Indiana Business Outlook Panel: Columbus

This event is sponsored by Centra Credit Union.

Outlook 2021: Columbus

The year 2020 has been unprecedented, and there are many unknowns heading into 2021. This virtual event is your chance to hear the perspectives of several of the state's leading economic thinkers as we all wonder what is in store for 2021.

8 am on Tuesday, November 17

Faculty members from the IU Kelley School of Business and local panelists will offer forecasts and perspectives on the global, national, state and local economies, as well as the financial markets.

New this year is the addition of a local “C-suite” member of the business community to offer perspectives and responses to the forecast.

There will also be a Q&A session to answer attendee questions.

Description of the video:

Welcome everyone to the 2021 business outlook panel. I'm Dr. Kevin Jones, Associate Professor of Management at IBEC. I'll be your MC for today. The IUPAC division of business is excited to offer this annual event to our largest audience ever in this virtual format, along with our co-host, the Kelly School of Business and the Columbus area chamber of Congress. The business aloo panel serves the primary fundraiser for undergraduate business students scholarships at PUC. And we sincerely appreciate the donations contributed by many of you in attendance today. We're also very grateful for the sponsorship from our community partners, Columbus Regional Health, Duke Energy, First Financial Bank, and remakes Real Estate Professional gene danica, as well as our media sponsors, the republic and ws, w CSR. The event would not be possible without the continue the annual support of our friends at centra Credit Union. So now, let's welcome chief credit Officer Brad Davis to get us started with some opening comments. Creek, anybody can download panel that has mentioned, I'm Brad David, cheap credit officer, Federal Credit Union. And we're proud to once again be the primary sponsor of the event containing or long containing supportive IUPAC, commentary, Chamber of Commerce, and one of the largest credit union in, with our global headquarters right here in Columbia. We're having, we have a highly vested interests in the economic health and well-being of many of our geographic area. The markets that are 30mm panel will address this morning. We recently completed construction of our new 57 thousand square foot corporate headquarters facility right here in Columbus. Evident in our commitment to this community. In a 135 thousand members that we serve every day. We greatly appreciate the contribution WPC in Indiana University, including the Kelly School of Business, to the economic and cultural vibrancy of Columbus and South Central Indiana market area. And we sincerely thank today's panelists for their participation and insights. Before I turn this back over to Dr. Jones, I do have a few central sponsored prize winners to announce those attendees who entered the drawing for today's event. First, we have a $50 Poppins girl gift card to autumn streamer at the beach DFT before Congress Area Career Connection. Next, we have a $50 you're willing to gift card that goes to Mark Schneider at Ivy Tech. And finally, we have a $50 dreams bakery and cafe gift card that goes to Leah Elliott and Elwood staffing. Graduations are winners. Those gift cards we mailed out this week. And you would that'll period, that go to Dr. Hugh. Thank you, Mr. Davis. Today we're honored to be joined by Dr. Heidi Kasner as our panel moderator today. Not to guess. There's dean of the Kelly School of Business at Indiana University and a Frank P. Pop off Chair of strategic management. She served in many leadership roles, including Associate Dean of Faculty and Research, Chair of the MBA program, and Chair of the Department of Management and Entrepreneurship, and has won dozens of teaching awards at the Kelly School and, and at the University of South Carolina. Let's welcome together deed ID Kasner to take us into our discussions today. I want to welcome everyone and thank you to our sponsors. A big thank you to Dr. Kevin Jones and to Brad Davis for hosting and welcoming us today. Before I introduce our panelists, I want to say a brief word about the Indiana Business Research Centre, IDRC. The Ib RC is a center within the Kelly School of Business at Indiana University. The Kelly School just celebrated its antennae or 100th anniversary. And the Ib RC has been a part of the school for nearly its entire history. Since 1925, IDRC has monitored socioeconomic trends as they relate to our state, the Midwest, and the nation. Idrc provides and interpret economic information needed by businesses, governments, and non-profit organizations. This includes stats Indiana and staff to America statistics for the US as a whole states, counties, cities and towns, townships, regions, census track and much more Hoosiers by the number, which is workforce data, unleashing data for decision-making and Research, which is a partnership of state agencies and the Indiana Business Research Center to improve the quality and usability of stats data. Indiana gateway, which provides information about how taxes and other public dollars are budgeted and spent by Indiana's local units of government. And the Center for Economic Model Researcher see EMR, which is quarterly economic forecasts for the US Indiana and Indiana metropolitan areas. There are many publications of Ib RC, including Indiana Business Review, which has been issued since 1926. It's a publication that provides analysis at inside not Indiana's economic and demographic issues. Now let me introduce our panelists for today and I'm going to start with bill with a doctor when he retired from teaching in the Department of Economics at Indiana University in 2008. But it continues his activities with the IU Center for econometric model research, where he uses large computer models to produce forecasts of the US in Indiana economies. Doctor, when he has a PhD in economics from the University of Wisconsin. Prior to graduate school, he served in the Navy and he joined the faculty at IU at 1980, following 5-years at Penn State. Dr. Kathy bonds, your meal is an associate professor of finance. The Kelly School. She perceived from masters and PhD degrees from the University of Chicago and an honors BA in Economics from IU. Her research interests focus on monetary policy, exchange rate