Indiana Forecast Summary
Indiana personal income growth during the middle two quarters of 2013 was sluggish compared to the U.S. The same was true for employment in the second quarter, but during the second half of last year employment grew more strongly in Indiana than in the nation as a whole. As we look into 2014, employment growth is anticipated to move parallel with the U.S., while personal income growth moves back to the national rate.
This forecast used personal income data for three quarters of 2013 and four quarters of 2013 employment data. Our November forecast was fairly accurate. Personal income data was stronger than anticipated in 2013:3 by 0.9%. About half of this was due to a 0.4% downward revision to the data for the second quarter.
Prior to the recession, Indiana historically lagged behind the nation’s personal income growth rate. Since the end of the Great Recession, until recently, Indiana’s growth was either on par or stronger than the national rate. During 2013, however, the historical pattern has reasserted itself.
Since 2009 Indiana’s labor market has mostly outperformed the nation as a whole, especially during the early part of the recovery period. In 2012, Indiana benefited from strong growth in manufacturing payroll employment, which pushed Indiana’s growth rate above the national levels. However in 2013, Indiana had payroll employment growth of 1.3%, which fell short of the U.S. (1.6%).
The current forecast for personal income has growth remaining subdued in the third quarter of 2013 (recall that data currently cover only through Q2), then bouncing back in the 2013:4. There is another slowdown in 2014:1, which matches the pattern in our U.S. forecast. Later in 2014 and beyond income growth is close to 4%, similar to our November outlook. Over the span of the forecast period (2014-2016), Indiana and the nation will have very similar average annual growth rates, hovering around 4 percent.
Employment growth from quarter to quarter has historically been choppy, which continued through 2013. The yo-yo pattern of strong versus weak growth was experienced in 2013; however we anticipate this leveling out to some degree in 2014 through 2016. In 2013, the state added 52,400 workers on payroll. In 2014, it is anticipated that payroll will rise by 48,800 workers. The unemployment rate will continue its descent with the anticipated 6.6% rate in 2014:1 falling to 5.4% by the end of 2015.
In 2013, Indiana employment continued to show steady expansion with growth of 1.3%. Personal income growth also held its own, and in both areas the state is roughly matched the nation. Our forecast for 2014 predicts slightly better employment growth from the manufacturing sector, but some deceleration in job creation elsewhere. Personal income growth is expected to improve in 2014 after a lull in 2013.