Indiana Business Outlook Panel: Kokomo

Outlook 2021: Kokomo

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 Wed., November 18

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.

This event is sponsored by Community First Bank and Indiana University Kokomo

Description of the video:

Good morning and welcome to the 20-20 economic outlook panel webinar. I want to thank all of you for joining us this morning. I hope all of you are well and taking care of yourself. My name is Allen crab and often I'm Dean of the School of Business here at IU COCOMO. And I am pleased to have a wonderful group of individuals joining me. I think we have a very informative presentation and that you'll find a great deal of information coming forward for this. I would like to begin by first introducing our sponsor for today's event. This morning, our sponsor is Community First Bank. We have had the great fortune of working with them for the last three years with sponsorship and can't tent can't thank them enough for their assistance in their participation. So with that, I will introduce you to Rob bloom, President and CEO of community first thing in morning. Thank you, Dr. Cabot, oft. First of all, I'd like to say, I'm, I'm guessing this is the first ever virtual presentation of this event. So thanks to the team and I UK and for putting this together on a virtual basis. Thanks to everybody who's taken the time to sign in this morning. On behalf of the Board of Directors and my coworkers here at Community First Bank. I'd like to say a huge thank you to to IU cave again for for continuing to host this event. For many of us that it serves as an informal kickoff to the holiday season. And we're very thankful to be able to participate once again. Thanks to, to, to UK for continuing to grow, grow and its, its role as an educator of our entire community. This event is 11 way that they reach out and help make COCOMO in Howard County, as well as the state of Indiana about a place with all the variables impact today's economy, whether they be political, medical, social, or otherwise. Today's panel should proved to be a very interesting one. Over the immediate past years, we've, we've enjoyed an unprecedented economic prosperity and growth. But it's been bookended by two economically traumatic events, the financial crisis of 2008 and the ongoing Coven 19 pandemic of today. So given the unique challenges that our country and our economies are facing, again, that should prove to be a very interesting panel. So again, thank you for the opportunity allowing the bank to be a part of this or that, and we're looking forward to it. Thank you very much. Thank you, Rob. And thank you and everyone else at community first bank for your tremendous support of this event. The School of Business as well as the IU COCOMO campus. It's been our pleasure to work with you over these years and we look forward to many more years working together on this and a number of opportunities. It's now my pleasure to introduce our moderator for today. Idling IT. Kasner is the dean of the Kelly School of Business at Indiana University. She's also the Frank P. Pop off, a chair of strategic management. Her research focuses on corporate boards, executive succession in mergers and acquisition. Dean Kasner earned her MBA and PhD from the Kelly School of Business and a bachelor degree in Business Administration from Southern Methodist University. Please join me in welcoming paint here. Thank you so much and I want to welcome everyone is well, and I want to thank Alan and Rob for both welcoming and hosting today. Before I introduce our panelists, I want to say just a very brief word about the Indiana Business Research Center or as we refer to it, Ib RC. The ITRC is a center within the Kelly School of Business at Indiana University. The Kelly School just celebrated its centennial or 100th anniversary. And the ITRC has been a part of our school for nearly the entire history. Since 1925, IDRC has monitored socioeconomic trends as they relate to our state, the Midwest, and the nation. Idrc provides an interpret economic information needed by businesses, governments, and non-profit organizations. Among the many things that they have include stats Indiana and stats America. These are statistics for states, counties, cities and towns, townships, regions, census tracks, and even stats for us as a whole. There's Hoosiers by BIN numbers, which is workforce data and 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 state data. And he had a gateway provides information about how taxes and other public dollars are budgeted and spent by Indiana's local units of government. And then there's the Center for Economic Model researcher, CMR, which provides quarterly economic forecaster the United States, Indiana, and the Indiana metropolitan areas. The center also has many publications including Indiana Business Review, which been published since 1926, and provides analysis and insight on Indiana's economic and demographic issues. I urge you to look at IDRC If you need data about Indiana or about various locales within Indiana, it really is a great resource. Now let me introduce our panelists and I'm going to begin with Dr. Elly, mafia crack. Dr. Moffitt craft is a native of France and holds a BS, MA, and PhD in economics. She's a Clinical Associate Professor of Business Economics and Public Policy at the Kelly School since 2006, and an affiliate faculty at the Institute for European studies. She coauthors the yearly international outlook for the Ib, RC for professional interests are in the, are in the areas of international economics with an emphasis on the relationships between business government and society. And she's interested in Strategic Sustainability. Then there is deck, Dr. Katherine bonds or Neil Doctor bouncer. Neil is an associate professor of finance and the Kelly School of Business. She received her Masters and PhD degrees from the University of Chicago and an honors BA in Economics from IU. Or research interests focus on monetary policy and exchange rate behavior, international financial markets, liberalization, and emerging stock markets. Prior to joining Kelly, she taught at the