Indiana Business Outlook Panel: New Albany

Outlook 2021: New Albany

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.

9 am on Monday, November 16

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.

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

This event is sponsored by IU Southeast School of Business and First Harrison Bank

Description of the video:

Good morning everyone. I am David at blend. I am the Dean of the School of Business at Indiana University Southeast. I would like to thank you for coming this morning and attending our event and welcome you to the 2020 economic outlook. We are so pleased to once again offer this program with our partner, the IU Kelley School of business. Before we begin, I'd like to recognize a couple of special guests and provide another thank you. First would be bill here. Bill is President and CEO of First terrorists and bank. We'd like to welcome Bill here, and they are also our longtime primary sponsor of this event. And special announcements that we're going to do a little different since it's a virtual event. Bill has agreed to provide some prizes that we're going to draw for at the end of the event. And the catch is you have to be present at the end of the event. So please stick around some really nice prizes that bill and first Harrison bank I provide it to us. Would also like to recognize State Representative Ed Claire who is with us this morning. Appreciate his support of IU in the school of business. Quickly from IU Southeast would like. Welcome. Kelly Ryan, executive vice chancellor of academic affairs. Dana wobble, Vice-Chancellor of administrative affairs. Betty Rousseau, Vice-Chancellor of advancement, and Amanda stone, cyber, vice chancellor of student affairs. Again, appreciate their support of this abet. The IU Southeast School of Business faculty and staff are deeply committed to providing an excellent hands-on education to our students, and they come from all backgrounds. In a couple of our big strategic initiatives include increasing our engagement with the local community and also helping spur economic and social growth with our community as well. And today's presentation be economic. It is just one example of our firm dedication to those principles. We'll go ahead and get started now, if you've not attended one of these before, you're in for a real treat. And to start with the introductions, I'd like to turn the stage over to my friend, the chancellor of Indiana University Southeast, Dr. Ray wallace. Thank you, David. And I appreciate that introduction and I want to welcome everyone here today. For this great event. While it is virtual, we hope that next year you'll be able to join us in physical form here on campus. But without further ado, let me just say welcome to Indiana University Southeast. My job this morning is to introduce our moderator. And let me tell you a little bit about idle in Kasner. Idle n are IID. Kasner was appointed Dean of the Kelly School of Business at Indiana University in Bloomington in July 2013. She is also the Frank P. Pop off Chair of strategic management. Didn't Kasner joined the Kelly School faculty in 1995 and has served in many leadership roles, including Associate Dean. Faculty and research, chair of the MBA program and Chair of the Department of Management and Entrepreneurship. Her research focuses on corporate boards, executive succession, on mergers and acquisitions. In addition to teaching more than 100 executive education classes, she has consulted with many national and international firms on management and board related issues. She currently serves on five prestigious boards. She has won dozens of teaching awards at the Kelly School and at the University of North Carolina, where she was a professor for 12 years. She recently was named Business Dean of the year about poets and quaint, a leading business school media outlet. Dean Kasner earned her MBA and her PhD from the Kelly School and her bachelor's degree in business administration from Southern Methodist University. Without further ado, please welcome Dr. ID. Kessler. Thank you so much. And I too want to welcome everyone. I want to offer my thanks to Chancellor Wallace and Dean effluent or from IU Southeast for hosting and welcoming us today. Before I introduce our panelists, I want to say a brief word about the Indiana Business Research Center or as we know it, IDRC, Ib RC is a center within the Kelly School of Business at Indiana University. The Kelly School just celebrated its centennial or 100th anniversary. A. And the ITRC 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 region, and the nation. Idrc provides an interprets economic information needed by businesses, governments, and non-profit organizations. Among the many things that IDRC has his stats Indiana, which is statistics for states, counties, cities and towns, townships, regions, census tracks, and much more steps America, which is a portal to us data supported by the US Economic Development Administration. Hoosiers five and numbers, 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 state data. Indiana gateway, which provides information about how taxes and other public dollars are budgeted and spent by Indianness, local units of government. And also the Center for Economic Model researcher CE and r, which is quarterly economic forecasts for the US Indiana and Indiana metropolitan areas. And there are several publications that are BRC hands in contexts which provides substantive, easy to read articles a bit about Indiana's workforce. The economy, which is published on a bi-monthly basis. Indiana Business Review, which has been going since 1926. This publication provides analysis and insight on Indiana's economic and demographic issues. Indiana economic digest, which examines daily news from newspapers around the State, focusing on hot business topics. So you can see the ICRC has lots of data and lots of good publications that you may want to look into. Now let me introduce our panelists for today. I'll do them in the order that they're going to be presenting. To start with, Dr. Andrew batters, who is an assistant professor in the Business Economics and Public Policy Department at the Kelly School of Business at Indiana University. Prior to joining Kelly, he was an associate economist and the Economic Research Department at the Federal Reserve Bank of Chicago. He received his