Columbus forecast 2026

Steven H. Mohler, D.B.A.

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

Frank Wadsworth, Ph.D.

Professor of Marketing and International Studies, Indiana University Division of Business, Columbus

Indiana serves as a manufacturing center for the United States, as three of Indiana’s metropolitan statistical areas (MSAs) rank in the top five MSAs in the country in percent of gross domestic product (GDP) provided by manufacturing activity. For the past 24 years, Columbus, Elkhart and Kokomo (along with Lima, Ohio) have consistently led the nation in manufacturing as a percent of GDP.¹ Based on this significant manufacturing dependence, Columbus experiences volatile GDP performance when compared to the state of Indiana and the United States (see Figure 1). However, this volatility has not been reflected in the unemployment rate during the past decade.

Figure 1: Year-over-year change in real GDP for U.S., Indiana and Columbus MSA

Source: CAGDP9 real GDP by county and metropolitan area and SAGDP9 real GDP by state, U.S. Bureau of Economic Analysis

Employment and unemployment

Our analysis of the Columbus MSA notes a concern regarding the labor force participation rate. The U.S. Bureau of Labor Statistics reported a benchmark revision in the Columbus labor force data between 2015 and 2016. This revision included a decrease of approximately 3,600 people in the Columbus labor force in January 2016 (not seasonally adjusted). As a result of this labor force data change, there was a six-point decline in the labor force participation rate for Columbus, bringing it to a level below the state and national rates. A better understanding of the declining labor force participation rate will be needed for future Outlook activities.

Columbus concluded 2024 with higher unemployment than 2023 and the highest unemployment rate since 2014, excluding the pandemic year of 2020. During 2024, the monthly unemployment rate varied between 3.3% and 4.7%. Monthly data for 2025 varies between 2.8% in April and 4.4% in January and February.

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

	2016	2017	2018	2019	2020	2021	2022	2023	2024	2025
U.S.	4.8%	4.1%	3.6%	3.3%	7.7%	4.6%	3.3%	3.6%	3.9%	4.5%
Indiana	4.0%	3.2%	3.0%	2.8%	6.0%	2.9%	2.6%	3.2%	4.0%	3.8%
Bloomington	3.7%	2.8%	2.7%	2.4%	4.6%	2.4%	2.2%	2.9%	3.4%	4.0%
Cincinnati*	4.0%	3.4%	3.1%	2.9%	5.0%	2.5%	2.2%	3.1%	3.6%	3.5%
Columbus	3.3%	2.6%	2.3%	2.2%	5.6%	2.8%	2.2%	3.0%	3.8%	3.6%
Evansville	3.8%	2.8%	2.8%	2.6%	5.6%	3.1%	2.5%	3.1%	3.7%	3.6%
Greensburg	3.3%	2.7%	2.8%	2.4%	5.2%	2.9%	2.3%	2.8%	3.5%	3.6%
Indy-Carmel-Greenwood	3.6%	3.0%	2.8%	2.6%	6.3%	3.1%	2.4%	3.0%	3.7%	3.6%
Kokomo	3.6%	3.1%	3.0%	3.0%	7.4%	6.1%	4.1%	4.0%	7.0%	6.2%
Louisville*	3.8%	3.2%	3.1%	2.8%	5.7%	2.7%	2.3%	3.0%	3.6%	3.5%
North Vernon	3.7%	2.9%	2.7%	2.2%	4.8%	2.9%	2.5%	2.8%	3.5%	3.4%
Seymour	3.3%	2.7%	2.5%	2.2%	4.7%	2.7%	2.4%	2.7%	3.2%	3.50%

* Only the Indiana portion of the metro is included.
Note: Data are not seasonally adjusted. 2025 shows preliminary August data because September data is not yet available due to the government shutdown. Highlighted 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

Labor market: Cautious optimism amid cooling demand

Columbus's unemployment rate has remained impressively low, stabilizing around 3.6% in mid-2025² after sharp post-pandemic declines (see Table 1). However, the Indiana Business Research Center projects a modest increase to 3.9% unemployment for 2026 — a shift driven by broader economic rebalancing rather than local weakness.

Three key factors explain this trajectory. First, as the Federal Reserve continues lowering interest rates, the economy is decelerating toward its sustainable long-run growth rate. This cooling produces slower job creation statewide, naturally pushing unemployment slightly higher. Second, after historically tight labor markets, employment demand across Indiana MSAs is normalizing from unsustainable pandemic-era lows. Third — and most encouraging for Columbus — local employment growth is rebounding after 2024's significant slowdown, with forecasts showing improvement through 2025 and 2026. This acceleration should prevent sharp unemployment increases and keep our labor market relatively healthy.

Yet Columbus faces distinct vulnerabilities tied to its economic structure. Manufacturing comprises approximately 43.8% of MSA employment as of early 2025³ — an extraordinary concentration that amplifies sector-specific risks. The primary concern centers on automotive and durable goods weakness, driven by sustained high interest rates and depressed consumer confidence. Cox Automotive projects U.S. auto sales will decline by low single-digit percentages through late 2025 into 2026, pressured by tariff-driven price increases on imported vehicles and metals.⁴ Under adverse scenarios, manufacturing slack could push Columbus unemployment into the range of 4.0% to 4.5%.

