Business and industry thrived in Northwest Indiana in 2018, and optimism carried on into this year.
The Region’s steel industry rebounded with the help of the Section 232 tariffs of 25 percent on all foreign-made steel and improving market conditions. U.S. Steel nearly tripled its annual profit to $1.1 billion. ArcelorMittal grew its annual profit by 12.7 percent to $5.1 billion last year as ArcelorMittal USA posted its best financial performance since 2007. BP, the big steelmaker’s neighbor along the highly industrialized lakeshore, nearly doubled its profit to $12.7 billion last year.
Workers shared in the prosperity as collective bargaining for new contracts happened to coincide with boom times. The United Steelworkers union negotiated a 14 percent cumulative raise over four years for workers at ArcelorMittal and U.S. Steel mills, and an 11 percent cumulative raise for BP Whiting Refinery workers over three years.
BP has been investing $300 million into a new naptha hydrotreater at its Whiting Refinery to meet a new U.S. Environmental Protection Agency mandate that gasoline must be less than 10 million parts per sulfur instead of the past standards of 30 parts per million.
Whiting Reliability Accelerator Manager Dan Hirse estimated the project, the largest since the $4.2 billion modernization that equipped the refinery to process more heavy crude from the oil sands, would create as many as 500 construction jobs over the next few years.
"We're making one of the largest investments in refinery since the modernization project," Hise told the Lakeshore Chamber of Commerce last year. "A hydrotreater removes sulfur from our fuel. In layman's terms, it makes our gas cleaner.”
The sweeping project won’t be completed until 2020.
"It's substantial," Hirsch said. "It will take all different trades to build: electricians, ironworkers, and pipefitters. It'll be different trades as it goes along."
Suddenly flush with cash after turning only a few annual profits over the past decades, U.S. Steel also is investing $750 million into the "revitalization of assets" at its sprawling Gary Works steel mill that stretches along seven miles of Lake Michigan lakeshore. It’s partly a course corrective after past CEO Mario Longhi starved the steelmaker of maintenance funds, resulting in inefficiency that was widely blamed for the company’s startling $180 million loss in the first quarter of 2017 and led to his ouster.
"This announcement is a minimum commitment. As we deploy the $2 billion asset revitalization program in our North American flat-rolled facilities, the amount could very well grow," U.S. Steel spokeswoman Amanda Malkowski said in a statement. "The investment covers a wide range of assets, and hundreds of projects, with a strong emphasis on customers with seven critical assets: the four blast furnaces, the steel shop, the casters and the hot strip mill.”
Other major investments came to the Region as the result of Hammond’s and Gary’s unsuccessful bids for the Amazon HQ2 office. Chicago and Indianapolis both ended up among the 20 finalists nationwide, but fell short as the company ultimately chose Washington D.C. suburbs in Northern Virginia and New York City, though the e-commerce giant has backed out of Long Island City due to local opposition.
Hammond’s pitch of the site of the former State Line Generating Plant on Lake Michigan sparked interest from New York City-based data center mogul Peter Feldman and Indianapolis attorney and developer Tom Dakich. They picked the site on the Hammond lakefront as a place to develop the Data Crossroads of America data center, which would use lake breezes and lake water to cool off computer servers that would store data from Netflix, Hulu, hospital systems and other heavy users of data.
The lakefront data center, right on the Chicago border, involves $40 million in investment upfront for an initial 105,000 square feet. Eventually, it could grow into a $200 million investment that would result in a 400,000-square-foot facility north of the Hammond Marina on the Chicago border.
Indiana Governor Eric Holcomb described it as a “huge win for the Region” at a dignitary-studded groundbreaking ceremony last year.
Dakich and Feldman tried for seven years to build a new data center in Chicago but without success. They found Indiana to be much more business friendly and conducive to investment.
"Years ago, we went to Chicago," Dakich told a business crowd at the Lakeshore Chamber of Commerce at the new Hammond SportsPlex in December. "Things didn't work out ... Now we have the approval of our development agreement, our ground lease, our tax-increment financing district. Everything it took us six years in godforsaken Illinois to not get, we got in less than a year in Indiana."
They sought extensive tax breaks in Indiana, including exemptions from the state’s personal property tax and 7 per sales tax if they invested $100 million within five years.
And, though it passed on the Region for a new headquarters to complement its longtime base of operations in Seattle, Amazon ultimately decided to locate a last-mile warehouse in a former Tradewinds logistics facility at Texas Street and 15th Avenue in Gary. It’s now employing 500 workers and looking for entrepreneurs who would run delivery services that would employ 40 to 100 more.
"The concept they have is for people to start their own businesses by being the delivery person," Gary Mayor Karen Freeman-Wilson said. "They will allow people to start their own courier services to deliver for Amazon specifically. A growth in small business and a growth in entrepreneurship can only help the city."
Overall, Northwest Indiana’s economy generated $30.4 billion worth of economic activity last year. Indiana University Northwest Assistant Professor of Economics Micah Pollak wrote in the Indiana Business Review's 2019 economic forecast that the Gary metropolitan area grew by 2.9 percent in 2018, or about twice as fast as normal.
The Region’s economy had been growing at a far more anemic rate of 1.5 percent a year since the Great Recession, swapping higher-paying industrial and construction jobs that pay an average of $80,000 a year with lower-paying service-sector ones that pay only an average of $39,000 a year. But Northwest Indiana added more than 1,100 new jobs last year, including some high-paying ones.
"Northwest Indiana has also been subject to several concerning trends, particularly declining employment in traditionally high-paying goods-producing jobs in manufacturing, construction and steel, which has only poorly been offset by a rise in low-paying service sector jobs, as well as a continuing decline in total population with the highest decline among important demographic groups. While economic growth has been relatively slow for Northwest Indiana following the Great Recession, in 2018 — for the first time in almost a decade — there are signs of significant economic improvement and accelerating growth," Pollak wrote. "Since the 1970s, as well as during the years following the Great Recession, Northwest Indiana has been experiencing a structural shift from goods-producing to service-providing jobs, which has led to continued declines in real income per person for the region. However, in the last year, there are signs of this structural change slowing and potentially shifting to a healthier sector employment mix."
Further growth is expected after years of stagnancy. Pollak forecasts growth of 1.8 percent to 2 percent this year. Unemployment should tick down, employment should rise by 2,500 jobs, and the gross domestic product should grow by $550 million to $610 million.
Indiana University professors estimate the state’s economy should grow by 3.2 percent this year. Northwest Indiana won’t grow as fast but will still see economic expansion.
"In 2018, Northwest Indiana saw some of the most promising and widespread signs of stronger economic growth since the end of the Great Recession," Pollak wrote. "Economic output grew by 2.9 percent to $30.4 billion, and there were signs of improvement across the board in sector employment mix, population growth, residential construction, retail sales, labor force participation rate and the steel industry."
Other economic jolts in the area include an ongoing $100 million development that’s expected to bring medical offices, a hotel and retail to Crown Point and a $1 billion investment in the Chicago Assembly Plant that will bring 500 more high-paying autoworker jobs to Hegewisch.
Last year, Illinois had a jobless rate of 4.3 percent, which was 40th nationally and last in the Midwest, according to the U.S. Bureau of Labor Statistics. Indiana boasted an unemployment rate of 3.6 percent that was lower than the national average.
The Hoosier state achieved a record of 2,731,600 people employed in the private sector in December, which was up by about 42,700 workers as compared to Indiana's previous peak of private-sector employment in December of 2017.