BA from the University of North Carolina, Chapel Hill and is a PhD from the Kellogg School of Management at Northwestern University. Dr. Katherine bonds or Nielson, Associate Professor of Finance and the Kelly School of Business. She received her Masters and PhD from the University of Chicago and it honors BA in Economics from IU or research interests on monetary policy and exchange rate behavior, international financial market liberalization, merging stock markets. Prior to joining Kelly, she taught at the University of Washington and worked as an economist for the Federal Reserve Bank of Kansas City, FEC, and the President's Council of Economic Advisers. Ryan brewer. Dr. Breuer is an associate professor of finance at Indiana University Columbus. He's test testified as a valuation expert in us that federal and Indiana state court systems. He worked for five years as a risk manager for Fortune five, Fortune 50 Corporation in Michigan and Indiana, ultimately attaining worldwide responsibilities to the development of policy compliance programs. He holds an MBA and PhD from the Kelly School and a BS in Engineering from Purdue University. And last but certainly not least, is uric defraying. Dr. defraying is the chief academic officer for IU Southeast. He oversees the IU Southeast academic units and programs library, office of the Registrar, Office of Institutional Effectiveness, Honors Program, applied research and education center, academic advising, Disability Services, first-year programs, 20 what? Twenty-first Century Scholars Program, Institute for Learning and Teaching Excellence, International Programs and Student Development Center. Dr. defraying earned his PhD from the University of Mississippi and his MBA and bachelor's degrees from Nichols State University. Now before I turn it over to Dr. brothers, I want to remind our audience members, you can submit questions through the Q and a function below the screen. So please be sure and submit any questions you would like to ask after our presenters have offered their presentations, and now I'll turn it over to our first speaker. Thank you for the warm welcome. I'm excited to be a member the business outlook, Monsieur, and look forward to an engaging panel discussion. So before I get going, I just need to get a quick. Given my secondary affiliation with the bedrooms or being in Chicago, I need to indicate that the music I express here today are my own and do not reflect the views of the Federal Reserve Bank of Chicago or the Federal Reserve system at large. So as charged with the US and international Alec, I'd be remiss not to start off by acknowledging the unprecedented forecasting environment economist, businesses and policymakers have faced over the last eight months and will continue to face over the near term. Since March of this year, we've seen unprecedented drops and then increases in economic activity indicators ranging from industrial production, payroll employment to real personal consumption expenditures. These abrupt movements and economic activity reflect the response of businesses and households to the pandemic. Responses to the pandemic from fiscal and monetary policy, including the cares act and Main Street lending program, were themselves unprecedented in many ways. And these were combined with a set of public health orders, the likes of which we have seen. So this is all to say that the outlook provide today comes with a heavy dose of uncertainty attached to it. A theme I'll hit on more than once. I'm sure they, the International Monetary Fund has estimated that by the end of 2020, the global economy will have shrunk by 4.4%. Our group at the Indiana Business Research Center Center, or Ib, RC, is cautiously optimistic that our estimate of a 5% global recovery in 2021 will be just enough to erase the 20-20 global drop and output. Turning specifically now to the outlook for the United States. From April to June, the year over year declining, US GDP was 9%. That decline comes in at an annual rate of 31%. To put that in historical perspective, the largest contraction of the great recession came in the second quarter of 2009, the year over year decline then in that recession was 3.9%, or annual rate of 8.4%. So this unprecedented decline in Q2 this year was met with a rebound in quarter three. Advance estimates have the annualized growth rate from Q2, Q3, it 43%, despite the rebound from quarter to quarter three and a level of GDP, and Q3 still constitutes a year over year decline of 2.9%. In effect, we've still not return to pre-coded 19 levels of GDP in the United States. Projections from the Ib RC, other professional forecasters, including the blue chip consensus forecasts released late last week, as well as another forecasting model that I've been a part of constructing referred here on the slide is Alex. All indicate that production levels, returning to pre-coded levels are unlikely to happen until later in 2021. That said, the dispersion of projections both within and across these forecasting approaches is wide enough to suggest that returned pre-coded levels has an uncertain timetable. Turning to the international outlook next slide. At the Ib RC, we are hopeful that with I sustain fiscal and monetary stimulus, the Eurozone economy will rebound and that economic activity will increase by 5% in 2021. With that said, the Eurozone is divided into zones, the North and the South, and the North. Germany and the Netherlands have leveraged larger budget surpluses and a robust industrial structure to relatively speaking, mitigate the effects of the pandemic. Alternatively, in the South, Spain, Portugal, Italy, and France, the effects of the pandemic had been more severe in terms of economic outcomes, this reflects a combination of an initial fiscal situation that was more constrained and that these southern economies do rely more heavily on tourism. In China, we forecast GDP to expand by 2% in 2020 alone, expansionary every country's economy for, for 2020. This is thanks partly to China's manufacturing industry shifting production to address the global demand for medical products and other work from home equipment. We project Jain is China's GDP will grow at a rate of 8% in 2021. The growth forecast for emerging markets remains fragile. Many of these countries economies are exposed to several downside risks, including the continued progression of the pandemic