99 years of economic insights for Indiana

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

Executive Editor, Carol O. Rogers
Managing Editor, Brittany L. Hotchkiss

Indianapolis-Carmel forecast 2017

Clinical Assistant Professor of Business, Kelley School of Business, Indiana University

Growth in the Indianapolis-Carmel-Anderson metropolitan area1 economy has been some of the strongest in the state, as unemployment continues to fall in Central Indiana. The unemployment rate for the Indianapolis metro stands at 3.9 percent, which is significantly below state and national levels.

The performance of the Indianapolis economy reflects broader trends of growth in urban economies, while more rural economies continue to struggle. However, even with decent job growth and low unemployment, real wages remain flat, holding down overall income levels.

Employment and wages

The Indianapolis economy is nearing full employment, with more than 1 million jobs in the metro and surrounding area and 40,000 unemployed.

The difference in the unemployment rate between Indianapolis and the rest of the state is largely attributable to differences in educational attainment. More than 30 percent of Indianapolis residents have a bachelor’s degree or higher, whereas across the rest of the state, that number is closer to 20 percent. Given the current unemployment rate for college grads of 2.5 percent, it is not surprising that Indianapolis has lower unemployment and higher wages.

The unemployment rate is lowest in the suburban counties, specifically Hamilton, Boone, Hendricks and Johnson counties, and highest in Madison and Marion counties. Figure 1 shows the unemployment rate as of September of 2014 and 2016 for the Indianapolis region broken down by the 11 counties in the area. Every county in the area is showing lower unemployment rates than the national average of 5.0 percent.

Figure 1: Unemployment rate by county


Source: U.S. Bureau of Labor Statistics

Given the low level of unemployment, job growth may taper off in 2017. We will finish 2016 with about 37,000 new jobs added. We are unlikely to see that kind of growth again without some migration into the area from other parts of the state, the country or the world.

Not all of the employment news has been good for workers in the area. Despite strong job growth and low unemployment, real average wages have been flat over the last two years. Much of the growth in jobs has come from lower-paying sectors (e.g., retail) or in areas where real wages have declined (e.g., health care).

Higher-paying industries, such as manufacturing, have seen losses in jobs—leading to lower overall wages. The number of manufacturing jobs has stabilized recently, but the long-term trend is downward. There are currently about 90,000 manufacturing jobs in the MSA, compared to more than 120,000 as recently as 2000. High-profile plant closings in 2016 have made headlines, but these are part of broader trends. Manufacturing is a strong segment of the Indianapolis economy, but technology and efficiency has led to increasing output without a corresponding increase in the workforce.

Housing and construction

Residential construction continues to be a segment of growth for the local economy, creating new jobs and additional investment. After a year of 20 percent growth, construction has flattened out in the latter part of 2016. As in years past, the highest levels of growth2 have been in the surrounding areas, especially Hamilton (16 percent), Hancock (38 percent) and Johnson (38 percent) counties.

The forecast for 2017 calls for slower growth based on a couple of factors. First, low unemployment in the area will make it more difficult for expansion to continue. Second, rising interest rates will dampen both investment enthusiasm and demand for housing.


Job growth in Indianapolis is driven by a few strong sectors, including management, construction and transportation. By contrast, job growth was weak in information, manufacturing and utilities (see Table 1).

Table 1: Jobs by industry, 2016 Q1

Industry Jobs Percent of
total jobs
in jobs
Change in
Health care and social services 139,383 14.5% $939 3.6% -2.4%
Retail trade 106,297 11.0% $527 4.6% -0.4%
Accommodation and food services 89,253 9.3% $314 1.7% 1.9%
Manufacturing 88,819 9.2% $1,754 -1.0% 1.7%
Administrative and support 79,526 8.2% $579 1.9% -0.2%
Educational services 71,202 7.4% $806 1.8% 2.7%
Transportation and warehousing 63,668 6.6% $794 6.6% -2.3%
Professional and technical services 54,293 5.6% $1,433 4.8% 4.2%
Finance and insurance 45,346 4.7% $1,648 4.0% -7.9%
Public administration 44,686 4.6% $985 0.6% -0.7%
Wholesale trade 42,657 4.4% $1,274 2.2% -1.6%
Construction 42,130 4.4% $1,030 8.4% 4.6%
Other services 30,245 3.1% $658 3.6% 1.5%
Information 17,023 1.8% $1,190 -2.8% -2.5%
Real estate and rental and leasing 15,450 1.6% $1,058 3.6% 0.7%
Management of companies 13,281 1.4% $2,336 9.7% 10.8%
Arts, entertainment and recreation 12,174 1.3% $924 1.0% -12.6%
Utilities 4,555 0.5% $1,958 -2.5% -3.7%
Agriculture 1,856 0.2% $748 -0.7% 3.9%
Total 964,158 $965 2.9% -0.3%

Note: Change columns are relative to 2015 Q1.
Source: STATS Indiana, using Quarterly Census of Employment and Wages data from the U.S. Bureau of Labor Statistics


Overall, the Indianapolis economy continues to be fairly healthy. The region is at full employment and continued job growth will ensure that it stays there. Furthermore, low unemployment and continued growth should lead to higher wages for workers. Increasing interest rates and a potential labor shortage will lead to slower growth in residential construction. Continued investment in the downtown area will drive growth in Marion County, while residential and commercial development in Hamilton, Hendricks and Johnson counties will fuel regional growth.


  1. This analysis covers the Indianapolis-Carmel-Anderson metropolitan statistical area, which includes Boone, Brown, Hamilton, Hancock, Hendricks, Johnson, Marion, Madison, Morgan, Putnam and Shelby counties.
  2. Growth is measured as percentage change in value of building permits compared to the prior year period using U.S. Census Bureau data.