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ECONOMIC ANALYSIS: Measuring jobs: How to get handle on how we're doing

April 24, 2006

Getting a good read on the Indiana economy is harder than you might think. That's partly because there really is no such thing as the Indiana economy. State borders are, after all, purely legal contrivances that flows of dollars, workers and goods don't worry much about. We're a collection of regions, in actuality, some centered within our state's borders and some not.

But it is the public sector that does the scorekeeping on the economy, and it is public officials who sometimes take the heat, or claim the credit, for its performance. So in the partisan jousting and posturing that is the daily bread of political life, the seemingly straightforward, factual question of how the economy of the state is performing becomes fodder for debate.

Facts are facts, of course, and one would think the data coming forth from the official scorekeepers in Washington and Indianapolis would quickly squelch any honest debate on economic performance. But in the realm of economic statistics, things are not quite so straightforward. The facts about economic performance turn out to be quite a bit softer than most people realize.

For example, consider the current debate over job growth. Has there been job growth under Gov. Mitch Daniels' administration or has there not? In one sense, nothing could be simpler to answer. The Department of Workforce Development says that 2,954,100 workers were on the payrolls of Indiana employers in March, the most recent time point we have data for. In January 2005, when the governor took office, employment was 2,882,200.

That comes to 71,900 net new jobs created. Argument resolved, right?

As an exercise in arithmetic, certainly. But as an evaluation of our economic performance, it doesn't really say much. Just as there are many words to describe snow in the Inuit language, there are many flavors of employment to an economist. And while I could spend the next three weeks of columns telling you all about them, let me just skip to the bottom line of my argument.

A solid appraisal of state job growth involves more than just picking a couple of monthly employment numbers out of a hat. What is needed is a picture of the trend in, say, the last two or three years of monthly job data, compared side-by-side with the trend in, say, the national economy, as a point of reference.

And, sad to say, in making that assessment, the data for the most recent months have to be discounted. The scorekeepers just haven't done a good job of picking up hiring by the state's non-manufacturing employers in the survey-based preliminary data, with the result being the early estimates are often substantially revised, as better source data become available.

What does that assessment say about Indiana right now? It is mostly good news. Since the mid-point of 2003, when employment bottomed out statewide, payrolls have headed steadily upward, at a 1.1-percent average annual pace that is only slightly off the 1.6-percent job rebound experienced nationwide.

That leaves plenty of room for improvement, to be sure, but compared to similar rates computed for neighbors Illinois (0.7 percent), Ohio (0.4 percent) and Michigan (-0.4 percent), it could be a whole lot worse.

Some parts of the state are clearly outperforming others. Lafayette, Fort Wayne, Michigan City and Columbus all have seen faster job growth than the national average in the last 12 months, although these conclusions rest on the shaky foundations of the most recent employment data. The Muncie and Kokomo metropolitan areas continued to see some job erosion in the last year, with the latter suffering a job decline of 2.5 percent over year-ago employment levels.

The real story, for those who care to stick to the facts, is that Indiana has been pacing the Midwest in job growth for the past few years. There's more to be done than that, certainly, but job growth sure beats the alternative.



Barkey is an economist and director of economic and policy study at the College of Business, Ball State University. His column appears weekly. He can be reached by e-mail at pbarkey@ibj.com.
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