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Indiana University Bloomington

Center for Econometric Model Research

Long-Range Projections Summary

February 2015

National

The quarterly U.S. forecast of December 2014 was used as the basis for this long-run projection. As shown in the Table below, that forecast showed real GDP growth averaging 2.9% over the period 2014-2017. Employment was expected to rise at a 1.8% rate, while consumer inflation averaged 1.6%.  That forecast reflected the lingering effects of the 2008-2009 recession, especially with regard to employment.  Over the period 2018 to 2035, real GDP growth is close to the near-term performance. It is basically equivalent to that projected in August 2014. Our projection of employment growth, while similar to August, is far lower than that in the short-run forecast. 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 and the long-run.

 

Control Forecast: Average Annual Percent Change for Selected U.S. Variables
Variable
2014-2017
2018-2035
Real GDP
2.9%
2.9%
Total Establish. Employment
1.8%
0.7%
Consumption Deflator
1.6%
2.0%

 

 

Indiana

The Indiana long run projection uses our December 2014 short-run control forecast as its basis.  The resulting long-run projections for employment (covering 2018-2035) are quite close to our August 2014 projection. By the end of 2017 (the short-run horizon) our forecast has the Indiana economy fully ecovered 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 August.

For the projection of the industry gross state product variables (GSP), we used the GSP historical data released in July 2014 which covers the period 1997 to 2012. 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 2014-2035 is projected to be 2.77% per year. Over the same period total Indiana employment is projected to grow at a 0.84% rate, with employment in manufacturing falling at a 0.03% rate, and in non-manufacturing growing at a1.00% rate.