SCHERERVILLE | Northwest Indiana's economy should continue down a path of slow growth next year, when the state's unemployment rate is project to shrink to 6.5 percent.
Indiana University Northwest assistant professor of economics Micah Pollak forecasted the region's economy will have grown by 1.6 percent this year, and will grow by about 1 percent next year. He originally predicted 2 percent growth in 2014, but revised that expectation down because of the government shutdown and the 1.5 percent county option income tax taking a bite from Lake County residents' paychecks and presumably their spending.
"Any growth is good," he said when the Indiana University Kelley School of Business Outlook Panel gave its 2014 forecast to a business crowd at Teibel's Restaurant in Schererville bn Friday. "Growth is better than no growth or a decline."
The Lake County Advancement Committee and Calumet College of St. Joseph sponsored the forecast, which projected statewide growth of about 2.5 percent next year, a flat inflation rate of 2 percent and some progress in the labor market.
Employment remains a nagging issue in Northwest Indiana. While Indiana will gain at least 45,000 to 50,000 jobs this year, Northwest Indiana is expected to lose about 2,000 jobs, mostly because the massive BP Whiting Refinery project has been winding down. Retailers are on pace to add about 2,000 jobs, but they are lower-paying while the construction jobs had been higher-paying.
Northwest Indiana's economy lost 32,000 jobs during the downturn, and has since recovered about half of them. The region still needs to recover 16,000 jobs to get back to where it was, but there have been economic bright spots.
Single-family home sales have risen by 16.5 percent in Lake County, and the supply of homes has dropped to 5.6 months from 8.5 months in Porter County, suggesting new home construction will have to pick up more, Pollak said.
The supply of warehouse and factory space also has been tightening. The region's industry vacancy rate also has shrunk to 7.2 percent from a high of 12 percent during the downturn.
New developments bode well, Pollak said. Indiana University Northwest is building a $45 million performing arts center, and a Whole Foods grocery store is coming to Schererville.
"Why you should care even if you will never shop there is that Whole Foods has the reputation of being at the vanguard of economic development," he said. "They're hesitant to go into an area unless they feel confident about its future prosperity."
Statewide, growth has been subpar and the unemployment rate remains stuck higher than the national average, said Indiana University professor Jerry Conover, who is also director of the Indiana Business Research Center.
Unemployment, which was most recently at 8.1 percent, is expected to fall to 6.5 percent next year, Conover said. The unemployment rate had peaked at 10.8 percent in Indiana during the depth of the downturn. But at the current pace of job growth, it will take the state another year or two to get back to where it was before the recession.
"Manufacturing has had some job growth," he said. "But the increased productivity means that it does not take as many workers to crank out the same number of products, even as sales and production have been increasing."
Nationally, the economy continues to improve, and profit margins have increase over time, said IU professor Robert Neal.
"Economists always tend to be a little dismal or dour," he said. "But if you remember back five years ago in November 2008, it was a very different time. It was ugly, very ugly. Financial markets were in a free fall. Credit markets were frozen up. It close to being a cash-only economy. Many investors panicked."
But since that time, the financial recovery has been strong, Neal said. The S&P Index has since risen by 90 percent, and is at an all-time high.
Corporate earnings are a cause for optimism, Neal said. They are expected to grow by about 6 percent this year, and by about 11 percent in 2014.
"That's a good sign," he said. "Profit margins are relatively high, and have been increasing over time. Overall, it's a positive signal for next year."