Muncie Forecast 2018

Dagney Faulk, Ph.D.

Director of Research, Center for Business and Economic Research, Ball State University

Kera Fenimore

Graduate Assistant, Center for Business and Economic Research, Ball State University

The Muncie area economy continued to grow slowly over the past year. Nonfarm employment increased by less than 1 percent, while average weekly wages increased by about 6 percent and the number and amount of food stamps issued decreased substantially. Residential home sales were strong and continued shortages of inventories in the $120,000 to $250,000 have not spurred much new construction. The number of building permits issued actually decreased relative to the previous year and are much lower than pre-recession levels.

The two biggest news stories were not directly related to the business sector but will affect local businesses, economic development prospects and the ability of Muncie to attract new households to live in the area.

• During May 2017, media reported an FBI investigation into alleged corruption in Muncie city government which has resulted in the indictment of one government official.¹ The investigation continues.

• After years of fiscal distress, during 2017, the State designated Muncie Community Schools, the largest school corporation in the county, as a fiscally impaired school corporation and appointed an emergency manager to implement a deficit reduction plan to stabilize the corporation’s finances by the end of the year.² The deficit reduction plan included closing three elementary schools and reducing the number of teachers.³ The school corporation’s enrollment decreased by another 500 students as more families moved their children out of Muncie schools.⁴

Some of the highlights from 2017’s business news included the closing of a local grocery store chain and the purchases of the shuttered Borg Warner plant and a local aquaculture facility. After closing several stores in Muncie over the past decade, Indiana-based Marsh Supermarkets filed for bankruptcy in spring 2017 and closed over the summer.⁵ Two of the four remaining locations were purchased by Kroger, which plans to open them under the Pay Less brand.⁶ The former BorgWarner plant, which closed in 2009, was sold over the summer.⁷ Most of the 1-million-square-foot building has since been demolished leaving about 200,000 square feet of space to be reused. Bell Aquaculture, an Albany-based fish farm that had been struggling financially, was purchased by AquaBounty Technologies to grow genetically engineered salmon.⁸

This article includes the most current data available on various measures of economic activity from public sources for the Muncie MSA (Delaware County) to analyze changes over the past year. A summary of the labor market forecast for the Muncie area is included in the conclusion.

Labor markets

The unemployment rate showed much variation but ultimately fell over the course of the year, decreasing from 5.6 percent in January to 4.3 percent in September (see Table 1). This September rate is lower than one year ago. Delaware County’s unemployment rate continues to be higher than Indiana’s rate of 3.6 percent (not seasonally adjusted) during September 2017. The labor force in the Muncie MSA ranged between 54,000 and 55,000 people during most months of the year, which is slightly lower than the pre-recession peak and much lower (by about 10,000 people) than the metro area’s labor force during the mid-1990s.

We use the monthly average of employment over the first three quarters of the year to examine changes in industry employment in the Muncie MSA. Nonfarm employment increased in 2017, adding 300 jobs (0.6 percent) compared to the previous year (see Table 2).

Nonfarm employment is still lower than pre-recession levels by more than 1,000 jobs, but overall continued to increase each year since 2014. Notably, the only sector to experience a decrease in employment was the trade, transportation and utilities sector, down 89 jobs (1.0 percent) since 2016. The remaining sectors fared better. The manufacturing sector increased by 33 jobs during 2017 (0.8 percent), and private service sector employment increased by 133 (0.4 percent). Government employment increased by 111 (0.9 percent) despite losses in the education sector. The leisure and hospitality sector also experienced growth (up 2.0 percent).

Quarter 1 average weekly wages in Delaware County increased from $693 to $736 (6.2 percent), as shown in Table 3. This marks an all-time high for average weekly wages (not adjusted for inflation). Wages in the Muncie MSA continue along the trend of being considerably lower than the state average, which increased from $845 to $919 (8.8 percent) between 2016 and 2017. This is the largest discrepancy between state and local average wages since at least 2001.

Only two industry sectors (the real estate and rental and leasing sector and the management of companies and enterprises sector) saw a decline in average weekly wages in 2017. The vast majority of the industry sectors in 2017 (16 out of 18) experienced positive increases in weekly wages ranging from 1.1 percent to 25.4 percent. Four of these sectors had an increase of 10 percent or more. The greatest increase took place in the administration, support, waste management and remediation sector (25.4 percent), followed by utilities (19.8 percent), finance and insurance (17.4 percent), and arts, entertainment, and recreation (10.2 percent).

The percent change in the inflation rate from first quarter 2016 to that of 2017 was 2.2 percent, so workers in 15 of the 18 sectors experienced real wage growth over this period.⁹

Housing

Building permit activity continues to be lower than pre-recession levels. There were eight new residential building permits issued during 2017, down 50 percent from 2016 (see Table 4). Single-family construction made up the majority of those eight new permits.

Residential sales decreased slightly during 2017; however, average days on the market also decreased to 59—an all-time low (see Table 5). Average sale price increased to $106,416 and has been higher than pre-recession levels for the past three years. Median sale price also continues to increase. Local real estate agents indicate that inventory is extremely low, especially for housing in the price range between $120,000 and $250,000.¹⁰

Social safety net

With increasing employment and wages in the metro area, the dollar amount of food stamps issued decreased for the fourth year in a row (see Table 6). Delaware County issued $1.77 million per month in food stamps in 2017. This is a 10.2 percent decrease since 2016 and the smallest amount issued since 2008. The number of food stamp recipients decreased to 14,614 (-9.8 percent), which is the lowest since 2009. In addition, the number of households receiving food stamps decreased to 7,000 (-10.6 percent), which is also the lowest since 2009.

Outlook

The past year provided evidence that Muncie continues its long, slow recovery. The unemployment rate showed much variation over the course of the year, while nonfarm employment increased slightly. Housing construction (measured by the number of building permits issued) is sluggish, and residential real estate sales continued to increase to the point of having inventory shortages in some price ranges. Wages increased and fewer households are relying on the social safety net, as seen in the continued decrease in food stamp usage.

The Indiana University Center for Econometric Model Research’s forecast predicts that Muncie MSA employment will grow by half a percentage point during 2018 and then slow down in the next few years, while income is projected to grow at 4.3 percent during 2018.¹¹ Population growth projections are flat.