Northeast Indiana area economy brighter than expected

September 16th, 2012

News Coverage:
Indiana Economic Digest

Northeast Indiana area economy brighter than expected

Grace Housholder, News-Sun

Three years ago, as Indiana and the nation were emerging from the storms of recession, John Stafford predicted a possible “jobless recovery” for our 10-county region.

Director of Indiana University Purdue University Community Research Institute for the past nine years, Stafford told KPC in early December 2009 that, “The phrase jobless recovery means we may see other measurements of the economy (improve) more quickly than job growth. We saw gross domestic product nationally increase in the third quarter of this year at the same time we saw employment decrease.

“Jobs tend to be one of the later things to come back,” he said.

That was in late 2009 when we were out of the “official” recession. The National Bureau of Economic Research, which defines recessions based on Gross Domestic Product, said, based on GDP, the recession began in December 2007 and ended in June 2009.

But the man or woman on the street defines a recession according to whether he or she has a job. In late 2009, people were still feeling as though they were in a recession, especially here in northeast Indiana.

Stafford said in December 2009 that as we deal “with the severe impact of this recession we should not lose sight of longer term trends and issues that we face as a region such as our ability to create white collar professional jobs at the same pace as the nation and our ability to deal with a manufacturing based economy that sees substantial gains in productivity but not necessarily concurrent gains in employment.

“We may produce every bit as much product,” he said, “but because of gains in productivity in manufacturing we are not going to see large gains in employment.”

The U.S. non-seasonally adjusted unemployment rate (post January, 2006) hit a high of 10.6 percent in January 2010, six months after the “official” end of the recession. Northeast Indiana reached a high of 13.2 percent in both March and June of 2009. The July 2012, national non-seasonally adjusted unemployment rate for the nation is 8.6 percent and the July, 2012, non-seasonally adjusted rate for the 10 counties of northeast Indiana is 7.9 percent.

Sometimes growing productivity leads to slower increases in employment.

Stafford last week said it is hard to measure productivity at the local level because productivity (output per employee) is GDP divided by hours worked. Between 2009 and 2010 both overall GDP and manufacturing GDP moved upward in our 10-county region and in our nation as a whole.

“Productivity as best we can measure it has been doing very well in the Fort Wayne metropolitan area,” Stafford said. “In theory, the higher the productivity the higher the wages should be. But wage level is tempered by labor availability. If you have a labor surplus and industry is able to find all the employees they need, there is less pressure for higher wages. As we ramp up the skills sets and industry has difficulty in finding workers theory would suggest you have to pay more to attract and retain the workers.”

Stafford said the U.S. is seeing recoveries from recent major recessions “becoming progressively longer.”

“Each one takes longer to grow the jobs lost,” he said. “It goes back to what we talked about three years ago — the change in the skill demands. Recessions have a way of thinning out jobs that are not likely to come back. After a recession different types of jobs appear often requiring higher levels of skill sets.”

Stafford said following each recession this “churn” is more significant. That is one reason why it takes longer for employment to recover.

During this “churn” or recovery, there is a so-called “skills gap.” For example, northeast Indiana today has 7.5 — 8 percent unemployment, with many people under-employed. But, Stafford said employers say they are struggling to find people to fill jobs — jobs that are available today.

This skills gap, created as the workforce retools, is not unique to northeast Indiana, Stafford said.

Economist generally agree that individuals will work in more varied job settings with different employers in different occupations over the course of their career than workers of any previous generation.

A billboard sponsored by Vision 2020 focuses on this change in culture and mindset. Found on U.S. 30, headed east from Columbia City to Fort Wayne, the billboard says, “Skills security, not jobs security. Are you ready?”

No longer can a worker land a job and think he or she is “set” for life, Stafford said. It is the “skills set” that helps a worker be “set” for life.

“It will be different for each employer,” Stafford said. But five of the skills frequently mentioned by employers are:

1. Problem solving

2. Ability to work well with a team

3. Technology skills, math

4. Attention to quality

5. Work ethic

“We have done better in the recovery period in regaining our employment totals than I would have expected when we were coming out of the recession,” Stafford said. “It has been a pleasant surprise to see our employment growth has been more rapid than the state or national levels. But we are not yet all the way back to where we were.”
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