behavior, international finance market liberalization, and emerging stock markets. Prior to joining helpfully, she taught at the University of Washington and worked as an economist for the Federal Reserve Bank of Kansas City, the FCC, and the president's council, council on economic, excuse me, Council of Economic Advisers. Ryan brew or Dr. Breuer is an associate professor of finance, Indiana University Columbus. He's testified as evaluation expert in the US Federal and Indiana state court systems. You worked for five years as a risk manager for a Fortune 50 Corporation in Michigan and Indiana, ultimately attaining worldwide responsibilities for the development of policy compliance programs. He holds an MBA and PhD from the Kelly School and a BS in Engineering from Purdue. Steve molar, Dr. Moler is a visiting assistant professor at IEP. You see, where he teaches management and economic courses. He was also on the faculty and held administrative roles for Ivy Tech and Indianapolis. His research interests are in strategy, marketing, social media, and small to medium enterprises. He holds a DBA, two master's degrees, and two bachelor's degrees. And lastly, but not least, bad, UAB is the BP for corporate strategy it at Cummins. In his role, he oversees cross-functional efforts for the company's strategic direction globally, including business development, partnerships, mergers and acquisitions, and divestitures. He also leads the company's electrified power business segment that earned a bachelor's degree in mechanical engineering from Ohio University and an MBA from the Kelly School. As I turn it over to Dr. Woody, I want to remind our audience members to submit questions through the Q and a function below on their screen. And if we have time at the end, we'll be sure to address those questions. And so let me turn it over now to Dr. witty. Thanks IT. Good Morning, Columbus. My assignment this morning is to talk about the national economy and its outlook for 2021. Now frankly, I don't have a clue this year. So thank you for your attention. While on the other hand, I used to be a professor, as IT said, which means that I can be pretty good at pontificating about things I don't really understand. So let's take a little look at what's been happening at the economy, in the economy. So this slide shows the changes in real GDP. Numbers are annualize. So each quarter's quarterly number is what would happen. If you had that quarter four quarters in a row in terms of the magnitude on the chart. The dark red line, the heavy red line is what has actually happened. That's data. The lighter red line is, is a forecast. And forecast here is in quotes. And the blue line, which is basically just a little flat one that goes straight across is are the forecasts that we had as of November last year. So that's about what we were telling you what happened in 20212020, sorry. As you can see, that's not what happened. In fact, what happened is that 20-20 was going along pretty much as we had expected up through February. The economy was growing about 2%. Employment was growing, unemployment was very low. And then of course, the pandemic hit and the bottom dropped out. In the first quarter of 2020, we had one month of pandemic related shutdown, but that was enough to take GDP growth down to minus 5%. Again, that's the annual number, annualized number. And then it hit with full strength. The shutdown did in the second quarter, which came in at minus 31 plus percent. And then in the third quarter, the most recent data we have, things bounce back. The bounce back actually started in, in, in May and June. So the whole collapse in the economy in the second quarter was really an April phenomenon. And then in the third quarter, we came in with a plus 33% growth rate. Now you can see that what I've got there for the future is another couple of pretty good quarters. Ten, almost 11% in the fourth quarter of this year, and then over 3% in the first quarter of next year. And then settling down to steady growth at about 2.5%. That doesn't look too bad. We're back to sort of the growth rate we were at predicting a year ago. But when you look at a chart like this in terms of growth rates, particularly when you have the big swings that we're seeing here, it really distorts things. So if we go to the next slide, here, we're looking at the same data, real GDP, except now we're looking at the actual level. So instead of being measured in terms of percentage changes, quarter to quarter is just the dollar amount and that dollar amount is measured in terms of 20, $12. When you look at real GDP, what you're looking at is the total output of the economy. The real part means that it's corrected for inflation and that's what the 20, $12. So it's measured in terms of what it would be if prices had remained the same as 2012. The gross part in gross domestic product means that you're not correcting for depreciation. So here the color schemes the same except there's a orange line in there. The orange line is drawn at the level of the peak pre pandemic. So that's at the level of things. And in the fourth quarter of last year before we had any academic effects. Okay, so here what you see is that again, you have a small drop in the first quarter, bank drop in to second quarter, and then I'll come back in the third quarter. But when you look at it in terms of levels, instead of sort of looking like, you know, you've had a 30% drop and then a 33% rise. Show you're back where you started, you're not back where you started. We're still in a pretty significant hole as as things stand now. And even with the good quarter that I see coming up in the fourth quarter and a reasonably good quarter and first quarter, we're still not back to where we would have been. We don't get back to breakeven until sometime during the second quarter of next year according to this forecast. And again, remember that's a forecast in quotes. Okay? And even worse, we don't ever get back to the pre pandemic trajectory. There's a permanent loss involved and the scenario that I'm looking at for next year and beyond. And 1.5% there at the right side is, is the net, net difference between the pre pandemic trajectory in blue and the current trajectory that I see in the red. So that's a 1.5% of missing GDP. And that's a pretty signifigant amount if the economy grows on average at about 2.5% in a normal time, that's 60% of one year's growth. That's not