University of Washington and worked at as an economist for the Federal Reserve, bake IT Kansas City. She also worked with the SEC and the President's Council of Economic Advisers. Dr. kyle Anderson is a Clinical Assistant Professor of Business Economics at the Kelly School of Business in Indianapolis. And the director Kelly and the Kelly schools evening or part-time MBA program on the IEP UI campus. His research focuses on pricing options and online markets. He has an MBA and PhD from the Kelly School in Bloomington. Doctor Anderson has seven years of experience in the healthcare and heavy trucking industries. And Alan prep and mock, Dr. crab and hop has served as Dean of the School of Business at IU COCOMO since June 2014. In addition to his administrative responsibilities, he oversees the MDA capstone course. He's also worked with other economists to support economic development. Prior to joining IU COCOMO, He was the founding dean of the College of Business at Purdue University, North Central and West Will Indiana. He holds a PhD in economics from Wayne State University. And last but certainly not least is Kevin Snyder. He joined the straightforward Cambridge group in September 2017, is the president of the speed grip. Chuck company. Previously owned and managed Beller met machine tool service at Dallas based company serving the manufacturing industry with repair and maintenance services for CNC machine tools. Upon selling the business in 2014, he worked as a fractional CFO in Florida. Kevin earned an MBA from the Kelly School and a BS in business and accounting from Bowling Green State University. As I turn it over to Dr. Moffitt craft, I want to remind our audience members they can submit their questions through the Q and a function below the screen. So don't hesitate to submit questions. Dr. Matthew crap. Thank you very much, Dean Kasner. And good morning to everyone in COCOMO. In a time of travel restriction, my mission this morning is to take you around the globe, emphasizing on the US, China, your area, and Latin America. So last year, our group at the Ib RC, forecasted a global output growth of about 3% for 20-20. But a microscopic virus came into the picture. And instead of a growth in economic activity, we are experiencing a global recession of a magnitude not seen since World War Two. It is estimated that by the end of 2020, the global economy will have shrunk by 4.4%. The number forecasted today may not be relevant tomorrow. Because the pandemic, which is our biggest obstacle to the recovery, is something that we have never experienced in modern times. As long as the virus circulates, unchecked, growth is compromised. At any moment, a resurgence of coffee 19 infection and subsequent tightening government restrictions can threaten to drag the world in an even more prolonged recession. Our group is cautiously optimistic that our estimate of 5% global recovery in 2021 will be just enough to raise the 20-20 Global drop in output. So let's have a little closer look at the economy of the United States. In the second quarter of 2020. The Bureau of Economic Analysis recorded macroeconomic statistics never seen before. From April to June, the year over year declining US GDP was 9.5%. To put that in historical perspective, at the height of the global financial crises, in the second quarter of 2009, the GDP contracted by 3.9%. In April 2020, the US Bureau of Labor Statistics recorded a record unemployment rate of 14.7%. As more than 20 million American abruptly lost their jobs, it could take years to return to the 3.5% unemployment rate. The US recorded in February 20-20. Because no one really knows what the post pandemic economy will look like. Corporate default rates are increasing. And more than half of the small business owners that have been surveyed by the US Chamber of Commerce worry about having to permanently closed their businesses. Clearly, the pandemic has created extraordinary circumstances and new challenges for policymakers in the United States and around the globe. These pandemic has affected aggregate supply and aggregate demand simultaneously. And these two sided market shock has consequently intensified the need for greater and more coordinated interaction between monetary policy and fiscal policy to try and minimize the economic harm. In regard to the monetary policy, the Federal Reserve lowered. Lowered its policy rate to near 0 and increased its holding of US securities to help consumer credits available and borrowing costs low. Additionally, in order to continue to support the nation's recovery, the 0 interest rate policy was announced to last through 22-23. In regards to fiscal policy, the US Congress voted the cares ACT that provided help to families and businesses. But as of now, Republicans and Democrats have not been able to and agree on a renewed fiscal package in a country where inequality is rising and racial and ethnic minorities are left behind. The downside risk to the forecast in the United State is the intensifying political divisions. However, thanks to the country's threshold, potential flexibility of the economy and the world appetite for the dollar. We estimate the growth in the US to be above 3% in 2021. So now let's look at the second biggest economy in the world, China. At the start of 2020, China experienced its first output decline in more than four decades. And it's now expected to expand at its slowest annual pace since Mao's Cultural Revolution in 1976. That said, China will be the only major economy with a positive growth in the year 2020. We forecast China GDP to expand by 2% in 2020 thanks to a robust recovery that has not been obstructed by a strong resurgence of the Ku, the virus. It is projected that GDP growth will further increased in 2021 to above 8%. So the return to growth in China has been powered by the countries state back industrial sector thanks to a pandemic that originated within its borders and left economies outside of China. Flannery, China's manufacturing power shifted to address the global demand for medical products and other work from home equipment. However, amid global backlash, overcome the virus, as well as calls from inquiries from Australia, continued