Indiana Business Outlook Panel: South Bend

Outlook 2021: South Bend

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 Friday, November 13

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 the Judd Leighton School of Business and Economics, IU South Bend

Description of the video:

Good morning and welcome to the 2020 Indiana University's Kelly School of Business, Business Outlook panel. Please download the official program, and this is located in the chat. I'm tracing anderson, interim dean of the Jed latent School of Business and Economics. The business outlook panel started in 1972 and it has grown and stature to include presentations in ten Indiana locations annually, including the location right here in South Bend. It is my pleasure to kick off today's event by introducing our moderator, Dr. Ken Carroll. Dr. Carol serves as the Executive Associate Dean for Indianapolis research and programs at Indiana University's Kelly School of Business. His career at Indiana University began in 1997. In addition to teaching and researching financial topics, he has served as Associate Dean of programs, co-director of Kelley Direct American Banking Association program. As chair of the undergraduate program. He has taught at Indiana University, the University of Tulsa, Purdue University, Yang site in Yonsei University in Seoul, Korea. Dr. Carol currently serves on the board of directors of Thrive Financial for Lutherans. He has previously served on the board of directors at the Lutheran high-school of Indianapolis and the Midwest Financial Association. He has also served on the ministry and Endowment Fund Board for calorie Calvary Lutheran Church in Indianapolis. He has served as Associate Editor for the Journal of Financial Research and as associate editor for The Financial Review. Dr. Carroll has taught courses in corporate finance, financial risk management, and financial institutions. His primary research experience includes banking, insurance, financial institutions and design. He has published more than two dozen papers in leading journals, including the Journal of money credit and banking, The Journal of Banking and Finance, The Journal of risk in insurance and banking. At The Journal of banking and finance, the Journal of Risk and Insurance, the Journal of Financial Research, and the Journal of Financial Services Research. Please join me in welcoming Dr. Ken Carol. Greetings from the Kelly School of Business, the Mishnah. The Kelly School is to transform the lives of students, organizations, and society through management education and research. We're proud to be part of the economic outlook panel for 2021. This is an especially unusual year with the impact of Kelvin in 20-20 and recovery in both 20202021. I'm looking forward to learning from our economic and financial experts who will share their 2021 outlook. Le marquis crowd will present the national and international presentation. She's a native of France and holds a BS, MA, and PhD in economics. She's Clinical Associate Professor of Business Economics and Public Policy at the Kelly School of Business and an affiliate faculty at the Institute for European studies. She co-authors yearly international outlook for the Indiana Business Research Center at Indiana University for professional interests are in international economics with an emphasis on the relationships between business, government and society. Kathy bonds or Neil, will present the financial markets presentation. She's an associate professor of finance at the Kelly School of Business. She received her Masters and PhD degrees from the University of Chicago in an honours Bachelor of Arts in Economics from Indiana University in blue. And her research and teaching interests are in the area of international economics and finance. And a focus on monetary policy and exchange rate behavior, international financial market liberalization and emerging stock markets. Prior to joining Kelly School of Business, she worked as an economist with the Federal Reserve Bank of Kansas City, the Security and Exchange Commission, and the President's Council of Economic Advisers. Ryan Brewer will present the Indiana presentation. He is an associate professor of finance at Indiana University Columbus, where he has taught undergraduate and graduate courses in corporate finance, investments and derivative since 2009. On several occasions spanning more than 15 years, Bryan and has testified as an evaluation expert in the US Federal Indian Niantic court systems. Prior to entering professional school, Ryan worked as a risk manager for a Fortune 500 Fortune 50 company, ultimately attaining worldwide wide responsibilities for development of policy compliance programs. Hong Zhang. We'll present the south than Metro presentation. She is an Associate Professor of Economics and Director of the Bureau of Business and Economic Research at the judge Leighton School of Business and Economics. Prior to her appointment on the latent School faculty, Dr. Shuang taught at the University of Oregon. She is a member of the Chinese economic society, Eastern Economic Association and Midwest Economic Association. Rob Handan will present the sweet C-suite prospective. He is President and CEO of hundreds strategic partner. Mr. Hunted and his firm offer extensive experience. The economics of all manner of unique real estate projects, including sports complexes, restaurants, hotels, retail, meeting, conference COP convention facilities in entertainment districts. Over the past 25 years, Mr. handed, as provided economic development, finance and planning expertise and conducted more than 700 feasibility and economic impact studies, including for some of the most notable transformative development projects in the US. Rob is written articles and downtown development and taught college level destination development courses. Mr. hadn't received his BS in finance from Indiana University in Bloomington. As you listen to this great panel, please participate with providing questions in the Q and a panel. After the presentation, we will select several questions to ask each panelist. So please remember to use a Q and a screen at the bottom of your zoom screen. Now, presenting LE marquis crop. Thank you very much and good morning to everyone. In a time of no traveling, my mission is to take you around the globe, highlighting the economies of the US, China, you area, and Latin America. So last year, our group at the IDRC forecasted a global output growth of about 3% for 20-20. But a macroscopic 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 20-20, the global economy will have shrunk by 4.4%. 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 look at the us a little bit more closely. 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 decline in US GDP was 9.5%. To put that in historical perspective, at the height of the global financial crisis, 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 would look like. Corporate default rates are increasing. And more than half of the small business owners surveyed by the US Chamber of Commerce worry about having to permanently close their businesses. Clearly, the pandemic has created extraordinary circumstances and new challenges for policymaker. In the United States and around the globe. It has affected aggregate supply and aggregate demand simultaneous. 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. The downside risk to the forecast in the United State is the intensifying political divisions. However, thanks to the country structural potential, the flexibility of the economy and the world appetite for the dollar. We estimate growth in the US to be above 3% in 2021. 