Anderson Forecast 2010

Director of Research, Center for Business and Economic Research, Ball State University

November 2009

The structure of the economy in the Midwest region is changing. Haunted by declining manufacturing employment, deteriorating infrastructure, and languishing older neighborhoods, small cities like Anderson are struggling to redefine themselves. The most recent recession has added to the woes of an already struggling economy. There are signs that the recession is ending. National output (gross domestic product, or GDP) increased in the third quarter of 2009 and the housing market appears to be improving in many areas (although much of this improvement may result from the federal credit for first-time homebuyers and is therefore temporary—like the Cash for Clunkers blip for the auto industry this past summer).

Various measures of economic activity are examined for the Anderson metro area (Madison County) in this analysis. The data used are from the last recession in 2001 (when available) through the most recent data (usually September 2009) available at the time of writing. The goal is to analyze trends since the last recession and changes over the past year. We conclude with a summary of the labor market forecast for the Anderson area.

Labor Markets

The unemployment rate in Madison County (9.7 percent) is consistently higher than that of the state (9.2 percent) and nation (9.5 percent). The non-seasonally adjusted rate dropped in September relative to August 2009, and the labor force also decreased (see Table 1). The declining labor force suggests that frustrated job seekers are dropping out of the labor market, i.e., not looking for jobs. If these potential workers enter back into the job market en masse when the employment picture begins to improve, this could lead to a spike in the unemployment rate. The unemployment rate includes people who are not employed and actively looking for work but does not include people working part-time who would like to work full-time and people who have stopped looking for a job.

Table 1: Labor Force and Unemployment for Madison County, September 2008 to September 2009

Year Month Labor Force Unemployed Unemployment Rate
2008 September 61,129 4,027 6.6
October 61,363 4,253 6.9
November 60,683 4,594 7.6
December 60,884 5,433 8.9
Annual 60,958 4,271 7.0
2009 January 61,540 6,811 11.1
February 61,257 6,659 10.9
March 61,107 6,957 11.4
April 60,643 6,267 10.3
May 61,882 6,980 11.3
June 62,450 7,105 11.4
July 60,939 6,881 11.3
August 60,468 6,298 10.4
September* 59,977 5,822 9.7
Note: Data are not seasonally adjusted.
*September 2009 data are preliminary
Source: Bureau of Labor Statistics

Table 2 shows average employment from January through September of 2009. Total nonfarm employment was 40,538, a decrease of 718 jobs (-1.7 percent) since 2008. This decline in jobs is substantially smaller than job losses from 2005 to 2007, but current economic conditions suggest that job losses will continue. Through September 2009, manufacturing was the hardest hit sector, shedding over 1,000 jobs (-25.5 percent), followed by professional and business services and education and health services. Over the same period, there were job gains in construction, leisure and hospitality, and government.

Table 2: Anderson Metro Employment by Industry, 2008 to 2009

Industry 2009* Change since 2008 Percent Change 2008–2009
Total Nonfarm 40,538 -718 -1.7
Total Private 33,338 -918 -2.7
Goods-Producing 4,725 -919 -16.3
Manufacturing 3,038 -1,040 -25.5
Mining, Logging, and Construction 1,688 121 7.7
Service-Providing 35,813 201 0.6
Professional and Business Services 2,475 -314 -11.3
Educational and Health Services 7,850 -139 -1.7
Other Services 1,675 -3 -0.2
Information 600 0 0.0
Trade, Transportation, and Utilities 8,788 121 1.4
Financial Activities 1,688 76 4.7
Leisure and Hospitality 5,538 260 4.9
Government 7,200 200 2.9
*January through September average. September data are preliminary.
Source: Bureau of Labor Statistics

The large job losses in manufacturing reflect national trends and have been increasing over several decades. Manufacturing accounted for just under 30,000 jobs in Madison County in the early 1970s. By 1980, manufacturing employment had decreased to 20,000. In 2000, there were just under 11,000 manufacturing jobs in the county. Today, there are about 3,000. These declines can be attributed to increases in productivity (so that fewer workers are needed to produce the same amount of output), globalization, and shifts in demand to services. Total employment in Madison County has decreased by about 10,000 workers since the 1970s. Over this same time period, the population has decreased from a high of almost 142,000 in 1972 to around 131,000 today.

The effect of the current recession on wages has been somewhat variable, with some sectors experiencing larger declines than others. Comparing first quarter data from 2008 and 2009, average weekly wages declined 3.2 percent (see Table 3). Of the largest sectors, wholesale trade and construction were hardest hit with declines of 15.6 percent and 7.9 percent, respectively. Wages in the manufacturing sector actually showed a modest gain (3.8 percent). The inflation rate for the Midwest region between the first quarters of 2008 and 2009 was -0.5 percent, so workers in sectors with wages declining more than 0.5 percent are faring worse than last year.