reliance on exports, including oil, and a less clear future trajectory of fiscal and monetary policies in total. Next slide, the world's economies, as well as the United States, or most likely in for overall decline in economic activity, a euro and for those countries and regions of the US that are reliant on service providing activities like leisure and hospitality and business travel. The most recent data and near term outlook is still gloomy. That said, absolute. Another significant shock that contributes to economic headwinds. Many businesses, regions and countries should expect rebounds an economic activity through the next year. So now I'll pass it on to Catherine, who will speak more specifically about the financial markets. Alright, well, thank you Andrew, and welcome everybody. It's, it's nice to be back to talk to the group IU Southeast. And even though I wish we could be there. What I'd like to do is talk about financial markets and indicate what the recovery of those markets is looking like. Andrew just talked about the recovery of the US economy and global economies. Well, let's look at financial markets and discuss where they might be headed. Well, it's important to understand some of the factors that were underlying financial markets and 20-20 and some of the patterns. So let me show you what happened in 2020 before moving on to our forecast for 2021. So on the right is a chart that is showing the three major indices for the US, the S and P 500 or the nasdaq Composite and the Russell 2 thousand. Andrew showed a lot of volatility in US GDP. Well, that was mirrored in financial markets with a very sharp drop in a matter of only six weeks, the SMP 500 fell by 31% between February 19th and March 23rd, where when it reached its low, the other indices followed, followed suit with the green being nasdaq, the red being S and P, and the blue being the Russell. 2 thousand of smaller firms. Well, after March 23rd, the markets shifted direction and started rising again. And in fact, unlike the US, real economy, markets, must markets surpassed their previous pre pandemic highs, with the Russell lagging a bit until just recently in the last couple of weeks. So we have seen a recovery of stock markets. We've also seen huge volatility as that yellow dotted line on my top right chart shows. On the fixed income side, we've seen historic drops in interest rates. We've seen short-term interest rates go to 0. We've seen the ten-year yield fall below 1% for the first time ever. And that's been, it's been below 1% since March. At the same time, we've seen expectations of low inflation as measured by the break-even treasury inflation protected rate and its state below 2%, which is indicating an expectation of inflation less than 2% on corporate debt. We saw a dramatic rise in credit spreads in March as this uncertainty was being revealed in bond prices and in concerns about whether companies would increase in terms of default rates. So we saw the AAA spread over the treasury 10-year yield go from 0.5% to over 2%. The high yield spread that's reflecting what we call junk bond status, rising to over 10% in March. But then you can see these credit spreads have fallen as revealed in that lower chart on the right, down to not quite where they were pre pandemic, but very close. So we have seen a recovery in most of the financial markets. Could have the next slide, please. Now what are the dominant factors affecting this pattern? And I think it's relevant to look at these factors so that we understand what might be impacting financial markets in 2021. Well, first of all, we saw a differential impact of COBIT 19 on sectors. The top-right chart is showing how the returns on two S and P 500 sectors performed between January and end of October of this year. There were huge gains to information technology, consumer discretionary and Staples and hell and somewhat to help firms. And by the way, consumer discretionary does include a famous company called Amazon, which some people think of is also a technology company. There were losses, very large losses to energy and also to finance an industrials with industrials including the airline sector. We also saw the very large impact of technology. My chart on the lower right shows how much of an impact just five companies had on the S and P 500 return between January and end of October of 2020. The S and P 500 over that time was a bit higher than 1% overall. But if you took out Apple, Microsoft, Amazon, Facebook, and alphabet or Google, actually the S and P 500 return over that time period would have been negative. So that was indicating the very strong impact of technology on the stock market, on the S and P 500. We also saw extraordinary monetary and fiscal stimulus. The federal reserve increased purchases of assets by $3 trillion. That's a 70% increase in the Federal Reserve's balance sheet. And importantly, they also broadened how they, what the type of assets that they were purchasing to include not only the traditional treasury bonds and, and even mortgage-backed securities, but also to include corporate bonds and municipal asked mute municipal bonds. We also saw an extraordinary increase in government spending as a result of the 2.2 trillion cares act and additional acts that followed that lead to a total increase of $3 trillion in a short amount of time. With the Federal Reserve. Federal deficit, fiscal deficit tripling from about 5% to 15% of GDP. And the debt to GDP now being about a 135% overall. As Andrew alluded, we've also seen very large uncertainty. We've seen uncertainty about the spread of covert 19, what the economic impact will be, the availability of the vaccine. And we got some very good news once again this morning on that. So we've seen the markets rise because of euphoria. Wep also seeing them fall when there's been some disappointment about the speed of delivery of the vaccine. So this is, this has contributed to volatility. And of course, we had the election and uncertainty about who would win and also what the outcome would imply for for policies, whether tax policies would change, regulations would change, whether that would be any fiscal stimulus could have the next slide, please. Well, we believe that many of these same factors are going to continue to impact financial markets going forward. Some of the positives we anticipate for markets include continued Federal