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's GDP to expand by 2% in 2020. And it is projected GDP growth will further increase in 2021 to above 8%. The return to growth in China has been powered by the countries state backed industrial sector. And thanks to a pandemic that originated within its borders, left economies outside of China floundering. China's manufacturing power shifted to address the global demand for medical product and other work from home equipment. That said, it is important to signal that China has relatively strong recovery, is supporting many economies around the world. Specifically, China, stimulus led infrastructure expansion allowed many export-led countries to start their recovery. Next slide, please. So now let's shift to the euro area. The area is divided into zones, the North and the South. In the North, Germany and Netherlands have leverage than large budget surpluses and robust industrial structure to straighten their resiliency to the pandemic. However, in the south countries like Spain, Portugal, Italy, and France have put the most stringent lock downs and counted the greatest number of death. Their fiscal space in the South was initially more constrains and therefore the safety net they could offer their businesses and their residents more limited. Furthermore, the southern economies do rely heavily on tourism. And because of all these, the economic burden has been insignificant in the southern states. 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 institutions will remain essential to stabilize the European financial markets. Likewise, the safety nets will support the nation expenditure related to the pandemic. Provide credit guarantees to the firms and support the most vulnerable households in Europe. We're hopeful that with a sustain coordinate fiscal and monetary stimulus, the Eurozone economy will rebound and that economic activity will increase by 5% in 2021. Finally, look at Latin America, the reach and includes large economies such as Brazil, Mexico, Argentina. That represents 8% of the world's population and account for 30% of global Cavic, 19 cases and 1 third of death. Many countries in the region depend on tourism. Commodity exports, and capital inflow, including remittances with commodity prices that their lowest historical level. Tourism at a standstill and remittances dropping as unemployment has risen around the world, those economies are greatly hit impacting the region as a whole. Furthermore, these emerging economies cannot increase their investment without raising fears of future default. The microeconomic tools to lessen the cataclysm. Coffee 19, unlimited. And therefore, a return to pre pandemic growth rate would likely take years. Next slide please. So in conclusion, in the first part of 20-20, virtually every economy in the world experienced a quasi 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 prospect that an economic recovery will be achieved by the end of 2021. Tandy, the absence of a prolonged lock down. Some countries have more budgetary room to maneuver and are enjoying lower cost of borrowing as their monetary institution has further supported their financial markets. Other countries with higher debt service cost have to rely on global solidarity. This 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. Economic survival will be to focus into short-term. In 2021. However, more long-term resiliency will need to be engineered in our global markets going forward. So now we're going to move to Kathy, who will look deeper into US financial outlook. Thank you, Ellie. And good morning everyone. What I'd like to do is is talk about financial markets. What, what Elliott has mentioned is we are seeing a recovery obviously and in both the US economy and globally. Although there's very much uncertainty around that, that forecast. When we look at markets for 2021, we think it's important to also look at what's happened to markets and 20-20, because many of the same factors that affected markets and 20-20 could be carrying over into 2021. So let me just quickly review what happened in, in 2020. When we look at the stock market, we saw a huge amount of volatility. That is indicated by the top-right chart with the line in yellow. The yellow dashed line is showing the volatility of the VIX, which is measuring expected stock volatility. And you can see what happened in March with that tremendous, OK, so volatility rose to almost done, almost historic levels, not quite to the level of the great finance, the global financial crisis, but very close in March, but then has come down to a level of around 26. I'm in terms of US markets, we saw a tremendous drop across all three indices. The Nas, back, the Russell and of course the S and P 500. With the S and P 500 decreasing by very similar amount to what the annualized a decrease in GDP was. We saw the SMP 500 decrease by 31% in a matter of six weeks in the spring. Well, as we look to what where we are now, as of recently, the market is up across all indices, across the S and P 500, around 9%. Nasdaq composite has, has boomed and it's up about 28%. The Russell 2 thousand, which met, which measures performance across small firms, has only recently recovered up until the end of October, that index was actually still below its January level. It in my chart, the green line is nasdaq, the red line is the S and P. And the blue line is the Russell 2 thousand, so tremendous volatility, but also recovery. In terms of the fixed income markets, we've seen a historic lows in short-term and long-term interest rates. Short-term interest rates are near 0. The 10-year Treasury bond yield fell below 1% in March and it has remained below 1%. Again, that's a, that's a new low. The break-even inflation rate as measured by treasury inflation protected securities is still indicating expectations of low inflation, however, and that's below 2%. On the corporate side, we saw a rise in corporate risk premiums as indicated by that lower chart. The blue and the brown lines in the lower chart are indicating the AAA spread over the treasury yield and the high yield. So the very risky debt over the treasury yields. So we saw tremendous increase in the pricing of corporate debt, but it is returned to much lower levels as of today, although still not quite recover to where we were before the pandemic. Next slide, please. There are three factors that have impacted the financial markets over 2020, which we believe are going to be also reflected in 2021. The first factor has to do with the differential impacts of covert 19 and its repercussions on different sectors of the financial market. So we've seen as the top right chart indicates, gains to information technology, consumer discretionary. And by the way, consumer discretionary does include an important company called Amazon. Consumer staples, as people were buying groceries and essential things for their home and the health sector. Those were the gainers of 20-20. Those companies that lost is significantly as shown in the top right chart, included Energy, Finance, and industrials. And industrials does include the airline sector. And we know due to the lockdown and travel, the airlines have been particularly hard-hit. The other interesting thing about sectoral differences is just the impact of technology. My chart on the bottom right is showing the impact of that the five largest companies and their financial performance through the end of October. Those five companies are the big tech