2003, industrial production declined nationwide but is finally showing some growth (see Figure 1). This area remains heavily invested in industrial production and very subject to economic disruptions as industrial production increases and decreases. The important news is that many of these job losses will be permanent due to increasing productivity, job losses to overseas, etc. This means that manufacturing production, while increasing somewhat, is unlikely to return to the glory days of the past.

[FIGURE 1 OMITTED]

Although the state and local loss of manufacturing jobs is still troubling, we think that the worst of the economic news is behind the region and we are optimistic about 2005 for the economy in general. Given the latest productivity, gross domestic product, and labor figures, it seems that the national and state economies are going to continue growing. This will certainly also be true of the local economy. But, as noted earlier, the relatively slow growth of employment has continued to be a prominent feature of this particular expansion. Recent trends show that employment is starting to pick up, giving a more favorable forecast for the area of about 3 percent to 4 percent growth--not outstanding, but not too bad either.

On the local front, past moves by the Fed to keep interest rates down and the incentives offered by the...