Indiana experienced personal income growth above the national rates for all quarters of 2016 and the first quarter of 2017, while employment growth was below the national rates for three quarters in 2016. The personal income growth trend is expected to change from 2017 through the end of the forecast period in 2020. Both personal income and payroll employment in Indiana are expected to have growth slightly lower than the nation from 2017 to 2020.
Data
This forecast used data through the first quarter of 2017 for personal income and gross state product, and through the second quarter of 2017 for employment. Personal income data for Q4 2016 were revised lower by just 0.1%, and the new data for Q1 2017 were also 0.1% lower than our June forecast value. Employment data for Q1 2017 had no change, and the new data for Q2 2017 were 0.4% below our June 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 1.1 percentage points ahead of the nation’s 2.9% Q1 2016 growth rate. Since Q1 2016, Indiana’s year-over-year growth rate has outpaced the nation’s by up to 1.8 percentage points each quarter.
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 18 quarters.
Baseline Forecast
We expect income growth over the remainder of the forecast period to be, on average, slightly lower than our June 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, (2017:2-2020:4) Indiana is expected to have slightly weaker average annual growth rates than the U.S (4.2% versus 4.3%).
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 in Q3 2017 then slowly decline, but Indiana is still predicted to average job creation of 29,800 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 of following five quarters to a near historic low of 3.3% in 2017:2. We expect the rate to gradually increase over the forecast period to 4.3%, matching the U.S. rate.
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 expected 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. Wages and salaries experience their lowest growth rate in 2016, while personal income growth is expected to bottom in 2017. Income growth is predicted to remain stable from 2018 to 2020.
Summary
Personal income growth and employment growth are both expected to lag slightly behind the U.S. quarterly rates from for the remainder of the forecast period. Manufacturing is again expected to sustain annual job losses from 2018 to 2020. However, in the next year, 10 out of the 11 industry sectors are expected to have employment growth.