Terre haute forecast 2014.

• Author: Christ, Kevin

The outlook for the Terre Haute regional economy continues to be clouded by persistent unemployment and an acceleration of a longterm downward trend in area employment. Our analysis suggests that the Terre Haute region faces not just a lagging cyclical downturn, but troubling long-term headwinds that will make it difficult for the region to remain an important economic hub. Long-term job loss, structural unemployment, unusual seasonality and below-average compensation all combine to paint a difficult picture of the local labor market and economy. The only current sources of optimism revolve around potential beneficial effects of the impending completion of the 641-bypass on the city's southeast corner, and the 2015-2016 promised opening of a production facility by Nantworks, a California-based pharmaceutical company.

Labor Market Conditions

For most of the past decade, the Terre Haute region's unemployment rate has lagged the state's unemployment rate by I. point to 2.5 points (see Figure 1). While the state unemployment rate was generally in line with the nation's rate between 2004 and 2008, and again between the middle of 2010 and the middle of 2012, the Terre Haute region's unemployment rate has remained stubbornly above both rates for most of this period. As the national unemployment rate began its slow descent from its peak in 2010, Indiana's rate first tracked the national improvement, but surprisingly lagged behind the national rate for most of 2012. While the national and state recovery progressed slowly, the Terre Haute region's labor market remained in the doldrums.

The contrast between Terre Haute's unemployment rate and the state's unemployment rate is striking. Coming out of the 2001 recession, the Terre Haute rate was a point or two higher than statewide averages. The 2003 closure of Columbia House had a large, if temporary, effect of widening the gap to nearly 3 points. Between 2004 and through the worst of the Great Recession, the Terre Haute region largely caught up with the state. Since 2010, however, the city once again lags the state dramatically. We believe these data suggest that the Terre Haute region's natural rate of unemployment may be 1 to 2 points higher than the state's rate, perhaps because of a higher proportion of structural unemployment. The implications for the metro area are significant: even if the state unemployment rate drops to pre-Great Recession levels, an event neither of us believe likely, Terre...