Eye on the Pie and Opinion

MARCUS: Numbers say Indiana's economy isn't healthy

May 28, 2011

Flash: The Rapture ruptured and Mitch Daniels declined enthronement as the GOP savior. Nonetheless, the Indiana Department of Workforce Development released its labor-force and employment data for April.

The full implications of the first two events will not be known for some time. The data releases improve our understanding of the current economic recovery.

The labor force, you’ll recall, is the number of people working, plus the number who are actively looking for work. DWD reports the unemployment rate as the percentage of the labor force that is not working, but actively looking for work.

As headlines across the state reported, Indiana’s jobless rate in April 2011 fell from 10.7 percent to 8.2 percent. For 14 consecutive months, since March 2009, our unemployment rate has declined. That’s impressive, but not indicative of a healthy economy.

 Usually, when an unemployed person gets a job, the number of people unemployed goes down and the number employed goes up. That’s a healthy economy. In Indiana, since February 2009, the number of people with jobs climbed by 48,500, while the number unemployed fell by 81,100. What happened? Where are the 32,600 formerly unemployed Hoosiers who did not get jobs? In these improving times, why does 40 percent of the decline in unemployment come in the form of leaving the labor force?

Were these missing people taken up in an unnoticed Rapture called retirement? Did they accept full-time volunteer positions in the Daniels for President campaign? Did they return to school or are they ensconced at home, discouraged about their prospects? All such people fail to qualify for inclusion in the labor force, which includes only those working for pay or looking for such work.

It was similar, but different, in the heart of the recession. Labor-force dropouts played a major role in the number of employed people as the Hoosier economy contracted for 22 consecutive months. Between February 2008 and November 2009, the number of people with jobs fell 284,200. Of these, 37 percent (104,200) became unemployed and 63 percent (180,000) dropped out of the labor force.   

Is Indiana’s economy healthy? If massive numbers of people are leaving Indiana, that does not suggest a healthy economy. Instead, we have a declining labor force with a growing population. Even if our average age is older than the typical state, social and economic forces over the past few decades have been keeping more and more people working longer.

During the recovery to date, we have regained just 21 percent of the employment lost. It may speak well for our economy that so many could drop out of the labor force and depend on their savings or the kindness of strangers for sustenance. Possibly it is a sign of our hearty Hoosier nature that we can withdraw (temporarily) from the consumer-driven economy and enjoy the simple life.

I doubt it. Even with personal savings, help from family and minimal unemployment compensation, this has been a devastating period for the people who depend on our economy.

The DWD also reports that only 5,600 jobs were added in Indiana over the past year. If you take out the growth of manufacturing jobs, the rest of the Hoosier economy added, on balance, no jobs at all.

The state’s 14 metropolitan areas split in the job growth report. Led by Kokomo and Elkhart-Goshen, six areas increased in jobs. Anderson and Muncie led the seven losers on the downside. (Bloomington had no change, which, after its vote to block Interstate 69, seems to be what they like there.)

If Mitch had run for president, could he have sustained his buoyant confidence about the health of our state’s economy? The national press might have looked behind the numbers and punctured the celebratory balloons.•

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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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