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Columbus forecast 2023

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Assistant Professor of Management, Indiana University Division of Business, IUPUC

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Associate Professor of Finance, Indiana University Division of Business, IUPUC

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President, Greater Columbus Economic Development Corporation

As a durable goods manufacturing-based economy, the Columbus metropolitan statistical area (MSA) experienced significant economic volatility in 2020 and 2021 due to global supply chain issues and fluctuations in consumer spending related to the pandemic. Columbus concluded 2021 with lower unemployment than 2020 and with slightly higher GDP. During 2022, the unemployment rate dropped below 2.0% on three occasions. Current expectations are for local economic output to increase during 2022 in light of vehicle production and sales projections. This article explores the 2022 data, as well as what is anticipated for 2023.

Key measures

Employment and labor force: From 2010 to 2021, the Columbus MSA experienced an overall increase in average annual labor force and employment, with growth of 4,415 people in the labor force and 6,754 in increased employment. Following the steep decline of 3,316 jobs lost in 2020, the number of jobs increased by 802 in 2021 and 615 in the first nine months of 2022, based on the Local Area Unemployment Statistics (LAUS) data set from the U.S. Bureau of Labor Statistics (BLS). Figure 1 shows monthly labor force and employment for the Columbus MSA through August 2022.

Figure 1: Labor force and nonfarm employment

Line chart from January 2010 to August 2022 showing labor force and employed.

Note: Data are not seasonally adjusted. Data is shown through August 2022.
Source: Local Area Unemployment Statistics (LAUS), U.S. Bureau of Labor Statistics

As is evidenced in Figure 2, labor force participation rates are declining and, as a result, labor supply pressures may continue with retirements and competition from new or expanding employers in surrounding counties.

Figure 2: Labor force participation rate

Line chart from 2013 to 2021 showing labor force participation rates for the Columbus MSA, Indiana and U.S.

Note: Data for Columbus MSA are not seasonally adjusted. Data for Indiana and the U.S. are seasonally adjusted.
Source: Local Area Unemployment Statistics (LAUS), U.S. Bureau of Labor Statistics and the American Community Survey, 1-year estimates, from the U.S. Census Bureau

Unemployment: The pandemic lockdown spiked unemployment in the U.S., Indiana and Columbus in April 2020 to double digits. As the nation slowly recovered from economic disruption, the unemployment rate for the U.S. declined to 3.3% in September 2022. Indiana’s unemployment rate for September 2022 (not seasonally adjusted) was 2.2%. Columbus’ September 2022 unemployment rate was 1.8% (not seasonally adjusted) after peaking at 17.5% in April 2020.1 The Columbus MSA unemployment rate is equal to or slightly lower than any of the counties contiguous to Bartholomew, reflecting the solid employment base in this county.

Table 1, which shows selected Indiana metros and micros, highlights that local unemployment rates remain lower than the national and state averages in the aftermath of the pandemic shutdown. Indiana’s and Columbus’ low unemployment rates are derived from an emphasis on manufacturing, which experiences tighter labor markets during economic expansions.

Table 1: September unemployment rate comparison for selected Indiana metros and micros

  2015 2016 2017 2018 2019 2020 2021 2022
U.S. 4.9% 4.8% 4.1% 3.6% 3.3% 7.7% 4.6% 3.3%
Indiana 4.2% 4.0% 3.2% 3.0% 2.8% 6.0% 2.9% 2.2%
Bloomington 4.2% 4.1% 3.2% 3.0% 2.6% 4.9% 2.2% 1.9%
Cincinnati* 3.7% 3.3% 2.6% 2.6% 2.4% 4.7% 2.2% 1.8%
Columbus 3.1% 3.0% 2.4% 2.2% 2.0% 5.0% 2.3% 1.8%
Evansville* 3.7% 3.8% 2.8% 2.7% 2.6% 5.5% 2.8% 2.1%
Greensburg 4.5% 4.2% 3.6% 3.2% 3.0% 5.3% 2.4% 1.9%
Indy-Carmel-Anderson 3.9% 3.7% 3.1% 2.9% 2.6% 6.2% 2.8% 2.1%
Kokomo 4.3% 3.9% 3.3% 3.2% 3.2% 7.8% 5.9% 4.0%
Louisville* 4.0% 3.9% 3.2% 3.1% 2.8% 5.6% 2.5% 1.9%
North Vernon 4.1% 4.1% 3.2% 2.9% 2.4% 5.2% 2.9% 2.1%
Seymour 3.5% 3.3% 2.7% 2.6% 2.2% 4.7% 2.5% 1.9%

