Eye on the Pie and Opinion and Economic Recovery

MARCUS: The recovery has taken root

February 27, 2010

From Madison to Merrillville and Elkhart to Evansville, the talk among businesspeople is positive. Customers are showing more interest, orders are picking up. The data may not be there to support the good cheer, but economic data are always delayed. A business may know what is happening up to the minute, but the public does not learn about general economic conditions for days, weeks or months after events have taken place.

Recent meetings I’ve attended and conversations I’ve had indicate that a business recovery is in progress across Indiana. There is more laughter and less anxiety. However, there is little talk of expanding employment. Confidence has not reached that level as yet.

This recession has cut deeply into employment statewide. In the past two years, we have lost more than 190,000 jobs. Our state’s employment level (at 2.8 million jobs) is the lowest since 1994. As usual, there are considerable differences across the state’s 14 metropolitan areas.

Anderson, Kokomo, Michigan City-LaPorte and Muncie did not have a single year since 1990 with employment as low as in 2009. Each of the 14 metro areas had fewer jobs in 2009 than in 2007, but Elkhart-Goshen was hit hardest (down 17 percent) followed by Kokomo, with a decline of 13 percent. At the same time, Columbus and Lafayette hardly felt a job decline; both were within 1 percent of their 2007 job levels.

Bloomington, Columbus, Indianapolis and Lafayette were the only metro areas with more jobs in 2009 than they had 10 years earlier. Evansville, Fort Wayne and Gary were within 5 percent of their 1999 levels; South Bend and Terre Haute were within 10 percent of those levels of a decade ago.

How far back must these metro areas go to reach their previous peak job levels? For Bloomington, Columbus and Lafayette, the answer is to just 2008. Indianapolis has to regain its 2007 level, while Elkhart-Goshen needs to reach back to 2006 and Evansville to 2005. The journey for the rest of the metro areas is even longer.

Both Michigan City-LaPorte and South Bend had their last job peaks in 2000. Gary, Kokomo and Terre Haute must each reach back a decade to 1999. Anderson and Muncie saw their job peaks in 1995. In each of those seven areas, there is much more than the recent recession to overcome.

Nonetheless, recovery is at hand. It will be most rapid for those firms that did themselves the least damage in the recession. While most firms reduced employment, some cut deeply and lost valuable, experienced personnel. Those companies now face an up-turn handicapped by their own aggressive cost-cutting.

Some of their experienced workers have or will find jobs with former competitors. These workers are ready to take on their old companies with the special zeal of the spurned.

As new orders come in, companies that thought they were going to become lean and mean will discover they have only turned meek and weak. They have become ill-equipped to offer the service and detailed attention that former customers came to expect when times were good. Customers placing new orders can be impatient with former suppliers who no longer offer superior attention to their demands. The pressures of a newly revitalized market can test the flexibility of those who sat through the recession and lost their initiative.

These times will test the management skills of Hoosier companies. Often it is clear how to contract. Expanding once again, however, does not necessarily mean returning to a previous arrangement of resources.

A former dean at Indiana University often said business is like playing the accordion. You must learn how to make sweet music while expanding and contracting.•

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Marcus taught economics for more than 30 years at Indiana University and is the former director of IU’s Business Research Center. His column appears weekly. He can be reached at mmarcus@ibj.com.

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