Reserve support. The Federal Reserve has indicated that they're going to keep interest rates, their target rate near 0 for the foreseeable future at least through 2021. Some of the Federal Reserve officials are predicting as late as 2023 before considering raising rates, there will be a there is a likelihood that there will be some kind of fiscal package passed, although what size that will be is still very much unknown. Another positive for the market has banned the adaptability and the innovation of businesses. We have seen businesses adapt to the virus some of course, better than, than others given the type of businesses that they are in. But we have seen a lot of innovation. We've seen IPOs, actually a record number of IPOs in 2020. And we've seen a 38% increase in new businesses started in the middle of a pandemic. So that is showing and demonstrating the adaptability and innovation of businesses which can carry forward into 2021. Near term, inflation risks are very low. And again, as the recent news has shown, we may see an acceleration of the availability of a vaccine. What are some of the risks, while the risks continue to be the economic impacts of additional shutdowns due to the spread of COBIT 19. And that's very much a concern. As we see. The cases rise and local governments respond to that increase in cases. We've also seen very high valuations as measured by price earnings or PE ratios. Two measures, the forward PE and the KP are both high relative to averages. The cape is the second highest level ever. Now there are two ways that a price earnings ratio can drift down closer to normal. One is through higher earnings, which may be possible as companies continue to recover from this time. The other, of course, is a fall in price. So we don't know how that will be resolved, but valuations are higher than normal. The question is, are we looking at a new normal for some of these PE ratios? If not, then, then that can be a risk. We also have some credit and interest rate risks. Credit risks because of the very low interest rate environment and the possibility that investments are being made given DID low, very low rates that ordinarily would not be viewed as profitable. If that's the case, when, once interest rates begin to rise again, that could lead to additional stress on companies that in a normal environment would have not have undertaken that kind of borrowing. Interest rate risks are that if rates start to rise faster than even the Federal Reserve expected, then that can put pressure on longer-term bonds. Longer-term bonds tend to be more sensitive to interest rate changes. And so that's, that's a concern. If interest rates start to rise, we actually don't believe that interest rates are going to move by huge amount over 2021. So that, that ladder risk, the credit interest rate risk is more likely to happen toward the end of 2021 into 2022. And last regulatory and tax policy uncertainty. There's still a lot of uncertainty about what will happen with policies because we're still figuring out what the full results of the election are that will continue to weigh on, on markets. But put these altogether, we do believe the positives are going to outweigh some of these risks to deliver positive equity returns in 2021. So I'll look forward to any questions you have. And in the meantime, I will turn the presentation over to Ryan Breuer who can talk about the state of Indiana. Thanks very much. Thank you, Catherine. I would also like to reflect my sentiment that I'd rather be there in person. Down there. New Albany is a beautiful campus, but it's good to be with you. Anyway. So I'm here to tell you about the Indiana economic outlook. Like the world and the United States, Indiana continues. Or 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. Hardest hit have been locations and industries reliant upon significant population densities, such as large cities in the businesses and properties located their travel destinations, particularly requiring airline flights, hotels, restaurants, bars, churches, and sporting events have been affected. Yet while the first wave moved through these areas, it reached the cradle of good goods manufacturing and production home to Indiana. While services, especially small 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 hit are smaller firms more likely to capsize. Even while the life preservers in the form of cares ACT funds are set to expire. Now, some background of Indiana as an economic center. As I said, indiana is the nation's most prolific manufacturing goods producing state, generating about 17% of GSP for manufacturing, and an additional 22% of GSP from goods to production, or nearly 40% of its total output from making things. Some might think of Michigan, Ohio, Pennsylvania, Wisconsin, Louisiana, or Texas. But Indiana leads this back. Because we make things in Indiana, we contract sharply in the early stages of a recession. And yet 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 annualized 31.4% as was highlighted moments ago, the Hoosier State fell by an unprecedented thirty-three percent annualized rate, resulting in an output loss of more than $31 billion. We've experienced recovery to some degree 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. 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, we've recovered to just over 3 million jobs. A significant pathway to recovery. Yet we would remain behind compared to pre pandemic levels. As we do not yet have numbers for output about the third quarter, the exact measure of the rebound to date remains unclear, but we are behind. Currently COBIT 19 confirmed cases, hospitalizations and deaths are spiking again here and across the Northern Hemisphere as we brace for cold weather. A time when general coronaviruses are known. Oftentimes proliferate. Okay, so why this sharp economic contraction? Why wasn't it like a regular recession? Is because we self-directed and an exogenous shock to gatherings, work, family, sports, social, 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, know more about the virus, therapeutics vaccines. The way it spreads or does not spread, it is less likely we will need to entirely shut down again. However, with the virus spiking in a new administration set to begin work in January. The option remains on the table. Furthermore, we just learned this morning that the states, I believe of Michigan, Washington, and Virginia have imposed new locked down restriction is not complete shutdowns. And we think we can avoid full-scale shutdowns. However, this does not mean people will go about activities for awhile like we did in the pre pandemic days. They likely will 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. There are two components to the labor market. Unemployment and labor force participation. I'll discuss each in turn. The unemployment rate in Indiana spike to 17.5% in April, us spiked to 14.7%. Large metro areas in vacation travel destination spiked harder. For example, Detroit hit 24% unemployment in April, and Hawaii remains over 13% unemployment now, by contrast, cities throughout indiana have recovered better in unemployment rate is now at 6.2% across the state as a whole. Again, this beats the US unemployment rate, which stands at 6.9%. 