just, you know, rounding error. You get the same basic picture if you look at other things. So let's look at the labor market. That's the next slide. This is the unemployment rate. And it's the same kind of picture going along. Really good. 3.5%. They're just before the pandemic it up a little bit in the first quarter and then a big jump in the second quarter. Now, unemployment is reported monthly, the GDP stuff is only reported quarterly. But here what I'm doing is taking monthly data and then averaging the three months in quarter to get quarterly data, which is what my model uses. If you look at the monthly data, the peak value in the second quarter was in April, and it was at 14.7%. The rise in April was by far the largest on record. Now since then it's come down a lot. The latest number we have is for October. And in October it was down to 6.9%. Which means that if you've gotten back more than half of what was lost in April. Forecast shows further, sees further progress. Group more gradual. Sort of we've been getting so far as the low-hanging fruit and now it gets harder. And again, as with the GDP at the end of the story out 2023 and beyond, we don't get back all the way to where we were. And the forecasts I've got it stabilizes at right at 4% as opposed to being around 3.7 or 3.6 in November forecast. So again, there's a significant loss. If we look at the employment numbers. Next slide, here's the change in employment. Again, employment is ordinarily reported on a monthly basis, but these are averages. So so the numbers here aren't quite the ones you've been seeing in the news. What you had was a big decline in the numbers here are shown in terms of the number of jobs lost per month. So in the second quarter it's down at 6 thousand jobs per month, which means 18 thousand jobs if you run that over three months. In fact, in March and April, the economy lost 22 million jobs. So the March lossless and shows up as a little decline in the first quarter, 22 million. And then you have a big jump up to a gain of above 2 thousand, close to 2500. For the three months of the third quarter. What I see is that the gains continue. They continue, but it's a lot more snow if we go to the next slide, it shows things here in terms of levels. And you can see here that even with the jump we had in the third quarter, we've got a long way to go in terms of getting employment back where it was. Or certainly to even, even more back to the trajectory that was on as of a year ago. And in fact, the looking at the orange line, which is at the level of the pre pandemic peak. We don't get back in this scenario back to the level of employment we had at the end of that 2019 until 2023, that's 3.5 years to get back there. And even when we get back, their employment is still far below where it was pre pandemic. This is really the underlying cause. And then some of the output short fall that we saw a couple of minutes ago, the labor force is going to take a permanent hit here. The number of people in the labor force has already taken a hit and we're not going to make all of that back up. Now, if you look at some of the underlying details of my forecasts, it's not all bad news. This is, this is an economy where there's a lot of diversity across the economy anyway, you slice it geographically. In terms of demographic groups, in terms of sectors of the economy. Looking at the ladder, manufacturing is doing pretty well. It's pretty much back to where it was pre pandemic. And in some areas, even better than pre pandemic. The same holds for housing, especially single-family housing. And my feeling is that, that trend particularly is going to continue. A lot of people have found that they can work just as well at home. All most, or maybe even in some cases better than they could when they were going into the office every day. And they don't have to spend a half an hour or 45 minutes each way commuting, which is a big gain. But if you're gonna be working from home, you don't wanna do it in a bedroom or something like that, or on a kitchen table. You want to have more room and you certainly don't want to try and do it. And if you've got, say, a wife and a husband, a spouse, and and a child in a two bedroom apartment. You want something more substantial to work from. And that's going to produce, I think, significant increase in the demand for housing. And particularly for single family houses which have more room. It's also producing a significant amount of demand for renovation of the existing house at a, at a room at a home office. Now, there are a few final comments that I think should be made. The first one is as I sort of hinted at the beginning, this is all really guesswork. All those dark red lines that are going way down and then way up or way up and then way down. Case of unemployment are completely unprecedented. We've never seen anything even remotely close to that in our economic history. And, and that means that past experience doesn't provide any guide. I don't even use the normal terminology for a business cycle fluctuation, which is that you have a recession followed by recovery. I use the terms a shutdown and a restart. That's different than a normal recession and recovery. It doesn't work the same. Past patterns don't apply. That's why I don't really have much of a clue about where we're going. There are a lot of things that are pretty sure to happen and have an influence, but there's no way to predict what they're going to be when they're going to occur, or what the impact is going to be to give you just two. There's the potential given the way that the virus is surging right now, that we're going to have a second round of shutdowns, I haven't folk put any of that into this scenario, but it's a possibility. But when dish thing shut down, how much they shut down? Where do they shut down? All of those are things that I have no idea about. Second thing, it's likely I think that we're going to get another stimulus package, even with a divided Congress and a new president. But how big will it be? What will be the components? When will we get it? All of those things will matter to what it does to the economy. And I don't have any way of I, I don't have any idea about those things. That's why I say that. We're, that this forecast is a scenario. It's not really a forecast, it's a guess at what things will be. What I can say is that the next year in the economy or year and a