companies. Apple, amazon, Microsoft, Facebook, and alphabet. If you take out those five companies, the stock market, the S and P 500 at the end of October, was actually negative. Those companies that impact of technology was really driving the overall market return for much of 2020. The second important factor impacting financial markets in 2020 was the extraordinary monetary and fiscal stimulus. The Federal Reserve's asset purchases grew by 3 trillion. That's a 70% increase of the Federal Reserve's balance sheet. And interestingly and importantly, that stimulus that those bond purchases have widened to include not only the traditional treasuries, but also corporate bonds and even municipal bonds. We also saw a tremendous increase in, in fiscal stimulus, nearly a $3 trillion spending package. Packages across the 2.2 tray and cares act and others. What that implied was, we have had a tripling of the federal deficit from about just under 5% to over 15% of GDP. The other impact and I, that was revealed any earlier slide on volatility was just heightened uncertainty about the future. Heightened uncertainty is going to be reflected in very volatile market returns and also pricing of risk. So there's been uncertainty obviously about the spread of covert 19 and just how much and what the economic impacts are, and whether they're going to continue across these different sectors. The availability of the vaccine. So we've seen euphoria as of Monday given Pfizer's announcement, and then different reactions since that time. So there's a lot of a lot of volatility around just both the promise and concern about how quickly a vaccine is going to be available. And then of course, we had the election and uncertainty about not only the outcome, but about the policies that will be undertaken by a new administration. Will taxes change? Will regulations change? Will there be a new fiscal, fiscal stimulus? So those, those heightened uncertainties have, have been affecting the market in 2020. And we believe they're going to continue to some extent over 2021. The next slide, please. So in terms of our outlook for financial markets, let me start by talking about the positives that we think will propel. Stock markets higher in 2021. These include continued FET support, federal reserve support. Interest rates are, the Federal Reserve's target is expected to remain near 0 through 2021. And some federal reserve board members have indicated they expect it to continue through 2023. So that's, that's going to keep interest rates low, keep borrowing cost low. And, and in mortgage rates. So that's going to provide stimulus for, for companies and help, help boost earnings. Fiscal stimulus of some kind is, is likely. Of course we don't know what that's going to look like. But the market continuing to expect some kind of stimulus package will eventually be passed. Other positives for the market include business in the adaptability of businesses in the face of this pandemic and innovation. I think it's interesting to, to see how businesses have been adapting. We've had actually a lot of earnings surprises now, earning when earnings are forecasts, especially last spring, businesses were being extremely cautious. In the third quarter, we saw 8986% of companies having earnings, positive earnings surprises for the third quarter. Again, that is partially reflecting the low base from what they were expecting. But I think it's also reflecting the fact that they are adapting. That there are, is some promise and, and innovation taking place and that's being reflected in company earnings. So company earnings have come in even though they're down for the year as a quarter three, there's still better, much better than what was expected. So that's that's a positive factor that's going to continue through into 2021. Near term inflation risks are very low. We don't expect inflation to, to take off given concerns about demand and also the Federal Reserve. So that's, we expect that to remain low. And we're seeing an acceleration of vaccine development that back in May, I don't think many people forecasts. So that's a positive going into 2021. What are some of the risks to financial markets in 2021? Obviously, as we're seeing the rising coded cases, the risks of additional shutdowns, and what that will imply for economic activity is a very significant risk. The market's always are evaluating that and pricing that into some extent. But if there are unexpected changes in in that, that perception of slowdown in economic activity due to lock downs. That will be reflected in the stock market. We also have very high valuations in financial markets right now in terms of the forward price earnings ratio, that's at 22, it's actually been higher, has come down a little bit, but it's greater than a five-year average of around 70. Schiller's cape cyclically adjusted PE ratio is at 30, which is the second highest level it's ever been. So valuations appear high now, valuations can come down to more of an average in two ways. One is earnings can rise and that would be, that would be good. The other is of course that prices can fall. So that will be something that will have to wait and see. But trying to understand these valuations in the face of uncertainty and in face honestly of structural changes that are going on in the economy is hard to assess. Maybe what these PE ratios should really be. Now, we have credit risks that I think are important to, to understand. Given the Fed's extraordinary actions in financial markets, it's bond buying across a wide variety of assets. What this means is some credit risks could be suppressed. If interest rates start to rise a bit, that could increase the, the fact that some companies adopted and, and went into some investments that, that in normal conditions they might not have otherwise undertaken. So there could be credit risks if, if interest rates start to rise. In terms of interest rate risks, long-term bonds are going to be very, very sensitive to any small increase in interest rates. They tend to be more sensitive in terms of the change in price. Long-term bonds could see more volatility and there's regulatory and tax policy uncertainty as I, as I indicated. So these are the positives and we have some risks that we have to consider going forward overall, however, we believe that these positives are likely to outweigh the negatives. We believe that there will be positive returns reflecting what we're seeing in the, in the economy, this innovation and the ability of businesses to adapt. So we expect positive returns in 2021, although we expect them to be below historical average. So with that, I'd like to turn it to Ryan Breuer who will give the state update. Thanks very much, everybody. Thank you, Kathy. So of course we are in the midst of a of a pandemic, the likes of which we haven't seen, I think our fore fathers and for mothers sought a 100 years ago. It's produced a sharp, deep recession, which is different from the Great Recession or the great depression in terms of the the style that it has impacted. It's sharp, it's quick. It seems to be shorter duration, although the jury is still out on that. Additionally, as we know, the cares Act, funding from the initial stimulus is running out. And covert currently is widely spiking throughout the world. Including the state of Indiana, where hospital beds are increasingly full. And we're leading into the winter months, which which is not necessarily the best place to be. Although as Cathy just indicated, we do have good reason to believe the innovations are coming, whether or not they will be distributed in reasonable