Indianapolis-Carmel Forecast 2012
Clinical Assistant Professor of Business Economics, Kelley School of Business, Indiana University
The Indianapolis-Carmel metropolitan area1 should continue a slow recovery during 2012, with unemployment declining, incomes rising and a general economic rebound. The Super Bowl in February will bring a nice, but temporary, economic stimulus. However, the recovery will be modest and leave economic growth below historic levels and unemployment above normal levels, even by the end of the year.
Employment and Wages
Over the past 12 months, Indianapolis added 6,100 jobs,2 a disappointing figure given the high level of unemployment. This poor growth has unemployment above 8 percent. The economy needs to add about 50,000 jobs to get back to normal employment, something that is likely to take several more years. Not only has the number of employed declined, but the size of the labor force has shrunk as people have stopped looking for work (see Figure 1). Look for an increase of 10,000 to 15,000 jobs during 2012.
Figure 1: Indianapolis Labor Force and Employment, January 2006 to September 2011
Note: Data are seasonally adjusted.
Source: STATS Indiana, using Bureau of Labor Statistics data and author’s calculations
There is some good news as wages are higher compared to a year ago.3 Average wages rose 4.3 percent, with gains across the board except for educational services. Table 1 provides a breakdown of wage change and job growth by industry for the Indianapolis area.
Table 1: Wages and Jobs for Selected Industries in the Indianapolis Metro, 2011
|Average Weekly Wage||Average Wage Change since 2010||Percent of Total||Change in Number since 2010|
|Administrative and Support and Waste Management and Remedial Services||$551||4.8%||7.3%||7.9%|
|Real Estate and Rental and Leasing||$832||7.6%||1.7%||3.7%|
|Health Care and Social Services||$832||4.4%||14.6%||2.8%|
|Accommodation and Food Services||$283||2.9%||8.8%||2.7%|
|Transportation and Warehousing||$720||3.6%||6.1%||2.6%|
|Professional, Scientific and Technical Services||$1,300||11.8%||5.3%||2.2%|
|Management of Companies and Enterprises||$2,020||14.1%||1.3%||2.2%|
|Other Services (Except Public Administration)||$582||-0.2%||3.2%||2.0%|
|Finance and Insurance||$1,535||11.8%||4.9%||0.4%|
Note: Data are for the first quarter of each year.
Source: STATS Indiana, using Quarterly Census of Employment and Wages data
Housing and Construction
The Indianapolis real estate market continues to struggle. Indianapolis ranks 18th out of the largest 100 metro areas with 6.5 percent of homes with mortgages being somewhere in the foreclosure process.4 Another 3.3 percent of mortgage holders are seriously delinquent on their mortgages. As bad as this looks, the percentage of mortgages in foreclosure or serious delinquency declined from 10.6 percent to 9.9 percent over the past year, a sign that stability in the housing market may be increasing.
Home prices fell slightly for the second straight year, declining 1.6 percent.5 The good news is that the number of homes on the market dropped 10 percent, indicating that home prices may stabilize.
Historically low mortgage rates have helped stabilize house prices, but have not been enough to increase them. The low mortgage rates are tempered by the tightened credit standards that make home purchases difficult for all but highly qualified buyers.
New residential construction in the area has shown continued weakness. Year-to-date new residential construction is 3.2 percent lower than last year. To put this in perspective, construction spending is 47 percent lower than it was just four years ago. Eventually, new home construction will pick back up, but it may not occur in 2012.
The Super Bowl will provide a small boost to the Indianapolis area economy. While economic impact estimates vary widely, conservative estimates would suggest an economic boost of $100 million to $200 million (more aggressive estimates put it between $400 million and $500 million). This spending represents about 0.2 percent of total annual spending in the Indianapolis area economy.
This should lead to a small bump in incomes and temporary jobs as Indianapolis welcomes tens of thousands of visitors. While most of the increase will be in retail and hospitality, the spending should be multiplied through the entire economy, giving a minor boost to many sectors of the economy. While the publicity for the city will be great, the economic benefits often don’t last for long after the event is over.
Barring any major negative shocks to the economy, incomes will grow in 2012, and the unemployment rate should continue to drift downward. However, the rate of job creation is not enough right now to put a serious dent in the unemployment rate, which will likely still be over 7 percent by the end of 2012.
- This analysis covers the Indianapolis-Carmel Metropolitan Statistical Area, which includes Boone, Brown, Hamilton, Hancock, Hendricks, Johnson, Marion, Morgan and Shelby counties.
- Employment data was collected from the Bureau of Labor Statistics reports accessed from the STATS Indiana website.
- Income data come from the Quarterly Census of Employment and Wages at the STATS Indiana website.
- Foreclosure and delinquency data come from Foreclosure-Response.org.
- Housing prices and supply of houses were collected from www.housingtracker.net.
Also in this Issue…
- Outlook for 2012
- International Outlook for 2012
- U.S. Outlook for 2012
- Financial Outlook for 2012
- Housing Market Outlook for 2012
- Indiana's Outlook for 2012
- Indiana's Agricultural Outlook for 2012
- Anderson Forecast 2012
- Bloomington Forecast 2012
- Columbus Forecast 2012
- Evansville Forecast 2012
- Fort Wayne Forecast 2012
- Gary Forecast 2012
- Indianapolis-Carmel Forecast 2012
- Kokomo Forecast 2012
- Lafayette Forecast 2012
- Louisville Forecast 2012
- Muncie Forecast 2012
- Richmond Forecast 2012
- South Bend and Elkhart Area Forecast 2012
- Terre Haute Forecast 2012