half is going to be very interesting, as Spock was liked to say. And as Kirk said to McCoy at the end of the first new Star Trek. But all was that. I think I'll turn things over to the financial markets and these presentation. Thank you Bill. Well, I think that idea of buckling up is, is very appropriate when we look at financial markets where they'd been in 20-20 and where they may be headed in 2021. Let me just summarize a couple of things about the financial markets and 20-20 and some factors that were impacting them. Because I think they're relevant to what we may see ahead in 2021. This can be summarized in the two charts I have on the right of the slides. When we look at the stock market, it's clear that the stock market reflected anticipation of the impact of Copan 19. Even before we started seeing the impacts in the real economy, we saw dramatic fall in all three major indices. The SMP 500, nasdaq, the Russell 2 thousand, which shows the index for smaller firms, really collapsing by a huge amount. But then starting toward the middle to end of March recovering. And in fact, the S and P and nasdaq had recovered beyond their pre coded levels. By early September, Russell, 2 thousand took a little bit longer, but now has also surpassed its pre COBIT level and all are reaching new highs. We also saw tremendous volatility, which is shown in the top right chart with that yellow line. In fact, that volatility level was not seen is the second highest level of volatility since 990s, except for what we saw during the global financial crisis. So we saw huge volatility during this, this past year in terms of fixed income markets, we actually saw the short-term Treasury bill rate even go negative for a very short time in March. It's been held stable close to 0. Since March, the 10-year bond yield fell below 1% for the first time ever in March, as there was a flight to safety that desire to hold safe assets. And that drove the ten-year yield down 2.5%. But now it's recovered to just below 1% and it's been holding there since March. It expectations of inflation as measured by the breakeven rate, had been below 2%, which is well within the Fed's target. On the corporate side, we saw in March a spike in credit risk. We saw that even at the AAA level, with the spread over the treasury bond rate going up to two over 2%. The high yield spread almost to 11%. So very, very strained markets in March, but then again recovery. So we're seeing recovery, same Recovery in financial markets. Even more than what we're seeing in the real economy as based on measures today. Could I have the next slide, please? So what are the factors that impacted 20-20 and can they carry over into 2021? There three I'd just like to identify. First, when you look at the stock market, what we see is a large differential in the impact of covert 19 and the economic repercussions of covered 19, we saw very large gains, of course, to information technology, that consumer discretionary and consumer staples sector. And by the way, consumer discretionary does include that famous firm Amazon. And consumer staples as people were buying food and, and paper towels and all kinds of supplies. And to some extent health. Who was hit? Well, energy as travel was stopped, the oil and energy sectors were strongly adversely impacted. That's in the top chart on the left you can see that had the largest drop. Industrials also suffered a very large hit that includes airlines. The other point about financial markets, the stock market and 20-20 was also the strong performance of technology. And in fact, if you look at the S and P 500 between January and end of October, if you took out just five stocks, and that's Apple, Facebook, Microsoft, Amazon, Google. Actually the S and P 500 January to October would've been negative. It would have had a negative return. So it was those five stocks, the strong performance plus the strong weights that we're helping propelled the market forward. So this, this impact of technology was clear in 20 22nd factor that was impacting markets was the extraordinary monetary and fiscal stimulus that we saw. We saw Federal Reserve purchases of assets starting toward the end of March when they announced their new right plan to help the economy purchase, uh, federal reserve assets, increasing byte, $3 trillion. Now that's more than what was bought during the global financial crisis. It represents a 70% increase in the Federal Reserve's holdings of assets. Importantly, that stimulus also included a wider set of assets that the Federal Reserve is now purchasing. So not only the usual treasury bonds, treasury bills, mortgage-backed securities that they bought during the global financial crisis, but it's been widened to include purchases, essentially of corporate bonds and municipal bonds as well, to support a broader and a sector of the economy. We also saw extraordinary fiscal stimulus, of course, with the cares act. And total government spending has risen by $3 trillion in a very short time. That led to a tripling of the federal budget deficit from just under 5% to over 15% of GDP. And of course, a consequent increase in debt. And we saw a huge uncertainty in financial markets, as you saw by that yellow line that I showed on the previous slide with the VIX going to the second-highest level. Concern about spread of COBIT 19, what the impact of that would be has caused a very large amount of volatility throughout the year. Also the availability of vaccine when that vaccine would be distributed. We've seen both lows and euphoria reflected in financial markets. And of course, another, another aspect of uncertainty during this past year has been the election. Who would win? What would that mean for tax and regulatory policy, as well as whether there would be an additional fiscal stimulus. So these were the three dominant factors in 2020. And to some extent we're expecting many of to continue through 2021. Can I have the next slide, please? So what is our outlook for financial markets? Well, as anything we have, positives and negatives are risk factors. What are some of the positives? We expect continued Federal Reserve support through 2021 as the economy continues to struggle from the lows that bill so correctly identified that our reserve is going to continue on as asset buying plan. That's going to provide support for both homeowners as they're trying to buy homes and keeping mortgage rates low. It's