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EYE ON THE PIE: Let's revisit the State of the State

January 23, 2006

Quite appropriately, Gov. Mitch Daniels did not make any claims about "a revitalized Indiana economy" in his recent State of the State speech. He stuck to the theme that we are on track to turning the economy around rather than proclaiming any victory.

This restraint was well-warranted. Indiana ranked 45th among the 50 states in its rate of employment growth for the past year (November-to-November figures). The nation added jobs at a 1.5-percent rate. Our 0.3-percent increase beat out only Ohio, Michigan, Mississippi and Louisiana. The first two of these have been victims of the auto industry's distress, while the latter two were victims of hurricanes.

Indiana managed an increase of only 10,000 jobs. The private sector grew by 15,100 jobs while government employment declined by 5,100. During the year, state government jobs fell by 2,500 and local governments decreased their employment by 3,000 workers. Half of those local jobs were in schools.

But then, who cares if government employment is cut? We hear, time and again, that government is not productive, it does not create wealth. That is a lie, but we hear it repeatedly from those who learned their economics listening to Paul Harvey and Rush Limbaugh. We are expected to believe that police, fire, education, health care, snow removal and the many other services of government are without value. Thus, if we decrease government employment, we must be doing something right. The idea that a growing private sector requires a growing public sector seems to be an untenable, even un-American concept.

Where were the jobs gained and lost? Health care and social assistance accounted for 44 percent of the 15,100 privatesector jobs added in the year. The social assistance number alone was 2,300 jobs added. Were any of these the result of shifting jobs from government to the private sector? I don't know. Leisure and hospitality services added 4,600 jobs, including 2,200 in limited-service eating places. Can you say "fast-food"?

On the down side, we lost 2,900 jobs in motor-vehicle-parts manufacturing and another 1,300 in transportation-equipment manufacturing. Primary metals, fabricated metals and plastic products each lost 1,000 jobs.

Of the 10,000 jobs Indiana gained, twothirds were in non-metropolitan areas while the other third were in the state's 14 metro areas. The biggest winner was Evansville, with a gain of 1.3 percent. Can you say Toyota? The biggest loser was Kokomo, down 2.4 percent. (Indiana counties in the Louisville and Cincinnati areas are treated as non-metropolitan because of data limitations.)

Normally, Hoosiers think the Indianapolis metro area is doing far better than the state as a whole. That was not true in the past year. The 10-county Indianapolis metro area added only 1,400 jobs (the same as the three-county Fort Wayne area), which was about half the rate of growth statewide. Columbus, Gary, Lafayette and South Bend were also growing metro areas, while Anderson, Bloomington, Elkhart-Goshen, Michigan City-LaPorte, Muncie and Terre Haute lost jobs.

It certainly is good to know we are on the right track to adding more jobs in Indiana. Our recent performance should make it relatively easy to do better in the future.



Marcus taught economics more than 30 years at Indiana University and is the former director of IU's Business Research Center. His column appears weekly. To comment on this column, go to IBJ Forum at www.ibj.comor send e-mail to mortonjmarcus@yahoo.com.
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