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Kokomo forecast 2023

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Professor of Economics and Management Information Systems, School of Business, Indiana University Kokomo

This article, as part of an annual series of regional economic analysis, presents economic data and forecasts for the Kokomo metropolitan statistical area (MSA), which includes Howard County. The analysis also looks at the Indiana University Kokomo service region.1 This region of north central Indiana centers around the city of Kokomo. Its western portion is closely connected to the Lafayette MSA, while the southern part closely follows the economy of the Indianapolis metropolitan area.

The regional economy relies on three main components: manufacturing, services and agriculture. Manufacturing represents a traditional strength of the region and accounts for a larger share of the economy as compared with both the Indiana and national averages – about 30% in the Kokomo MSA. Agriculture plays an important role outside of the large population centers.

Employment and unemployment

In 2021, the region recovered from the impact of the coronavirus pandemic, and the labor market was quite tight at the end of the year, heading into 2022. Unemployment rates reached historic lows close to 1% in several of the region’s counties (see Figure 1). Throughout 2022, labor markets returned to normality. Many people who left the labor force at the height of the pandemic resumed their participation in the labor market. The labor force and both employment and unemployment numbers showed a steady increase in 2022. By August, most of the region was closer to its natural rate of employment and unemployment, with the unemployment rate around 3%.

Unemployment rate figures in the region generally move in a similar direction, reflecting commonality in the makeup of the economy. The outliers are Howard County with unemployment rates on the high side and Hamilton County on the low side. Hamilton County continues to have an extremely tight labor market. Howard County, including the city of Kokomo, exhibited significant variation in unemployment rates, ranging from 2.9% to 6.9% over the last year. In Howard County, the number of jobs actually exhibits much more stability than the unemployment rate figures display. However, the total labor force and unemployment numbers are volatile, indicating a high share of the county’s residents are marginally attached to the labor force. Howard County also has a higher share of manufacturing jobs compared to the region and the state of Indiana, and so its employment figures are strongly influenced by any irregular activities within the manufacturing industry.

Figure 1: Regional unemployment rates by county

Line chart and data table from September 2021 to August 2022, showing unemployment rates for each of the 14 counties in the region.

Note: Unemployment rates are not seasonally adjusted. August 2022 data are preliminary.
Source: STATS Indiana, using Local Area Unemployment Statistics (LAUS) from the U.S. Bureau of Labor Statistics

Table 1 presents a summary of the employment data for the Kokomo MSA encompassing Howard County. The share of manufacturing jobs is relatively high and close to 30%. Government employment including public schools and hospitals makes up 13.6% of the total nonfarm jobs in the MSA. Other important sectors include retail trade with 12.7%, as well as leisure and hospitality with 11.9%. The overall number of jobs is relatively stable between the annual averages for 2021 and August 2022, with the largest increases coming in the wholesale trade (+12.5%) and natural resources and construction (+7.7%) industries.

Table 1: Employment in Kokomo MSA by industry, 2021-2022

Industry % of total
employment
Employment,
August 2022,
(thousands)
Employment,
2021 average,
(thousands)
% change,
2021-2022*
Total nonfarm 100.0% 36.9 36.7 0.5%
Total private 86.4% 31.9 32.0 -0.3%
Government (includes schools & hospitals) 13.6% 5.0 4.7 6.4%
Goods producing 29.3% 10.8 11.1 -2.7%
Natural resources and construction 3.8% 1.4 1.3 7.7%
Manufacturing 25.5% 9.4 9.8 -4.1%
Service-providing 70.7% 26.1 25.6 2.0%
Trade, transportation and utilities 17.6% 6.5 6.3 3.2%
Wholesale trade 2.4% 0.9 0.8 12.5%
Retail trade 12.7% 4.7 4.5 4.4%
Transportation and utilities 2.4% 0.9 0.9 0.0%
Information 0.5% 0.2 0.2 0.0%
Financial activities 3.3% 1.2 1.2 0.0%
Leisure and hospitality 11.9% 4.4 4.2 4.8%
Other services 5.1% 1.9 1.8 5.6%

Note: Employment numbers are not seasonally adjusted. August 2022 data are preliminary.
*Percent change calculations are using the 2021 annual average data and the August 2022 data.
Source: STATS Indiana, using Current Employment Statistics (CES) from the U.S. Bureau of Labor Statistics

Table 2 presents a summary of the average wage data for the Kokomo MSA. Average weekly wages in most industries increased between 2021 and 2022. The largest wage increases occurred in manufacturing (+23.5%), utilities (+16.1%) and the small category of arts, entertainment and recreation jobs (+31%). Declines in wages were observed in real estate and leasing (-3.8%); transportation and warehousing (-4.5%); and agriculture and forestry (-4.0%).

