Indiana experienced personal income growth and employment growth below the national rates for 2015 and most of 2016. However, Indiana’s personal income growth rate is expected to outpace the U.S. rate from 2017 through the end of the forecast period in 2019. Payroll employment in Indiana is expected to sustain slightly lower growth rates than the nation from 2016 to 2019.
This forecast used data through the second quarter of 2016 for personal income and gross state product, and through the third quarter of 2016 for employment. Personal income data for Q1 2016 was revised higher by 1.1%, and the new data for Q2 2016 was 1.7% above our September forecast value. Employment data had no revisions, and the new data for Q3 2016 were just 0.3% below our September 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 0.2 percentage points ahead of the nation’s 3.6% Q1 2016 growth rate. Indiana’s 3.3% growth rate for Q2 2016 was once again slightly lower than the nation’s 3.4% growth rate.
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 0.7 percentage points.
We expect income growth over the remainder of the forecast period to be slightly higher than our September forecast. A peak quarterly growth rate of 4.9% is forecasted for all quarters of 2018. Over the full span of the forecast period, (2016:3-2019:4) Indiana is expected to have stronger average annual growth rates than the U.S (4.7% versus 4.6%).
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 is predicted to rebound over the remainder of the year, with 9,100 jobs created in Q4 2016. Over the full forecast period, job growth is expected to stabilize, but Indiana is still predicted to average job creation of 33,900 annually.
The unemployment rate experienced two consecutive quarterly increases (from 4.5% in 2015:4 to 4.8% in 2016:1, and 5.0% in 2016:2) for the first time since the end of the recession. However, the Q3 2015 unemployment dropped back to 4.5%. We expect the rate to remain stable at 4.5% for the majority of 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 falls to below zero for 2016, 2018, and 2019.
Annual change in personal income and wage and salary income generally parallel change in total employment. 2016 is expected to have the lowest growth rates for both personal income and wage and salary growth. These rates are predicted to increase in 2017, followed by stable growth over the remainder of the forecast period.
For most of 2015 both personal income growth and payroll employment growth were below the U.S. quarterly rates. 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 is expected to experience annual job losses in 2018 and 2019, but in the next year, all sectors except for fabricated metals are expected to have employment growth.