time. We still have to have to see whether that's true or not. So how about Indiana? Indiana as a heavy manufacturing state? It has the highest percentage of employment and GDP in manufacturing and goods produced in the country. And some people are surprised by that with Michigan, Pennsylvania, Ohio, Wisconsin, some other states that are also heavy manufacturing Indiana's number one in that regard. In a sense that has been a bit of a of a softening buttress to the pandemic because we're not heavy in leisure and tourism. Now it's difficult to convince people in the big college towns that that's true because of course, in the big sporting events and other places where people gather, the pandemic as of course, hit that very hard. So first I'm going to start with some statistics on Indiana. As I said, we're a heavy manufacturing state. So the way Indiana responds to a pandemic early on in, in a recession. Indiana is a cyclical states, so the negative effect is much more pronounced in Indiana unfortunately than it is in other parts of the country. And during recovery, Indiana recovers more quickly early on in a recovery, especially. So the unemployment rate in Indiana, for instance, in April hit 17.5%, which was much higher than the United States at 14.7%. The united states currently is it 6.9%, and Indiana's that 6.2% for the UE three, the unemployment rate. Another important component of unemployment or the employment market is the labor force participation rate. Indiana is down right now from a post recession peak of 65.1 at 63. The United States is a little worse at 61.7. So when I get back to Indiana, we went from 65.1 down to 63. And what that means is we've lost a 100 thousand jobs. A 100 thousand people had been taken out of that calculation. That figures out what the unemployment rate is. And even worse, 70 thousand since the pandemic hit. So we've lost a 100 thousand since the peak and 70 thousand since the pandemic. It sounds bad, but because Indiana again was buttressed by being more of a manufacturing state and less of a leisure and hospitality state, we still are doing better than other peer states as a whole. The labor force in the, in the United States is about a 164.6 million. They dropped out about 2.8 million jobs total in the, in Indiana again, it was only a 170,000 jobs lost since the beginning of the pandemic. And again. We react much more severely in the initial phases of any kind of a recession. And so in the second core, when things were really bad around the country and around the world, the United States GDP fell by 31.4%, whereas in Indiana we fell by 33%. Next slide, please. So have different industries in Indiana been impacted by the recession? As you can see, in March, in leisure and hospitality, we had 436,600 jobs in April, 61% of those were put on furlough or gone. There has been a recovery since then. And overall in that particular industry, we've lost about 18 thousand jobs. So down a little over 4% in, in our big area of cultural comparative advantage in Indiana, manufacturing goods and producing, producing goods were down 52,700 jobs. Again, a little over 4% of the total economy, or a 4% drop in the, in the total amount of jobs in that particular sector, education and healthcare. Interestingly as down more, we're almost down 5% in education and health care jobs. And business and professional services were about break-even. Retails down about 3%. So again, the cumulative job losses are more than a 100 thousand. And but we can see that the break out in Indiana is split pretty evenly among leisure, hospitality, manufacturing goods, and education to healthcare, retail down a little bit as well. And of note, I think in the bigger cities where leisure hospitality is a bigger component of their overall GDP, I think they're fairing much worse. Places like Hawaii, places like Florida, bigger cities, probably Chicago. Next slide, please. So what's the state outlook given the situation that we're in? That the outlook is really a function of the severity and duration of additional lock downs that may happen, or business restrictions or restrictions with human activity. It's also a function of the development of vaccines and therapeutics as well as if and when we're going to get another stimulus, all industries are going to be affected in the longer we go without stimulus and without a vaccine, we're going to have more dislocation. And the problem with that is some of these jobs, there is indication with a labor force participation rate, as mentioned moments ago, that we're losing jobs where people are not longer in the workforce seeking employment. They'd been out so long they're no longer counted. And some of these people are probably going to have a difficult time reentering into the economy if this, if this continues much further. So given everything that we've heard and everything that we know about developments in what's happening. We think that the first quarter is likely to be rough of 2021 in Indiana. As we enter into the winter months as Cove it is spiking, we still don't have a distributed vaccine or therapeutics that, that are widely mitigating the pandemic. However, we do believe there's enough optimism to think that in the second half of 2021 we're going to have some strong output and jobs growth. Again, all industries will be effected. Longer-term trends. A little bit more on the bright side for Indiana, auto sales are strong. They've recovered pretty considerably since the initial wave of the pandemic back in the spring. And public transportation has been dislocated considerably since the pandemic hit, which is further doubling down on the cultural impact of automobiles, which benefits Indiana in the long-term is a trend. Another trend is given what's been happening with supply chains and offshoring and reshoring. Given that reshoring continues to be a trend into the future, Indiana would benefit from that as well. So that's the state of Indiana and the anticipation for 2021. So again, in the initial part of 2021, we feel like there will be some risk in some, in some volatility within the last half of 2021, we're going to see better output and better jobs production. And with that, I'm going to turn it over to Hong for a local outlook for the area of South Bend, Indiana. Thank you. Hello everyone. Thanks for my colleagues forecast on global, national and state economies. I find I, Coburn 19 plays a big role in their reports. In my presentation has also shaped by Coburn 19. So to begin with, let me give you a summary of what happened in the local economy, which includes southbound mesh, a Wacom, and alcohol Gaussian in the first month of 2020. Because of we are in the metropolitan areas. The statistic, the statistic comment a little bit, our phone behind the national and state data. Alright, so due to the unprecedented P and emic and efforts to contain the virus. So the state of Indiana SUA state Y lock me out in March and then eat east, the restrictions beginning in May. So as a result, we saw that our local economy was severely affected by be endemic in 2020. So for both salesman mesh, measure, walk an hour, Karl Gaussian, we solve a sizeable decline in the labor force, sharp flaws and unemployment and hikes in the unemployment rate and employment and GDP even both areas dropped dramatically in April and May rebounded since June 2020. Despite the high unemployment, the cost of local labor still continued to rise during the pandemic area. And for the housing market, the St. Joseph housing market slowdown in its new home construction, but the sales of existing homes remained