94 years of economic insights for Indiana

The IBR is a publication of the Indiana Business Research Center at IU's Kelley School of Business

Evansville Forecast 2015

Professor of Economics and Dean of Business, Romain College of Business, University of Southern Indiana

Six years and five months after the onset of the Great Recession in December 2007, employment in the Evansville metropolitan area (metro) reached pre-recession levels. In contrast, real output had reached pre-recession levels by the end of 2010. During 2014, relatively strong growth in manufacturing and retail trade, combined with increases in personal income and announcements of future fixed investments provide the basis for projecting increased output, income and employment in 2015.

Once all data are released for 2014, nominal personal income is estimated to have increased by 1.3 percent, and real gross metro product is estimated to have increased by 0.2 percent.

The unemployment rate in the Evansville metro fell from 6.0 percent in January 2014 to 4.7 percent in September 2014, compared with a drop in the national unemployment rate from 6.6 percent to 5.9 percent over the same time period. Job gains occurred primarily in the following sectors: leisure and hospitality, manufacturing, and government. Sectors experiencing job losses include professional and business services, construction, and education and health services.

Homeowners experienced home price appreciation as existing home prices increased from an average of $141,663 in 2013 to $142,457 in 2014. Between 2013 and 2014, single-family housing permits are estimated to have increased by 31 percent, though housing starts decreased from 798 to 745.

The manufacturing sector continues to be an important base for metro area household incomes and consumer spending activity, even as the economy exhibits a long-term pattern of diversification away from manufacturing-industry dependence (see Figure 1).

Figure 1: Evansville Metro Manufacturing Employment as a Percent of Total Nonfarm Employment

figure 1

Source: STATS Indiana, using U.S. Bureau of Labor Statistics and Indiana Department of Workforce Development data

Still, as one of the most manufacturing-dependent metro areas in the nation, the Evansville economy was noticeably impacted by the recent recession. Since 2007, Evansville’s manufacturing workforce has fallen by 9.7 percent or about 3,230 workers, compared to the 5.7 percent reduction in Indiana’s manufacturing workforce over the same period.

In 2014, manufacturing earnings continued to be a significant driver of economic activity, accounting for about 25 percent of total earnings in the Evansville economy and about 35 percent of total output. The manufacturing sector accounts for 16.4 percent of employment in the Evansville metro (see Table 1).

Table 1: Manufacturing’s Percent of Total Employment, August 2014

  Evansville Metro U.S. Indiana
Manufacturing 16.4% 8.7% 17.2%
Durables 54.8% 63.1% 72.3%
Nondurables 45.2% 36.9% 27.7%

Source: STATS Indiana, using U.S. Bureau of Labor Statistics and Indiana Department of Workforce Development data

Outlook

Given the proportion of output sold outside the metro area, the strength of the recovery in the Evansville area is linked to the strength of the broader U.S. economy. As employment and demand for locally produced goods continue to surpass pre-recession levels, disposable income and output growth are expected to increase in 2015.

In 2015, Evansville metro area output is forecasted to increase by 2.1 percent; the number of jobs is projected to increase by 1,900; nominal personal income growth is forecasted to increase by 3.9 percent; and the unemployment rate is projected to be 4.9 percent.

A widening gap between the Evansville economy and the U.S. economy with regard to income growth over the past three decades highlights the importance of achieving higher rates of output and employment growth. The completion of the I-69 segment between Evansville and Bloomington by the end of 2015 will likely be an important source of expanded economic activity. The additional transportation and distribution networks resulting from the I-69 extension are expected to provide a solid foundation for future employment and output growth.