Table 2: Average wages in Kokomo MSA by industry, 2021-2022

Industry Employment,
Q1 2022
Avg. weekly
wage, Q1 2021
Avg. weekly
wage, Q1 2022
% change,
2021-22
Total 34,674 $1,027 $1,158 12.8%
Agriculture and forestry 80 $941 $903 -4.0%
Utilities 129 $1,932 $2,243 16.1%
Construction 1,162 $912 $983 7.8%
Manufacturing 9,425 $1,819 $2,247 23.5%
Wholesale trade 766 $1,188 $1,349 13.6%
Retail trade 4,582 $542 $588 8.5%
Transportation and warehousing 937 $937 $895 -4.5%
Information 273 $797 $857 7.5%
Finance and insurance 860 $1,483 $1,528 3.0%
Real estate and leasing 284 $759 $730 -3.8%
Professional and technical services 783 $788 $828 5.1%
Admin. and support services 1,080 $540 $609 12.8%
Educational services 2,854 $715 $737 3.1%
Health care and social services 4,975 $851 $953 12.0%
Arts, entertainment and recreation 96 $294 $385 31.0%
Accommodation and food services 4,031 $303 $319 5.3%
Other services 1,066 $452 $505 11.7%
Public administration 1,252 $839 $871 3.8%

Source: STATS Indiana, using Quarterly Census of Employment and Wages (QCEW) data from the U.S. Bureau of Labor Statistics

Economic forecast

The economic well-being of the Kokomo region continues to rely on the health of its manufacturing. The big news in May 2022 was the announcement by Stellantis and Samsung SDI that Kokomo was selected for a new electric vehicle battery manufacturing facility. Stellantis was previously known as Fiat Chrysler Automobiles and rebranded after a merger with France-based automaker Peugeot. Targeted to become operational in 2025, the plant aims to have an initial annual production capacity of 23 gigawatt hours (GWh), with a possible increase to 33 GWh in the next few years. The total capacity would continue to increase as demand for Stellantis electric vehicles is expected to rise. The joint venture company will invest over $2.5 billion and create 1,400 new jobs in Kokomo and the surrounding areas. Total investment may reach $3.1 billion. The new facility will supply battery modules for a range of vehicles produced at Stellantis’ North American assembly plants. This is Stellantis’ only planned electric vehicle battery factory in the U.S. and only the second in North America.

Early construction activities for the new Stellantis factory have begun at the site with production operations planned to launch in the first quarter of 2025. The Indiana Economic Development Corporation created a substantial incentive package for the joint venture. Some of the tax breaks and investment funds will go to the companies and some of it will pay for infrastructure for the project. The incentive package includes up to $37.5 million in conditional tax credits, up to $2 million in conditional training grants and up to $20 million in conditional redevelopment tax credits. Stellantis can only receive the incentives once Indiana residents are hired for the new jobs.

New investment by Stellantis, as well as the re-tooling of existing facilities, is expected to provide a positive impact on the region’s employment and wages in 2023 and beyond. The Kokomo MSA lagged other metropolitan areas of the state in employment growth in 2021-22. This trend is expected to reverse in 2023-24. Projections made by the Indiana University Center for Econometric Model Research (CEMR) demonstrate that Kokomo is expected to shift from a decline in total employment to significant growth in the next two years (Figure 2). Kokomo is the only MSA in which most of the employment growth is still in the future.

Figure 2: Average annual employment growth rate data and forecast in selected Indiana MSAs, 2021-2024

Column chart showing "past year" and "next 2 years" growth rate forecast for Indianapolis, Lafayette, Muncie, Kokomo and Indiana.

Note: The past year refers to the average annual growth rate from 2021 Q1 to 2022 Q2. The next 2 years refers to the average annual growth rate from 2022 Q1 to 2024 Q1.
Source: Indiana University Center for Econometric Model Research

The CEMR forecast estimates employment figures (Figure 2) as well as unemployment rates (Figure 3) for the state of Indiana and its MSAs. The forecasts are based on trends in labor market data compiled by the U.S. Bureau of Labor Statistics. Current employment and unemployment data show the Kokomo MSA behind the overall trend of pandemic recovery.

Figure 3: Unemployment rate data and forecast in selected Indiana MSAs, 2021-2023

Column chart showing unemployment rate for second quarters of 2021, 2022 and 2023 for Indianapolis, Lafayette, Muncie, Kokomo and Indiana.

Source: Indiana University Center for Econometric Model Research

As seen in these tables and figures, the economic picture is forecasted to change dramatically in 2023 and 2024. As the other Indiana MSAs see slowing employment growth, the Kokomo MSA is expected to show an average annual growth rate of more than 5% in employment. The unemployment rate is expected to decline close to the state’s rate of 3% in 2023.

National and state-level economic factors will continue to affect the local economy. As inflation remains stubbornly high and the Federal Reserve continues to raise interest rates, the cost of capital increases and economic activity in the U.S. and in Indiana is dampened. However, Kokomo and the surrounding north central Indiana area is expected to continue catching up with the state’s average level of labor market performance. New business investment including the Stellantis electric vehicle battery plant will have an increasingly positive impact on the area. Overall, this provides reason to remain cautiously optimistic about the area’s economic well-being.

Notes

  1. This 14-county service region includes Howard County, along with the following counties: Carroll, Cass, Clinton, Fulton, Grant, Hamilton, Madison, Miami, Pulaski, Tippecanoe, Tipton, Wabash and White.

References