South Bend and Elkhart-Goshen.

• Author: Black, Grant C.

The Michiana region, composed of the metropolitan areas of South Bend-Mishawaka and Elkhart-Goshen, faced a modest economy in 2006. The year started with promise that weakened in late spring and summer. However, hope has rekindled as conditions improve late in the year. Given ongoing uncertainties about the local economy, as well as predictions for slower growth at the state and national levels, the outlook for 2007 is less promising than recent years.

Employment

Figure 1 shows the overall slowdown in the region's employment growth. Unemployment rates throughout the region were generally lower in 2006 compared to 2005. Unemployment rates rose in the summer but turned downward again in August. Unlike in 2005, unemployment rates in South Bend exceeded the national and state averages throughout the year, while the unemployment rate in Elkhart remained below the national and state averages for the first half of 2006. While employment expanded, rising wages in the region may have attracted new entrants into the labor market that did not have sufficient demand to match.

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Table 1 reports employment data by industry for the region's metropolitan areas. From September 2005 to September 2006, total nonfarm employment increased modestly by 0.3 percent: Elkhart experienced a relatively larger gain, adding more than 1,400 jobs while South Bend lost 594 jobs. Approximately 279,900 people are employed in nonfarm sectors across South Bend and Elkhart, with employment being about 15,500 higher in South Bend.

Manufacturing employment grew by 1,300 jobs due in part to a strong first quarter in 2006 for the RV industry that disproportionately benefited Elkhart. Manufacturing employment may be more uncertain in the year ahead, as local labor relations remain unstable, plant closings take affect, and side effects from the domestic auto industry's downturn on local producers and suppliers are yet to be fully felt. As an indicator, RV shipments in August 2006 were 2.4 percent lower than in August 2005, though cumulative 2006 shipments exceeded 2005 shipments by approximately 29,000 units. Additionally, two local vehicle suppliers, Adapto and Gunite, announced plant closings that could see 276 workers to 376 workers laid off, and AM General has initiated temporary shutdowns in response to weakening demand for the commercial Hummer H2. Moreover, the Bach labor strike continues, lasting eight months to date.

Nonmanufacturing employment saw mixed...