rising tension with the United States on trade and technology. And a growing US led coalition against Huawei. Global demand for Chinese products is increase. Is it decreasing? Furthermore, South Asian countries such as Vietnam, with lower wage and environment and less trade risk, or emerging as a more attractive trading partners in the global supply chain. Nevertheless. It is important to signal that China's relatively strong recovery is supporting many economies around the world. Specifically, China's stimulus led infrastructure expansion allowed many export-led countries, in particular, commodity exporters, to recover while their service activity continued to be hampered by the resurgence of the virus. Next slide, please. So now let's go to the euro area. The area is divided into zones, the North and the South. In the North, countries like Germany and Netherlands have leverage them large budget surpluses and robust industrial such structure to straighten their resilience to the pandemic. However, in the south, countries like Spain, Portugal, Italy, and even friends have put the most stringent lock downs and counted the greatest number of death. Their fiscal space was initially more constrained and therefore, the safety nets they could offer their businesses and their residents more unlimited. Furthermore, the southern economies in Europe rely heavily on tourism, particularly in France, which relies heavily on tourism, aeronautics, and luxury products. Some of the hardest heat sector during the pandemic. The economic burden has been insignificant. These north south dichotomy was viewed initially as the last straw to the fragile unity in the euro area. But unprecedented coordinated efforts from European Commission on the fiscal side and European Central Bank on the monetary side, have so far supported the Euro area by limiting the economic devastation. Although we estimate that by the end of 2020, the Eurozone annual GDP will drop by 8%. The safety nets that were deployed by the European institution will remain essential to stabilize the European financial market. Likewise, the safety nets will support the nation expenditure related to the pandemic, provide credit guarantees to firms and support the most vulnerable households in Europe. And we hope that with a sustained, coordinated fiscal and monetary stimulus, the Eurozone economy will rebound and economic activity will increase by 5% in 2021. Finally, let's take a look at Latin America. The region that includes large economies, such as Brazil, Mexico, Argentina. That represent 8% of the world's population and account for 30% of global coffee, 19 cases, and 1 third of death. Many countries in the region depend on tourism. Commodity export, and capital inflow, including remittances with commodity prices at their lowest historical level. Tourism at a stand still, and remittances dropping as unemployment has risen around the world. Those economies are greatly heat impacting the region as a whole. Furthermore, these emerging markets cannot increase their investment without raising fears of future default. The macroeconomic tools to less than the categories of covered 19, unlimited in the region. And therefore, a pre pandemic growth rate will likely take years. Adding to concern social and political problems in the region, or a batch erase ten years of sustained increases in middle-class living standard. Next likely. So in conclusion, in the first part of 20-20, virtually every country in the world experience a simultaneous collapse of its economic activity. Mind you, a collapse that was historically unmatched in time of peace. The swift, comprehensive and well targeted monetary and fiscal support is improving the prospects that an economic recovery will be achieved by the end of 2021, pen day, the absense of prolonged lock downs. Some countries have more budgetary room to maneuver and are enjoying lower cost of borrowing. Others with higher debt service costs have to rely on global solidarity. These health related economic crises is highlighting the fact that our global market approach to trade that has many points of interconnectivity is only as strong as the weakest health system. Economic survival will be the focus, the short term in 2021. However, more long-term resiliency will need to be engineered in our global market going forward. So now Kathy will present the current situation in the US financial markets and the outlook for 2021. Thank you. Thank you, Ellie. Well, Elliott has given us a tour of the world and the economic conditions before we get to our outlook for 2021 financial markets, let me just do a quick review of where we stand today as a yesterday. And if you take a look at the chart on the top right, which shows major stock indices and also volatility. As of yesterday, the S and P 500 is up on the year 12%. Now that's an amazing recovery given that in a short period of time between about February 19th and March 23rd, the SMP 500 fell by over 30%. We see similar recovery by other stock market indices. The nasdaq is up 30% after falling 24% in the first part of the year. The Russell 2 thousand, which is an index of a larger index but of smaller firms, has taken a little bit longer to recover, but now is up 7% on a year after dropping by over 40%. So that's what the stock market is looking like. And, and the chart, by the way, is green for the nasdaq, red for S and P. And blue is indicating the Russell 2 thousand as. And when we look at the fixed income markets, as Elie indicated, we've seen very low interest rates as a result, Federal Reserve stimulus short-term rates have been your zeros since March. The 10-year bond yield has been below 1% since, since March. That below 1% level, by the way, is a historic low for the 10-year treasury yield. We've also seen expectations of inflation as measured by the break-even rate, remain very low. So expectations of inflation have remained look below the 2% target of the Federal Reserve. On the corporate side, we saw credit risk spreads rise in March when the markets were experiencing a lot of stress. After the Federal Reserve's announcement of their support. That stress was relieved. And we saw credit risk