providing that backstop of support for corporate debt as well as other assets. We are expecting some kind of additional stimulus package. We're not quite sure what, but that, that can also provide some support for earnings that companies are going to experience. Another positive for financial markets going forward, I think, has been the adaptability and innovation that's happening in businesses around the United States. As we've seen, earnings announcements come in. 86% of those earnings announcements for the third quarter were higher than expected and also by a larger amount. Now, it's clear that early back in the second quarter, companies were also being very cautious about their prediction for third quarter ornate earnings. But nevertheless, the magnitude of the earning surprises that we're seeing, I think, are a positive reflection of how companies are adapting and will continue to adapt and also the rewards to adapting to we have a new normal for the business environment. Near term inflation risks are going to continue to remain low despite the Federal Reserve stimulus. And as we've seen by the two recent announcements in the last week, we've seen an acceleration of vaccine development. And if we can get assurances on the speed of delivery, that's going to continue to support company earnings and the market. What are the risks? What risks, of course, as Bill identified, are the risks of additional shutdowns and the harm to economic activity. Also in the stock market, we're seeing very high valuations. The PE ratios are above their averages. Their PE ratio on forward PI is about 22, which is above the five-year average. The Cape, which is another measure that's commonly viewed, is at 30, around 30, which is the second highest level that's ever been only surpassed by what we saw during the global financial crisis. The other. And so with, with PE ratios, what does that mean? Whether two ways that a PE ratio can return to normal. One is that earnings rise and my positives are hopeful that, that that is going to continue to happen. But it's also possible that those prices could revert closer to, to the earnings and that means that drop and stock values. So if, if we expect. An average for PE ratios, then that's, that's something we'll have to watch. On the other hand, it's not clear we're in a new environment whether even these old averages for PE ratios necessarily apply going forward. The other risks that I just want to mention, our credit risks, as we've seen, the Federal Reserve provides support to the markets very broadly, what that means is credit risks, in some sense, had been suppressed by this, by this stimulus. If interest rates are going to rise sooner than expected, that could put stress on companies that perhaps a borrowed, but would ordinarily not have borrowed, given no more normal economic condition. So it could be that companies could be more stretched than what is currently reflected in the existing credit spreads and that could pose a risk to future earnings on the interest rate side, if we see a faster recovery and if interest rates start to rise than longer-term assets could be more sensitive and there will be more sensitive in their price and could see greater volatility and fall. And also we have regulatory and tax policy uncertainty. It looks like we're going to have it divided government, but there's still some uncertainties about the policies will be for the next couple of years and that's going to potentially impact companies. So overall, our forecast is remains positive. We think that the positives will outweigh the negatives. That like bill, there's a very large amount of uncertainty. Hold on to your hats because I suspect there's going to be greater volatility, additional volatility, and 2021 as we continue to sort through these extraordinary changes that we've been seeing. So with that, I'll turn it over to Ryan for the State Outlook. Thank you very much. Thank you, Gabby. So we're talking about shutdowns and magnetic Go and the possibility for continued shutdowns or husband some news recently out of Michigan, New Jersey, Virginia, state of Washington with some targeted shutdowns. And I think a week or two ago we heard news from Germany and Austria about targeted shutdowns over there as well. So like the world and the United States, Indiana continues to recover from the pandemic which hit North America like a tsunami in March this year. As the waves of infection continue to move through the economy, various geographic locations in various industries have been affected at different times, in different ways and to different degrees as Bill suggested, an unprecedented fashion, hardest hit who'd been locations and industries reliant upon significant population density, such as large cities like Chicago and Detroit. In businesses and properties located their travel destinations, particularly requiring airline flights, hotels, restaurants, bars, churches, sporting events and other places people gathering in close proximity. Yet while the first wave moved through these areas, it has reached the cradle of goods manufacturing and production in the state of Indiana. While services, especially small services companies like barbershops, dentist offices, are most subject to failure and furloughs. Manufacturers are also feeling the pain among businesses in manufacturing and assembly hardest It would be the smaller firms more likely a cap size even when the life preservers and the forms of cares ACT funds are set to expire. Now, some background in the state of Indiana as an economic center. As I said, indiana is the nation's most prolific manufacturing and goods producing state, generating about 17% of GSP for manufacturing, which is number one in the country. And an additional 22% of GSP from goods production, or nearly 40% of its total output from making things. Some might think of Michigan, Ohio, Pennsylvania, Wisconsin, Louisiana, Texas. Yet Indiana leads this pack because we make things in Indiana, we tend to contract sharply in the early stages of a recession, if you can call this pandemic a recession. And we expand quickly in the early stages of recovery. For instance, in the second quarter of 2020, while the US fell in output by a record amount of annualized 31.4%, highlighted previously, the Hoosier State fell by an unprecedented level of 33% annualized, resulting in an output loss of more than $31 billion. We've experienced