Indiana experienced personal income growth above the national rates for all quarters of 2016, while employment growth was below the national rates for three quarters. These trends are expected to continue from 2017 through the end of the forecast period in 2020. Indiana’s personal income growth rate is expected to equal or outpace the U.S. through 2020, while payroll employment in Indiana is expected to have growth slightly lower than the nation from 2017 to 2020.
Data
This forecast used data through the fourth quarter of 2016 for personal income and gross state product, and through the first quarter of 2017 for employment. Personal income data for Q3 2016 were revised higher by just 0.1%, and the new data for Q4 2016 were equal to our March forecast value. Employment data for Q4 2016 were revised higher by 0.7%, and the new data for Q1 2017 were 0.6% above our March 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 0.4 percentage points ahead of the nation’s 3.6% Q1 2016 growth rate. Indiana’s 3.8%, 4.3%, and 3.5% growth rates for Q2, Q3, and Q4 of 2016 were all above the nation’s respective 3.4%, 3.6%, and 3.0% 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 has experienced tepid employment growth since 2013, with year-over year growth outpacing the U.S. in only 3 out of the past 17 quarters.
Baseline Forecast
We expect income growth over the remainder of the forecast period to be slightly lower than our March forecast. The highest quarterly growth rate of 4.5% is forecasted for the last 6 quarters of the forecast period. Over the full span of the forecast period, (2017:1-2020:4) Indiana is expected to have stronger average annual growth rates than the U.S (4.4% versus 4.2%).
After averaging strong quarterly job growth of 14,100 from Q1 2015 through Q1 2016, the state experienced a dip in quarterly employment growth (as we anticipated) to only 3,300 jobs in 2016:2. Growth rebounded over the remainder of 2016, peaking at 19,700 jobs in Q3. Over the full forecast period, job growth is expected to peak then slowly decline, but Indiana is still predicted to average job creation of 29,100 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 four quarters to 4.0% in 2017:1. We expect the rate to decrease again in the second quarter, then to slowly increase over the forecast period to 4.3%.
Total establishment employment growth peaked in 2015. We expect growth to decelerate slowly this year and during 2018, and then to hold steady in the remaining forecast years. Manufacturing employment growth has a different trend with an expected growth peak in 2017 followed by significant deceleration. Growth is expected to fall below zero for 2018 and remain in negative territory for the rest of the forecast period.
Annual change in personal income and wage and salary income generally parallel change in total employment. 2017 is expected to have the lowest growth rates for both personal income and wage and salary growth. Income is predicted to grow slightly faster from 2018 to 2020.
Summary
Personal income growth is expected to outpace the U.S. quarterly rates from 2017 to 2020, but quarterly employment growth for Indiana is forecasted to be slightly less than the nation for the remainder of the forecast period. Manufacturing is expected to sustain annual job losses again from 2018 to 2020. However, in the next year, all sectors are expected to have employment growth.