Indianapolis-Carmel forecast 2019
Clinical Assistant Professor of Business, Kelley School of Business, Indiana University
The Indianapolis-Carmel-Anderson metropolitan area1 economy is poised for another year of strong growth and conditions that will benefit many in the area. Development continues to be solid in many areas and unemployment is low. The number of jobs and the level of wages both continue to grow.
Communities around central Indiana are finding it necessary and important to invest in projects that improve quality of life and provide amenities for residents. Carmel has invested heavily in developing its downtown area. Speedway’s development of its downtown is leading to growth in business and residential investment.
Downtown Indianapolis continues to draw significant development in all four quadrants. Large-scale projects, such as the Convention Center expansion and hotel development on the Pan-Am Plaza site or the Waterside development on the old GM plant, are still years away (and plans are not yet finalized). But many smaller projects will continue to lead to growth in the downtown market.
The message to community leaders is clear. Investing in infrastructure to improve quality of life is necessary to maintain a healthy local economy. Tax incentives are not sufficient to draw in businesses and residents. Bike trails, community centers and connected neighborhoods were once seen as luxuries, but now are important economic development tools. This trend will continue, especially if the economic expansion continues nationally.
Employment and wages
The Indianapolis-Carmel-Anderson economy added 22,900 jobs over the past 12 months, an increase of 2.1 percent. The unemployment rate in the area is similar to last year, sitting at 3.5 percent. It is likely that the rate will remain between 3.4 percent and 3.8 percent throughout 2019. Low unemployment is a good indicator of a healthy local economy and is good for workers—but it may create some challenges for businesses looking to grow. The number of job postings exceeds the number of people looking for work.
Last year, the workforce grew by 2.8 percent, a trend that will need to continue in order to fuel employment growth. The local economy will continue to add jobs in 2019.
A number of national trends continue to play out in local employment sectors. Health care and social services remains the largest sector for employment in the Indianapolis metro, growing by 4.4 percent over the last year. This reflects the national trends of an aging population and increased investment in health care services.
Transportation and warehousing is seeing the largest growth in jobs, with an increase of 12.7 percent. Indianapolis continues to solidify itself as the “Crossroads of America,” with continued investment by some of the largest transportation and distribution companies in the United States.
Retail jobs are down 6.5 percent, reflecting the trend of consumers moving to online shopping. Wages remain low in this area. Manufacturing jobs were also down over the year, but wages increased by 10.6 percent (see Table 1). Manufacturing output continues to grow in Central Indiana, but productivity gains are leading to fewer jobs in the sector. However, those jobs are increasingly higher-skilled jobs, leading to mean wages of over $100,000 per year.
Table 1: Indianapolis metro employment, 2018 Q1
|Industry||Total jobs||Average weekly wage||Change in jobs since 2017 Q1||Change in
average wage since 2017 Q1
|Health care and social services||149,885||$1,052||4.4%||2.1%|
|Accommodation and food services||90,777||$347||0.5%||2.7%|
|Administrative and support services||81,473||$667||3.8%||0.5%|
|Transportation and warehousing||71,933||$867||12.7%||2.6%|
|Professional, scientific and technical services||57,008||$1,535||3.9%||0.5%|
|Finance and insurance||46,727||$2,011||2.5%||12.7%|
|Other services (except public administration)||30,789||$713||0.8%||1.0%|
|Real estate and rental and leasing||16,070||$1,162||1.6%||4.1%|
Source: Quarterly Census of Employment and Wages (QCEW), accessed via STATS Indiana
Housing and construction
Housing prices have continued to rise in Central Indiana, with the average selling price going up by about 7 percent over the last year. This reflects two trends of more building of higher-end housing and general residential inflation. Building permits are also increasing in the metro area, with average quarterly growth of 18 percent compared to the prior year.
While the good economic conditions have encouraged increased building and home ownership, there are some concerns that this will not continue. The 30-year mortgage rate is a full point higher than it was a year ago. While still low by historical standards, rising interest rates will certainly dampen enthusiasm for new housing and tend to constrain prices. Further, labor shortages in the construction industry will lead to rising costs in home construction.
Overall, the Indianapolis economy continues to be strong. The region is at full employment and continued job growth will ensure that it stays there. Low unemployment and continued growth are leading to higher wages for workers. Increasing interest rates and potential labor shortages will lead to slower growth in residential construction. Economic growth will be around 2.5 percent in the area.
Over the longer term, Indianapolis’ growth rate will be determined by its ability to grow its skilled workforce. Labor shortages constrain economic growth. Investment in workforce development and educational skills should be priorities for policymakers.