* Only the Indiana portion of the metro is included.
Note: Data are not seasonally adjusted. Red cells indicate the highest rate and green cells indicate the lowest rate for each year.
Source: STATS Indiana, using Local Area Unemployment Statistics (LAUS) data from the U.S. Bureau of Labor Statistics

Weekly earnings: Average weekly earnings for the Columbus MSA experienced an impressive 36% growth from a low of $730 in 2009 to $996 in 2018.2 However, average weekly earnings then declined for three consecutive years from 2018 to 2021. A turnaround is noted in the first nine months of 2022 based on a 20.5% increase from the 2021 average weekly earnings. Figure 3 shows the average weekly earnings data since 2007.

Figure 3: Total private average weekly earnings in the Columbus MSA

Dual-axis combination chart from 2007 to 2022 showing average weekly earnings and rate of change.

Note: Data are not seasonally adjusted. 2022 data is shown through September.
Source: Current Employment Statistics (CES), U.S. Bureau of Labor Statistics and Indiana Department of Workforce Development

Economic indicators

Vehicle sales and production: Total vehicle sales in the U.S. have shown considerable volatility during the pandemic years. From near-record sales in 2018, sales declined in 2019 and 2020, then increased in 2021. This sales trend can be seen in Figure 4.

Figure 4: Total annual U.S. new vehicle unit sales

Note: Data are seasonally adjusted.
Source: U.S. Bureau of Economic Analysis, Total Vehicle Sales [TOTALSA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/TOTALSA

New vehicle production in the U.S. for the 12-month period from October to September of each year declined from a high of 11.8 million vehicles in 2016 to 8.5 million units in 2020.3 A recovery in production in 2022 to 9.5 million vehicles can be seen in Figure 5. Supply chain issues will continue to be a headwind for the automotive industry into 2023, with rapidly rising interest rates resulting in a further chill on demand as possible buyers contemplate durable goods purchases in the face of higher borrowing costs.

We should note, Figure 5 does provide some reason to be optimistic, as it appears that – at least for now – some of the supply chain interruptions that vexed multinational durable goods producers from 2020 through early or mid-2022 may have abated somewhat. There have been increases in inventories and production numbers as we approach 2023. Yet, this optimism is countered by the continued buoyancy of the CPI, also shown in Figure 5.3,4,5

Figure 5: U.S. monthly vehicle production, inventory and CPI

Source: U.S. Census Bureau, Retail Inventories/Sales Ratio: Motor Vehicle and Parts Dealers [MRTSIR441USS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MRTSIR441USS, November 28, 2022.
Board of Governors of the Federal Reserve System (US), Motor Vehicle Assemblies: Autos and Light Truck Assemblies [MVAAUTLTTS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MVAAUTLTTS, November 28, 2022.
U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: New and Used Motor Vehicles in U.S. City Average [CUSR0000SETA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CUSR0000SETA, November 28, 2022.

Local building permits: Following a strong fiscal year 2017 for building permits in Columbus (287 permits), residential building permits declined in fiscal years 2018 and 2019 before recovering in 2020 and 2021 (see Figure 6). Data for fiscal year 2022 reflects a continued elevated level from January to September (184 permits) following a slight decline in the last three months of 2021 (36).

