MARCUS: Does economy depend on manufacturing?

Morton Marcus
September 25, 2010
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Morton Marcus

I don’t know how it started, but word has gotten around that I can put children and adults to sleep just by talking to them. Babies with colic were my specialty, but lately more and more sleepless seniors have been calling.

Last week, Ethereal Andiron rang up about 2 in the morning.

“Youngster,” she said, “could you help a bit? I’m having trouble tonight and so much to do tomorrow.”

“You want me to name all the county seats in Indiana?” I asked.

She declined that offer. “No, I really need to get to sleep quickly. Do the personal income story. I can never remember any of that the next day.”

“The incomes of Hoosier households,” I began, “come mainly from private, non-farm businesses. That’s 84 percent of the total; people who work for federal, state or local governments get somewhat more than 14 percent, and farming makes up somewhat less than 2 percent.”

“Yes,” Ethereal said contentedly. “That’s the tale I remember.”

“Now,” I proceeded, “of that big chunk of personal income originating in the private sector, 27 percent comes from manufacturing firms. That’s more than double the national figure and first among all 50 states.”

“Do we care?” her drowsy voice asked.

“Absolutely,” I insisted. “There are important questions about these matters whenever Economists Anonymous meet. Indiana’s change in earnings from the private sector (-6.6 percent) in 2009 was the nation’s fifth-worst.”

“Is that so?” Ethereal murmured.  

“Truly,” I responded. “Then there’s the evidence that, of the 16 metropolitan statistical areas containing Indiana counties, Bloomington, in 2009, had the strongest private-sector earnings growth. But that was only a pathetic 0.1 percent which, sadly, was good enough for 23rd place among the country’s 366 metro areas. 

“A squeaker at that. Only 25, or just 7 percent, of those 366 metro areas saw private-sector earnings grow in ’09.” 

“Goodie.” Ethereal’s words were now slurred.

“Anderson, second in Indiana, was 68th nationally,” I continued. “Its private-sector earnings decline of 1.6 percent was equal to the declines in Hot Springs, Ark., and Hattiesburg, Miss. From there on, it’s down the slide: third place Terre Haute (-3.3 percent), the Louisville area fourth (-3.5 percent), Evansville fifth (-3.7 percent).

“At the other end of the range, Elkhart-Goshen and Kokomo (both below -16 percent) had the fastest-declining private-sector earnings in the country in 2009. Columbus (-10 percent) came in eighth from the bottom. That’s a pretty sad picture.”

“Sad,” Ethereal echoed.

“But that’s not the full story. Kokomo, at 57 percent, led the nation in the share of non-farm private-sector earnings coming from manufacturing. Columbus was second (52 percent). Elkhart-Goshen (51 percent) was third.”

“One, two, three—that’s nice,” Ethereal said.

“Hardly,” I said, “but there seems to be no valid statistical relationship between the rate of change in private earnings within a state or metro area and manufacturing’s dominance, or lack thereof, in the state or metro area. That seems to dent the idea that manufacturing rules how an economy performs.”

“Dent—not nice,” she managed to mutter.

“It’s just speculative,” I added, knowing she was just about asleep. “Take two towns with identical statistical profiles and they may react to national economic changes very differently. There are many variables and detailed statistics needed to draw meaningful conclusions.”

There was now a gentle, lady-like purr on the line. I hung up the phone, satisfied that again I had been of service to one in need.•


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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