Muncie.

• Author: Barkey, Patrick M.

Only a few years ago, the short-term problems of the Indiana economy were largely solved. Jobs were plentiful, unemployment rates were scraping the ground, and the state's revenue coffers were flush. That left us in the unusual--and unfamiliar--situation of facing up to the larger, long-term problems facing the state economy, including the deterioration of our relative standard of living and the net out-migration of our educated population.

The recession of 2001 has only partially changed that situation. It has delivered to us--ahead of the U.S. economy as is the Indiana custom--a taste of the familiar cutbacks and closings in manufacturing, which have hit Muncie and East Central Indiana as hard as anywhere else. But coming on the tail of a seven-year stretch that has seen job growth locally stagnate even as the national economy charged ahead, it has been difficult to sort out which of the recent woes are due to the recession and which represent the outgrowth of trends that precede that event.

The East Central Indiana region, defined as Blackford, Delaware, Grant, Henry, Jay, Madison, Randolph, and Wayne counties, experienced zero population growth over the last decade. Terre Haute is the only other urban area in Indiana with a similar experience. Thus, the backdrop for our recession experience of 2001-02 is one of relative decline.

Total Employment

This decline is clearly evidenced from the behavior of total employment over the last twelve years, as shown in Figure 1. The data, which are seasonally adjusted quarterly averages of the monthly DWD reports on payroll employment, depict an economy that peaked in mid-1995, more than six years before the U.S. economy slowed down. Since its high point of more than 62,000 jobs at the last decade's midpoint, Muncie business establishments have steadily contracted payrolls, to just under 58,000 employees in the third quarter of 2002.

[FIGURE 1 OMITTED]

The picture is a bit misleading, however. Changes in accounting and ownership at a single large employer, the now-defunct Burlington Motor Carriers trucking company, caused a pre-1995 buildup in total employment and a sharp decline immediately thereafter that were more apparent than real. A closer examination of the data reveals that the true starting point for the downward trend preceding the 2001 recession was in mid-1997, when the economy suffered four setbacks in the manufacturing sector in quick succession.

Manufacturing

The closure of GM's Delphi...