Figure 6: Local fiscal year building permit trends for the Columbus MSA

Column chart from fiscal year 2008 to 2022 showing building permits issued, with a trend line trending up slightly.

Note: The fiscal year is October to September.
Source: U.S. Census Bureau

Because the growth rate of building permits is a leading indicator of economic activity, building permit numbers in 2021 and 2022 may constitute a good omen for the Columbus MSA going forward as more potential employees can obtain housing. However, as interest rates continue to rise at a rate not seen since 1980, the cost of construction continues to trampoline higher. Consequently, there is a real fear that some of the building permits currently on file in Columbus (and across the country) may be allowed to expire without executing some of the given construction projects due to rising costs and expectations for future declines in demand for commercial and residential real estate transactions.

Residential housing sales: Residential sales declined from a high of 1,045 units for the first nine months of 2018 to 844 units in 2019 and 879 units in 2020, before increasing by almost 100 units in the first nine months of 2021 to reach 978 sales units. Sales continued to increase in 2022, reaching 1,022 units sold from January to September. Also evident is the significant decline in inventory and days on the market (see Figure 7). Inventory of unsold homes declined to 42 units in January 2021 before rebounding to 58 units one year later and 133 units in September 2022. Also noteworthy, the average median price, as reported by MIBOR Market Insights, has increased from $189,000 in 2020 to $250,000 in 2022, a 32% increase over the two-year period.

Figure 7: Columbus MSA real estate sales, inventory and average days on the market

 Dual-axis combination chart from January 2017 to September 2022 showing unit sales, inventory and average days on the market.

Note: Data are shown through September 2022.
Source: Metropolitan Indianapolis Board of Realtors, National Association of Realtors and Indiana Association of Realtors

Local capital asset project projections: From 2013 to 2022, the Greater Columbus Economic Development Corporation (EDC) tracked 96 separate projects by primary employers with announcements of either an expansion or new operation within the Columbus MSA, calling for a total of $1.006 billion in capital investments in building and/or equipment purchases. Among the 96 projects, 88 represented an expansion of existing employers and eight were from companies new to the county. 

As shown in Figure 8, over the last five years, the pace of expansions has declined from eight projects each in 2018 and 2019, to six each in 2020 and 2021, and five expected in 2022. Four new “attraction” projects helped offset the declines over this period, but investments are down an average of $22.6 million per year ($89.3 million of average investment per year from 2018-2022 as opposed to $111.9 million of average investment from 2013-2017).

Figure 8: Greater Columbus EDC announced projects and investments

Dual-axis combination chart from 2008 to 2022 showing announced investment expenditures, as well as number of expansion projects and number of attraction projects.

Source: Greater Columbus Economic Development Corporation

A bright point during the most recent period was the announced $103 million investment by California-based Ninth Avenue Foods, who began construction on a new 260,000-square-foot dairy beverage production facility in Columbus, the company’s first such site outside of its home state.

Greater Columbus EDC currently reports a robust pipeline of active new projects within industries such as food manufacturing, battery manufacturing and others. If forecasts for increased new car sales materialize,6 then local automotive component manufacturers might invest in new equipment and/or building improvements to meet increased demand. However, as noted elsewhere, with rising interest rates and inflation pressures creating a headwind against those forecasts, existing company expansions may be slow to materialize in the year ahead. 

Local real GDP growth: From 2017 to 2020, Columbus chained GDP decreased by 1.2%. This period included a 7.8% rebound in 2018, before declining again in 2019 and even more so in 2020 (-7.6%), at the beginning of the pandemic disruptions. Columbus GDP in 2020, the most recent data available, has now contracted to only slightly above the 2011 level. Table 2 reflects the GDP change for the nation and several Indiana metros – including Bloomington, Evansville and Indianapolis. Only Bloomington, Columbus and Kokomo experienced GDP declines in 2019. The Columbus and Kokomo GDP fluctuations reflect the cyclical nature of a manufacturing/durable goods-based economy.

