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Economic forecast

The Community Research Institute looks at the good and bad news for Northeast Indiana

By Michael Summers

michael_summers@fortwaynereader.com

Fort Wayne Reader

2010-12-19


Here’s some news you may not know — the recession officially ended in June, 2009.

At least that’s what the National Bureau of Economic Research —the leading authority in economic research in the US — declared a few months ago. But if the announcement leaves you scratching your head and wondering if you missed something… well, you haven’t. Unfortunately. The economy is still pretty grim, unemployment is still high, and though there are definite and encouraging signs of improvement, especially in Northeast Indiana, recovery has been painfully slow, and probably will continue to be so, with no sign of a sudden explosion of economic growth in our future.

In other words, we — the nation and the region — are no longer at the bottom of the trough. But we can still see the bottom from here.

Those are, in simple terms, the findings of an annual economic outlook project conducted by the Kelly School of Business at Indiana University and the Indiana Business Research Center. Published in the Indiana Business Review every year, the report takes a look at where Indiana has been, makes a few predictions for the year ahead, and shows how the state stacks up with the rest of the nation.

The data for the Fort Wayne area is compiled and analyzed by the Community Research Institute at IPFW. CRI’s director, John Stafford, says the report has examined how the Fort Wayne metropolitan area has done from the start of the recession — December 2007, according to the NBER — to its end in June of 2009, and this year includes data through September 2010.

For anyone who wants to know exactly what kind of shape the Fort Wayne area is in economically, the findings are pretty enlightening. But before we move on to that, Stafford is going to try to explain how we could be out of a recession for well over a year, without feeling like we’re out of a recession. “Most of us think of the recession as a dropping off of economic activity, and then the coming back out of it,” explains Stafford. “But in a technical sense, it’s really the first half of that — you hit the low point, and then you start recovery. In technical terms, the end of a recession really connotates the bottom of the trough, the low point.”

So the recession ended when the economy stopped declining and started getting a little better (relatively speaking). As part of the report, Stafford and the CRI looked at what’s happened economically in the Fort Wayne metropolitan area from December 2007 through September 2010. We were hit harder in terms of loss of employment than what occurred nationally. The numbers: our employment went down 7.8%. Across Indiana it went down 7.2%. Nationally, it went down 5.3%.

This is no surprise. As Stafford explains, the manufacturing sector — much of it tied to the auto industry — is a huge driver of the economy around here. It’s been that way for decades. “Manufacturing didn’t start the recession, but that area certainly felt the brunt of it,” Stafford says. “We lost over 20% of our manufacturing jobs in the ‘downside’ part, from December 2007 through June 2009. We lost 23.9%; the state lost 21.7%. The nation lost 14.2%.”

The good news — once again, relatively speaking — is that, in the manufacturing sector, employment in the Fort Wayne area has grown by 9.2%, compared to a growth of 3.5% in Indiana and a loss of just under 1% for the rest of the nation.

It’s an encouraging sign for our area, but when talking about the year ahead, Stafford strikes a more cautious note. Obviously, the rebound in manufacturing will continue if consumers continue spending — if they demand product, we’ll make product. Pretty simple economics. But of course, the manufacturing sector, as important as it is to the Fort Wayne area, is only part of the picture… “Another portion is our ability to create what’s called professional, white collar, advanced service jobs,” Stafford says. “That’s an area where we have lagged behind a number of other metropolitan areas over the last decade.”

Where other metropolitan areas have been able to deal with the declining number of manufacturing jobs by picking up the slack with what Stafford calls “advance service jobs,” Fort Wayne and many other cities of its ilk have had a tougher time. “Part of that is maybe somewhat unique to our area,” Stafford says. “We’re in there with the Daytons and Toledos and Rockfords and the Peorias — we’re in a different category than the Chicagos and the Minneapolis — and we’ve all struggled with this ability to create those high-wage, white collar professional jobs.”

