Indiana Forecast Summary
Indiana experienced personal income growth below the national rates in 2014. However, employment growth in the state experienced its third quarter of just above national average growth. As we look beyond 2014, both employment and income are anticipated to generally parallel the nation.
This forecast used data through the third quarter of 2014 for personal income data and through the fourth quarter for employment. Personal income data for the second quarter was revised higher by 0.3% and the new data for Q3 was stronger than our previous forecast by a similar amount (0.2%). Employment data was nearly on target with the last forecast – only deviating by 0.1%. These results indicate the December forecast fairly accurately estimated the state’s recent economic behavior.
During the recovery from the Great Recession, Indiana’s personal income growth rate was mostly on par or stronger than the national rate. However, since mid-2013 Indiana’s average personal income growth rate has lagged behind the nation’s rate each quarter. Indiana fell sharply behind the nation in 2014:1, but rebounded in the second and third quarters to be just 0.9 percentage points behind the nation’s 4.0% growth rate in quarter three .
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. Indiana experienced tepid employment growth for most of 2013 compared to the U.S., but then closed the gap in the fourth quarter. In the second, third, and fourth quarters of 2014, Indiana slightly outpaced the U.S. quarterly payroll growth by 0.1, 0.2 and 0.1 percentage points, respectively.
We now expect income growth over the next three years that is slightly higher than our December forecast. A peak quarterly growth rate of 5.6% is forecasted in Q3 of 2015. Additionally, over the full span of the forecast period (2014:4-2017:4) Indiana is expected to have slightly stronger average annual growth rates than the U.S (4.2% versus 3.9%).
After disappointing first quarter payroll employment growth, the state saw an increase of over 17,000 jobs in the final three quarters of 2014. The state will likely experience a fourth consecutive quarter of strong job growth with expected creation of 19,300 jobs in 2015 Q1. Over the full forecast period, job creation slowly decelerates, but still averages 52,800 per year.
Thus far in 2014, personal income growth has lagged the U.S. Payroll employment growth, on the other hand, slightly outpaced the U.S. rate during the second half of last year. Personal income and employment growth are both expected to increase in 2015, then to decelerate somewhat in 2016 and 2017. Manufacturing job creation from 2015 to 2017 will not keep pace with the growth rates experienced in 2014. However, in the next year, all industries are expected to have employment growth.