Table 2: Annual GDP growth rate comparison for selected metros

  2014 2015 2016 2017 2018 2019 2020 3-year
average
U.S. 2.3 2.7 1.7 2.2 2.9 2.3 -2.8 0.8
Indiana 3.1 -1.0 1.9 1.7 3.5 0.5 -3.1 0.3
Bloomington, IN 5.4 -1.1 2.7 4.5 3.2 -0.5 -0.9 0.6
Cincinnati, OH 2.8 2.4 3.9 1.4 1.6 3.7 -3.6 0.6
Columbus, IN -4.6 -3.2 -1.8 -0.1 7.8 -0.8 -7.6 -0.2
Evansville, IN -1.4 0.6 2.0 6.3 4.5 4.5 -2.8 2.1
Indianapolis-Carmel-Anderson, IN 2.0 -2.6 2.1 1.2 4.0 2.5 -2.8 1.2
Kokomo, IN -4.2 -7.1 -3.0 -2.4 2.3 -0.5 -4.2 -0.8
Louisville, KY 1.1 2.1 1.6 0.8 1.6 1.9 -2.7 0.3

Note: Shaded cells indicate declines.
Source: U.S. Bureau of Economic Analysis (chained GDP)

Cummins Inc. review

Cummins Inc. is the largest employer in Columbus and the surrounding region, employing approximately 8,000 persons in central and southern Indiana. Facilities include multiple production sites and offices throughout the region, and its global headquarters in Columbus. 

In 2023, Cummins is positioned to experience a solid year of sales in all business segments, with demand for engines very strong right now. Backlog is also strong leading into year’s end. We expect Cummins to be able to absorb all input cost increases and realize profit margins comparable to pre-inflation periods, resulting in increased nominal EBITDA (earnings before interest, taxes, depreciation and amortization) in 2023. We do not expect changes to labor structures already in place for Cummins in the Columbus area.

Background: In August, Jennifer Rumsey assumed the role of President and CEO of Cummins, with former long-time CEO Tom Linebarger continuing as Executive Chairman. With more than 20 years at the company, Ms. Rumsey is credited with co-developing the company’s “Destination Zero” strategy for decarbonization, and the company is making significant investments in electric and hydrogen fuel solutions while continuing the company’s leading position in diesel-powered applications.7

Cummins operates five business units: engine, components, distribution, power systems and new power.8 

Earnings summary: Cummins weathered the storm of the pandemic when sales dropped to $19.8 billion in 2020, a 16% drop. Sales rebounded in 2021 to $24 billion (see Table 3). In 2021, CMI stock generated $14.61 per share (diluted), the highest returns in at least three years.

Table 3: Cummins Inc. operating performance (millions of dollars)

  2019 2020 2021
Net sales 23,571 19,811 24,021
Gross margin 5,980 4,894 5,695
Operating income 2,700 2,269 2,706
Net income 2,260 1,789 2,131

Source: United States Securities and Exchange Commission, Form 10-K for Cummins Inc.

Solvency and liquidity summary: Cummins appears to be in excellent financial shape. As of December 31, 2021, Cummins had well over $3 billion in cash and marketable securities, sufficient working capital, plenty of orders for future cash flow and stable sales, having apparently recovered from the sales drop of 2020. With assets booked at $23.7 billion and equity booked at $9.4 billion, Cummins appears to be in sound financial condition.

Table 4: Cummins Inc. solvency and liquidity

  2020 2021
Working capital
(millions of dollars)
5,562 5,225
Current ratio 1.88 1.74
Long-term debt/equity 0.40 0.38

Source: United States Securities and Exchange Commission, Form 10-K for Cummins Inc.