spreads fall both between AAA and between high yield bonds, which indicate the most risky bonds compared to the US treasury yield. So on the lower right chart, we're seeing a spike early and Treasury or incorporate corporate spreads indicating a lot of risk. And then coming back fairly close to where they had been prior to the pandemic. Could I have the next slide, please? So as we look at the factors that impacted financial markets in 2020, we want to look at those and think about how, how they might be carrying forward into 2021. So what are those factors? We identify three dominant factors that have been impacting financial markets. First of all, when we look at the stock market, it's very clear there has been a differential impact of Copan 19 on different sectors of the economy and on, and as reflected in financial markets. My top-right chart is showing sectorial returns of the S and P 500 companies. We saw very large gains to information technology. Companies, consumer discretionary, consumer staples, and to some extent health as well. Now consumer discretionary, By the way, does include a famous company called Amazon. So those kind of returns are reflected there. Who lost in 2020? Well energy with the elimination of travel or the severe cut back and travel, demand for oil and other energy sources has dropped dramatically and that's reflected in that very low negative bar on the top right chart. Financial services were also hit hard by the drop in interest rates as a, as a source of income. Industrials that include airlines were also hit hard. Now the other factor of stock markets impacting stock markets was the strong influence of technology being reflected and returns. If you look at the S and P 500 index between January and the end of October, which was before the election. It, it turns out that the five largest stocks of the S and P 500, which include Apple, Facebook, Microsoft, Amazon, and Google, can were positive. But if you subtract those five stocks, the returns from those five stocks based on their weights in the index. The S and P 500 Index through the end of October actually would've showed a negative return. So there was a big influence of technology on, on the stock market over 2020. The second impact in the stock market had to do with what Elie mentioned. And that was the extraordinary monetary and fiscal stimulus that a reserve purchases of assets increased by 3 trillion. That's more than what the action, what actions they took during the global financial crisis and represents the 70% increase in the Federal Reserve's balance sheet. Importantly, the Federal Reserve's stimulus also included a widening of their safety net. They have included purchases of other asset-backed securities in addition to treasury bonds, but also corporate bonds and municipal bonds. So that's, that's a broadening of what the Federal Reserve is actually buying. We, Ellie mentioned the fiscal stimulus when you combined the cares act with the other fiscal packages in 2020, that amounted to an additional 3 trillion, which has tripled the federal, federal budget deficit from under 5% to over 15% of GDP. And then of course, we've seen extreme uncertainty about the future. We've had uncertainty about the spread of covert 19, about what the impact would be when a vaccine would be available. And of course, we also had uncertainty about the election and what that would mean for tax, fiscal additional fiscal stimulus and any changes in regulations? Well, that heightened uncertainty means heightened risk and that also affects stock values. Can I have the next slide, please? So as we look at 2021, we think there are positives and negatives and many of the forces that I discussed about 20-20, you're going to be reflected and in 2021 as continuing. What are the positive for financial markets in 2021, continued Federal Reserve support will be one. As Elie mentioned. There's no indication that the Federal Reserve is going to back off of their very low interest rate policy. They've indicated they're going to continue their bond buying program and that's going to provide continued support and keep both short-term and long-term interest rates low. We do expect some fiscal stimulus package will be passed. The timing and the magnitude is very much uncertain. However, the other positive factor for 2021 has, has been the adaptability of businesses and their ability to innovate during this pandemic time. So even though, as Elie mentioned, we've seen much difficulty across a wide variety of firms. Firms are figuring out how to adapt to this new normal situation. And in fact, as we look at earnings announcements, there have been positive surprises on, on company earnings better than expected. Even though those expectations might have been very low, but still better than expected, which is indicating flexibility and adaptiveness. In addition, we've seen new business applications. Even in the middle of a pandemic, actually up 38% according to the census. And we seen a high number of IPOs being conducted over this year. In near term inflation, risks are very low, which means cost overall for consumers and businesses are not going to be rising at a rapid rate. And the other positives, as we've seen from the news over the last week. Or we've had acceleration of vaccine development and the promise that the availability of the vaccine could, could come sooner. What was originally forecast? What are some of the risks? Well, as Elie mentioned, additional shutdowns due to the spread of covert 19 remain a primary risk. If the economy and local areas have to shut down business activity due to the spread of the virus. Obviously, that's not going to be helpful to company earnings and that will be reflected in the stock market. The other risk has to do with valuations. Currently, valuations for stocks remain high. The PE ratios by two measures, the forward PE and, and they cape, remain above their averages. And in fact, the KP is that it's second Hi, ever. Well, how can a PE ratio, price earnings ratio returned to normal? One of two ways. One is that earnings could rise and that could help lower that denominator. The other reason, the other way it can happen is for