Kokomo forecast 2026

Alan G. Krabbenhoft, Ph.D.

Professor of Economics
School of Business, Indiana University Kokomo

This article, as part of an annual regional economic analysis series, presents an overview of economic conditions in Indiana University Kokomo’s 14-county service region.¹ In doing so, the report examines a number of statistical measures key to providing insight into the well-being of the region. The analysis places particular emphasis on the city of Kokomo and Howard County, recognizing that many of the challenges they face are shared across the broader service region.

North Central Indiana finds its economy heavily dependent on two major sectors: manufacturing and agriculture. This is also true for much of the state outside of major metropolitan areas. A significant portion of the region’s employment and productivity is located within the manufacturing sector. The region is particularly dependent on the production of automobiles, automobile components and related industries within the supply chain.

Any map of the region quickly reveals a lack of sizable population centers. Instead, the region consists of many small towns and a heavy rural presence. Between these towns reside large expanses of fertile land ideal for growing agricultural products. While growing crops remains the primary use of such land, the importance of raising livestock and the requisite processing facilities cannot be ignored. Although the level of employment in the agricultural sector wanes in comparison to manufacturing, this region is part of “America’s Breadbasket,” signifying the importance of the agricultural sector.

The ability to meet regional and global needs for agricultural products is nonetheless dependent on numerous factors. These include growing conditions that fluctuate widely from year to year, as well as global trade of these commodities. As a result of such variability, this report also provides a review of the region’s planted and harvested acreage, crop yields, total production and per-bushel prices of the two primary crops grown in the region (corn and soybeans). At the time of this writing, the U.S. Department of Agriculture does not provide county-level data in its monthly report. In terms of livestock, we focus here on hog production. Furthermore, some data may be limited in its currency due to this fall’s government shutdown.

Unemployment

Although the economy is a long way removed from the volatile unemployment rates seen at the onset of the pandemic, it is still striving for the unemployment rates seen in the pre-pandemic days. Figure 1 shows non-seasonally adjusted unemployment rates for the first eight months of 2025. There was very little fluctuation in unemployment rate for the U.S. The Indiana and Howard County rates, however, show a greater degree of volatility, with a high-low spread of 1.5 percentage points for the state and 1.8 percentage points for Howard County. During the first couple months of 2025, the unemployment rate showed small-to-moderate drops in unemployment before experiencing a larger drop in March. However, since the declaration of “Liberation Day” in April (when the Trump administration rolled out its new tariff plan), the unemployment rate has mostly risen, especially for Howard County.

Identifying the specific cause of such increases can be difficult, but the uncertainty created by widespread tariffs and the following rise in unemployment are not coincidental. In addition, the removal of the EV tax credit has had an effect on the regional manufacturing industry. Potential changes in national trade policy are likely to create uncertainty in the economy and less stability in unemployment rates.

Figure 1: Monthly unemployment rates for U.S., Indiana and Howard County, 2025

Note: These data are not seasonally adjusted. August 2025 data is preliminary.
Source: STATS Indiana, using Local Area Unemployment Statistics (LAUS) from the U.S. Bureau of Labor Statistics

The unemployment rates for the 14 counties in the service region are shown in Figure 2. For the eight months displayed, there seems to be a relatively consistent and tight-knit pattern for 13 of the 14 counties. Howard County stands as a significant outlier. Its unemployment rate ranged from a high of 7.3% in January to a low of 5.5% in May. In contrast, Hamilton County, which is much less dependent on manufacturing and has a much more diverse economic base, has consistently showed the lowest rates of unemployment within the region. This is consistent with previous studies showing that Hamilton County is often the least affected by volatility in the unemployment rate.

The agricultural sector

Agricultural production over the last three years has remained relatively stable, as measured in acres planted and harvested (see Table 1). While 2024 represented a downturn in corn yield per acre, yields appear to have bounced back in 2025. This year, the greatest challenge farmers faced was deciding early in the spring how much of their land to allocate to growing corn versus soybeans, amid uncertainty surrounding U.S.-China relations. While the changes for 2025 were not very significant, farmers in Indiana did slightly reduce the planted acreage of soybeans and slightly increase the acreage of corn. Even with these changes, U.S. farmers have remained on edge as China has refused to purchase U.S. soybeans. The press has focused on the likelihood that many farmers dependent on soybean sales were in danger of bankruptcy. A tentative agreement was reached very recently for China to resume soybean purchases during the remaining months of 2025, with projections indicating continued purchases through 2028.

