Indiana University East, Richmond
There is mixed news coming from the Richmond–Connersville–New Castle (RCNC) area economy. The manufacturing sector, especially in Richmond, suffered a few plant closings in 2004 and 2005. A significant number of good-paying jobs were lost. Firms producing durable goods such as automobile parts, wire, and machine tools, are affected in varying degrees by current economic conditions. International competition from low-wage and low-cost producing nations, along with soaring commodity and energy prices, is affecting the bottom line of local firms.
Against this background, there is a silver lining. A few firms, such as Johns Manville, Osborn International, Berry Plastics, Contract Industrial Tooling, and JMC Restaurant Distribution, plan to expand in 2006. This internal expansion, plus the location of new firms (including both the strip mall adjacent to Hayes Arboretum by private investors and business prospects by the Economic Development Corporation of Wayne County) will brighten the employment picture. Taconic Farms and Kelsie’s Food and Dairy, for instance, will add 250 new jobs, followed by the strip mall with another 200 jobs. Between January and August 2005, there was a net job gain of 268.
The August 2005 figures, released by the Indiana Department of Workforce Development, showed that the unemployment rates in Wayne, Fayette, and Henry counties were 7.0 percent, 8.1 percent, and 6.2 percent, respectively. These rates were higher than both the state rate of 5.2 percent and the national rate of 4.9 percent (see Figure 1). In terms of county rankings, they were second (Fayette), seventh (Wayne), and twenty–first (Henry). With the exception of Henry county, the unemployment rates inched upward from August 2004. In short, total employment was 63,120 from a labor force of 67,780, giving an employment-to-labor-force ratio of 93.1 percent while the employment-to-population ratio of 45.3 percent remained unchanged. The employment-to-labor-force ratio is expected to improve with increased economic activity.
Unemployment Rate, 1995 to 2005
Slow job and productivity growth translates into slow income growth. Personal income is the income received by all persons from all sources or the total income for all households. It also reflects the quality of life in a community. The per capita personal income (PCPI) in 2003 for Wayne, Fayette, and Henry counties was $25,316, $27,172, and $27,428, respectively. Indiana’s 2003 PCPI was $28,838, while the nation’s was $31,472. Analogously, the poverty rate in the tri-county area was 11.7 percent (Wayne), 10.4 percent (Fayette), and 9.5 percent (Henry).
The service sector continues to lead the local economy on the employment front. Growth in health care and education services, professional and business services, and personal services adds jobs and helps offset job losses in other sectors of the economy. It is important to note that Reid Hospital and Health Care Services, apart from its $250 million complex on Chester Boulevard, is Wayne County’s largest employer with 1,517 employees, followed by Richmond Community Schools with 853 employees.
The housing sector is doing reasonably well after a slowdown in the first half of the year. There is an uptick in home sales partly due to the influx of professional and management people in RCNC. There is also upscale movement among existing homeowners. Interest rates are still relatively attractive. Local financial institutions reported on October 31, 2005, rates of 5.95 percent for fifteen-year mortgages, 6.32 percent for thirty-year mortgages, and 5.35 percent for one-year adjustable mortgages. Long-term rates on conventional mortgages are slightly lower than they were when the Fed began tightening policy in June 2004.
The City of Richmond issued 1,083 building permits with an investment value of $17.2 million between January and September 2005. The local median price of a home is $93,000, well below the national median of $204,600. Home price increases are expected to slow with the market cycle, and if the Fed continues tightening policy, it will affect mortgage origination and equity extraction which, in turn, will affect personal consumption expenditures and gross local product.
Related to housing is banking. Banking activity is picking up. It is much better than a year ago. Profit margins are somewhat compressed because of low interest rates. There is also disintermediation of funds to brokerage houses. Disintermediation follows as depositors take their funds out of intermediaries and invest in open market instruments such as Treasury bills, commercial paper, and corporate bonds.
Barring external shocks to the U.S. economy, the RCNC economy is expected to perform better in 2006. There is, however, some degree of skepticism regarding consumer confidence and the future course of the national economy.
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