essentially unchanged and whether higher median sales price. So next, let me show you charts and tables should give you a few highlights of local economy in 2020. So next slide, please. Okay, so the first table show a first graph shows you the labor force and employment runs in big might region of South Bend and Al card. So we saw that labor force falls in the first eight months of 20-20. And in particular, labor force declined by 3200 and sounds by Mesha Walker and 3700 and now cargo ship. Now as for the employment, there's are sharp fought in April due to the logged out order and what backups since May. So based on the household survey, the average monthly unemployment declined 8.5% from 2019. And in south LA measure Wacom, but that decline, it's 7.9%. And in our corrugation it was 9.4% decline in its employment. So now if we take a look at the unemployment rate in the second figure. And similarly, there's a hike in, there's a spike in unemployment rate in April 2020. So the April unemployment rate reached 21.2% in South and measure Walker and 28.6% in alcohol Gaussian, both of which Award the highest rate and a largest over the month increase in the history of Assyria's, which dated back to the 19 to 1990. And then for the, for the table it shows you the industrial break down data from B and as Flavel establishment survey. So the total non-farm employment in salesman measure walk I declined to 10,880 a in 2020. So it's about 7.6% lower than that in 2019. Now, in South Bend, we see employments when doubt in all major industries, especially with heavy job losses in private, educational and health services and manufacturing, losing 2100 jobs and leisure and hospitality, about 2 thousand jobs. Alcohol Gaussian also hit hard in its total non-farm employment. Shedding 11,700 drop, which is about 8.5% decline. Employment decrease was led by the laws and manufacturing, losing 8 thousand jobs. Leisure and hospitality, about at close to 1300 jobs, and trade and transportation and utilities, moving about 1260 jobs. Alright, so wait for the housing market, which as shown in figure three, since I don't have data from Alpine County. So this this figure only shows the single-family residential building permits issued in St. Joseph County. So we saw that they see Joseph housing market slowdown in its new home construction. A total of a 148 single-family building permits were issued in the first month of 2020. So this number was 29 permits fewer and 16% lower than that in 2019. And that Mike's a second consecutive year of decline. But the cells of existing homes remained essentially unchanged and the median sales price went up 6.9% in 2020. So overall, when we look at the labor market and the housing market shrank from the fingers and the table. We saw that the employment, sorry, the economy has recovered since May after the opening of local business. In the third quarter, that South Bend Michelle walk has total non-farm employment rose by 3.8%. From the second quarter. I alcohol, Gaussians total non-farm employment added 7,600 jobs in the third quarter, with almost two thirds of again, in manufacturing. But compare to the prepay endemic level, which in the first quarter of 2020, we saw that in the third quarter of the labor force is still 5,100. Last in South measure Wacom and 4,400 lower end Alfred ocean. The non-farm employment in South the mesial Walker as 17,000 or less and 11000, I'm sorry, 11,200 less in alcohol Gaussian band in the first quarter. So the underlying information as that the local economy is recovering, but there's still a long way to return to the free pandemic a level. So next slide, please. Next slide, please. We're looking forward to 2021. So there are still concerns and uncertainty in the recovery path. So I will talk about, I will talk about the local economy from first packed or perspectives, personal consumption, government spending, business investment and a housing market. First is the consumption. So consumption takes about truth burrito, or national economies similarly, but it's very important to the big part and local to colony. A reef central research from central suggests that the pandemic could have changed consumer attitudes. Behaviors, purchasing habits, and purchases are more likely. Focus on the most basic means. People are shopping more cautiously. And turned to digital commerce. And consumers are using digital tools to connect Lauren and play to manage the isolation. So the implication for the local economy that's that consumers may continue to exercise caution on the attending crowded places, such as restaurants, bars, casinos, hotels, movie theaters, department stores, dentist, daycare centers, barbers, and exaggerates. And this trend is compounded by the constraint on the second wave of coronavirus in the fall through the winter N2 2021. A recent news report, a surgeon Coburn, 19 cases across the nation, but the Midwest leading in the new case for new cases per capita, sort of the outbreak continues, stays could reinstate limitations on movements and activities. So altogether will, we won't see fewer business activities in leisure and hospitality. Sensitive retails, personal services, and even manufacturing in the first, second quarters of 2021. Sort of course, we hope that effective treatments and vaccines can boost consumer confidence and returning to their normal lifestyle before the comb and 19. But currently there's no clear timetable when a VAX and will be available to the public. So consumers will still be likely to shift away from entertainment, food service, accommodation toward activities that can take place in socially distanced way. And in the 2020 recovery, the whip out in consumer spending to a certain extent was attributed to the massive government stimulus packages that US government increased the unemployment benefits from $600 per week to from $377 per week in the fourth quarter of 2017. And the US government sand, sand pandemic stimulus payments to households under a certain income flashers, right? Considering this limited government with sources, how long the government stimulus effort can continue will cast a dark cloud over the consumption recovery and 20-20 went. Alright, so next let's take a look at the government sector. So government as a important employ your local economy. In 2021, the local government will continue to experience lower tax revenue under the high unemployment and lower economic activities. As for the business investment in the affected industries mentioned previously, such as leisure and hospitality, sensitive retails, personal services will continue to decline because of a lower demand. Now considering the housing market, it's under a mixed of, of factors ever factors. So the positive side is that the long-term, the US long-term mortgage rate is currently at a very low level. And the work from home Trent as surging to P, the social distance. So both of the factors will boost demand for houses with a former to take advantage of the low interest rate and a later to improve living conditions. But the possibility of a double-dip recession, continued, high unemployment rate, and a running out government stimulus will reduce household income in 2021. So based on these mixed effects, joseph counted in 2021 will see fewer new home constructions and existing home sales will be softened. Though the median sales price will rise at a smaller pace. So in summary, as long as the disease remains significant, inserting 2021, consumer demand and leisure and hospitality, sensitive retail, personnel, services and even manufacturing well continue to lag. Soften