IBJOpinion

MARCUS: Manufacturing is economy's blessing, bane

Morton Marcus
May 7, 2011
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Morton Marcus

In late April, the nation’s Bureau of Economic Analysis released its income and employment estimates for the 2009 economies of all 3,000-plus counties. Now, analysts take their turns to make the shower of numbers blossom as May flowers.

2009 stands as an important year for it was the low point of the recent recession. While personal income nationwide dropped 1.7 percent, without adjustment for inflation, Indiana’s decline equaled 2.3 percent. In rough numbers, Hoosiers had $5.2 billion less to spend or save in 2009 than in 2008. Our earnings (what we made by working for ourselves or someone else) fell $8.8 billion. Dividends, interest and rents were $2.4 billion lower than a year earlier.

Offsetting these shortfalls in income from the private sector was the increase of $5.3 billion from the federal government, made up primarily in unemployment compensation and other forms of public assistance.

In short, without the federal government’s stepping up to help, the Hoosier recession in 2009 could have been twice as bad.

The federal stimulus added $800 million to the Hoosier economy through local, state and federal jobs. Teachers, firefighters and police officers kept their jobs because the feds did what the state would not do—protect its citizens in times of trouble.

At the local level, the results were mixed. In a time of deep recession, private-sector earnings rose in four Indiana counties (Greene, Owen, Pike and Dearborn) while private-sector earnings dropped 15 percent or more in six other counties.

Manufacturing alone accounted for 53 percent of the decline in what people earned at their private-sector jobs. While statewide earnings from manufacturing fell $5.1 billion (down 14 percent), Sullivan County led the state with a 14-percent increase. At the same time, manufacturing earnings dropped more than 40 percent in Fayette County. Among the 21 counties with 20-percent or greater declines in earnings from manufacturing were Jefferson, St. Joseph, Porter and Henry.

These data also demonstrate the realities of our local economies. Students and chamber of commerce board members are taught that manufacturing is the base of the Indiana economy. County extension agents and the Farm Bureau advertise agriculture as the base of our economy. In selected quarters, mining is added to the base.

In truth, any economic activity can be part of a community’s economic base if it brings money in from other places. Education is a vital part of the economic base in Monroe and Vigo counties because of Indiana University and Indiana State University. Hospitals add to the economic base in Allen and Marion counties, while residential services are the chief export of Hamilton and Johnson counties.

Statewide, manufacturing accounted for 25 percent of total private-sector earnings in 2009, with farming a mere 2 percent and mining a negligible 0.05 percent.

However, at the county level, the story is different. Mining in Knox, Daviess and Gibson counties exceeded 6 percent of total private-sector earnings, or 10 times the state average.

Farming provided about 40 percent of the earnings generated in Warren and Benton counties. Fifteen of our 92 counties derived at least 10 percent of their private-sector earnings from farming. Additionally, farming exceeds 5 percent in another 30 counties. Important, but not as dominant as one might believe after attending the Indiana State Fair.

Manufacturing, admittedly down in 2009, still provided more than 50 percent of the earnings for workers in Kosciusko, Noble, Gibson, Howard and Owen counties. In another 14 counties (including Bartholomew, Elkhart and Jackson), manufacturing paid the bills with more than 40 percent of total private earnings. One quarter of all earnings came from manufacturing in another 30 counties (including Cass, Huntington, Jefferson, Floyd and Shelby counties).

Despite the bad year in 2009, manufacturing supplied at least one-fifth of private earnings in 62 counties. Repeated reports of its demise notwithstanding, manufacturing continues to dominate the Hoosier economy.•

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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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