Table 3: Average Weekly Wages in Anderson Metro, 2008:1 to 2009:1

Industry 2009:1 Change since 2008:1 Percent Change
Total $571 -$19 -3.2
Wholesale Trade 757 -140 -15.6
Agriculture, Forestry, Fishing, and Hunting 508 -65 -11.3
Construction 665 -57 -7.9
Arts, Entertainment, and Recreation 370 -31 -7.7
Information 587 -35 -5.6
Finance and Insurance 690 -39 -5.3
Other Services (Except Public Administration) 354 -11 -3.0
Administrative, Support, and Waste Management 403 -11 -2.7
Retail Trade 385 -8 -2.0
Management of Companies and Enterprises 1,456 -29 -2.0
Transportation and Warehousing 727 -9 -1.2
Health Care and Social Services 650 -8 -1.2
Educational Services 683 -7 -1.0
Professional, Scientific, and Technical Services 638 -5 -0.8
Public Administration 680 2 0.3
Accommodation and Food Services 213 2 0.9
Real Estate, Rental, and Leasing 457 9 2.0
Manufacturing 824 30 3.8
Note: Mining and utilities are not available due to nondisclosure requirements.
Source: Bureau of Labor Statistics

Housing

Residential construction, as measured by residential building permits for new single- and multi-family housing units, peaked in 2003 with 484 permits issued between January and September. In contrast, only thirty-eight permits have been issued for the same time period in 2009, a decrease from the sixty-eight issued for the same period in 2008 (see Figure 1).

Figure 1: Madison County Residential Building Permits, 2001 to 2009

Figure 1: Madison County Residential Building Permits, 2001 to 2009

The slowing economy and a tighter mortgage market have taken their toll on the real estate market. Activity in Madison County has slowed over the past year (see Table 4). The number of units sold decreased to 2,746—a decline of 318 units (-10.4 percent) during the period covering January to September 2009. The average sales price has been trending downward from more than $91,000 in 2005 (the first year for which we have data) to $69,502 in 2009.

Table 4: Madison County Residential Real Estate Sales, 2005 to 2009

Year Units Sold Average Price
2005 3,586 $91,101
2006 3,722 84,352
2007 3,676 79,652
2008 3,064 77,362
2009 2,746 69,502
Note: Each year is based on January through September averages. Dollar values are not adjusted for inflation.
Source: Metro Indianapolis Board of Realtors

Social Safety Net

Table 5 shows the dollar value of foods stamps issued and the number of food stamp recipients. From 2008 to 2009, the dollar value of food stamps issued increased by more than 30 percent to more than $2 million. The number of recipients increased by 5.7 percent from 2008 to 2009, although the 2009 total is lower than that of 2007 and may reflect a change in population or the change in the state’s system of administering benefits.

Table 5: Food Stamp Recipients in Madison County, 2003 to 2009

Year Total Dollar Value of Food Stamps Issued Number of Food Stamp Recipients
2003 $1,027,207 12,117
2004 1,153,232 13,277
2005 1,368,883 14,457
2006 1,455,455 15,384
2007 1,519,787 15,681
2008 1,549,855 14,725
2009 2,027,924 15,557
Note: Each year is based on January through September averages. Dollar values are not adjusted for inflation.
Source: STATS Indiana, using FSSA data

Gaming

In May 2008, electronic gaming became available at Hoosier Park. Fiscal Year 2009 (July 2008 through June 2009) is the first full year of operation. Of the thirteen gambling establishments authorized by the state, Hoosier Park ranked fifth in terms of total winnings (over $202 million) and the amount of wagering taxes paid (almost $56 million). Total employment at the casino is around 780, with just over 70 percent of employees from Madison County. The expansion of Ohio casinos recently approved by voters is expected to have a negative effect on Hoosier Park.

Outlook

The official numbers provide a bleak picture of the local economy. Overall employment and average wages have decreased. The unemployment rate is lower, but so is the labor force. There are bright spots: Nestlé opened a new manufacturing facility earlier this year, creating hundreds of jobs. Bright Automotive has a contract to develop a hybrid vehicle for the U.S. Army. Anderson has begun improvements on its wastewater treatment facilities to comply with the Clean Water Act.

In the coming year, we expect employment to continue to decrease about half a percent (-200 jobs) in Madison County through the first quarter of 2010 and then to stabilize through the remainder of 2010.1 We expect that income growth will remain flat through 2010. This outlook may be a bit optimistic given the difficulties faced by the U.S. auto industry, particularly General Motors and Chrysler, and the continuing difficulties in the financial sector, both of which ultimately affect employment and earnings in east-central Indiana. After the official end of the 1990–1991 recession in March 1991, the national unemployment rate continued to increase for more than a year, peaking at 7.8 percent in June 1992. We may see a similar scenario in 2010.