business investment and the word cent, government budget hinder the weak labor market recovery. In South Bend, the unemployment rate, it could be between seven to 8%. In alcohol Gaussian, the unemployment rate will be around six to 7%. And personal income in both areas will stay stagnant in 2020. But I gave a, I give a lower unemployment rate forecast. An alcoholic ocean volunteers themselves the initial water, which is a trivial that you the rebound in recreational bag of industry, although the manufacturing employment in South in hell cried ocean in August 202020, it's still a thow them below. It's August 20th, 19 level. So the according to the RV industry association August report, the total RB shipments was up 17.3% from August 2019. The spread of the pandemic and a need for social distancing. Will we frame consumers from using flight and hotels where crowds gathered? Instead, an RV is a favorable option to satisfy the desire to travel while keeping a good distance from the crowd. So that's why bm and consequently the demand for RB as translated into more production in the RV industry. And that's why I forecast a 1% lower AND unemployment rate for our cargo ship. So that's what I have for local economy. And now that's strange. You, Esther, and you, ooh, I'm sorry. Let's turn to. Hot info and then see for scientists these weaknesses. Well, good morning everyone. Thanks so much for joining. This has been a great panel so far and really appreciate it. I'm I'm supposed to be on here to give sort of the C-suite perspective. So you're not going to have any slides for me, but I have a lot of data and statistics. I'll give you a brief overview of sort of who I am and, and a little bit about my company just to give you a sense of the geography that, that we, that I've covered and that we cover so meridionally from the Indianapolis area and Carmel and went to IU Bloomington, graduated in 94 with a degree in finance and then move to DC and back to India and then eventually to Chicago in 1998. Now I live in Southwest Michigan, but our offices in Chicago. I started my firm in 2006 and we're in Indiana founded company. So we sort of covered this area pretty well. And what, what we do, as was mentioned in the, in the, in the bias is 100 partners. As I said, we're based in Chicago. We essentially fly all over the place for a living or we used to doing real estate development consulting for mostly public private partnership style projects, game-changing projects, ranging from convention centers and hotels to stadiums and arenas, to mixed-use districts and the like. So we've, we've worked in 48 of the 50 states and all around the world. And as I mentioned, for the most part, our clients are public sector and in wheat get around a lot or we did. And now we're doing so virtually. So I did not know what was going to become of our business since the pandemic really had our industries in their crosshairs. Anything where people come together and gather in a community gathering place, whether it's for sports or concerts or conventions, or just a downtown district or a suburban district or entertainment and restaurants. That's us. That's what we've been working on. We have been very fortunate that we have had our ups and brown. Sorry about that. Of course, dogs are barking. And I've done about 50 of these this year so far. It's the first time that's happened. So I apologize. But anyway, so we've been very lucky. We we had a good had a steam coming into we had a good head is seeing coming into, into the year and into the pandemic. And so we've done okay in terms of our consulting, but we did slow down. We had a lot of projects basically go on ice for about four months. We barely booked any business from April, May, June, and July. And And that was very, very difficult and scary. But then things picked up in September and October and November has not been so bad either. So That's that's been good for us and we took advantage of the PPP loan and we're waiting to find out if we're going to get that forgiven. Hopefully it will be. So in terms of how how is this affected us? So we're based in Chicago and River north. In the area just north of downtown. We had not only the pandemic, but we had two big Knights of two big instances of looting and riding that took aim at our downtown and our office area. Everything was boarded up. And now we have this fourth gut punch of the 30-day locked down in advisory. And and so that the you know, we got another they just announced yesterday another 30-day locked down advisory. So so basically, we have a situation where we just don't know when people can come back to work. We started doing Tuesdays and Thursdays for a couple of months, but if anybody had anything and actually I'm recovering from coded right now too. But anytime we had a scare in the office, people of course, would stay home. And we're trying to decide if we're going to expand our office or not. And so we're actually negotiating right now to take a much bigger space. And if we do that, we're going to get about a 20% discount on the rent. Because before it was, it was a landlords market and now it's a renters market. Everybody is making their footprint smaller. They're working remotely and all of that, we think that there's a long-term space for office. You know, there's there's a there's a place and a space for office. And so we, we want to make that investment in the future and we figure we can take advantage of the of the downturn in office rent. So I think that's going to be very hopefully good for us in the long term to get a good deal. But as this continues too, you know, not get better anytime soon. And hopefully once the vaccine comes, Things will get better rapidly. But until then it's going to be pretty rough. And so we're just sort of biting our time and I don't want to make that leasing deal until I have to. So the building's been bugging me because they want to get us locked in for another eat your term. But we're negotiating a lot of concessions. So that's a situation we don't have a lot of people in the office is everybody has been working remotely. It's interesting because buildings like ours that are not high-rises, where in a seven story building, those are more popular than high-rise buildings right now because of the effect of the elevators. So people don't want to be in elevators with other people if they can avoid it. And they want to be able to have the option to take the stairs to their office if they can. And so high-rises don't really give you that great of an option for that. So there is more of a desire for low-rise buildings than high-rise buildings. And so that's been a trend we've been seeing. The benefits to Southwest Michigan have been great. As you know, Southwest Michigan as a big second home spot and a vacation spot for many people in the Chicago land area. And we've seen our real estate values out here really go through the roof. You cannot find a site to build on all the in our neighborhood that was developed in the last recession, but no houses were built because land values dropped so much. We've now sold every lot, pretty much on our street. And people are building homes that were are now going for almost double what they were four years ago. Whereas in Chicago where I just sold a house. So I'm out here permanently except for to go into the office occasionally. The values there, of course, with all the problems in Chicago, have not been going up, they've been stagnant or a little low. So that's what we've been seeing in Chicago now, for some of the areas that we cover you, we've had some great information