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. Lf PR, as we call it as a calculation, kicks out the adults in the unemployment equation when they'd been seeking work for longer than three months. Thus, ostensibly we could end up with a low unemployment rate and a low LFTR, which would not be good. Rather, what we would want would be a low unemployment rate and a high LFTR. The labor force participation rate in Indiana was reduced by the great recession, which harmed labor, labor market considerably. The LFP are reached a post recession rate of 65.1% in the peak employment years of 2016 to 2018. The all-time peak in Indiana was 71.1%, reached in 1995, when the unemployment rate and the LFP are considered together. Losses across the state of Indiana since the peak of the labor market in 2018 have resulted in the elimination. To date of over a 100 thousand workers. Of these, about 70 thousand have been lost during the current pandemic of 20-20. Nonetheless, Indiana as a relatively light leisure and travel state and a relatively heavy manufacturing and goods producing state fairs well versus neighboring states and peer states. Next slide, please. Industries that were initially affected include travel oriented businesses, including airlines, hotels and restaurants and bars. Manufacturing was also hit hard a month or so later, but only about half as hard. Industries across Indiana, including leisure and hospitality, manufacturing, goods production, education and healthcare and retail have rebounded somewhat. Yet all have suffered three to 5% labor losses since March. Of these manufacturing losses at more than 50 thousand jobs lost account for 50% of the total losses to our capacity. Additional losses will depend upon our continued responses to the virus therapies. Behaviors in vaccines and national debt increases notwithstanding, which was discussed earlier, additional fiscal stimulus. Next slide please. The last quarter of 2020, in the first quarter of 2021 will likely include output interruptions or attenuations. Avoidance of which is largely dependent upon additional fiscal stimulus, as well as the effect of effectively developed and distributed therapeutics and vaccines. We were talking before presentation about whether the new vaccines are all going to be difficult in terms of having to be kept at very, very cold temperatures. 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. A while ago I hinted at who will likely suffer and be rewarded as we move forward. So who will suffer? Big cities, major sporting organizations reliant upon largely densely populated events, socially oriented services like salons, Dennis doctors and others performing preventive care, optional care and elective services. These business will suffer relatively more until the pandemic lifts. Sadly, low wagers will suffer more than higher wagers because service jobs will continue to be disproportionately affected. And these workers will be more at risk to furlough or unemployment who will benefit places of business with less population density, small and mid-size cities, rural communities in automotive companies benefit because public transportation is less in favor these days. Also, businesses able to continue to capitalize from the use of technology will be able to survive longer and may shape trends going forward. Indiana stands to benefit from some of these trends currently set in motion. A state with smaller, less densely populated cities and with a large presence in automotive, which has rebounded significantly since March and April. And pharmaceutical development businesses, Indiana stands to benefit from its manufacturing culture. That could also benefit from reshoring jobs. As we continue to look for new supply chains. Also, we might benefit from population gains arising from migration away from large Midwest cities such as Detroit and particularly Chicago. Thank you. And now I will turn it over to Europe to discuss the outlook for the greater Louisville area. Uh, thank you so much, Ryan. Good morning everyone and welcome to another economic outlook. This is economic Outlook 2020. I this isn't no, my first year full-time in the Sanders Chair and business. And I'm very I want to thank our donors. I miss oo Sanders and the late Judge Sanders from lanes with Indiana for making the chair a possible. I'm also very grateful and thankful to Executive Vice Chancellor Kelly Ryan for serving in the position of Executive Vice-Chancellor. She's held that position since G11. And I'm very thankful for all the support that she provides me and the Sanders Chair too, engaged in the community and work and economic Bella et al. I'm also very grateful and thankful to chance to Wallace and Dean for their support in making my work in economic development and community engagement possible. And again, we also want to join my colleagues, Chancellor Wallace and Dean Caplan, and thanking the Kelly School of Business, dean Kasner for, for providing the support to make this program a success. This is one of our signature events at IU Southeast, and we're especially grateful to the killer School of Business for their role in making this a tremendous success. So the year of 2020 will go down as a year that observe both the steepest job losses and largest gains for Louisville Metro. In the late first flora in early second quarter, Louisville Metro saw unprecedented job losses you to pandemic and shutdowns in the months following. Job gains have been strong relative to normal economic conditions, but