Indiana experienced personal income growth above the national rates for the first three quarters of 2016, but employment growth below the national rates for 2016. These trends are expected to continue from 2017 through the end of the forecast period in 2019. Indiana’s personal income growth rate is expected to equal or outpace the U.S. through 2019, while payroll employment in Indiana is expected to sustain slightly lower growth rates than the nation from 2017 to 2019.
This forecast used data through the third quarter of 2016 for personal income and gross state product, and through the fourth quarter of 2016 for employment. Personal income data for Q2 2016 was revised higher by 0.4%, and the new data for Q3 2016 was also 0.4% above our December forecast value. Employment data had no revisions, and the new data for Q3 2016 were just 0.1% above our December forecast.
During the recovery from the Great Recession, Indiana’s personal income growth rate was mostly on par or stronger than the national rate. However, from 2013:3 to 2015:4, Indiana’s average personal income growth rate lagged behind the nation’s rate each quarter. Indiana fell sharply behind the nation in 2014:1, but rebounded to be 0.3 percentage points ahead of the nation’s 3.6% Q1 2016 growth rate. Indiana’s 3.8% and 4.2% growth rates for Q2 and Q3 of 2016 were both above the nation’s respective 3.4% and 3.6% growth rates.
From 2010 to 2012 Indiana’s labor market mostly outperformed the nation as a whole, especially during the early part of the recovery period. During this period Indiana benefited from strong growth in manufacturing payroll employment, which held Indiana’s growth rate above the national levels. Compared to the U.S., Indiana experienced tepid employment growth since 2013, with year-over year growth lagging behind the U.S. by up to 0.8 percentage points.
We expect income growth over the remainder of the forecast period to be slightly lower than our December forecast. A peak quarterly growth rate of 4.7% is forecasted for Q1 of 2017 and Q4 of 2018. Over the full span of the forecast period, (2016:4-2019:4) Indiana is expected to have stronger average annual growth rates than the U.S (4.5% versus 4.4%).
After averaging strong quarterly job growth of 12,600 from Q1 2015 to Q1 2016, the state experienced a dip in quarterly employment growth (as we anticipated) to only 1,800 jobs in 2016:2. Growth rebounded over the remainder of the year, with 11,500 jobs created in Q4 2016. Over the full forecast period, job growth is expected to peak then slowly decline, but Indiana is still predicted to average job creation of 31,500 annually.
The unemployment rate experienced a quarterly increase (from 4.6% in 2015:4 to 4.7% in 2016:1) for the first time since 2012. However, the rate then dropped each following quarter in 2016 to 4.1% in Q4. We expect the rate to slowly increase to 4.4% over the forecast period.
Total establishment employment growth peaked in 2015. We expect a slight increase in 2017 and then slowly decelerating growth in the remaining forecast years. Manufacturing employment growth has a different trend with dramatic growth in 2014 followed by significant deceleration. Growth fell to below zero for 2016, and after a rebound this year is expected to return to negative territory for 2018 and 2019.
Annual change in personal income and wage and salary income generally parallel change in total employment. 2016 and 2019 are expected to have the lowest growth rates for both personal income and wage and salary growth. These rates are predicted to be slightly higher during 2017 and 2018, the remaining years in the forecast period.
Personal income growth is expected to outpace the U.S. quarterly rates from 2017 to 2019, but quarterly employment growth for Indiana is forecasted to be slightly less than the nation for the remainder of the forecast period. Manufacturing experienced annual job losses in 2016 and is expected to sustain annual job losses again in 2018 and 2019. However, in the next year, all sectors except for fabricated metals are expected to have employment growth.