Region’s economy more diverse, employs more at higher average pay

January 19th, 2018

By Doug LeDuc | Greater Fort Wayne Business Weekly

It’s been a little more than 10 years since the nation went into the most serious recession most of us can remember. The latest full-year data available from the Bureau of Labor Statistics shows northeast Indiana has more than fully recovered from it.

An analysis of BLS data for the 11 counties of northeast Indiana by the Community Research Institute at Indiana University-Purdue University Fort Wayne shows the region’s 2016 economy was more diverse and employed more people at substantially higher average annual pay than during 2006, the last full year before the recession.

A gradual expansion that started in June 2009 brought an end to the 18-month Great Recession, which the National Bureau of Economic Research said began in December 2007 and lasted longer than any downturn since World War II.

By 2016, the region’s total employment had grown about 1 percent to 352,467 from 350,350, and its average annual pay had risen about 21 percent, to $41,539 from $34,467.

As a percentage of total employment, manufacturing shrank by close to 2 percentage points as the service sector grew by close to 3 percentage points, while only slight changes were noticed in the local, state and federal public employment sector and the “everything else” sector.

Medical employment – a significant segment of the service sector – was not affected by the recession the way manufacturing was. Across the country, the population continued to age, increasing the demand for health-care services.

BLS data show that without any reduction in the number of licensed practical or licensed vocational nurses employed in the Fort Wayne metropolitan statistical area, the number of registered nurses employed in the MSA jumped 34 percent, to 5,740 in 2016 from 4,270 in 2006.

That was the occupation employing the most workers by far in the bureau’s health care practitioners and technical occupations category, which saw its employment in the region increase 18 percent, to 14,940 from 12,620.

“If you’re 70 and you need a new hip, you’re getting it,” said Rachel Blakeman, CRI director. “You’re not waiting for the economy to turn around. That’s a pretty steady market, whereas with vehicle manufacturing, when times are good, you’re producing a lot of vehicles, and when times are tight, people don’t purchase as many vehicles.”

The recreational vehicle industry can follow a similar business cycle, and Mark Cullnane, a research assistant at CRI, said the Elkhart-Goshen MSA had the nation’s highest unemployment rate in 2009 because the industry was such a large share of its total employment when the recession hit RV sales.

President Obama visited Elkhart in February 2009 to call attention to the city’s high unemployment rate – which peaked that year at 19.6 percent – and to offer encouragement.

He had promised during that visit recovery was possible by working together. He returned to the city in June 2016 to praise its hard work and determination, which helped lower Elkhart’s unemployment rate in those seven years to about 4 percent.

Employment diversification can benefit a local economy by helping “to buffer yourself against a downturn for certain sectors,” Blakeman said. “What it all comes down to is, you don’t want to have all your eggs in one basket.”

Data CRI obtained from Economic Modeling Specialists showed northeast Indiana’s gross regional product struggled the most from the recession’s impact during 2009, when it fell to $28.8 billion from $30.1 billion the previous year and $30.7 billion in 2007.

By 2010 the region’s production had grown to $31.9 billion, and the next year it rose to $33.1 billion. Last year, it was at $38.8 billion. Blakeman said during an economic outlook presentation at IPFW in November that 27 percent of the Fort Wayne MSA’s gross domestic product came from manufacturing, compared with 12 percent for the nation.

Out of 475 congressional districts, U.S. Rep. Jim Banks, R-3rd, represents the district with the greatest share of manufacturing employment, Blakeman said.

At Northeast Indiana Regional Partnership, “we’ve had conversations around diversification,” said John Sampson, president and CEO. “I think it makes people a little uncomfortable to say we’re going to walk away from manufacturing. I don’t think that’s in the cards for us. We’re still good at it and we have the technical skills required to support it.

“But, we have to be aware that manufacturing in general is becoming far more productive with far fewer employees,” he said. “What happens in every recession is employers, they must upgrade, they make investments in capital and technology and what it does is tend to put on the street the lower skilled jobs.

Often those jobs are replaced “with more higher skilled jobs, and jobs more technical or associated with automation and so forth, and so we cannot go into this thinking manufacturing is our future where we’re going to have lots of highly-paid, low-skilled jobs. That is of the past,” he said.

The trend toward increased use of robotics and other technologies, and generally boosting productivity through automation has contributed to the reduction that has taken place with the region’s manufacturing employment.

And with the trend expected to continue, Sampson said improving the skills and education of the workforce is an important way for the region to adapt to that aspect of its future.

“We believe we need to focus on our major target industries and then also be cultivating some of the emerging industries that have been coming on strong, like e-commerce and design and craftsmanship,” he said.

In addition to new target industries relating to design and craftsmanship and employers working with advanced materials, major target industries for the partnership include employers working with vehicles, logistics, food and beverages, specialty insurance and medical devices and technology.

It is only within the last few years that the region has returned to full employment from pre-recession levels. But, Sampson said it is notable that during the first two or three years following the recession, northeast Indiana generally was doing better than the nation overall in job creation, and was noted for that nationally.

“In terms of the way the regional economy is performing today, the way that we’re collaborating together as a region, the effort invested in education and workforce development initiatives – all those tend to better equip the region’s employers to respond to downturns and declines,” he said. “So we would generally make a case that at least the economy is in a better place than it was in.

“I’m very optimistic that this region can compete, but we have to stay committed to this over the long term and … create the economic conditions and quality-of-place conditions that make this a wonderful place where people want to live but also can live and do so with prosperity.”

The region’s total employment surpassed its 2006 figure in 2015, at 350,514.