have yet to fully recover. The massive job losses in the first half of the year. 2021 will see additional job gains. And the reason is expected to fully recover job losses by late 2021. So April is the is the month when the local Academy hitting bottom a Louisville Metro stop, job losses of about a 123 thousand. So we basically went from about 682 thousand jobs in FEV in February, and that dropped to about 559560 thousand jobs in April. This was a loss of about a 123 thousand jobs. And this is equivalent to the level of jobs that existed back in April 1996. So we have to go all the way back to 1996 to be at a similar level of jobs for little metro. From a to G, the area quickly recovered about 40 thousand jobs. This is the largest game going back to to go back to 1991, perhaps the largest Daemon record. Over a two month period we had the Lord has losses, enlarges gains on record. Since that time, month-over-month gains or decelerating, but remains to definitely higher than historical month-over-month gains. Year-over-year job losses are now slightly higher than the deepest level that existed during the Great Recession. Over your job losses statement had around right now about 36 thousand jobs during the Great Recession were down about 3032 thousand jobs. So let's talk about where we observed these job losses. Job losses and gains were primarily concentrated in manufacturing. Lesion, hospitality, retail, professional business services, in education, in health services. In April, these five sectors alone had combined year over year losses of about 91 thousand. And this is out of about a 120 thousand total losses. More than a third of these losses occurred illusion after tally. And as of September 2020, the most recent data available, these same four sectors had year-over-year combined losses of about 23 thousand, which is a considered would approve IT from April. Though let's take a closer look at somebody just netbooks manufacturing. Manufacturing has gone from being down about 20 thousand April to down about 5 thousand in September. With a drop in inventories nationwide and anticipated increases in demand. Manufacturing strips II solid year in Louisville Metro. The last time we observed a similar drop in nation-wide inventory was in 2009, the Great Recession. Manufacturing job growth in Louisville Metro then solid double-digit percentage growth in subsequent years, reaching as high as 18%. Year over year and year over, year over year growth. Now, well, we're not necessarily see those job gains, gains as high as 18%, but we will continue to erase some of the job losses from early in the year. Professional business services down 8 thousand in April, to the most recent data available, around three thousand, three thousand, six hundred. After exiting a recession, the region generally sustains their positive growth in professional and business services. For example, the last recession saw six consecutive years of positive growth in professional business services. There to recession was prior to the Act, 2 thousand when 990s. The area saw years of sustained growth in professional business services, but only a couple of exceptions into respective years. So we should see solid growth in professional business services over the coming year and will like, it will likely make up the 3600 jobs deficit. Retail, retail was down 88 thousand plus in April. We're down about 1000 plus in September with all the disruption sagging, Blake's a retailer, This isn't an impressive recovering. This sector is somewhat a wildcard. However, the question is, Will consumers increase in-store shopping or rely on online shopping? Some consumers will want to venture out, and I do think that retail will also be race. These losses by the end of next year. Education health services was down 20 thousand. We're down to about 5 thousand with the latest data leaves in hospitality, now, 35 thousand. A group and we're down about 8 thousand Now in September, as the regional economy continues to reopen and people begin to travel again, we should anticipate gains in leisure and hospitality over 2020 avoid making additional progress for the 8 thousand job losses. Other sectors also saw losses, but the magnitude was not as wards due to the smaller size of some of these respective sectors, we expect growth across all sectors to continuing into 2021, entering the regime to a level that would erase, as I said previously, all job losses by later 2021. Suddenly the eta 2019. Again, this data at the county level in terms of payrolls, it's a bit more dated in the metro area, but I just want to update when studying Indiana. But 2019 began with a very strong quarter for southern Indiana getting about 1900 jobs and making the best since 2017. Unfortunately, JOB gains over the rest of 2019 were subdued. And one-quarter actually show negative growth from the previous year within nations recession beginning in the first quarter of 2020. The reason saw no growth from the previous year and saw a small decline in jobs for the first quarter of 2020. Manufacturing, retail, accommodation and food services in health care and social services saw the largest declines. Transportation warehousing showed sizable gains, and we should see this continue through all of 2020 and into 2020, you want Clark County actually added 600 jobs with Floyd and Washington and losing about three hundred and two hundred respectively. Both Harrison in Scott counties were A-flat compare to the previous year. And in these times is good to be flat, flat as in. So when the numbers come out, we will probably see deep losses in the second quarter 2 thousand community setting, you know, now we do have employment data by county that are more recent. And this data represent workers who live in the county but may work inside or outside the respective counties. The five counties, southern Indiana region saw year-over-year declines in employment that were more than six times the declines observed during the great recession. With year over year employment declining over 30 thousand. The most recent decline is slightly more than 5 thousand. And this is about equivalent to the depths of the Great Recession. So we're right now in terms of employment across southern y'know, whereby equal to what we observed in the, in the, the depth of the Great Recession. We expect something needed to be growing at a flat changing year over