Northwest Indiana could begin to feel the effects of the national economic recovery in six months, with the NWI Leading Index forecasting weak but positive growth ahead, according to Micah Pollak, an assistant professor of economics at IU Northwest.
Index components that forecast conditions in the transportation and manufacturing sectors, both important to Northwest Indiana's economy, showed significant increases in January and February.
Those increases could eventually affect the region's largely stagnant jobs market, which until now has felt the lingering effects of the recession as well as productivity increases, which can lead to slack employment, Pollak said.
A third component of the forecast, measuring the strength of the housing market, remains at levels 64 percent above one year ago. That should lead to increased employment for home building contractors and their crews as the weather warms, Pollack said.
"They are usually the last people to get hired back again, so this is great news," he said.
The Northwest Indiana Coincident Index, a measure of current conditions, continued to show little growth in the first two months of the year. That index remains stuck at around 135, which is not much higher than the year-ago reading of 133.
Pollak and IU Northwest Professor of Finance Bala Arshanpalli recently revised the NWI Coincident Index to make its readings comparable to both the national and Indiana indexes. Those indexes show the nation and Indiana have undergone a more robust recovery than Northwest Indiana, reading 142 and 148, respectively.
Under the old system for calculating the NWI Coincident Index, the reading had hovered around 100 for much of the past year, showing little or no growth. The new calculation of the index shows the same lack of growth for the past year. The higher number does not mean growth has suddenly increased, Pollak said. It's simply due to the change in methodology.
That difference between Northwest Indiana and the rest of the nation is reflected in unemployment data from the U.S. Bureau of Labor Statistics. Northwest Indiana's most recent unemployment rate was 10.8 percent, while the national rate has dropped to 7.7 percent and the Indiana rate is 8.6 percent.
Despite only muddling progress for Northwest Indiana's economy in the past year, there is increasing hope employment here could begin to show some positive gains this year.
It appears the federal budget sequester, and the austerity that is a part of it, has so far kept employers from hiring, Pollak said. However, pent-up demand could produce more hiring at the year goes on, he said.
Increased spending on rail infrastructure and big gains in the Dow Jones Transportation average both point to companies and investors expecting more trade, shipping and sales in the future, he said.
Some signs of increased hiring are already being seen locally, with steelmaker ArcelorMittal in the first phase of screening applicants for openings at its steel mills in Northwest Indiana, said Linda Woloshansky, CEO of the Center for Workforce Innovations in Valparaiso.
The hiring by the steelmaker is being driven mainly by the need to replace older, retiring workers, Woloshansky said. There are estimates that many heavy industrial employers will be losing up to 50 percent of their workforces due to retirements in the next five years.
The Center of Workforce Innovations is also getting inquiries for labor force data from economic developers, a sign that companies are seriously looking at opening operations in Northwest Indiana, Woloshansky said.
"It seems like there is a some real sound interest in Northwest Indiana from companies that are looking to locate here," she said.