Indiana University Northwest’s School of Business and Economics has been tracking the Region’s economy through the Northwest Indiana Coincident Index for the past four years. But now it has upped its game.
Assistant Professor of Economics Micah Pollak and Professor of Finance Bala Arshanapalli in 2012 devised the NWI Index, a localized economic barometer that folds metrics like wages, home sales and steel production into a single number. Unlike other economic data about Northwest Indiana, it doesn’t just lump the Region in with the broader Chicago metro area.
But the index, which now stands at a reading of 143, wasn’t always readily understandable or intuitive, so Pollak worked to come up with something less abstract.
“When we say the index is 142, people don’t really have a sense of what that means,” Pollak said. “We wanted to convert it into something more mainstream, that people would be able to interpret better.”
He came up with a new Northwest Indiana Imputed Gross Metropolitan Product, or GMP, that’s based after something most people who take any interest in the economy are very familiar with — the Gross Domestic Product.
Can be used as a tool
The often-cited GDP tracks the total value of all the goods and services produced in the United States. The very similar GMP does the same for Northwest Indiana. It's imputed, meaning it's partly based on data and partly on algorithm.
IUN's GMP is quarterly. Currently, the only available data that's comparable is the U.S. Bureau of Economic Analysis's annual report on GMP for the entire sprawling Chicago metro area, which extends all the way into Wisconsin. Northwest Indiana makes up only a small part of that area. That report doesn't drill down into any Northwest Indiana specifics either.
Business owners, politicians and anyone interested in the current status and direction of the Region’s economy can use it as a tool.
“Just like any other measure, the largest benefit to us is in discovering how the indicator changes over time,” said Tony Sindone, clinical assistant professor of finance and economic development at Purdue University Northwest. “So I would be very interested in how the so-called needle moves from one time period to the next.”
Purdue University Northwest has developed similar metrics for tracking the economy.
“The Region benefits from such research by using these results to assist in implementing policy to move the needle even more in the right direction,” Sindone said.
IUN’s GMP tracks data back to 2006, and the research has found the local economy has barely grown since the Great Recession, due to a lack of good jobs.
Last year, the Region’s economy grew by 1.1 percent to $29.4 billion.
"Northwest Indiana's economy is large," Pollak said. "The relative size of Northwest Indiana's economy is 8.6 percent of the State of Indiana's economy and 4.5 percent of the economy of the Chicago Metropolitan Area. Our region’s GMP is only slightly lower than the GDP of the entire state of Vermont, which was $31.1 billion."
Northwest Indiana's economy is growing, but slowly, Pollak said. Its growth rate lagged behind both the state and the nation, which saw growth of 3.6 percent and 2.4 percent over the same time period, respectively.
Real GMP in Northwest Indiana has grown by just 0.6 percent or $15 million when adjusted for inflation over the past year. That again trailed the national rate of 1.4 percent and the Indiana real GMP growth rate of 2.7 percent.
"When controlling for inflation, our GMP has grown very little," Pollak said. "In the last year, real GMP, which is GMP adjusted for changes in the price level, grew by $15 million in year 2015 dollars."
Per capita real GMP, the measure of average income, output and spending per person in the Region, dropped by $104 to $39,066 over the last year, a decline of 0.3 percent.
"Over the same time period, real GDP per capita for the U.S. grew by 0.62 percent and for the State of Indiana by 2.4 percent," Pollak said.
Unemployment is higher in Northwest Indiana than elsewhere, standing at 6.1 percent in the Gary metro and 6 percent in the LaPorte metro area in August. It stood at 4.5 percent in Indiana, and 4.9 percent nationally.
But the fundamental problem is how good-paying manufacturing jobs have vanished while new jobs are being created in low-paying sectors like retail.
"The higher-paying, good-producing jobs are being replaced by jobs that don't pay as much," he said. "We're getting jobs in retail, sales, and food services. We're not attracting high-paying jobs in manufacturing."
To see the data or for more information, visit http://go.iu.edu/nwi.