South Bend and Elkhart forecast 2026

Hong Zhuang, Ph.D.

Director of the Bureau of Business and Economic Research and Professor of Economics, Judd Leighton School of Business and Economics, Indiana University South Bend

Despite headwinds from higher interest rates and elevated tariffs, the South Bend-Mishawaka and Elkhart-Goshen labor markets demonstrated notable resilience in 2025. The labor force expanded, employment growth outpaced the national average and the unemployment rate declined. At the same time, labor costs rose at a faster pace, reflecting tighter labor market conditions. The housing market in St. Joseph County remained active in 2025, with increases in new single-family home construction and closed sales of existing homes.

Labor force and employment

According to data from the U.S. Bureau of Labor Statistics, the combined labor force of the South Bend-Mishawaka and Elkhart-Goshen metropolitan statistical areas (MSAs) averaged 255,887 during the first eight months of 2025, an increase of 3,515 compared with the same period in 2024.¹ Trends in the monthly labor force and employment for both MSAs are presented in Figure 1.²

The South Bend-Mishawaka area accounted for most of the regional gain, with its labor force expanding by 2,980 individuals. The Elkhart-Goshen MSA also grew, though more modestly, by 535 individuals.³ Despite these recent gains, both regions have yet to return to their pre-pandemic levels. Relative to 2019, the South Bend-Mishawaka labor force remains 5,195 individuals below its earlier total, while the Elkhart-Goshen labor force is still down by 4,982.⁴

Employment conditions have also improved over the same time period. From January to August of 2025, total employment across the two MSAs averaged 244,851, up 5,216 jobs (+2.2%) from a year earlier. The South Bend-Mishawaka MSA added 3,733 positions (+2.6%), whereas the Elkhart-Goshen MSA gained 1,483 jobs (+1.6%).⁵ By comparison, employment increased 1.7% statewide and 1.3% nationally during this period.

Figure 1: Monthly labor force and employment in the South Bend-Mishawaka and Elkhart-Goshen MSAs combined

Note: Data are shown through August 2025 and are not seasonally adjusted.
Source: STATS Indiana, using U.S. Bureau of Labor Statistics data

Unemployment

Unemployment continued to ease across both metropolitan areas in 2025. Figure 2 tracks jobless trends from January 2005 through August 2025. As the graph shows, rates moved downward from the previous year. The South Bend-Mishawaka MSA recorded an average unemployment rate of 4.5% from January to August, down 0.5 percentage points from 2024 but still 0.6 percentage points above the 2019 level.⁶ In the Elkhart-Goshen MSA, unemployment fell to 4.1%, a decline of one percentage point from the previous year and 0.6 percentage points higher than its pre-pandemic rate.⁷ Both MSAs reported jobless rates above the statewide average of 3.8%. Compared with the national rate of 4.3%, South Bend-Mishawaka’s unemployment was slightly higher, while Elkhart-Goshen’s remained a bit lower.

Figure 2: Monthly unemployment rate in the South Bend-Mishawaka and Elkhart-Goshen MSAs

Note: Data are shown through August 2025 and are not seasonally adjusted.
Source: STATS Indiana, using U.S. Bureau of Labor Statistics data

Employment by industry

According to the business establishment survey from the U.S. Bureau of Labor Statistics, total nonfarm employment in the South Bend-Mishawaka MSA averaged 141,950 from January to August 2025, an increase of 2,675 jobs (+1.9%) compared with the same period in 2024.^8,9 Table 1 provides a detailed breakdown of sectoral employment changes during this period. Despite these gains, total nonfarm employment remains 4,275 jobs below the 2019 level.¹⁰

Several industries contributed to the region’s job growth in 2025. The private educational and health services sector led the way with an addition of 1,425 jobs, followed by professional and business services (+400); natural resources, mining and construction (+325); other services (+288); leisure and hospitality (+175); trade, transportation and utilities (+150) and manufacturing (+88). Offsetting these increases were job losses in financial activities (-163) and information (-13). Government employment held steady.

The Elkhart-Goshen MSA experienced a more modest employment gain. Total nonfarm employment averaged 131,613 between January and August 2025, up 0.3% from the previous year but still 4.6% below its 2019 level.¹¹ Job declines were concentrated in manufacturing (-550); trade, transportation and utilities (-100) and leisure and hospitality (-100), with a small reduction in financial activities (-13). Meanwhile, several sectors added positions: professional and business services (+463); private educational and health services (+300); natural resources, mining and construction (+175); other services (+100) and information (+75). Employment in government remained unchanged.

Table 1: Year-to-date employment by industry and metro area

Note: Data are for January through August 2025. Data are not seasonally adjusted.
Source: STATS Indiana, using Current Employment Statistics (CES) data from the U.S. Bureau of Labor Statistics

Local wages and hours worked

Labor costs rose across both metropolitan areas in 2025. In the South Bend-Mishawaka MSA, average hourly earnings for private sector workers increased 9.2% to $31.59. In contrast, the Elkhart-Goshen MSA recorded a smaller wage gain of 1.4%, with average hourly earnings at $31.77 in 2025.

