Economist: Indiana might benefit as pandemic pushes people to flee big cities

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The coronavirus pandemic is pushing people away from the nation’s largest cities, which might be a boon for Indiana.

From manufacturing and real estate to higher education, retail and public transit, the pandemic is “accelerating previous trends at a rate we’ve never seen before,” said Jeff Korzenik, Fifth Third Bank’s chief investment strategist, on Thursday at IBJ and Fifth Third’s annual Economic Forecast event.

In the real estate market, Korzenik said, homebuyers and businesses are now more interested in being in the suburbs and mid-sized cities than in large cities—a dynamic that could benefit Indiana in general, and Indianapolis specifically.

“This is a trend we believe will stay in place” even after the pandemic, Korzenik said.

As evidence, he cited a June survey of Site Selectors Guild members—people who help companies analyze and choose the best locations from which to operate.

In that survey, Indianapolis was named one of the top mid-sized cities for new projects. Also on the list were Columbus, Ohio, and Kansas City, Missouri, as were the Raleigh-Durham area in North Carolina; Colorado Springs, Colorado; Huntsville, Alabama; Reno, Nevada; Tucson, Arizona; Boise, Idaho; and the South Carolina cities of Columbia and Greenville.

The increasing interest in suburbs and mid-sized cities also might mean northwestern Indiana sees an influx of residents from Chicago, Korzenik said.

On another front, Korzenik said he sees opportunity in the manufacturing sector as momentum continues toward “reshoring,” or bringing production back to the U.S. from China and other foreign countries.

In recent decades, the U.S. share of global manufacturing employment, which was about 5.5% in 2000, had dropped to about 3.5% in 2010 and has stayed near that level since then, Korzenik said. The loss in jobs happened because companies moved production overseas as a way to cut costs.

But China is not the low-cost manufacturing hub it used to be, Korzenik said, citing data from Boston Consulting Group. According to that data, in 2019 the cost of manufacturing in China was 95% of manufacturing in the U.S. In comparison, Japan’s costs were at 103% of the U.S., while South Korea’s were the same as the U.S., and Germany’s were 16% higher.

The five cheapest countries for manufacturing included India, at 87% of U.S. costs; Mexico and Thailand, both at 86% of U.S. costs; Malaysia, at 83% of U.S. costs; and Indonesia, at 81% of U.S. costs.

Korzenik said he doesn’t believe the U.S. is headed toward another round of pandemic-inspired lockdowns—like those that happened this spring—even though the number of COVID-19 cases and hospitalizations has skyrocketed in recent weeks.

“We’ll be able to muddle through” without more lockdowns, Korzenik predicted.

Korzenik also said he expects Congress to approve another round of COVID-19 economic relief, although he thinks it will happen after Inauguration Day, which is Jan. 20.

He also predicted the stimulus package would be in the range of $1.5 trillion to $2 trillion. That would be more modest than the first wave of stimulus funding approved in late March, which provided more than $2.2 trillion in aid to individuals and businesses.

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One thought on “Economist: Indiana might benefit as pandemic pushes people to flee big cities

  1. If people move, the planners will have to remember that keeping density levels down is as important as moving to a “midsize” city or small town. Whether the left likes it or not, single family non-attached dwellings still provide a distancing level that is far below the proximity of multi-family housing. Often derided over the last 25 to 30 years, the suburban single family community is by its very design a low density setting. It often led to a lack of social contact that was frowned upon for not being as able to create the kinds of human interaction that was so critical in the past for communities to have a certain close knit group. Now this whole COVID situation makes those attributes not nearly as desirable.