Topic: Miller College of Business

December 18, 2009

Indiana's economy will steadily improve in 2010 as manufacturing, transportation, construction and informational technology industries — all severely decimated by the recent recession — bounce back, says a Ball State University economist.

Speaking at the 2010 Economic Outlook Luncheon Dec. 16, Michael Hicks, director of Ball State's Center for Business and Economic Research (CBER), said the state's economy will show slow but steady growth through all four quarters of next year, but employment numbers won't return to prerecession levels until 2011 or 2012.

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"I believe that next year will be somewhat better as it's apparent we are coming out of the worst economic downturn since the early 1980s," Hicks said. "Those industries that were pounded by this recession will be the first to bounce back.

"However, it will be modest growth for the economy at best. Sections of northern Indiana, including the area around Elkhart dependent on the recreational vehicle industry, were devastated by the recession and will see some, but not all, jobs return."

Indianapolis will continue to be the state's economic engine, attracting top quality employers and workers from around the country. However, smaller cities will not see this rapid growth due to an aging labor force and structural changes in key sectors of their economy, Hicks said. 

"The good news is that when pent-up demand for new capital investment is unleashed, mid-sized Indiana towns will be on the national radar as a result of media coverage and a relatively healthy fiscal environment in Indiana," he said.

Hicks' analysis calls for manufacturing to expand by 1.24 percent in the first quarter, 1.96 percent in the second, 2.41 percent in the third and then dropping to a still respectable 1.76 in the final three months of the year.

Overall employment should rise by 0.03 percent in the first quarter before climbing 0.6 percent in the final quarter. However, the labor force will continue to shrink through third quarter.

Hicks points out that Indiana's labor force is about 2.8 million people, a drop from a high of 3.2 million in late 2008 when the recession started and the economy began to bleed jobs.

"We have thousands of older people who spent decades working in moderate to low skilled positions in manufacturing operations around the state. Many of these workers suffer significant skill deficits in today's workplace," Hicks said. "Many were laid off or forced to retire in their late 50s or early 60s and have few options for new jobs other than retraining or starting their own ventures.

"Since we have thousands of people who have retired or gone back to school, the state is running behind in its revenues," he said. "I don't believe this will improve until the labor markets begin a stronger rebound this summer."