In 2025, projected market prices for both corn and soybeans have seen a downturn. Soybeans have experienced a 1.8% decrease in price, while corn prices have fallen 10.2%. Despite near-record crop yields, these price drops have generated fear among farmers and uncertainty over whether family farms can hold out. Anticipation of large-farm bankruptcies has led to even greater uncertainty in the farming industry. Since April of 2025, the U.S. has not seen any orders for soybeans from China, a nation that typically imports roughly 20% of its annual need from the U.S. However, some hope has returned following the administration’s recent trip to Asia, where a deal has reportedly been struck in which China will resume its soybean purchases with anticipated shipments of approximately 12 million metric tons for the remainder of 2025 and annual purchases of 25 million tons in each of the next three years. While encouraging, these projected annual purchases are still considerably less than the previous year’s annual purchases. Only time will tell if this optimism holds.

Hogs

Indiana hog producers reduced their inventory from September 2024 to September 2025 by 200,000 heads (a reduction of roughly 4.5%). Litter rates were also down by 1.3% from 11.35 to 11.2 over the course of the year. These figures are quite consistent with national figures. 

Forecast

Nearly five years since the pandemic, the national, state and local economies have continued to move forward, albeit at a relatively slow and sporadic pace. Surprisingly, Howard County appears to be lagging the other regional counties. This is especially puzzling given the $6 billion investment by StarPlus Energy in the county, the completion of its first EV plant in 2025 and anticipation for the second plant coming online in 2027. Collectively, the project is expected to bring 2,800 new jobs to the region. Tariffs and problematic trade disagreements remain key factors in the region’s future.

Also critical is the status of the EV tax credit that was allowed to expire at the end of September. Failure to reinstate the tax credit is likely to have dampening effects on StarPlus Energy’s future. In the meantime, production of EVs is anticipated to continue as planned. Stellantis, the region’s largest employer, continues to make commitments regarding its future, recently announcing a $13 billion investment in U.S. factories with more than $100 million targeted for Kokomo (where the new Hurricane 4 EVO engine will be built). With this investment, Kokomo expects another 100 new jobs to be created.

The expansion of manufacturing within the region has not been without some challenges. Given the projected influx of nearly 3,000 new jobs, the region faces a considerable housing shortage, especially since approximately half of the new employees will be coming from South Korea. The available housing stock is limited, albeit growing slightly. Home prices have continued their upward trend, rising by more than 7% in 2025. This is likely to increase even more as the Federal Reserve has made two anticipated interest rate drops in the last four months. Mitigating this, at least to some extent, are ongoing efforts to play catchup with new construction of single-family homes and multifamily dwellings.  

Assuming the moderation of trade restrictions, one can see a brighter future for agriculture within the region. Stability in agricultural production, as well as trade policies, will provide welcome comfort to farmers. However, the looming threat of ongoing or escalated trade tensions continues to keep many in the agricultural sector awake at night.

Lastly, another factor that makes forecasting more challenging is the prospect of inflation. As previously mentioned, the Federal Reserve has made two 25-basis-point reductions in interest rates in the last quarter. A third was anticipated following its December meeting. However, concerns that such a move could exacerbate inflation have led many to believe that a rate change is unlikely. This, coupled with the ongoing impact of tariffs on imported goods, means the average consumer will likely find increasing prices in the grocery aisle, especially during the winter months as more produce is imported from Central and South America. Manufacturers who depend on importing critical resources or supplies from abroad have little choice but to pass the additional production costs on to the consumer.

Given our region’s dependence on manufacturing and agriculture, one option worth consideration involves diversification of our economic base. Increasingly, areas throughout Indiana have had lively discussion over the establishment of data centers. Ease of access to two major interstate highways also raises the question of possible multi-modal facilities. Such changes do not suggest the abandonment of our manufacturing roots. Rather, through diversification, the degree of economic variability may be reduced slightly with expansion into the service sector.

Notes