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Experts predict slow Indiana economy

June 6, 2008

Expect the state economy in coming months to feel like a head cold that won't go away. And the Indianapolis area won't escape the doldrums.

That's the take from the latest quarterly forecast issued by a group of Indiana University economists.

The Center for Econometric Model Research says the state will suffer declining employment and rising joblessness until this time next year.

While unpleasant, it could be much worse. The state will lose only 32,000 jobs, or about 1 percent of total employment, by the end of 2008 compared to the end of 2007. That's about a third of the loss sustained in the most recent recession in 2001 - itself considered mild.

"It doesn't look like it's going to be that hard for Indiana this time," said economist James C. Smith.

The national economy will slip into recession this year, the forecast says. However, another IU economist, Bill Witte, said economists at the National Bureau of Economic Research, which officially declares recessions, might have difficulty determining whether the weakness actually meets the standard.

Traditionally, the definition includes two straight quarters of declining gross domestic product, or the total amount of goods and services produced.

The national economy is so milquetoast that it might waver between growth and contraction, escaping the official definition but still making people feel like they are in one, Witte said.

Statewide, the unemployment rate will rise to 5.5 percent from the current 4.6 percent, the forecast says. Still, the rate won't reach the 6 percent anticipated by the forecast for the national level early next year.

A slight increase in non-manufacturing employment will be nullified by a 4-percent drop in manufacturing jobs. Construction employment will fall 8 percent.

The Indianapolis area might fare slightly better than the state as a whole, and could emerge more quickly due to its concentration in life sciences, Witte said.

When recovery arrives for the state next year, it will be weak, the forecast says.

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