News and Tribune

November 16, 2012

SUNSHINE AND RAIN: Business outlook has ups and downs

By JEROD CLAPP
jerod.clapp@newsandtribune.com

NEW ALBANY — Some businesses have seen growth in the Louisville Metro and Southern Indiana areas, but local business experts say there’s still a long way to go before things are really good.

The panelists at Indiana University Southeast’s annual Economic Outlook Breakfast on Thursday forecasted 2013’s economy. Uric Dufrene, IU Southeast’s Sanders Chair in Business, said while payrolls in Southern Indiana and the Louisville Metro area are looking strong, they’re still not up to prerecession levels.

He said with 620,000 payrolls slated in the area, there’s just 7,000 fewer than there were before the recession. But he said though growth has been good, the local economy isn’t out of trouble yet.

“But as we move past 2012, I guess the question is can we expect this growth to continue or decelerate or level off with the state... and U.S. economies,” Dufrene said.

He said of those payrolls, hospitality, manufacturing and professional business services are the strongest. The growth experienced in manufacturing happened mainly in automotive production and automotive parts, which he said might not continue to be as strong as they were this year.

“Now, much of that growth, in my opinion, in the automotive production and automotive sales that we’ve been seeing is basically driven by pent-up demand in the U.S. consumer,” Dufrene said. “The question is whether or not these gains can be sustained once we move past this pent-up demand phase.”

And while he said weak local and global demand pose problems for manufacturing, some of that deceleration could be compensated for in housing and construction.

He said housing prices seem to be on the rise and building permits are booming in the area, but construction jobs have been relatively flat for the last year. But he said with the onslaught of permits, that could change soon.

And unemployment overall is decreasing, but he said there are still concerns with the number of people not working in the area. He said though the most current unemployment data is from September, there has been a notable slowing in unemployment’s decline.

“I’m not suggesting that this data point alone is indicative of a recession, but it is data that we can’t ignore and I think it’s just further evidence of this slower payroll growth that we will see for the entire region in 2013,” Dufrene said.

He said though the area’s unemployment rates are lower than the national average, there’s still about twice as many people unemployed as there were before the recession hit in 2008. Clark and Floyd counties’ unemployment rates are both lower than 7 percent; Indiana’s stood at 8.2 percent in September.

Dufrene said while much of 2012’s economic outlook for the region was somewhat strong, he expects things to slow a little more in 2013.

“But sometimes, as they say, good things must come to an end and I do believe that we will begin to see some somewhat slower growth,” Dufrene said. “Not negative payrolls, but certainly if we go off the fiscal cliff, there will be a recession, there’s no question about that. But we will see slower growth for Louisville Metro for 2013, probably around 2 or 1.5 percent versus around 3 percent.”



INDIANA AND BEYOND

Statewide, jobs have been increasing about 50,000 a year, another panelist said. Jerry Conover, director of the Indiana Business Research Center at the Kelley School of Business, said the state lost about 200,000 jobs in the recession and has since recovered about 150,000 of them.

“We haven’t seen that kind of growth in Indiana in employment since the late ’90s when employment was really booming,” Conover said. “And that’s certainly welcome relief from years when we were doing well to add 10,000 jobs the whole year.”

Nationally, another panelist said unemployment is declining but still at near 8 percent, which he said is more than normal.

Kyle Anderson, an assistant professor of business and economics at the Kelley School of Business at Indiana University in Indianapolis, said he thinks about 2 million jobs will be added to the work force in 2013 keeping the unemployment rate around 7 percent. But the big looming question is whether Washington will resolve the fiscal cliff coming up or not.

“Politicians seem to be pretty good at putting off immediate pain and pushing our problems down the road, which is essentially what we’re asking them to do here,” Anderson said. “And as much as it sounds good to push our problems off down the road, we’re going to come to a time where we need to have more tax revenue and less government spending to bring down the deficit.

“However, we’d like to do that when we have strong economic growth and low unemployment because it is going to put a damper on the growth of the economy.”