year in formula by the middle of 2021 to late 2001. We can take a look at job postings to see what's happening. Real-time up postings data allow us to take a look at real-time data and the local labor markets and hiring across. So they need a hit a recession low in the month of April with job loss postings burning approximately 25% below levels that exist in January 2020. Postings in October on our higher by a small amount, the prepaying the mean levels. And compared to last year, last October, job posting don't running slightly high. The the top three occupations emerging after summer 2020, we're all transportation and logistics related. These included labor isn't freight, stocking it through movers, heavy and tractor trailer truck drivers in stock clerks. So the the nation will likely see, just to kind of wrap things up, you're now the nation. Well, we're likely to see another round of fiscal stimulus after the November elections coming probably in 2021. The size of the stimulus, of course, rest on the political party that controls both houses of Congress. And as up to date, does appear that we will have a split government regardless of that outcome. However, any fiscal stimulus will provide additional support for growth and for this region outlook, fiscal stimulus, in addition to improving unemployment rates and the overall financial strength of the household will result in LNG. Job gains remove a metro. Why can we be somewhat optimistic about Louisville Metro? And that's because of two primary reasons. One is the financial strength of the household. Household net worth is in a better position now compared to the Great Recession. Heading into the Great Recession, household net worth is national. Values were declining actually. So the household was any weakening state. This time household net worth is in a better position and has not declined to levels that when you saw during the Great Recession, savings rates are down, compare to a pandemic all-time high, but remain elevated compared to historical levels. The current savings rate is actually double the rate that existed coming into the recession. And you go all the way back in the 19 fifties. There was only one year when the savings rate was higher, and that was in 1975. Household debt to income is also at lower levels compared to the Great Recession. Why is this important to Louisville Metro? Well, because there is a link between the region of the academy and the national consumer durable goods, automobiles, transportation, warehousing, and leisure and hospitality are all industries that depend on the strength of the consumer and all are important to the regional economy. The second reason why I'm optimistic about Louisville Metro is what's happening in manufacturing. Manufacturing suffered deep losses in the pandemic, but has been returning with strong growth. Nasa indicators such as the ISM, Manufacturing Index and lower inventory levels point to its strong growth area manufacturer. So we do anticipate that the reader will fully recover lost jobs by the end of 2021. Growth is expected across all sectors with strengthen manufacturing, professional business services, leisure, hospitality, and transportation and warehousing. Strong household balance sheets nationwide, coupled with pharaoh willing manufacturing indicators imply an above average year for job growth and Louisville Metro uncertainty with respect to fiscal in tax policy and a different regulatory structure in addition to virus related impacts on travel could provide strong headwinds to Yahoo. At this time, I would like to now turn it over to the customer. Thank you so much and I'd like to invite all of our panelists to turn their cameras back on and their microphones in case we have questions that you may be answering. And the first two questions, I'm going to take them together and maybe Andrew, if you could help us with these questions. The first question is, will the new administration in Washington raised corporate taxes as a mechanism to assist low wage earners whose jobs may not come back and related to that, would a Public Works jobs program similar to the FDR's New Deal have a positive impact on the economy. And this would be directed at low wage earners in need of long-term assistance. I think I think those are both great questions, so thanks for offering them up. So I guess I want to tackle that and two waves per. So again, I'm not, I'm not an economist currently in the administration. I'm not in those conversation are future administration amount and those conversations so but certainly the expectation would be that there will be potentially changes in tax policy. And so I think given that the corporate taxes were ones that had been moved by the current administration, that that might be one that we see changing over the near term. Obviously, there's a political aspect there that would aggregate has potentially. But in terms of, terms of the outlook for the economy, I think clearly what the data indicate is that the recovery that has happened or the rebound, an economic activity that's happened has been very, very disproportionately to some sectors and not to others, just, just as an example. So the finance and insurance sector of the United, the United States, in terms of employment, has, has reached virtually it's precoding levels. Whereas leisure and hospitality, as many of the panelists have already mentioned, has been particularly that aren't there, still at 20% declines there in terms of employment numbers. So, so to, to both questions, there's going to be very, a very real sense to which the labor market is going to have losers that are going to have long-term permanent job losses. So assistance that is provided to them will certainly bolster the economy. One final point though to, to bring to that is that we have to think very carefully about the extent to which these job losses that were experiencing represent permanent relative to transitory job losses. So it's going to be obviously a huge, huge uncertainty associated with it given what consumer activities are likely to unfold after the pandemics they wanted that seem to be administered. What have you, how, how much do we return to our normal or how much it is, what we are going to experience a new normal. And that's going to be a really important aspect to keep in mind when we're, when we're thinking about all these sorts of policies