And even jobs in the manufacturing sector are changing. As Stafford says, there’s a lot of good, solid employment in that sector, but not a lot of new jobs. “Historically, those manufacturing jobs have been some of our more higher wage job opportunities,” Stafford continues. “But those jobs are changing dramatically. Manufacturers are doing more with fewer people, and those that aren’t doing more with fewer people are at a competitive disadvantage and likely not to be around for very long. You want to be supportive of manufacturers who are doing things to make themselves competitive, but along the way they’re doing more with automation, with technology, with information management, and doing it less with sheer numbers of people.”

“That’s a real challenge when you’re an area like Northeast Indiana. It’s difficult for that to be the sector that creates large numbers of new jobs.”

A lot of people will recognize that this has been an issue that the Fort Wayne area has been grappling with for decades. Stafford himself has been on the front lines for much of it — he started in 1975 as a city planner for the City of Fort Wayne and Allen County, worked in the planning department through the 70s and 80s, served with the Helmke administration on two different occasions, and also worked with many area business organizations (that’s the brief overview). “In the late 70s, we got clobbered. Absolutely clobbered,” he says. “But we had a really strong recovery in jobs from about 1983 or 84 to about 1997, when things started to level off.”

A combination of factors leads to that recovery that began in the mid 80s, but it was more than simply being in the right place at the right time when companies began to look for somewhere to set up operations; leadership in Allen and other Northeast Indiana counties did their homework and were able to offer some very competitive packages to interested companies. “The preparation and the opportunities matched,” Stafford says. “Fort Wayne had several large wins in that time period. The General Motors assembly plant happened in that period. ITT ramped up their production of the SINCGARS radio for the defense industry. A number of other industries came in here. And in some of the other counties, companies came across the line from Michigan, and found Indiana a better business climate. These were generally relatively small operations tied to the automotive industry, but they brought a lot of jobs to many of those counties.”

Things leveled off in the late 90s, when in terms of jobs or per capita income, we weren’t growing as rapidly as the rest of the country. Some of that was due to the specific decisions of various companies to leave or change operations — a hazard that every community has to deal with occasionally. But the economy was already softening well before the beginning of the recession in 2007 and the “crash” in 2008.

Stafford sees 2011 looking much like 2010, with a gradual decline in the unemployment rate, and other positive news arriving in drips — companies expanding, re-hiring workers, or locating here. All-in-all, more good news than bad (probably), but still, there won’t be an explosion in employment any time soon. “There is a collective forgetfulness that this wasn’t your typical, cyclical recession, where you tend to see a slight downturn that doesn’t last for too long, and then a fairly robust recovery,” Stafford says. “We went through some very fundamental shocks in the economy. This thing started out with the housing bubble, started out with the crisis in the financial markets. It didn’t start out with a decline in consumer spending that lead to lack of purchasing of goods that ended up being a loss of employment in manufacturing. That’s a typical short-term recession. That’s the kind of thing we saw in 2000/2001, it’s what we saw in the 1990/1991 time frame. This was much different, much more fundamental economic factors driving it.”

And nurturing this slow recovery requires a lot of hard work. Stafford, as we’ve said, has been involved in local economic development since the mid-70s, and he is convinced there’s no “magic bullet” solution here. But on the other hand, he sees more emphasis placed on economic development now than at any time in the last 20 years, with a level of interest and effort that rivals what happened in the early 80s. He cites recent broad-based initiatives to look at ourselves and our region — like YLNI’s Vision 20/20 survey — as well as efforts in professional development, regional marketing, and other investments we are making that make the city and the region more competitive. As an example, Stafford points to several “shovel-ready” sites that were recently certified. Maybe it’s not a particularly huge example, but that’s the point: it underscores the kind of small steps that need to be taken, and the slow way in which these things come together. “It’s a piece of the puzzle,” he says. “You’ve got to have quality locations for companies to put facilities in. If you don’t, they’re simply not looking at you. It doesn’t make it happen; it’s just one of those precursors.”

And when it doesn’t happen overnight, we shouldn’t get discouraged. Well, more to the point, we can’t afford to get discouraged. “We have to think of ourselves as a community in a very competitive sense,” says Stafford. “We are competing with other communities worldwide for jobs and investment, and we’re doing that every single day. And the minute we forget that, we’ll lose out. We’ve got to think, as a community, what investments are we making that make us more competitive, that make us more attractive for jobs, and what are we investing in that doesn’t do that.”

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