Construction, manufacturing may lead economic recovery

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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