recovery to some extent since then, as the pandemic abated somewhat during the warmer summer weather and interactive restrictions were lifted during that time. For instance, during peak employment pre pandemic times in Indiana throughout 2019 and up through February of 2020, Indiana held about 3.17 million jobs or thereabouts. Indiana reached a low during the second quarter of 2020 of 2.74 million jobs with an average during that quarter of about 2.86 million jobs. It's a lot of job losses. We've recovered to just over 3 million jobs, a significant pathway to recovery. Yet we remain behind compared to prepare endemic levels, as we do not have output numbers about the third quarter yet for the state level, the exact measure of the rebound to date remains unclear. Currently covered 19 confirmed cases, hospitalizations and deaths are spiking again here and across North America and the northern hemisphere. As we brace for cold weather, a time when general coronaviruses are known to oftentimes proliferate. So why do we have such a sharp economic contraction and why don't we have the ability to understand how to forecast things as well as we typically would in the usual year, is because we self-directed an exogenous shock to gatherings, work, family, social, sports, and other groups. We locked down to flatten the curve. We intentionally shut the economy down to help mitigate the effects of the virus. The economic damage thus far has been swift in deep, quite unlike the damage wrought by the great recession. Because we now nine months forward from March first, know more about the virus, therapeutics vaccines. The way it spreads, the way it does not spread, is less likely. We will need to entirely shut down again. However, with the virus spiking and a new administration is set to begin work in January. The option remains on the table. My best estimate is we will utilize other forms of virus control as much as we can, such as masks, ventilation and distancing to avoid full-scale shutdowns. However, this does not mean. People are going to go about activities like in the pre pandemic days, they will likely not. I'll get to who suffers and who benefits from this in a moment. But next, I want to discuss the Indiana labor market with two components about the labor market that are important. Unemployment rate in labor force participation. So I'll discuss each and turn. The unemployment rate in Indiana spiked above the US level of 14.7%. Indiana went all the way to 17.5% in April as a cyclical state, large metro areas and vacation travel destinations spiked harder. For instance, Detroit hit 24% unemployment in April, and Hawaii remains over 13% unemployment now. By contrast, smaller cities throughout indiana have recovered better and the unemployment rate is now at 6.2%, which is better than the US, which stands at 6.9%. But the second measure of health and labor markets is the labor force participation rate, which describes the percentage of adults either working or seeking work in a given geographical region. And Bill alluded to this earlier. The LFTR, as we call it as a calculation kicks adults out of the unemployment equation when they'd been seeking work for too long, more than three months. Thus, ostensibly, we could end up with a low unemployment rate and a low labor force participation rate, which would not be good. And that's where we're headed. Rather, we would like to have a low unemployment rate and allow a high labor force participation rate. The LFP are at Indiana was reduced by the great recession from a peak in 1995 of 71.1% to a new peak post Great Recession of 65.1% at the, the tightest labor market we had seen in a while between 20162018. Now it's reduced to 63% post pandemic when the unemployment rate and the LFP are considered together. Losses across the state of Indiana to the job market since the peak labor market of 2018, have resulted in the elimination of well over a 100 thousand workers, probably close to a 140 thousand. These 70 thousand have been lost during the current pandemic of 20-20. Just considering the four most important industries. Nonetheless, Indiana as a relatively light leisure and travel state and a relatively heavy manufacturing goods production state, fair as well versus neighboring in pure states could actually seven next slide. So industries that were initially affected include travel oriented businesses like hair, airlines, hotels, and restaurants. But manufacturing was also hit hard about a month or so later, but only half as hard. Industries across Indiana, including leisure and hospitality manufacturing and goods production, education, health care, and retail have rebounded somewhat. Yet they've all suffered about three to 5% labor losses since March of these manufacturing losses, because Indiana is a heavy manufacturing and goods producing state, account for more than 50 thousand of these jobs, which is about 50% of our total capacity in the labor market. Additional losses will depend upon our continued responses to the virus, therapies, behaviors, vaccines, and national debt increases notwithstanding additional fiscal stimulus. Could I please have the next slide? So where are we headed? The last quarter of 2020, in the first quarter of 2021 will likely include output interruptions or attenuations as we continue to suffer with the virus avoided this of which is largely depend upon an additional fiscal stimulus as well as effectively developed and distributed therapeutics and vaccines. As our collective wisdom as to how to defeat the virus continues to improve, the last half of 2021 will likely show improvements to output and perhaps to a lesser extent in the labor markets. Although these forecasts are tenuous at best. A while ago I handed who will likely suffered, who'll be rewarded as we move forward. We will suffer. So far it looks like big cities, major sporting organizations reliant upon large, densely populated events. Socially oriented services like salons, Dennis, doctors and others performing preventive care, optional care, an elective services will suffer. These businesses will suffer relatively more until the pandemic lives. Sadly, low wage earners will suffer more than higher wage earners because service jobs will continue to be disproportionately affected in these workers will be more, more at risk to far lower unemployment. Who will benefit places of business with less population density? Small and