Indiana Forecast Summary
Indiana experienced personal income growth and employment growth below the national rates in 2014. Indiana’s personal income growth marginally outpaced the nation in the first quarter of 2015, and is predicted to outperform the U.S. rate for the remainder of the year. Payroll employment is expected to follow suit with slightly higher than U.S. rates for the latter half of 2015.
This forecast used data through the first quarter of 2015 for personal income and through the second quarter of 2015 for employment. Personal income data for Q4 2014 was revised stronger by 0.4%, while the new data for Q1 2015 was just 0.1% above our June forecast value. The new employment data was 8.9 thousand (0.3%) higher than our June estimate.
During the recovery from the Great Recession, Indiana’s personal income growth rate was mostly on par or stronger than the national rate. However, from 2013:2 to 2014:4, Indiana’s average personal income growth rate lagged behind the nation’s rate each quarter. Indiana fell sharply behind the nation in 2014:1, but rebounded in the next four quarters to be 0.4 percentage points ahead of the nation’s 4.5% Q1 2015 growth rate.
From 2010 to 2012 Indiana’s labor market mostly outperformed the nation as a whole, especially during the early part of the recovery period (Figure 2). In 2012, Indiana benefited from strong growth in manufacturing payroll employment, which held Indiana’s growth rate above the national levels. Compared to the U.S., Indiana has experienced tepid employment growth since 2013, with year-over year growth lagging behind the U.S. by 0.1 to 0.7 percentage points.
We expect income growth over the remainder of the forecast period to be slightly lower than the June forecast. A peak quarterly growth rate of 4.7% is forecasted in both Q3 of 2015 and Q2 of 2016. Over the full span of the forecast period, (2015:2-2018:4) Indiana is expected to have marginally weaker average annual growth rates than the U.S (4.5% versus 4.6%).
After averaging job growth of 11,500 each quarter of 2014, the state saw an average increase of 16,900 for the past two quarters. The state will likely continue to experience solid, but slowing job growth, with expected creation of 12,700 and 14,000 jobs in 2015 Q3 and Q4, respectively. Over the full forecast period, job creation is expected to level out, but still averages 43,000 at an annual rate.
The unemployment rate experienced a sharp drop between Q1 and Q2 of 2015, with June recording a 5.1% rate. We expect an increase of 0.1 percentage points in Q3, followed by a gradual decline throughout the remaining forecast, down to 4.8% by the end of 2018.
Total establishment employment growth is expected to peak in 2015 followed by a slight drop in 2016 and even growth in the remaining forecast years. Manufacturing employment growth has a different trend with dramatic growth in 2014 followed by significant deceleration. Growth falls to almost zero in 2016 and slightly below zero in 2017 and 2018.
Annual change in personal income and wage and salary income generally parallel change in total employment. Over the forecast period, we expect an increase in personal income growth rates in 2015, but a drop in wage and salary growth, followed by a gradual decline in real income growth in subsequent years.
In 2014 both personal income growth and payroll employment growth lagged behind the U.S. rates each quarter. Personal income and employment growth are expected to increase marginally in 2015 and outpace the U.S. rates in the last 2 quarters of 2015, before decreasing and leveling off from 2016 to 2018. Manufacturing job creation from 2015 to 2018 will not keep pace with the growth rates experienced in 2014. However, in the next year, all industries are expected to have employment growth.