NWI Index shows local economy has been growing slowly

2013-09-07T00:00:00Z 2013-09-07T15:50:16Z NWI Index shows local economy has been growing slowlyJoseph S. Pete joseph.pete@nwi.com, (219) 933-3316 nwitimes.com
September 07, 2013 12:00 am  • 

Northwest Indiana's economy picked up for the ninth straight month, but posted only a slight gain in the July NWI Index.

The economic forecast for the next six months also is positive, but weak or moderate growth of no more than 2 percent is expected, according to the most recent reading from the index.

Indiana University Northwest professors developed the NWI Index in order to gauge the dynamics of the region's economy and fill a void in data about what is happening locally. The index tracks a mix of national and local variables, including the U.S. Leading Index, the interest rate spread and steel production.

Overall, the index rose slightly to 135.7 in July from 135.6 in June. Indiana University Northwest professors said not much happened in July as compared to June, and the slight increase could be attributed to momentum from improvements earlier in the year.

"It's more of of the same," said Micah Pollak, an assistant professor of economics at Indiana University Northwest.

Construction has been a bright spot in the local economy, largely because of the $3.8 billion Whiting Refinery modernization project that has employed up to 14,000 skilled tradesmen over the last five years, Pollak said.

Other big projects have recently cropped up, including the $104 million corporate headquarters Urschel Laboratories is building in Chesterton and the Shops on Main shopping center in Schererville, said William Hasse III, president of Hasse Construction in Calumet City.

Area construction firms were busy in the first quarter of the year, but it slowed down in April, May and June, Hasse said.

"As we start to get into the third quarter, we're seeing more activity," he said.

Commercial and industrial construction largely dried up during the downturn, but now stores, offices, medical facilities and nursing homes are starting to get built again. Hasse estimates the amount of work is about 75 percent of what it had been in 2006 and 2007.

Contractors are still making small profits because there's a lot of competition for the available jobs, Hasse said. But more development is taking place, and mothballed projects such as Shops on Main are getting revived.

"Businesses are starting to look to grow and reinvest," he said. "In the industrial setting, manufacturers are replacing obsolete equipment and structures. They're reinvesting after letting things decay while waiting out the long market recovery."

Ongoing improvements in the NWI Index suggest reason for optimism, but it should be tempered because there were no significant changes to any of the index components last month, Pollak said. Growth remains sluggish, and Northwest Indiana still has a long way to go before it gains back all the jobs lost in the recession.

The Calumet Region lost 30,000 jobs, or about 10 percent of the total, during the Great Recession. About half of those jobs have returned since 2010, and faster growth is needed for the region get back to its pre-recession employment level, Pollak said.

Statewide, Indiana has already recovered about 94 percent of the jobs lost during the downturn. The region trails the state and the nation in jobs recovery, largely because of the concentration of heavy industry in the area, Pollak said.

Manufacturers are more reluctant to add new employees because hiring is more of an investment than it is for other industries, Pollak said. The jobs pay better and turnover is lower, so they prefer to hire when they know they will need the employee for the foreseeable future.

"If you have a high-tech internet-based company, all you need is to add some desks and computers," he said. "You can't just build a whole bunch of new factories. Manufacturing is big and slow-moving."

Overall employment in the Gary metropolitan area dipped by 2,600 in July, which the study's authors deemed negligible.

Most of the major components of the index only had negligible changes since June, Pollak said. Steel production went up by 11,000 tons, average manufacturing work hours ticked down down slightly and U.S. retail sales rose by $832 million.

National indicators showed more momentum. The U.S. Manufacturing Index increased by 8.8 percent, while the housing market index shot up by almost 10 percent. The Dow Jones Transportation Index increased by 2.53 percent in June, which is significant for the region because it is a major transportation hub.

Locally, steel production has risen by 62,000 net tons, compared to six months ago. Area employment has grown by about 1,200 jobs over the same period.

The NWI Index has risen from 134.4 since the beginning of the year, marking a gain of just under 1 percent. The index has risen by nearly 14 percent since its recent low of 119.2 in April 2009.

Growth in the next six months is projected to be about 1.7 percent.

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