mid-size cities, rural communities, automotive companies benefit because public transportation is less in favor and more socially isolating. Also, people able to continue to capitalize from the use of technology will be able to survive longer and may shape trends going forward. So in all indiana stands to benefit from some of these trends that are currently set in motion as a state with smaller, less densely populated cities and with a large presence in automotive and pharmaceutical development in the stands to benefit from its manufacturing culture, which could also be a benefactor of the reshoring of jobs, the after effects of the trade war. Also, we might benefit from population gains arising is migration away from our neighbors in Chicago and Detroit could benefit population growth in Indiana. With that, I will now turn it over to Steve to discuss the outlook for Columbus, India. Thank you. Good morning. Thank you. Columbus metropolitan statistic area has enjoyed strong employment growth, low unemployment, and weekly earnings growth during the 2013 to 2008 team period. While unemployment remain low in 2019, average weekly earnings began to decline. With this trend continuing into 2020. The decline can be associated with reduced weekly hours that began in 2018. How her labor compensation cost can be expected to continue to experience upward pressure. We should note that Columbus continues with the lowest unemployment rate in the immediate area. On the next slide, we will review one of the main drivers of GDP in the canvas area. Vehicle sales. Composite economic activity is durable goods and manufacturing driven. More than 50% of the Columbus GDP is related to transportation and motor vehicles. The pandemic lockdown is clearly reflected in these charts of light vehicle sales and domestic production. The silver lining is evident in the relatively quick recovery. A vehicle sales and production. Also important is the low inventory to sales ratio that supports the quick return to pre, locked down production. Current forecasts support a return to us vehicle sales of approximately 17 million vehicles annually in 2021. After declined to approximately 14.5 million vehicles in 2020. A quick return of consumers to purchasing vehicles is good news for Columbus. We also should note durable goods orders rebounded quickly after the March, April decline. However, Consumer Sentiment continues and reduced levels, which may hinder consumer spending. On the next slide, we'll review investment spending and housing and businesses in Columbus. Thomas housing sales continue at a lower level than the peak period of 20132014. Columbus has also experienced a reduction in average days on the market. As inventories tightened. This change is supported by reduced construction activity as housing permits declined from a high of 287 in 2017 to a 49200019 before rebounding slightly 20-20 May 20 be attributed to shifts in a local construction industry and Lynn limited land readily available for new development as reported by local realtors. We should also note the double-digit decline and commercial property sales volume, including office, industrial, and retail space. Data also provided by a local realtors. The Greater Columbus area Economic Development Board provides data regarding Plan local business development. After peaking in 2015, plan business development has declined with the exception of 2018. Currently, 20-20 is projected to represent the lowest planned business development since 2010. This may reflect a cautious outlook by local businesses. The next slide provides our historic perspective, the Columbus MSA GDP. The Gross Domestic Product for Columbus, increased almost 5% in 2018. The most recently reported year for MSAs. After increasing 4% in 2017. Both increases are well ahead of the national average and stay increases for the same period. We anticipate when the data's available a slowing in 2019, followed by a sharp decline in 2020 and due to the pandemic for Columbus, how are based on the rebound in durable goods orders? The purchasing manufacturers index increase, the rebound in vehicle sales and the potential for return of commons revenues and profits to 2017 levels. We are projecting 2021 GDP growth of 2.5 to 3.5% for the Columbus MSA. While this is not a typical bounce back from a recession, GDP in the first half of 2021 is expected to be muted due to the pandemic and political posturing. Based on this GDP growth for Columbus, we anticipate unemployment to decline to between 3, 4% for 2021. However, with overall employment returning to 2017 levels, the hospitality sector will continue to be an drying on unemployment. In the first six months of the year. I would like to emphasize the pandemic was an unexpected shock to the US economy. Quite an understatement. Yes. Times this health related shocked and the nation's political uncertainty remain dynamic variables within the presented projections that you all will provide a C-suite perspective. Now, warning everybody, I am going to keep my remarks very brief. And for those of you who know me, I think I'm going to try to keep it to two minutes, which would be a record for me. So I'd just like to start by saying, I hope all Irwell and safe and healthy, bizarre sort of unprecedented times. I think I'd just like to reflect on what we've heard from several of the presenters. And certainly the way we're seeing things or to two big themes, you know, uncertain, uncertainty in the economy and the economic outlook. And that's not just for North America, but globally. We see different things happening at different rates and paces globally. And then adaptability and innovation as we look into a new normal, as we look forward into what we see happening in 2021 and beyond. I think it's pretty accepted sort of outlook that vaccine, when the vaccines come, we aren't, nobody's exactly sure what that really means. And so what does the new normal look like sort of going forward. So let me just step back real quick and say, so what did we do at Cummins? And one of the biggest things during this time is to make sure that people are safe. Both the people that work in your communities are safe is a, is a big deal. Without that, certainly people can't even begin to sort of return to do any kind of work without doing it safely. And so we spent the first part of this pandemic not only shut down and back in our homes, but in order to restart