Balancing these risks are substantial upside factors. Major manufacturing investments from Toyota Material Handling and King's Hawaiian will bring significant employment in 2025 and 2027. Additionally, the national data center construction boom — expected to exceed $1 trillion over five years — creates robust demand for diesel-powered equipment and lift trucks that Columbus manufacturers produce. These investments provide important diversification and growth potential.

Real estate and building permits

The 2026 housing outlook reflects persistent supply-side frictions and subdued demand as builders enter the year with muted sentiment. After 12 months of weak buyer traffic and elevated inventories, industry forecasts show continued downward revisions to single-family construction starts.

Three binding constraints will drive housing outcomes in 2026. First, borrowing costs remain prohibitive. Builders consistently identify high mortgage and construction interest rates as their primary financing obstacle in recent National Association of Home Builders surveys.⁵ This limits both buyer affordability and construction financing availability. Rather than launching new projects, builders increasingly deploy price cuts and incentives to move existing inventory. While the Federal Reserve's recent quarter-point rate reduction provides marginal relief, meaningful housing market recovery requires 30-year mortgage rates falling to the 4% to 5% range.

Second, materials and trade frictions — including tariffs and elevated costs for imports such as Canadian lumber — have increased construction expenses while injecting uncertainty into project scheduling and budgets. This volatility reinforces builder caution about starting new developments. Third, labor availability remains constrained by demographic shifts and immigration policy pressures. Many builders continue citing labor cost and availability among their top operational challenges, extending completion timelines and driving wages higher.

These dynamics create asymmetric market implications for 2026. Multifamily and remodeling activity should remain relatively strong as developers and homeowners pivot toward rentals and "stay-and-improve" renovations amid reduced mobility. New single-family starts, however, will stay restrained until financing costs ease and builders reduce current inventories. National permitting data through mid-2025 confirms this retrenchment, with recent monthly figures signaling further moderation. The nation's two largest builders — D.R. Horton and Lennar Group — expect flat sales and declining earnings this year.
Columbus metro builders should anticipate emphasizing smaller, lower-risk product types, deploying targeted incentives and postponing large-lot expansions until financing and input-cost conditions stabilize.

U.S. vehicle production and sales

The U.S. vehicle market should close 2025 strong, with sales running at a 16.4-to-16.9-million-unit annual pace.⁶ Yet 2026 presents fundamentally different conditions shaped by trade policy uncertainty, supply chain vulnerabilities and persistent affordability challenges.
The base case forecast of 15.8 million units assumes current tariff policies — including 25% duties on imported vehicles and parts — remain active, creating sustained price pressure. With average transaction prices near $47,500 and monthly payments at $913, consumers remain strained, with 56% reporting it's a bad time to purchase.⁷ The electric vehicle transition will slow as the $7,500 federal tax credit expired in October 2025. Hybrids should partially offset declines in the EV market.

An optimistic scenario reaching 16.9 million units requires eased trade tensions and reduced tariffs, improving affordability through lower interest rates and increased manufacturer incentives. Conversely, a pessimistic outcome of 14.5 million units emerges if escalating trade wars and supply disruptions — such as the Novelis aluminum plant fire constraining F-150 production — compound production constraints.

Implications for Indiana

As America's second-largest auto-producing state, Indiana's more than 140,000 manufacturing jobs and extensive supplier network tie directly to these automotive outcomes. While our investments in EV battery production and supply chain infrastructure position us favorably for long-term growth, 2026 represents a pivotal year requiring careful navigation of industry-wide challenges. Success depends on managing near-term headwinds while positioning for the inevitable transition ahead.

Gross domestic product (GDP)

Local real GDP growth: From 2013 to 2023, the national and Indiana chained GDP grew at a compound annual growth rate (CAGR) of 2.5% and 1.9%, respectively.⁸ During this same period, the Bloomington, Cincinnati, Indianapolis and Louisville MSAs grew at a 1.9% CAGR or more.⁹ Columbus' GDP actually declined at a CAGR of 0.2% during this period. In 2023, manufacturing accounted for 50.7% of the Columbus GDP number. Additionally, Columbus manufacturing is strongly correlated to vehicle production and assembly and Cummins' net revenue. Table 2 presents the GDP change for the nation, Indiana and several Indiana metros – including Bloomington, Evansville and Indianapolis. Only Columbus experienced a GDP decline in 2023. The Columbus and Kokomo GDP fluctuations reflect the cyclical nature of a manufacturing/durable goods-based economy.

Outlook for 2026

Based on the above review of economic data, Columbus may experience approximately flat real GDP change (-1.0% to +1.0%) for 2025, similar to 2024. Weakness in the automotive and durable goods sector fueled by continuing high interest rates and combined with low consumer confidence may be key to this scenario. For 2026, Columbus real GDP is projected to increase between 0.0% and 2.0% based on moderation in consumer durable goods spending, increasing revenue for Cummins,¹⁰ reduced economic uncertainty and declining interest rates.

In this scenario, key downside risks to employment include potential weakness in the automotive and durable goods sectors, driven by relatively high interest rates and low consumer confidence. Cox Automotive expects U.S. auto sales to drop by low single-digit percentages in late 2025 and into 2026, mainly driven by price increases, caused by new tariffs on auto imports and metals. This could lead to potential slack in the manufacturing sector, possibly pushing unemployment into the 4.0% to 4.5% range. Also, structural challenges may result in persistent workforce shortages and skill mismatches in 2026. Furthermore, the lack of available and affordable new and existing housing is noted as a factor that may drag on economic growth by limiting the ability to attract or retain a larger workforce.