from folks today about Indiana, about different market. So I'm just going to take you through some of the markets that we cover. Certainly on the hotel front, this is hit very, very hard. Hotels are down to 44% occupancy. They were down to about 20% occupancy at the, at the worst of it, and started to rebound quite strongly earlier in the summer. But then every time we had a spike, things would taper off and we're now in this spike now we're, we're close to a 150 thousand infections a day. Now again, that's still an estimated half of the infections that we had in March or April when we were at, when New York and Boston and New Jersey, we're getting hit so hard, but still it's the highest measured amount that we've had. So hotels have been very, very hard hit. Airlines have been hit harder. So hotels are down about 56% right now in overall rev par, which is revenue per available room, airlines are down. 64% were running at about 36% of last year's levels are high. Watermark was about 38% back in October when we had a million people go through TSA a day. But we're used to doing about 2.5 million through TSA every day. In terms of the kinds of hotels that are hurting the most, it's luxury and upper upscale, full-service urban hotels, as you can imagine, that's where the most people are gathering in avoiding now during the pandemic. So those are down about 77% still to this day. But small town metro AND Interstate Hotels and economy hotels are doing a lot better. Economy hotels are only down about 16% in rev par from where they were this time a year ago. So they, so the least among us have been doing the best. But we know that many of our convention and visitor Bureau of clients, including in South Bend, Misha walker, I'll hark ocean. They're struggling quite a bit. Al cargo ship, not as much as South initial walkthrough, which has been struggling as you can imagine. And we also work on sports facilities. So imagine, of course. The limited number of people going to sporting events including Notre Dame football games and IU games. And, you know, it's the best year ever for IU football, so are super excited, but you can't get a lot of people there. So sports conventions and concerts are all just really could put. Now, Indianapolis has gained versus Chicago because they are allowing certain conventions if they get an approved health plan by the state. Whereas Chicago, you can't have more than 50 people. So that's been a challenge. The same things happened in Florida versus Vegas. Vegas has lost a ton of conventions to Florida because you just simply can't have big groups in Vegas, but you can in Florida if you get a pre-approved plan. So we're seeing a lot of these things happen across these marketplaces and of course, people moving from apartments to homes. We also have a millennial generation, which is our biggest generation now getting into household formation, weddings, children in homes. So all this is happening at the same time. And so it's really benefiting new home construction. And it's put a little pressure, but not a ton, but a little bit of pressure on apartments. And then I'll just finish off by just sharing some statistics on unemployment rates. And then I'll wrap it up. The hardest hit amongst the states and cities has been Hawaii, Honolulu, you can imagine they just started getting flights there a few weeks ago. They were at 2.1% unemployment. They peaked at 20%. They're still at 13.6% unemployment, that's six times the rate they were before. Now Indianapolis is doing very well. They were at 2.8%. Unemployment at the beginning peaked at 133. Now they're 6%, so they're just about 2.5 times where they were before. Whereas Detroit, Chicago, New York City, big cities like that. Detroit peaked at 24.4%. Unemployment there now at 9.8% before the pandemic, they were at 3-7. Chicago was at 3-6, went to 175, but is still at 10.5%. Again, with the, all the riots and looting that have happened there as well as in New York City. We think that those things had a lot to do with people starting to move out and those unemployment rates to stay higher. South Bend is we've heard, is about two times the unemployment rate as it had before. It's at 73 now. It wasn't 3-6 before, but they peaked at 21. L. Cart is doing great as was mentioned there at 5.3% unemployment, but they were 27 before this started, they peaked at almost 30%. Fort Wayne's doing great. Grand Rapids is doing very well. Madison, wisconsin, 3.8% unemployment, but they were at 2.3 before. So just some different statistics. But in terms of who's sort of doing relatively the best of the ones I mentioned since its Madison and actually Fort Wayne want they're less than two times the unemployment rate they had before. But the bigger the city, the worse off it is. By Indianapolis. Indiana by and large has been doing well. But there's a long road to recovery as especially for these mass gathering events there, that's a huge component of the economy. Whether it's in hotels, airlines, cruise ships, conferences, conventions, any sort of group event. That it's going to take a while for that to come back. So that's I know I've gone over my time and so I'll turn it back to over and really appreciate the chance to, to talk today. I want to thank each of our panelists for a great presentations. We do have a couple of questions and so I'll ask our panelists if they can turn on their cameras. And then I'm going to ask a couple of questions. First ones for Ellie, what might another global shutdown look like for the global economy recovery forecast like that today? Yeah. So it's true that the numbers that we forecasted today, they were, they could just not be relevant tomorrow because clearly, the pandemic is the greatest obstacle to recovery. And the problem is that it's something that we have really never experienced in modern times. So as long as the virus circulates and it's unchecked, growth is compromised. So for sure, at any moment, if we have a resurgence which we have in many countries around the world and in my country of France, specifically a lock down. Quickest. I tend to drag the welding and even more prolonged recession still locked down. We'll have dramatic effect for stolen. That questions for Kathy, The Federal Reserve response to COBIT 19 increase the supply of cash from 3.3 trillion to about 5 trillion. Does this generate a dangerous risk for inflation? It's a great question. Yes, we've seen a huge build up and the Federal Reserve's balance sheet. And, and when you think about them buying assets, that means theoretically, money could be so much more money into the economy which could lead to inflation down the road. However, for 2021, we don't see inflation as a risk. That's, that's not expected. And any of the measures that try to forecast that be at asset prices. Surveys of, of expectations. And I think that the effect of the, where we are in the economy is going to keep pressure is low. So inflation could be a risk, but it's, that's going to be years down the road. It's not going to be in the next one to two years other than just a bearing moderate increase in inflation. Thank you. Question that I think would go well for Ryan. Why? Why is a labor force participation rate and so important? Why not just consider the unemployment rate? It's a good question. So what happens is, and the, and the question is kinda tied into savings rate. It's kinda tied into manufacturing. And, and I think it's tied into what I used to say in previous. Conversations with respect to the state of Indiana and the outlook panels from years before. And I would say it again if, if