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Construction, manufacturing may lead economic recovery

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Year In Review

There comes a point in a long night of boozing when you can’t get any drunker. Realizing that might prompt you to call a cab, but it won’t prevent a hangover.

The economy seemed to follow a similarly painful path in 2010. The recession came to an official end 18 months ago, but Indiana’s unemployment rate hovered around 10 percent. That left most Hoosiers with the economic equivalent of popping ibuprofen and sipping water.

There are some bright spots on the horizon, though.

A number of software firms announced expansions, including the e-mail marketer ExactTarget, which will hire 500 people at its downtown Indianapolis headquarters.

Diesel-engine giant Cummins added jobs in Seymour and said it will expand its Columbus headquarters. The beleaguered automotive sector cranked up its production lines, though employment levels remain down.

The pockets of growth alongside devastation in certain industries—real estate and construction—make reading the economy tricky.

“The slow and uneven job growth combined with shockingly fast productivity growth eerily signals that much of our economy has gone through a structural change,” noted Michael Hicks, director of Ball State University’s Center for Business Research.

What that suggests, Hicks said, is that many of the 8 million U.S. jobs that evaporated won’t come back in the same industries. “If that is so, and I am afraid it is, it heralds a long and painful readjustment.”

Indianapolis seems poised to bounce back relatively quickly. Newsweek in November listed Indianapolis as one of 10 cities in the nation that’s best-situated for recovery, thanks to affordable housing, a growing population and a pro-business climate that’s attractive to a variety of industries, from life sciences to motorsports.

Hicks predicts a slowly improving 2011. He thinks unemployment will fall throughout the year to 8.7 percent, and personal income will rise 4.81 percent.

The fastest-growing industries will be those that have seen the biggest losses: construction, manufacturing and transportation, Hicks predicted.

“There is some good news,” he said. “We economists and our models did a poor job of predicting this recession, and the nature of the mathematics underlying the models suggests they are more likely to underestimate the rate of recovery than overestimate it.”•

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  1. I'm a CPA who works with a wide range of companies (through my firm K.B.Parrish & Co.); however, we work with quite a few car dealerships, so I'm fairly interested in Fatwin (mentioned in the article). Does anyone have much information on that, or a link to such information? Thanks.

  2. Historically high long-term unemployment, unprecedented labor market slack and the loss of human capital should not be accepted as "the economy at work [and] what is supposed to happen" and is certainly not raising wages in Indiana. See Chicago Fed Reserve: goo.gl/IJ4JhQ Also, here's our research on Work Sharing and our support testimony at yesterday's hearing: goo.gl/NhC9W4

  3. I am always curious why teachers don't believe in accountability. It's the only profession in the world that things they are better than everyone else. It's really a shame.

  4. It's not often in Indiana that people from both major political parties and from both labor and business groups come together to endorse a proposal. I really think this is going to help create a more flexible labor force, which is what businesses claim to need, while also reducing outright layoffs, and mitigating the impact of salary/wage reductions, both of which have been highlighted as important issues affecting Hoosier workers. Like many other public policies, I'm sure that this one will, over time, be tweaked and changed as needed to meet Indiana's needs. But when you have such broad agreement, why not give this a try?

  5. I could not agree more with Ben's statement. Every time I look at my unemployment insurance rate, "irritated" hardly describes my sentiment. We are talking about a surplus of funds, and possibly refunding that, why, so we can say we did it and get a notch in our political belt? This is real money, to real companies, large and small. The impact is felt across the board; in the spending of the company, the hiring (or lack thereof due to higher insurance costs), as well as in the personal spending of the owners of a smaller company.

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