Kokomo forecast 2011.

• Author: VanAlstine, Jason

After the worst two-year stretch in recent memory, the local economy in Kokomo is finally starting to show signs of improvement. Large-scale investments at some of the area's largest manufacturing facilities have led to increased job opportunities and optimism. This change in attitude can even be seen in the national media, as Kokomo has gone from one of "America's fastest-dying towns" (1) to a "town back from the brink." (2)

Employment

Unemployment rates in 2010 have been declining, with rates above 13 percent for the first three months, rates above 12 percent for the next four months, and rates below 12 percent in August and September. As seen in Figure 1, the unemployment rate has remained above both the national and state averages for the entirety of the past three years, but it has been closing the gap since June 2009, especially in the third quarter of 2010. This decrease has occurred in spite of an increase in the number of people who have resumed their job search this year (the labor force increased by approximately 2.2 percent since January). Combining this information with recent news about investment and hiring at Chrysler, Delphi and Abound Solar Inc. indicates that the local economy is trending in the right direction in recent months and should continue to do so in the near future.

[FIGURE 1 OMITTED]

However, if a longer view is taken, a disturbing trend has emerged over the past 10 years. More than 12,600 jobs have left the Kokomo area since its peak employment level in May 2000, a decline of 25 percent (see Figure 2). The rate of job loss is far exceeding the rate of population decline, which points to future problems in both the labor market and housing market if the recent gains in employment are not sustained and built upon. Additionally, analysis of Howard County commuting patterns shows a net loss in population at the end of the work day, decreasing the amount of earned income that remains in the local economy.

[FIGURE 2 OMITTED]

Sector Analysis

Table 1 lists the five largest economic sectors in the Kokomo MSA based upon employment. Although manufacturing has taken a beating in the last decade, it still remains the largest sector, comprising nearly one quarter of all of the jobs in the area. A recent uptick in manufacturing activity and a growing health sector due to the area's aging population have the local economy on the rise. As with the national economy, many of the other sectors such as retail and education will...