Average weekly hours showed little change in South Bend-Mishawaka, holding steady at 32.40 hours in 2025, while Elkhart-Goshen saw a 2.2% increase to 36.53 hours. Consequently, average weekly earnings rose in both regions — up 9.3% to $1,023.74 in South Bend-Mishawaka and 3.7% to $1,160.46 in Elkhart-Goshen.

Housing

The housing market in St. Joseph County stayed robust in 2025. Figure 3 illustrates trends in single-family residential building permits issued in St. Joseph County from January 2005 to August 2025. During the first eight months of 2025, 199 new permits were issued, representing a 19.9% increase from the prior year and 12.4% above pre-pandemic (2019) levels. The average value per permit declined 4.3% to $446,041 in 2025.

According to data from the Indiana Association of Realtors, new listings of existing homes in St. Joseph County rose 5.6% in the January-to-August 2025 period compared with the same months of 2024. Closed sales increased 16.1%, while the median sales price climbed 13.1% over the year and reached an average of $343,150, signaling sustained strength in local housing demand.  

Figure 3: Single-family residential building permits issued in St. Joseph County

Note: Data are shown through August 2025.
Source: St. Joseph County Building Department

Forecast

The 2026 economic outlook remains uncertain, reflecting the interplay of both aggregate supply and demand shocks. Several key developments, most notably the 2025 tariff escalation, tighter immigration policies and AI-driven technological transitions, continue to shape the national and regional economic landscape.

According to the Yale Budget Lab, the average effective U.S. tariff rate reached 22.5% in 2025, the highest since 1909.¹² Higher tariffs raise import prices and production costs for firms dependent on imported inputs, while also increasing living costs for households consuming imported goods. The magnitude of this negative impact depends on the share of imports in production and household consumption.

The International Monetary Fund’s October 2025 World Economic Outlook finds that higher tariffs have primarily affected U.S. importers, with import prices (excluding tariffs) mostly unchanged and only limited increases in retail prices thus far.¹³ However, firms may gradually shift a portion of these costs to consumers, which would disproportionately affect low-income households.

At the same time, a tighter immigration policy has reduced the foreign-born labor supply, shrinking the available workforce. This decline constitutes a negative supply shock, constraining productive capacity and placing upward pressure on wages and prices. Over time, such reductions in labor supply may slow growth in labor-intensive industries and contribute to broader inflationary pressures.

Meanwhile, the AI revolution introduces both opportunity and disruption. In the long run, AI-driven technological progress will raise productivity and reduce production costs, allowing firms to produce more with fewer resources and improve overall economic efficiency. However, in the short run, the adjustment may cause displacement for workers in entry-level or routine occupations, creating temporary downward pressure on labor demand and frictional unemployment. On the demand side, AI adoption also spurs significant investment activity, as firms invest in automation, data systems and machine-learning infrastructure — boosting short-term aggregate demand and output.¹⁴

Monetary and fiscal policies are both expected to support overall demand in 2026. The Federal Reserve lowered the federal funds rate by 25 basis points in both September and October, with further cuts anticipated in 2026. Lower borrowing costs encourage household spending and business investment, helping offset the drag from higher tariffs and labor shortages. On the fiscal side, the One Big Beautiful Bill Act (OBBBA) continues to provide an expansionary stimulus through extended tax cuts, higher deduction caps, new investment incentives and increased spending on defense and border security.¹⁵ These measures are expected to lift disposable income and business activity, though at the cost of wider fiscal deficits and potential inflationary pressure.

Weighing these offsetting forces, the U.S. economy is expected to expand at a subdued pace in 2026, though inflation is likely to remain above the Federal Reserve’s 2% target.¹⁶ The combination of lower interest rates, expansionary fiscal policy and AI-driven investment should sustain growth, while higher tariffs and tighter immigration constraints pose notable risks.

These national dynamics provide the macroeconomic backdrop for regional developments in northern Indiana. In the South Bend-Mishawaka metropolitan area, the ongoing construction of the General Motors-Samsung SDI battery facilities and the Amazon data center will continue to stimulate labor demand in 2026. The local unemployment rate is projected to range from 4.3% to 4.5%, with modest wage growth reflecting the higher national price level. Household income is expected to rise further as total work hours increase.

The housing market in St. Joseph County will likely be mixed. Lower interest rates may attract additional homebuyers, though some may delay purchases in anticipation of further rate cuts. At the same time, higher tariffs on imported construction materials, such as steel and lumber, combined with immigration-related constraints on construction labor, will raise building costs. As a result, new home prices are projected to increase, indirectly pushing up prices for existing homes through redirected demand.

In the Elkhart-Goshen MSA, employment is expected to expand modestly, with unemployment hovering between 4.0% and 4.2%. Manufacturing accounts for about 46% of total nonfarm employment, with most positions tied to recreational vehicle (RV) production. Accordingly, a projected 3.9% increase in RV shipments to 350,000 units in 2026 should help sustain local manufacturing employment and stabilize broader labor market conditions.¹⁷ The opening of Amazon’s new fulfillment center in fall 2025 will add further momentum to job growth through 2026. The wage rate is also expected to rise modestly, supporting a corresponding increase in household income.

Overall, while the U.S. macroeconomic environment presents a combination of short-term risks and long-term opportunities, the combined economy of South Bend-Mishawaka and Elkhart-Goshen stands to benefit from major industrial investments, ongoing construction and modest employment growth in 2026.