Terre Haute forecast 2013.

• Author: Guell, Robert

The Terre Haute regional economy is struggling to generate a rate of growth above "stall speed." The unemployment rate remains stubbornly high, and history suggests that unless the national economy grows more than 2.5 percent, the Terre Haute regional unemployment rate is unlikely to fall. Unfortunately, consensus forecasts for national economic growth are just in the 2.5 percent range, and the downside risks currently seem greater than the upside potential. Hence, the outlook for the Terre Haute regional economy remains much as it was last year: weak and susceptible to outside shocks.

If the national economy were to slip into recession, whether as a result of a failure to avoid the "fiscal cliff" or because of global disruptions in Europe or China, such a decline would constitute the third dip in output for the local economy since 2004. As can be seen in Figure 1, the Terre Haute metropolitan area experienced its first dip when Pfizer announced its departure, and experienced a second, more dramatic downturn in 2008, along with the rest of the country. Since that second downturn, total output of the local economy, measured by inflation-adjusted gross domestic product (GDP) for the metropolitan area had barely regained its pre-2008 levels by 2010. Another setback at this stage could be troubling indeed.

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As one would expect, the employment picture remains clouded. As can be seen in Figure 2, even though unemployment rates in Terre Haute were higher than national and state rates during the expansion between 2002 and 2007, they were at relatively low levels in the 5 percent to 6 percent range as the recession began. As the recession deepened, unemployment quickly spiked in Terre Haute as it did elsewhere, peaking well above the national 10 percent peak (in seasonally adjusted terms). Though the recovery has lowered the national and state rates, Terre Haute's unemployment rate remains about 2 percentage points higher than state and national rates. In short, the recovery has simply not been sufficiently robust to produce the jobs necessary to significantly reduce the local unemployment rate. Moreover, there are 5,000 fewer jobs in the area than there were a decade ago with a labor force that is approximately the same size (about 80,000).

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Furthermore, the sectoral composition of jobs in Terre Haute has also changed in notable ways over the decade. Collectively, manufacturing, retail, and health and education...