and considering them. Great. Thank you for that. The, I think the next question probably belongs to you, and that is, one of our listeners is trying to figure out whether the stock market favors the election of President Trump in 2016 are Biden and 20-20. There's some evidence in terms of how the market reacted following those elections that it has its favorites. So would you say that the market favored both Trump's election and then bind selection or one versus the other. What can you tell us about how we might explain the market behavior we've seen? I think the market does not like uncertainty. And so a benefit of having an election is you start to remove that uncertainty. Now we're in a bit of an unusual time in that all of the results, as was mentioned, we're still not sure whether we're going to have a divided government or a single party is going to control both houses of Congress. So that, that is uncertainty that's going to continue to be reflected in, in the market. In terms of whether the market favors one or the other. Actualy history doesn't, doesn't suggests that one party always has a positive reaction. That it will depend on the policies that are being enacted. It depends on the conditions we are at at the time and this resolution of uncertainty going forward. So it cap if you don't mind me following up on that because I see we're running quickly at a time with a quick response. You're new with all of that uncertainty that we're heading into 2020. I'm how can our listeners recheck their 401K portfolios? And that's a great question. I would encourage everyone who is attending today to be careful about being a day trader, I think look longer term as we have this very large amount of volatility, it can, we can see it double within a period of a couple of days. So with this large volatility, I think stay longer term. Diversification still pays off as we've seen, some of the value stocks recover recently compared to some of the growth stocks like at, like apples, so diversification still pays. Second, I would be careful about holding long-term bonds. If you're going to hold long-term bonds in the corporate sector, hold only investment. Yeah, I would suggest you hold investment grade unless you're really interested in holding a lot of risk. Because there is both interest rate risk and credit risk to non in growth and investment grade bonds. And last, be careful of the feeds when you're investing in mutual funds, pay very close attention to the fees that you are paying through those funds because that can subtract from your returns. Very correct. Thank you for that. If I want to ask are one last question, I know we're really out of time, so i ask our respondents to do this very, very quickly. A byte administration. The question was a bind administration may repeal tariffs imposed by President Trump on China. How would that affect Indiana and Kentucky? So responses to that, Ryan, do you want to you want to take that one? Sure. I'll take that one. Id. I think it would be interesting to have that happen. And again, it would stand to benefit Kentucky, maybe you can talk to, but with respect to Indiana, we have significant RV industry in northern Indiana. We also have automotive across the state. And those exports would benefit given that terrorists would be lifted. Additionally, we have pharmaceutical inputs and we have a significant trade partnership with Ireland. And given that we were, we were enabled to reduce those tariffs, it would benefit Indiana industry. I think I'm not and I think you're it could talk to Kentucky potential. You already mentioned Kentucky very briefly. Certainly. I think this would also benefit industries in Kentucky, particularly bourbon. And, and in general, we're removing terrorists will expand the markets for all companies locally as well. Create. Thank you for that. I now need to turn it over to Dean app. I'm for the prizes and actor wrappings up 4F. Yeah. Thank you very much and thank you to all of our panelists this morning. Given the uncertainty that exists today, they had a very difficult task, but they provide a very highly informative and very useful presentation. So thank you so much for that today. Real quick, before we get the prize drawing, want to give you a quick update on IU Southeast School of Business. I assure you that we are open for business. We excuse me, are actively enrolling students for both this spring and even the winter session in face-to-face and online classes. If you'd like to get more information about that, go to explore I.us dot com. You can also get some information about our new program in safety and occupational health. A lot of talk about the pandemic. Lots of companies making adjustments and lots of jobs out there now for people in safety and health. So you can also find some information on that. Explore iOS.com. So now the moment you've been waiting for the prize drawing, everyone that attended today is eligible. If I announce you, winter, my administrative assistant, Brittany Schmidt, will get with you via email to discuss your options for claiming your prize. And what what I'm going to we've already done the drawing in the interest of time. What we have is first Harrison bank has very graciously provided for Yeti mugs and will announce those winners first. So the first winner of a yeti mug is robert Campbell. Robert Campbell has won a yeti mug. The second winner of the mug is Marissa Neil. The third winner is Josh statin, and the fourth winner is Bill White. So again, my administrative assistant, Brittany Schmidt, will be getting with you to claim those. And the grand prize is a yeti cooler. And unfortunately I did not win. But the winner today is Taylor Sykes. So Tailor written, you will be getting with you as well. So once again, thank everyone for attending. It was a great event. We very much look forward to getting back on campus next year. And please check your emails because we'll be reaching out to you about that event in the very near future. So thank you all and enjoy the rest of your day.

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For more information, contact Brittany Schmidt at 812-941-2664 or brittmurr@ius.edu.

Indiana Business Outlook Panel: New Albany

Outlook 2021: New Albany

9 am on Monday, November 16

Panelists

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Indiana Business Research Center social media channels