prices to fall well, fall in price toward more of an average PE ratio would actually, would obviously be a negative for the stock market. So those are, those are two ways. Of course, we also don't know what could be the new PE ratio standard under our new, new normal for an economy. So that's very much a question, but, but these high valuations do remain a risk. We also have some credit risk given that. The tremendous support that the Federal Reserve has offered in terms of its offering of stimulus purchasing bonds, which have helped support the ability of companies to borrow, municipalities to borrow, et cetera. That could be leading some to borrow more than they might otherwise, had. We not had such a low interest rate environment. So if those risks are heightened as things return to normal, as interest rates start to inch up, we could start to see greater credit risks are revealed in, in bond rates and likelihood of defaults, et cetera. So that that remains a risk. Interest rate risks we believe are going to be low in 2021 because we expect the rates to remain low. However, for long-term bonds, long-term bonds are very sensitive to any changes in interest rates. So a small change in interest rate could mean a fall in the value of a long-term bond portfolio. And then we have regulatory and tax policy uncertainty. It looks like we're going to have a divided government, which means probably any changes are going to be incremental. But still that will remain a point of uncertainty as we head into 2021 and the first part of the year. Overall, we believe the positives will outweigh the negatives and that we'll see some of these positive effects delivering positive equity returns in 2021. So with that, let me turn it over to Kyle for the state outlook. And thanks very much, everyone. Thank you, Kathy, and and excited to present to the COCOMO again this year. I'm going to talk about the Indian economy. And the first thing I want to kind of point out is that India is a pro cyclical economy. And what I mean by that is when things are going well in the national economy, immune to this a little bit better. And you can see that here with the Indiana growth rate being a little bit higher for the last eight or so years in our kind of our long recovery or growth period in the first half of the year. And the two bars on the right, you see that Indiana went down further. And but since then, indiana employment has gone up more than the national average. And the reason for that is we're a manufacturing state at our heart. So the locked down hurt manufacturing more than Services. And, but in the second half of the year, we've kind of figured out how to do that. And I know that's especially relevant here in COCOMO. So the unemployment rate statewide is a 6.2%. But we need to keep that in mind that I've got here that 60 thousand or missing. That's the number of people in Indiana who have left the labor force since February. So we have people exiting either because their jobs have gone away and they're not quite ready to go back in. Or more likely, it Spokes who, for family reasons or health reasons have to be out of the workforce right now. So if we added those folks back in, we'd have an unemployment rate much closer to 9%. But still overall we're, we're stronger than comparable states. As we move to the next slide, we'll see here that The economy is not kind of just one thing in Indiana, but it's spread out both in terms of geography and in terms of industry. So Indianapolis and some of the urban areas, especially around the southeast portion down by Louisville. Those areas have done a little bit better. And areas in the middle of the state, Anderson, MSC Coke though, that these areas have struggled a little more with employment gains. So right now our jobs growth is strongest in construction, strongest in transportation, warehousing of all the Amazon that Kathy talked about. A lot of those jobs are here in Indiana in in logistics and distribution. And we're seeing strong job gains in health care. And that just reflects not really the pandemic more so it reflects just our aging population and the health care necessary to take care of us. Job growth has been weakest in retail and in education. And so with that, we'll move to our outlook for this state. So in the next slide, we'll see that the state forecast, we're like the US, we're expecting a recovery in 2021 and that will offset a lot of the damage. 20-20. However, you know, saying it that way. Essentially what what we're calling for is a lost two years that by the end of 2021 will essentially be back to where we were by the end of 2019, which is a recovery. But it means we've missed out on two years of employment growth on income growth in economic activity production. As Cathy talk a little bit about, we, economic stimulus is probably still needed, especially with all the news really over the last couple of weeks. As we've are realizing that we're going to have to scale back some of that public facing business, some of the things like restaurants and travel, those sorts of industries that have been hit hardest. They're going to continue to be hit over the next few months at least. And so we need some economic stimulus that will help support consumer incomes, which helps Indiana because of that reliance on manufactured goods that will help small businesses and will help state and local governments. And so we just need to see, you know, what, to what degree and whether that can happen. In Washington, unemployment will fall between 4, 5% by the end of the year, which isn't really a pretty good number historically. It's not quite where we were in 2019, but it's it is a a, a good level of employment, improved trade. So the last few years we've seen a lot of trade wars and tariffs and things that aren't put a damper on Indiana's economy. And we don't really know how a Biden administration will address trade policy. Because the election didn't really have much of that substantive policy discussion in it. So we're just going to have to wait and see. And of course, all of this is dependent on the pandemic improving. And I feel like this is a little bit of an optimistic forecast. But the reason