factories and things, investing in things like automation and PPE. Safety, equipment like mass contains. So we Retooled some of our lines and arts filtration business to provide filtration material for people who wanted to make mass. And then we started making surgical masks ourselves to make sure that our employees when they're there are safe and have plans to make sure families get some of the common themes, get those to. It's important to note that when people talk about the uncertainty, this is the biggest variable in our economic forecast going forward as we look forward and think about where we see economic activity, you know, headed. The single biggest variable is what will the effect of the, you know, COBIT have on the economy? So as we look and our base forecast was basically around if people comply, we get a hold of the virus. We keep things, you know, we see some normalize returned economic activity, normal arise. But what's really devastating to economic activity is the start, stop, start, stop. And that would be required in a public health crisis, which is what this is, is a public health crisis in order for people to feel safe. And so around the world we see differing outcomes, differing. We've been in this since February at Cummins, since we have significant operations and move on. So we saw this in China first. And in fact, our operations in China are basically almost back to normal levels. And so we have different rates and paces kind of around the world. So going forward, you know, imagine this public health crisis will be the single largest determinant as to how the economy moves and how we do with the economy. In all my remarks are, are aimed at industrial, industrial economy, not the technology economy. So let's just move quickly to innovation and adaptability. Obviously, lots of people, not just Cummins, took their companies online over a very short period of time and figured out we could do things that, you know, before I think the people in our key groups thought would take us ten or 15 years to achieve. We achieved in a very short period of time. So nobody sure what that will deliver from an economic perspective going forward. It definitely won't be the same. But in any case, no matter what it does it feel like to us as we look through the different industrial economies of the world. I think the first speaker Bill noted this. We don't see a return to getting back to the 20th, 19, you know, pure economic levels. Intel 20, 20th, late 20 to maybe 23. And so it's going to be a while. So while we feel these recoveries pretty sharp recoveries were not in total recovered to where, you know, where we need to be. So I think there's still some significant uncertainty ahead is what I'd say and I'm going to leave it there, see if we have any time for Q and Q and a idea. I'll I'll just turn it over to you. Thank you. Actually keep your camera on because we did have a question that just came in that I think is quite relevant for you. And the question is about the impact on the US China relationship for Indiana, Columbus and of course the USSR. Ah, Sidney went to respond to that. Yet so very simply, I just say global trade is important. It's important to operations in Indiana. We engineer things all over the world in different places. We do a lot, a lot in southern Indiana that gets exported all over the world. So I'd say that the US China relationship is an important relationship in the economy who are intertwined. But it feels like in both places, you know, populism is driving us in a different direction. And you'll see that China designed a economic deal with 13 different Asian countries over the weekend, which is basically the replacement to TPP, the Trans-Pacific Partnership, those never signed by the US, despite the US's, It was the US's idea and the US worked on it for 18 years. We didn't sign it. So I think going forward, this is going to be a tricky relationship and even an embodied an administration, I don't think that the China US relationship is going to just tilt back the way it was. I think like a lot of things. And this was in global trade. Global trade was in retreat before we got to the pandemic. Pandemic just accelerator that really broke a lot of supply chains. So I think reshoring primary, he is going to come most places for people thinking about how do I do global supply chains going for, it accelerated that thinking less about, even less about trade policy. So it's going to be difficult either way, I think. Got it. Got it. And maybe just time for one more question. Kathy boundary Neal. We have a question about more on a personal level, what everyone has talked about uncertainty with investors facing so much uncertainty heading into 2021, how can they protect their 401K portfolios? While thank UID and for one, expect volatility, be prepared for that fear for your portfolios and that means think longer term, everybody don't jump on the next announcement or, or sell either way. Also, realize that holding long-term bonds, given how low interest rates are. I'll be very careful about that because long-term bonds, the only way interest rates can go is pretty much up right now. And so that could hurt the values of longer term bonds. Focus on diversification across some different asset classes as well as within stocks. We've seen small stocks recover were recently and value stocks gain compared to gross stocks. So diversification longer-term still pays. And finally, as you're investing in mutual funds, pay attention to the expenses because larger expenses can certainly dragged down those returns. Fairing five, thank you. Sound match. And with that, I know we are out of time. I want to turn it back over to Kevin Jones for a wrap up. And you didn't Kasner. Lots of information to reflect, done. Very useful information through reflect on I want to give a hearty thank you for joining us today and supporting business students scholarships. A link to this video recording will be soon. Many thanks to Dean Kasner and the Kelly School of Business, our outstanding panelists and a special thank you to the many staff at IU PUC and the Kelly School of Business who work behind the scenes to produce this event. Thank you to the Columbus area Chamber, central credit union, and all our sponsors for supporting this a bit and our business students scholarships. Please stay safe. We look forward to seeing everyone again next year for the 2022.