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Indiana University Bloomington

Center for Econometric Model Research

Long-Range Projections Summary

August 2015

National

The quarterly U.S. forecast of June 2014 was used as the basis for this long-run projection. As shown in the Table below, that forecast showed real GDP growth averaging 2.6% over the period 2015-2018. Employment was expected to rise at a 1.7% rate, while consumer inflation averaged 1.4%.  Over the period 2019 to 2036, real GDP growth isabove the near-term performance. It is basically equivalent to that in our previous projection (February 2015). Our projection of employment growth, while similar to February, is far lower than that in the short-run forecast. In the latter employment growth is elevated by the final stage of recovery from the 2008-2009 recession.  The long-run growth in both output and employment are in line with our assumptions about long-run potential. Inflation is low in both the near-term (due partly to decline in energy prices) and in line with the Federal Reserve target for the long-run.

 

Control Forecast: Average Annual Percent Change for Selected U.S. Variables
Variable
2015-2018
2019-2036
Real GDP
2.6%
2.9%
Total Establish. Employment
1.7%
0.7%
Consumption Deflator
1.4%
2.0%

 

 

Indiana

The Indiana long run projection uses our June 2015 short-run control forecast as its basis.  The resulting long-run projections for employment (covering 2019-2036) are quite close to our February 2015 projection. By the end of 2018 (the short-run horizon) our forecast has the Indiana economy fully recovered from the 2008-2009 recession.  The long-run projection thereafter reflects our assumptions about labor force growth and productivity, which remain essentially the same as in February.

For the projection of the industry gross state product variables (GSP), we used the GSP historical data released in July 2015 which covers the period 1997 to 2013. Productivity is defined as the ratio of GSP to total employment in an industry. Projections of productivity together with projected sectoral employment levels are used to calculate GSP.  When combined with employment growth the result is GSP growth in this projection that is very close to our previous projection. 

The average growth rate of total Gross State Product over 2015-2036 is projected to be 2.76% per year. Over the same period total Indiana employment is projected to grow at a 0.69% rate, with employment in manufacturing falling at a 0.35% rate, and in non-manufacturing growing at a 0.88% rate.