for that is what we're looking at is 2021. And the I think that the second half or the second three quarters of 2021 will be a lot better than the first part of it. With that, I'm going to turn it over to Dr. crab and half to talk about the local forecast. Thank you, Kyle. It's sum and pleasure to be here today and speak to you a little bit about this north-central and Central Indiana economic conditions. The last several years have then, as my counterparts have explained, been relatively stable in many different ways. And in doing so, the key aspects with regards to this portion of the state is really a function of two elements. One having to do with manufacturing, specifically automobiles or supply, those within the supply change. And then the other is within the agricultural sector. We focus very extensively on the manufacturing sector here in the central portion of the state, in large part because it is the number one driver of employment. And in doing so, we see that the unemployment rate has indeed, or at least had indeed been hit by a relatively stable period of time for almost the last probably five years. If we go back to multiple forecasts in the past, even last year's little blip in April of 19 seems to be relatively minor in comparison. However, as you can see, starting with the onset of the pandemic in, in March and especially going into April, we saw a massive increase in the level of unemployment, specifically here in Howard County. But as my figures also point out in my report that this was not unique to Howard County. Obviously, the increase in unemployment was seen also within the state as well as across the US. But at the same time we've seen that rapid increase, that 33.5% that we saw in April 2012, 20-20 was indeed the highest county unemployment rate in the entire state of Indiana. And indeed, the next closest was nearly ten percentage points lower than that, which would've come from nearby Miami County. The key element with regards to that was with the abrupt up turn and then substantial downturn, had a lot to do with the fact that for a period of time we had a complete and total shutdown with regards to many aspects of the economy, with the exception of those areas deemed essential, which would be predominately healthcare, drugstores, groceries in a variety of small others. But manufacturing took a huge hit and shut down. And for our area, especially for Howard County in general, that represented. Approximately 8 thousand workers becoming unemployed in a matter of a very short period of time. As you can see though, the number hasn't dropped considerably. And in fact, actually, as of September, the most recent data that I had for Howard County puts us at roughly 7.3%, which is within approximately three or 3.5 percentage points of where we were at some of our lowest. And as our forecasts last year indicated, it suggested that we were not anticipating that there would be any significant decreases in unemployment in the foreseeable future that we were operating at what would be considered to be full employment. And in doing so, therefore, if anything, we would be subject to minor minor shocks here in there, such as luck what was hit in April of 2019. Nonetheless, we did not foresee obviously the pandemic occurring, but what is resulted in this particular area of Indiana and especially Howard County, rebounding as quickly as it did, have a lot to do with its heavy dependence upon manufacturing. So in some ways, while it was a curse, it was also a blessing because the main automobile manufacturers and other manufacturers quickly found or sought out ways to help with the mitigation. Adapted safety practices that engaged social distancing and mask wearing and the like. And the unemployment in that particular sector went down considerably. And as a result, the, the remaining unemployment that predominantly exists does indeed exist to some extent in the Hospitality and Tourism area, which would include restaurants, also including retail. Those would be the areas that have had the longest standing restrictions as established by the government governors, executive orders as far as the stage reopening. But as you can see, as we progress through those stage free openings, that unemployment rate has indeed come down. And in fact, actually we are now only slightly above the state of Indiana rate and below the national rate. In terms of in terms of agriculture. Agriculture has been a very interesting up and down cycle for the last several years. 2018 was a boom year. 2019 was an absolute bust with multiple episodes of flooding very early in the season. Plantings and replanting. Replanting is again, having considerable impact on every aspect related to production. The yields that were coming forward, as well as the amount of acreage planet. Next slide, please. As you can see, I'm doing some comparisons of 201820192020. I'm looking at are two primary. Grains, corn and soybeans. We can see that as of October, the most recent data coming from the USDA, we see that indeed, whether it's corn planted, harvested and the like, we are app or just slightly above that particular level with regards to the acreage, what is band nice has been a massive rebound, really about a 15% rebound in yield per acre as relates to 2019. In this particular situation, we see this Boomer Boston, as has been the case for a number of years. This rapid change from one year to the next has not provided for a healthy environment for the agricultural sector and has led to a fairly significant number of farm foreclosures. Hope being this year that this booming year in terms of corn production especially, would indeed represent a significant improvement in their financial wellbeing. Soybeans. Similarly, another major crop in our immediate vicinity, while acreage planted and harvested, has not quite met up with the 2018 numbers, we've certainly seen improvement. Not only of left from last year, but a slight improvement from 2018 in the yield per acre. Production is approximately even with regards to where we were again in a, in a boom here in 2018. But in comparison to the 2019 circumstances, we are roughly about 25% ahead of that particular year. Now, I