The Times Board of Economists is more optimistic than it has been since before the Great Recession upended everyone's financial forecasts.
The 19-member board of Northwest Indiana business leaders, who represent a cross-section of industries throughout the Region, say the economy has been strong and they feel it will only improve with a Republican president and Congress who will likely cut taxes and regulations. But they have some concerns such as uncertainty over health care and difficulty finding good employees when unemployment is so low.
Though there are already signs of conflict in Washington, less regulation and lower taxes should be good for business, said Mark Ennes, vice president and wealth management adviser for Merrill Lynch in Merrillville.
At 35 percent, America’s corporate tax rate is currently the third highest in the world after Chad and the United Arab Emirates, but about $2.5 trillion in offshored profits should be repatriated if taxes are cut enough, Ennes said. Tax cuts also would help the small businesses that drive most of the growth in the economy, he said.
“Small business confidence is off the charts,” Ennes said.
Members of the Board of Economists voiced confidence about the direction of the economy both locally and nationally at their most recent meeting at Ciao Bella Ristorante, in Schererville. They said the steel industry was recovering after the import crisis, that car sales were strong, that fewer people were out of work and that new construction was taking place across many sectors.
On a scale of 1 to 10, the group ranked the expected performance of their respective sectors over the next three months at an average of 7.1 locally and 7.2 nationally, up from 6.6 locally and 6.7 nationally during September 2015. The Board expects the local economy will be a 7.1 out of 10 in a year, as compared to 6.6 out of 10 when the board last convened in 2015.
Those are the most optimistic forecasts to issue from the board since October of 2007, when the average score for the performance of the local economy in the next three months was a very robust 7.9 and a nearly equivalent 7.8 for the national. An average score of 8 was the forecast for the local economy in one year.
Facts on the ground
“The casino business is robust and continues to grow every so slightly,” said Dan Nita, senior vice president and general manager of Horseshoe Casino in Hammond. “We’re growing into the hospitality space. The business is driving more revenue through shows, dining, lodging and games."
Recent competitive factors for Northwest Indiana casinos include the presence of 14,000 slot machines at bars, restaurants and social clubs in greater Chicagoland. Another is the planned opening of a Four Winds casino in South Bend, which will mark the advent of tribal gaming in Indiana.
“From a tax standpoint, we pay a 35 percent gaming tax on all revenue,” he said. “They’ll (Four Winds) pay something like 3 to 5 percent. A 3,000 base point differential is quite a difference.”
Stocks have been soaring since the election, and the local construction industry has benefited greatly from the unusually warm winter, Centier Bank President and Board Chairman Michael Schrage said. Tax cuts may result in short-term gains next year, but any savings at banks will be used to price financial products more competitively.
“You can expect to see more automation, experiments with interactive teller machines and stuff like that,” he said.
Centier is looking to grow across the state in markets like Lafayette, Fort Wayne and Michiana.
Banks, hotels, hospitals, churches and senior living communities are among the those doing construction projects, Hasse Construction President Bill Hasse said.
“We’ve got a cautious optimism,” he said. “We’re seeing a lot of residential and non-residential building — lodging, office, commercial, recreational and transportation. We’re expecting more federal government work.”
The new administration has promised up to $1 trillion nationally in infrastructure spending. The construction business had already been seeing a significant impact from low fuel prices, low interest rates, and low inflation.
Nationally, non-residential construction is up about 5 percent. Locally, there’s been a lot of significant projects such as NIPSCO’s infrastructure upgrade and a new Franciscan Health hospital that’s under construction in Michigan City.
Overall, Northwest Indiana produced a gross metropolitan product of $29.6 billion last year, which represents about 9 percent of Indiana's economic activity and about 5 percent of the greater Chicago metro area's, said Micah Pollak, assistant professor of economics for Indiana University Northwest.
“We’re a pretty big player,” he said.
Good times pose challenge
Health care enjoys some of the benefits of a healthy economy, but huge uncertainties remain as to whether Congress and the Administration will be able to repeal the Affordable Care Act, what it will be replaced with, and how much it will cost, according to Porter Regional Hospital CEO Steve Lunn.
“I think if I could sum it up in one word it would be uncertainty,” Lunn said. "There's a lot of uncertainty and waiting to see what's going to be next."
There's been a balancing act in the industry between providing a higher level of care, ensuring better access to care, and getting reimbursed for care. Health care providers have been working to better coordinate services across the network.
"We're working smarter as a network," he said. "We're trying to have better, more open communications to provide care better together at a better value."
The quick-service restaurant business has been doing well with “fine, steady” growth over the last two to three years, said John Barney, president of Barney Enterprises, which operates a number of Wendy's restaurants across the Region.
“I am optimistic things are going to improve, and sales are going to continue to improve,” he said. “Things are going to get stronger and better. When gasoline was $4 a gallon, car counts were down. Now sales are back up and we’re getting more traffic."
One of the biggest problems quick-serve restaurant face is finding and retaining employees when the unemployment rate is so low, Barney said. The restaurants need high-quality people serving customers and have had to raise wages in some markets.
“Trying to find people on the management side is equally difficult,” he said. “We need to grow our own management. We usually can’t hire anybody in with the right talent for that. It’s the biggest issue for the future of the business.”
Unemployment remains pervasively high in some Lake County localities like Hammond, Gary and Lake Station, Center of Workforce Innovations President and CEO Linda Woloshansky said. Still, industries like manufacturing, logistics and construction have had challenges getting the skilled workers they need.
Northwest Indiana for instance has close to 1,000 unfilled openings for truck drivers.
There’s been more of a push in education to ensure that graduates are job-ready.
“They need to have the skills and competencies and be able to do the work,” she said. “A diploma shouldn’t just be a piece of paper. Students are also looking more carefully at what employers want, given the high costs of education.”
Northwest Indiana’s economy is indeed growing, but at a slower pace than the state and nation, Pollak said. At the state's universities, enrollments have sagged since the nation began its recovery from the Great Recession.
“In education, enrollment is countercyclical with the economy,” Pollak said. “More students enroll when they can’t get a job. They come back to get a degree or go on to get a graduate degree."