Cummins international exposure: As the world continues to expect risk outcomes in Europe or Asia, North America – while not free of exogenous risk factors altogether – may be shielded from a more severe economic event. We see that of the $24 billion in sales in 2021, Cummins earned $12.5 billion in North America, and only $3.2 billion in China. Thus, risk is shielded in terms of international exposure, with considerable assurances coming from the light-duty, medium-duty and heavy-duty engine businesses.

Cummins employees: Worldwide, as of December 31, 2021, Cummins employed 59,900 people. Of these, about 8,000 work in the Columbus area. Cummins restructured 2,300 jobs worldwide between 2020 and 2021, during the grip of the pandemic. We do not foresee a Cummins employment restructuring in 2023 in the Columbus area.

Outlook

Upside potential

  • U.S. light vehicle sales are forecast to recover in 2023 to around 15.6 million vehicles and continue to grow to 16.2 million vehicles in 2024.9 North American vehicle production is forecasted to increase to 14.6 million units in 2022, then increase to 15.8 million units in 2023 (an 8% increase).10
  • “Buy America” elements within the Inflation Reduction Act of 2022 may create additional opportunities for existing automotive suppliers who produce parts for electric vehicles (EVs) and those same incentives are expected to attract new investments by battery manufacturers throughout the U.S.
  • Cummins is positioned to enjoy another year of sales growth, much of which will be driven by inflation, yet the company should be able to preserve profit margins and EBITDA, surpassing 2022 levels. Of course, this is contingent on the economy not landing too hard given the aggressiveness of the Federal Reserve’s fight against inflation. Employment appears to be stable and economic growth seems likely, although there are obviously risks.
  • Current high levels of inflation may encourage more workers to reenter the workforce, easing burdens on the labor market and encouraging local employers to create additional jobs.

Downside potential

  • Personal consumption may be constrained in 2023 as the U.S. savings rate returned to pre-pandemic levels in the first half of 2022 and consumers react to rising interest rates associated with Federal Reserve actions during 2022.11
  • Global and U.S. vehicle production are projected to be constrained in 2022 and 2023 by supply chain issues.12,13
  • New orders for manufactured durable goods decreased in the past two months following increases in March through June.14
  • Residential housing sales and building permits may decline in 2023 and 2024 as higher interest rates begin to decrease demand and affordability.
  • Continuing the sentiment from the previous forecasts, Columbus continues to have a high rate of labor force participation (66%), relatively low unemployment and competitive weekly earnings.
  • As is the case throughout the country, local GDP growth may be hindered by the lack of available workers if unemployment rates remain low and the number of unfilled jobs remains high.15

Forecast

Three scenarios are presented as economic forecasts for the Columbus MSA: a soft landing, moderate landing (most likely) and hard landing - terminology used in relation to the Federal Reserve monetary policy actions.

Soft Landing

Columbus may experience no real GDP growth to positive real GDP growth of 3% based on recovery in new vehicle sales and strength in durable goods, with performance strongest in the second half of 2023. Risks exist that might lead to weaker results, however. High inflation and rising interest rates pose the highest risk, and continued supply chain challenges, trade uncertainty, tightening of business investment and a further tightening of the local labor market may challenge GDP growth.

Unemployment may average around 2.1% in 2023, but this may be complicated by participants returning to the job market as inflation impacts consumer spending.

In this scenario, the number of employed is expected to increase by between 1,000 and 2,000 in 2023 based on new market entrants and a similar number of people returning to the workforce.

Moderate Landing (most likely)

Columbus may experience declining real GDP between 1.0% to 4.0%, similar to the 2014–2016 time period. Weakness in the automotive and durable goods sector, fueled by continued supply chain issues and high interest rates, combined with declining consumer confidence, would be key to this scenario.

Unemployment may increase slightly to 3.0% to 4.0% in 2023 due to slack in the manufacturing sector and the addition of up to 1,500 new entrants into the job market. In this scenario, the number of employed is expected to increase by between 0 and 1,000 in 2023. We expect this economic weakening to materialize in the second half of 2023.