didn't put any together any slides as relates to the particular forecast. But I do have some general ideas with regards to where we will anticipate knowing our immediate area and will find itself in a situation where unemployment will continue to diminish over time. And we see that we will find ourselves with the rate over time probably not till the end of 2021 being brought down to the levels that we saw in 2019 and in the years prior. The other thing to note, ironically about this region was the fact that there was a considerable difference in the levels of unemployment that were experienced, especially in those early stages. The pandemic. As mentioned, the unemployment rate in Howard County rose to 33.5%, yet, the lowest within our service region. Only rose, I say, only to approximately 10%. That being in Hamilton count. Some of the dynamics that have resulted in the significant fluctuation or differentiation between the experience on inflation rates and unemployment rates rather, and the rates of recovery has a lot to do with two elements. One, the level of dependence upon manufacturing, which as we know, Howard County, is extremely dependent upon. The other is the diversification of the economic environment. Howard County being very heavily manufacturing rises and falls with regards to that. But when we look at other counties that have experienced far less, we see a situation in which that, such as Hamilton County, with the diverse nature of their economy, the upswing in unemployment, which took place in April, was not near severe, nor has banned the reduction or the pace of reduction in the unemployment rate for that particular region. So in that regard, we are continuing to be hopeful that we will experience continued decrease in the level of unemployment. One area of caution or concern that we have is that with the Defense Production Act, COCOMO and Howard County benefited considerably as a result of that. The passage of that act and the signing of that by the President's OK, and the White House and the administration. Because it put into play a partnership between General Motors and then tack here at what had been a previously idled facility. And in doing so, employed roughly 1000 workers who were charged with assembling approximately 30 thousand ventilators for hospitals and health care facilities to address the needs of obviously those who had experienced the worst symptoms related to the pandemic. Unfortunately, we have seen that contract be fulfilled and indeed, the employees at this Wassily in COCOMO have each receive notification that their positions will end by the end of November. And as a result of that, given the timing, I would anticipate that when we see december numbers for unemployment come back in January, when the reporting is actually done. We would anticipate that during that timeframe, we would have a slight bump. It might even be more than a four or five percentage point bump. With regards to this, as those individuals are placed out of work, hopefully for a short period of time. But again, the hope would be that we would see that that sector of the economy being manufacturing would take the greatest sense, the greatest opportunity to absorb at least a few more of those workers. But thankfully, we're not experiencing the difficult situations as we, as we previously were in our manufacturing sector. As far as agricultural production. Again, another big driver of our region, as Kyle pointed out and others pointed out, international trade is an incredibly important aspect to the state of Indiana and especially to centrally. Tenth Central, and North Central Indiana. The vast majority of our service region of the four counties contains probably the largest, one of the largest areas of sectors that is dedicated towards agricultural production. Predominantly crop production, but to some extent also some livestock production focusing predominantly in Hobbes. Trying to develop a forecast for that is sort of the equivalent. Trying to read tea leaves, staring into a crystal ball, or with any luck, finding a right version of the Farmer's Almanac. The hope would be of course, that we would have an opportunity to see farmer C two consecutive years at least of consistent positive growing seasons. And as a result of that, allow themselves to get back on their feet even more so than has been possible with this boom and bust market that has been experienced over the last really five or six years where we've had one year that has been fantastic, or at least very good, followed by another year where the numbers worked against us considerably. Having two consecutive years in a row where we would have consistent growth within the agricultural sector. And again, a favorable trade environment would mean a great deal for this part of the country. As is often the case part of the issue that the forecast depends upon, as many of my colleagues have pointed out, is what happens with regards to this second wave of the pandemic. If we do indeed, as we seem to be in the midst of this second wave, the question will be whether or not the manufacturing sector will be able to maintain those in workplace safe guards remain in a relatively stable environment. The optimism that is developed as a result of the potential of x creation of two vaccines now is leading us to be even more optimistic. But obviously we have some sectors, again, such as retail, hospitality, and tourism travel that still have a fair distance to to recover. And in doing so, those also tend to be employees who are on the lower end of the respective pay scales. And as a result of that, they find themselves dealing with a situation where the impact of the coded in the shutdowns, the reductions in services that they're able to provide has the greatest financial impact. So with regards to that, I would say, I'm hopeful and optimistic that especially with the development of the vaccines, 2021 will show some continued employment growth. And. With regards to that, I will turn it over to Kevin Snyder. And thank you. Thanks so much Allen. Again, I'm Kevin Snyder. I'm president of the speed grip check company and Al card, Indiana. We're a small manufacturing company. We