SCHERERVILLE | Northwest Indiana outperformed the state and national economy despite the economic recession being one of the worst in U.S. history, according to an Indiana University panel of economists.
However, the economists speaking Friday at Teibel's restaurant said the region and the nation will have a rocky road to recovery as some indicators such as unemployment remain above pre-recession levels.
Don Coffin, associate professor of economics at Indiana University Northwest in Gary, said improvement in Northwest Indiana's economy in 2010 will depend largely on how the nation performs. He said if there is a 2 percent growth in employment nationally, that would mean 2,200 more jobs for the region.
"We're seeing a weak recovery," Coffin said.
About 50,000 jobs are expected to be added to Indiana payrolls in 2010, according to Jerry Conover, director of the Indiana Business Research Center at the university's Kelley School of Business. Conover said unemployment will hover around 9 percent next year, an improvement from the current rate of 9.6 percent in September.
Employment is a lagging economic indicator, and it will be a while before many people feel the recovery, according to Ellie Mafi-Kreft, a clinical assistant professor of business economics.
Corporate finance professor James Smith said financial markets have taken a beating in the last 18 months, and the current valuation gains are far from the 2007 peak levels. The Standard & Poor's Index dropped 38 percent in 2008, ranking as one of the worst year-over-year declines.
Using a football analogy, Smith said "we're still deep in our own territory, and we've got a long way to go."
Although Smith said the market is volatile, stock prices should "meander up" next year.
Smith expects there will be more bank failures in 2010, and it's not a good sign that earlier this year Indiana had its first bank failure since the 1950s.
The state's gross domestic product is expected to grow 2 percent next year, but that is following a projected 3 percent drop this year, Conover said.
Increases in sales of existing homes next year will boost the residential real estate market, but Conover said 2010 retail sales will be flat.
The economists also agreed mortgage interest rates and the federal funds rate -- the rate banks charge to lend to one another -- are expected to remain near their current levels next year. However, Smith admitted the prime rates may not extend to many borrowers because of tighter lending standards.
Despite concerns about inflation and increasing government deficits, the panel agreed that without the recent stimulus spending, the country probably would be looking at far worse conditions.
"The good news is that we have avoided the worst," Mafi-Kreft said. "Instead of a depression, we're talking about a recession and the end of a recession."
Corinne Alexander, assistant professor in agricultural economics, said agriculture has taken a hit this year, and next year may not be much better. Alexander said a lagging corn harvest, lower meat consumption levels and other factors could push Indiana net farm incomes to a level between $700 million and $1.2 billion this year. A year earlier, net farm income stood at $3.2 billion.
Positives and negatives
Indiana University corporate finance professor James Smith laid out some of the positive and negative developments on the horizon as the domestic economy recovers from a recession.
Positives
* Leading economic indicators are showing improvements
* Money and jobs are starting to flow into the economy from the stimulus package
* The drop in the dollar's value could boost exports because American goods are cheaper abroad
Negatives
* The commercial real estate market is headed for further deterioration
* Oil prices have increased
* Government deficits growing
