MARCUS: Show us the progress, not the promises

Morton Marcus
November 27, 2010
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Morton Marcus

My soon-to-be 2- year-old grandson is reaching the NO! stage. Shortly, he’ll be asking Why? Why doesn’t Indiana’s economy keep pace with the nation? Why, when we hear so much about new jobs, about Indiana’s beating out this state or that in some national ranking, do the data most often tell a different story? The answers are always the same. It’s hard to turn around a big ship.

But it doesn’t matter when there is no map or compass at the helm. What are our state’s objectives? Are we pointed in the right direction? Why turn around when you have no idea where to go or how to get there? To use a different analogy, the Indiana Economic Development Corp. is like a retailer that counts only the orders and sales transactions, and keeps no record of the returns. Where are the independent, audited reports of jobs created?

With no functional audits of our economic development organizations, no comprehensive and intensive data on business activity, we are left dependent on insufficient, remote data sources.

The U.S. Bureau of Economic Analysis has just released the 2009 estimates of state gross domestic product. This is the measure of the economy, the context within which we judge unemployment and other indicators of economic well-being.

State GDP is conceptually the same as national GDP—the value of all goods and services produced within our borders during a given period. After adjustment for inflation (of which there has been little), Indiana’s GDP was down 3.6 percent in 2009 compared with the previous year. With most economists agreeing that 2010 is a recovery year, 2009 was the bottom of the recession that began in late 2007.

Nationally, GDP was down 2.1 percent, with Indiana ranking 46th in the country. We were among 38 states that saw real GDP fall last year. Neighbors Kentucky (-1.8 percent), Ohio (-2.7 percent) and Illinois (-3.4 percent) were 28th, 38th and 44th, respectively. Only Michigan (-5.2 percent), ranking 49th of the 50 states, was more successful than Indiana in the rush to the bottom.

From 2004 to 2009, Indiana’s average annual GDP growth rate (0.2 percent) ranked 46th in a nation that grew an average of 1.1 percent. Good years and bad, we can be trusted to be batting toward the very bottom of the order.

Where were our strengths and weaknesses last year? Our greatest strengths were in the highly volatile mining and agricultural sectors. Our most severe weakness was in durable goods, where Indiana saw a decline of 13.4 percent in the value of output, compared with a national decrease of 7.5 percent.

In construction, Indiana’s 9.4-percent decrease compared favorably with the nation’s 9.9-percent decline. That’s not good; it’s like being on a runaway toboggan and your team issues a press release minimizing the danger because you’re traveling half a mile slower than the runaway toboggan in front of you.

While the U.S. finance and insurance sector dropped 2.7 percent, Indiana saw that sector’s output grow 1.3 percent. Both real estate and the utilities also had growth superior to our national counterparts.

In sum, our state economy remains one of the weakest in the nation and we have to scrape the barrel to find happy talk. The question for the future is, can our business sector rebound faster than the nation so that, in this recovery, our aggregate market share is not diminished once again?•


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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