have about 50 employees. The company was founded in 1946, and the first 169 years of its existence were under the same families ownership. The company was purchased by a small private equity company from Detroit in late 2015. And I joined the firm in late 2017. The objective of developing and executing a growth plan. Our product is called work holding. We make devices which hold them a piece of metal while it's being machined in metalworking machines like lays Mills, gear cutting machines, grinding machines and so forth. We sell to a very diverse group of customers and a number of industries. Aerospace, automotive construction, off road, Defence, medical, you name it if it's gotta metal part in it. We salad to that industry and we have a number of customers area utilizing our product. Relative to the pandemic, we fall under the definition of a critical business infrastructure manufacturing company based on the industries, essential industries that we serve. As such, we have maintained a continuous business operations throughout the pandemic. And almost all of our jobs require our employees to be on-site. We were very fortunate that we had a really good sales quarter, first quarter of 2020. And our delivery cycle is typically eight to ten weeks. So we had a nice order backlog and we carried in and turn, which is the stained us pretty much through the second quarter of this year. Our incoming sales volume was at its lowest. During the month of May, we were down 40 to 50% at that time. And for the full year, we expect our as our revenue to be down about 17%. Compared to 2019. We did apply for and received a loan under the paycheck protection program. And that has been very helpful in allowing us to maintain operations and do the kinds of things we needed to do. And we've been very proactive as most manufacturers have, to prevent the spread of the virus in our facility and allow our employees to keep working. We we require mandatory master face coverings or in place inside the facility. We have extensive disinfection and sanitizing routines. We maintain social distancing and physical separation. We have a pretty strict stay at home when you're sick. Alci and employees are paid for their first day. Normally, we wouldn't be pain sick a bit. Birthdays pay, just make sure that nobody has the incentive to come to work when they're sick. And we then evaluate the employee and determine whether. They should stay home and whether they should be sent for testing. We have a very limited visitor policy. Suddenly essential visitors are allowed in the facility. And we really encourage our employees to be diligent outside of work and be careful with the kinds of activities they're participating in to prevent the virus from coming here. We've been pretty successful. We've out of 50 employees, we've only had three positive aces throughout the time that endemics bin here. And to those people were a married couple that both work for our company. And none of those cases have been from a transmission at work, so they've all been transmitted outside the workplace. We do File CDC AND DO EL guidelines in terms of quarantine periods and paid time off. Either with the low number of positive cases, we have experienced a fairly significant number of absences which have impacted production and their indirectly related coded. So in addition to just positive, and he says you've you've had Pat childcare issues to deal with and we've had time off or people that suspected they may have had coded and were tested and later proved to be negative. And we've had some folks, especially early on who were concerned about the virus and who requested paid time off to stay away from work for a period of time. One of the big challenges is for an industrial company or manufacturing company has a lot of the selling process is conducted face-to-face. Typically, our salespeople are walking the factory floor with our customers. They're identifying issues in there, providing solutions for those issues. And with the pandemic, you not only had businesses in our sectors closed, but most have prevented outside salespeople from coming to the facility. To what that's required is a really an increased use of video and telephone and more indirect sales processes. For us looking into 2020 line. Obviously, as other speakers have said, the outlook is somewhat uncertain. But our industry analyst are predicting a year in 2021, which is very much like wanting 19. And I know Cal use the term lost two years and that's pretty much what we're seen as well. So we're building our budget for 2021. Pretty much on the same level as 2019. That would give us a 20% increase in revenue over 2020. But still kind of looking at a flat to 2019 year. That's the overview from speaker at CEQ company. And now I'm going to turn it back over to IDE for questions and answers. Thank you very much. I really appreciate that comment. Unfortunately, the presentations and the panelists have done such a wonderful job of detailing the, the nature of the areas of their presentation that we've actually exceeded our time limit. So we've add only just one question come through and we were fortunate enough to get that one answered. So as a result of that, I'm going to take this opportunity to close our webinar. Let me begin by thanking Dean Kasner, our panelists for their insight and all of you for attending. I would like to remind all of our viewers that School of Business at IU COCOMO is always ready to serve as a resource for not only COCOMO, but also North Central Indiana. And certainly if there are needs from our students or from our faculty, we are certainly ready to meet that need. And so we would ask that you reach out to us if that is indeed the case. I will then say that I ask that you all have a great day. Hope you and your families remain healthy as we approach this holiday season. And again, thank you for joining us and have a great day.

Panelists

Contact Info

For more information, contact Terri Butler at 765-455-9275 or tbutler@iuk.edu.

Indiana Business Outlook Panel: Kokomo

Outlook 2021: Kokomo

8 am on Wed., November 18

Panelists

Contact Info

Indiana Business Research Center social media channels