The 2017 economic outlook for Indiana and the Fort Wayne metro area is more of the same – growth in output that exceeds the United States as a whole – but that growth will be constrained by daunting, structural obstacles in our economy, a panel of economists at IPFW said on Friday.Indiana’s economy this year is projected to expand by 3 percent, with a forecast of 2.8 percent growth next year, said Timothy F. Slaper, the director of economic analysis at Indiana Business Research Center at Indiana University.
“2016 and 2017 are looking like good years, especially compared with the rest of the country. The rest of the country would love to have 3 percent growth,” Slaper said.
U.S. gross domestic product is likely to grow about 2.5 percent this year, with a panel forecast of growth slowing to 2 percent nationally next year.Hedayeh Samavati, interim chair of economics at IPFW’s Doermer School of Business, outlined the figures that showed how long employment has taken to climb out of the hole the Great Recession carved in the Fort Wayne area’s economy. Only this year has the metro area recouped its recession losses
In 2006, the last “normal” year before the recession, employment in the metro area – Allen, Wells and Whitley counties – was about 205,000. In January-September of this year, employment was about 208,500.
“The recession hit us worse than the nation as a whole,” she said.
In 2009 dollars, the growth in metro-area GDP has been slow, too, from $18 billion in 2006 to $19.3 billion in 2015, she said. The most disheartening sluggishness, the measure most widely felt, is in inflation-adjusted income, from $41,000 in 2006 to $41,934 this year.
One problem the state faces is failing to invest in human capital adequately, she said. Whenever governments face shortfalls, Samavati said, “it seems like education is the first one to get the ax, at all levels.” The prevalence of drug addiction, particularly opioid painkillers, is another drag on the growth of the local and state economies, she said.
She projects only a 1 percent growth in the metro area’s GDP next year, to about $19.5 billion.
Slaper agreed that in the Fort Wayne region, lagging per-capita personal income is a serious impediment. It’s only 87 percent of the national figure here. The best antidote would be increasing the share of Hoosiers who earn college degrees. In Indianapolis, where educational attainment more nearly matches the national level, personal per-capita personal income is 99 percent of the national figure, he said.
Elham Mafi-Kreft, clinical assistant professor of business at IU’s Kelley School of Business, said that the best hope for raising the state or local GDP quickly is through improving productivity. Another option would be to get a younger population, but that’s not going to happen “unless we open up our borders, and I don’t think that’s in the policy now.”
The election of Donald Trump as the president brings more uncertainty to economic projections; if, for example, he succeeds in adding large, new tariffs to Chinese imports, that probably would bring retaliatory restrictions on U.S. exports, Mafi-Kreft suggested.
Nevertheless, there are still strong underlying conditions in the economy – including low inflation, low unemployment and low interest rates – that are likely to power continued modest growth.
However, she warned that “Make America Great Again, his campaign slogan, will not be that easy to deliver.” The country still has an aging population, rising income inequality and lagging productivity.
Speaking about the prospects for financial markets, Rob Neal, professor of finance at the Kelley School of Business, said that worries about the near-term risks of Trump’s election may be overblown.
“The world didn’t end” with Nov. 8’s election returns, he said, and “we’ve actually had relatively healthy gains in the market.”
Neal added, “Markets seem to be saying there’s cause for at least cautious optimism.”
The panel’s appearance at IPFW was organized by the Doermer School of Business at IPFW.
Income growth in northeast Indiana
Income growth in 11 counties of northeast Indiana outpaced the national rate of growth for the sixth consecutive year in 2015, the Northeast Indiana Regional Partnership announced on Friday.
According to federal figures, per capita personal income increased to $39,937 in those 11 counties. That’s a 4.3 percent increase, compared to a 3.7 percent increase in the nation and Indiana as a whole in 2015.
Northeast Indiana still lags far behind the country as a whole in per capita personal income. In 2015, income here was 83 percent of the national figure, but it represents a strong improvement from the depths of the Great Recession. In 2009, income in those 11 counties was only 80.4 percent of the national per capita income, according to the Regional Partnership.