Indiana Forecast Summary
Indiana experienced personal income growth and employment growth close to the national rates for 2015. Indiana’s personal income growth rate slightly outpaced the nation in the third quarter of 2015, but is predicted to remain lower than the U.S. rate for the fourth quarter of 2015. Payroll employment growth experienced slightly lower than U.S. rates for the first half of 2015, but outpaced or equaled the nation in the latter half of 2015 and is expected to remain stronger in Q1 2016.
This forecast used data through the third quarter of 2015 for personal income and through the fourth quarter of 2015 for employment. Personal income data for Q2 2015 was revised higher by 0.8%, and the new data for Q3 2015 was 0.5% above our December forecast value. Employment data was nearly on target with the last forecast – deviating by less than 0.1%.
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 2014:3, 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 to be 0.8 percentage points ahead of the nation’s 5.2% Q4 2014 growth rate. From 2015:1 to 2015:3 Indiana’s personal income growth rate has been close to the nation’s 4.5% 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. During this period 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 experienced tepid employment growth in 2013 and 2014, with year-over year growth lagging behind the U.S. by up to 0.6 percentage points. However, in Q3 of 2015 Indiana payroll employment growth outpaced the nation by 0.5 percentage points, and in 2015:4, Indiana and the nation had equal growth rates of 2.0 percent.
We expect income growth over the remainder of the forecast period to be slightly lower than our December forecast. Over the full span of the forecast period, (2015:4-2018:4) Indiana is expected to have stronger average annual growth rates than the U.S (4.9% versus 4.5%).
After averaging quarterly job growth of 11,500 during 2014, the state saw an average increase of 17,300 for 2015 despite low fourth quarter job creation. The state will likely continue to experience solid, but slowing job growth, with expected creation of 13,200 and 11,900 jobs in 2016 Q1 and Q2, respectively. Over the full forecast period, job growth is expected to level out, but Indiana is still predicted to average job creation of 32,300 annually.
The unemployment rate experienced its 11th consecutive quarter of declines in Q4 of 2015 to 4.5%. We expect the rate to level off throughout the remaining forecast period, stabilizing at 4.7% by 2018.
Total establishment employment growth is expected to peak in 2015 followed by a slight drop in 2016 and slowing, but 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 below zero for 2016 to 2018.
Annual change in personal income and wage and salary income generally parallel change in total employment. The negative growth in personal income for 2013 reflects both the ending of the payroll tax reduction and an acceleration of dividend payments in 2012. Over the forecast period, we expect gradual declines in personal income and wage and salary growth rates.
In 2015 both personal income growth and payroll employment growth were similar the U.S. quarterly rates. Personal income growth is expected to outpace the U.S. quarterly rates from 2016 to 2018, but quarterly employment growth for Indiana is forecasted to be slightly less than the nation for the remainder of the forecast period. Manufacturing is expected to experience job losses from 2016 to 2018. However, in the next year, non-manufacturing industries are expected to have employment growth.