Get PDF of this article

The Indianapolis-Carmel metropolitan area¹ should continue a slow recovery during 2012, with unemployment declining, incomes rising and a general economic rebound. The Super Bowl in February will bring a nice, but temporary, economic stimulus. However, the recovery will be modest and leave economic growth below historic levels and unemployment above normal levels, even by the end of the year.

Employment and Wages

Over the past 12 months, Indianapolis added 6,100 jobs,² a disappointing figure given the high level of unemployment. This poor growth has unemployment above 8 percent. The economy needs to add about 50,000 jobs to get back to normal employment, something that is likely to take several more years. Not only has the number of employed declined, but the size of the labor force has shrunk as people have stopped looking for work (see Figure 1). Look for an increase of 10,000 to 15,000 jobs during 2012.

Figure 1: Indianapolis Labor Force and Employment, January 2006 to September 2011

Note: Data are seasonally adjusted.
Source: STATS Indiana, using Bureau of Labor Statistics data and author’s calculations

There is some good news as wages are higher compared to a year ago.³ Average wages rose 4.3 percent, with gains across the board except for educational services. Table 1 provides a breakdown of wage change and job growth by industry for the Indianapolis area.

Table 1: Wages and Jobs for Selected Industries in the Indianapolis Metro, 2011

Industry	Wages		Jobs
	Average Weekly Wage	Average Wage Change since 2010	Percent of Total	Change in Number since 2010
Total	$906	4.3%	100.0%	1.5%
Administrative and Support and Waste Management and Remedial Services	$551	4.8%	7.3%	7.9%
Real Estate and Rental and Leasing	$832	7.6%	1.7%	3.7%
Construction	$963	4.8%	4.2%	3.2%
Health Care and Social Services	$832	4.4%	14.6%	2.8%
Accommodation and Food Services	$283	2.9%	8.8%	2.7%
Transportation and Warehousing	$720	3.6%	6.1%	2.6%
Professional, Scientific and Technical Services	$1,300	11.8%	5.3%	2.2%
Management of Companies and Enterprises	$2,020	14.1%	1.3%	2.2%
Other Services (Except Public Administration)	$582	-0.2%	3.2%	2.0%
Wholesale Trade	$1,097	5.3%	4.7%	1.3%
Retail Trade	$489	5.8%	10.6%	1.2%
Finance and Insurance	$1,535	11.8%	4.9%	0.4%
Educational Services	$720	-4.1%	8.1%	-0.3%
Manufacturing	$1,795	5.3%	9.7%	-2.2%
Information	$1,185	8.0%	1.9%	-4.4%

Note: Data are for the first quarter of each year.
Source: STATS Indiana, using Quarterly Census of Employment and Wages data

Housing and Construction

The Indianapolis real estate market continues to struggle. Indianapolis ranks 18th out of the largest 100 metro areas with 6.5 percent of homes with mortgages being somewhere in the foreclosure process.⁴ Another 3.3 percent of mortgage holders are seriously delinquent on their mortgages. As bad as this looks, the percentage of mortgages in foreclosure or serious delinquency declined from 10.6 percent to 9.9 percent over the past year, a sign that stability in the housing market may be increasing.

Home prices fell slightly for the second straight year, declining 1.6 percent.⁵ The good news is that the number of homes on the market dropped 10 percent, indicating that home prices may stabilize.

Historically low mortgage rates have helped stabilize house prices, but have not been enough to increase them. The low mortgage rates are tempered by the tightened credit standards that make home purchases difficult for all but highly qualified buyers.

New residential construction in the area has shown continued weakness. Year-to-date new residential construction is 3.2 percent lower than last year. To put this in perspective, construction spending is 47 percent lower than it was just four years ago. Eventually, new home construction will pick back up, but it may not occur in 2012.

Super Bowl

The Super Bowl will provide a small boost to the Indianapolis area economy. While economic impact estimates vary widely, conservative estimates would suggest an economic boost of $100 million to $200 million (more aggressive estimates put it between $400 million and $500 million). This spending represents about 0.2 percent of total annual spending in the Indianapolis area economy.

This should lead to a small bump in incomes and temporary jobs as Indianapolis welcomes tens of thousands of visitors. While most of the increase will be in retail and hospitality, the spending should be multiplied through the entire economy, giving a minor boost to many sectors of the economy. While the publicity for the city will be great, the economic benefits often don’t last for long after the event is over.

Forecast

Barring any major negative shocks to the economy, incomes will grow in 2012, and the unemployment rate should continue to drift downward. However, the rate of job creation is not enough right now to put a serious dent in the unemployment rate, which will likely still be over 7 percent by the end of 2012.