Hard Landing

Columbus may experience declining real GDP between 5.0% to 8.0%, similar to the Great Recession (2008–2010). Significant monetary policy tightening could lead to further weakness in the automotive and durable goods sector, as well as a sharp decrease in consumer spending as jobs are lost. Small businesses would be affected as transactions would decrease in frequency.

Unemployment could increase to at least 8% and possibly as high as 13% in 2023 due to slack in the manufacturing sector spilling over into other segments of the local economy, forcing firms to reduce payrolls. In this scenario, the number of employed is expected to decrease by between 1,000 and 5,000 in 2023.

Notes

  1. U.S. Bureau of Labor Statistics data retrieved November 1, 2022 from https://www.stats.indiana.edu/laus/laus_view3.html
  2. U.S. Bureau of Labor Statistics and Indiana Department of Workforce Development data retrieved November 1, 2022 from https://www.stats.indiana.edu/ces/ces_naics/
  3. Board of Governors of the Federal Reserve System (U.S.), Motor Vehicle Assemblies: Autos and Light Truck Assemblies [MVAAUTLTTS], retrieved November 2, 2022, from FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/MVAAUTLTTS
  4. U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: New and Used Motor Vehicles in U.S. City Average [CUSR0000SETA], retrieved November 2, 2022, from FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/CUSR0000SETA
  5. U.S. Census Bureau, Retail Inventories/Sales Ratio: Motor Vehicle and Parts Dealers [MRTSIR441USS], retrieved November 2, 2022, from FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/MRTSIR441USS
  6. August 2022 light vehicle production forecast update, retrieved October 20, 2022, from https://ihsmarkit.com/research-analysis/august-2022-light-vehicle-production-forecast-update.html
  7. Ohnsman, A. (2022, July 14). Cummins promotes Jennifer Rumsey to CEO as diesel giant seeks cleantech overhaul. Forbes. https://www.forbes.com/sites/alanohnsman/2022/07/14/cummins-promotes-jennifer-rumsey-to-ceo-as-diesel-giant-seeks-cleantech-overhaul/
  8. Key Cummins Inc. financial information and associated key business information was taken from the CMI 10-K for 2021, retrieved on October 31, 2022, from: https://investor.cummins.com/sec-filings/annual-reports/content/0000026172-22-000008/0000026172-22-000008.pdf
  9. Alliance for Automotive Innovation. (October 6, 2022). Reading the meter: A look inside a cleaner, safer, smarter auto industry.  https://www.autosinnovate.org/_default_upload_bucket/Reading%20the%20Meter%2010-6-2022.pdf
  10. IHS Markit. (August 15, 2022). August 2022 light vehicle production forecast update. https://ihsmarkit.com/research-analysis/august-2022-light-vehicle-production-forecast-update.html
  11. U.S. Bureau of Economic Analysis. Table 2.1. Personal Income and its Disposition (A) (Q). Retrieved on October 12, 2022, from https://apps.bea.gov/iTable/iTable.cfm?reqid-19&step=2&isuri=1&1921=survey
  12. Behrmann, E. (2022, October 5). Global car sales seen staying below pre-pandemic levels for another year. https://www.bloomberg.com/news/articles/2022-10-05/global-car-sales-seen-below-pre-pandemic-level-for-fourth-year
  13. Alliance for Automotive Innovation. (October 6, 2022). Reading the meter: A look inside a cleaner, safer, smarter auto industry.  https://www.autosinnovate.org/_default_upload_bucket/Reading%20the%20Meter%2010-6-2022.pdf
  14. U.S. Census Bureau. (2022, October 27). Monthly advance report on durable goods manufacturers’ shipments, inventories and orders. https://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf
  15. U.S. Bureau of Labor Statistics. Number of unemployed persons per job opening, seasonally adjusted. Retrieved on November 1, 2022, from https://www.bls.gov/charts/job-openings-and-labor-turnover/unemp-per-job-opening.htm