Cove, it wasn't just so dominant. But it has to do with the fragility of the label, the labor market. It's almost like mountain climbing where you're out in the Sierra Nevada Mountains and you're climbing up a rock and it's kinda gradually and loose and you and you slip and you could fall versus if you're on a granite form and you can easily get traction and move up the mountain without slipping. So the labor force participation rate measures something different than the unemployment rate. It has to do with the extent to which people leave the labor market because they've been looking for jobs so long and there isn't anything out there, and they move away. Now what I'm afraid of is in this particular situation, we have lower wage earners being disaffected by the pandemic because of leisure and hospitality being so poignantly hit. And I think Rob did a good job of illuminating that for us with respect to looking at Hawaii verse in Chicago versus say southwest Michigan, smaller cities, smaller cities and mid-size cities are benefiting from this pandemic significantly because people are trying to socially distance. And I think that's, that's sort of a trend that may or may not continue to take hold. I think it will to some extent. But the labor force participation rate to put this back on point basically says, when somebody loses their job and they can't find a job quickly and they continue to not be able to find a job, the eventually fall out of the calculation. So there are people that are in the population that are employable, that are in, that are adults that don't have a job. They're not counted as part of the unemployment statistic. And there, of course, out of a job. So they're not able to make money, they're not able to cover their bills. But at the same time they're not they're not counted in that very widely publicized you E3 or unemployment rate, which is so, so widely cited. So I think, I think really we need to look at both the LFTR though, the labor force participation rate and the unemployment rate in, in concert to sort of get a better idea of how the labor market, how healthy the labor market is. And just the, the punchline here is what I used to say is that Indiana needs to move away from manufacturing culturally, we've gotta get a better, higher educational attainment rate and be more versatile, Be more like granite, so that when we do get dislocated from a job, our population can more quickly rebound and be transferred into another position and be productive member of the economy. And I think that without education, without training, without some specific skill that can be transferable, it leaves someone subject to being a part of that labor force participation, participation rate statistic. Thank you greatly appreciated. On questions I think you might be good at answering. Since the cobe at 19 outbreak in March, we've seen the personal savings rate increased from single digit throughout 20 or even 33% in some instances. What implications does this have on our economic recovery? Tr, this is good impact. So this qubit 19 actually keep people in socially distance wave which, which me and us from spending around. And even if we relied on medicinal shopping and just what mth thumbnail perspective, I also find that I serve on. I saved all my personal grocery shopping. So if I go to in-person grocery shopping, I tend to put more items. Then what's listed on my shopping list? That if I go a digital shopping, if I have ten things listed on my shopping list, I would just stick to let them drag them into my shopping card and then check out and then go. So it helps with the personal savings. And of course, because of the social distance requirement, we saw that a lot of private educational and private education and health services are down. So that does help, but actual bowels into, into households savings. So in economics we know that savings dot channeled into investments. So down in a road and a long-term at helps to finance new and innovative business ideas. So my personal experiences that I start seeing more of what innovative delivery service, for example, for the grocery delivery service that we all need in the social distance way. Well, we not only get it from the local grocery stores, as I shop a lot in the Oriental world switch towards, I start saying, and Chicago oriental grocery stores tapped into the South Bend markets. They are using mu I knew new platforms to gather those little, little stories, smallest stores in China now and they can put together the thing that you need. And even if with I think that's a long distance travel of view hours that they can make it happen that it's within a day that you place an order by one o'clock, by 1pm and you get a seven PM. Increased competition, but it also creates new opportunities and that means the financial investment and that will come from the household saving. And second is for the, for their household, for the consumer perspective that the consumers, the consumer has its urged that they want to go out and spend. So after staying at home for, for more than half a year, this, this passion to spend has been surprise for such a long time. So down the road in 2021, if consumers see the situation improve and it's safer to travel, I would see a big surge in, in consumption. So to view, look a little bit. If we look at a little bit further to two Chinese market. So they have experienced this very severe and harsh locked down than the first part of 20-20. But then by the summer when the number has been tape or gal brought brought down, I start seeing a lot more surge in the in the gathering. So now could be what happened in the US count in a row. So for the and for the business investment, for the personal consumption than saving today will be channeled into those two big parts and contributes to the GDP recovery. Thank again each of our panelists, and now I'd like to turn it over to Tracy Anderson, who is going to give us our closing comments in closing remark. Thank you so much. Thank you to Dr. Carol for moderating today's event and to all of our expert panelists. This has been a fantastic overview of the regional, state, national, and world economic condition. I also want to thank those who helped organize the event and the technicians that may zoom work for us today. Kathy halon, Jacob, CBO, and Zach. What? These are just the people who directly helped me. I know there are many more behind the scenes who I do not personally know. Thank you all. I'd like to end today's presentation with just a few announcements. We have been in the process of updating our websites and our social media platforms. Please check these out for special events you may want to virtually attend. This would include work workshops and webinars offered by the Small Business Development Center. Training opportunities offered by professional development and entertainment opportunities offered by the raccoon School of the Arts, just to name a few. This past week, we've lost a titan of business and philanthropy. It is with great sadness. I recognized the passing of our great friend Art GCO on November seventh, 2020 at age 90. Art was truly a man of faith, letting as light shine throughout the community. If you ever had the privilege of meeting or, you know, he had a special ability to make you feel like the most important person in the room. Those who knew him, know what I'm talking about. It was truly an honor and privilege to have known or DCF. Art and his wife had were instrumental in establishing and sustaining the IU campus in L cart. There were also sponsors of the Armstrong dinner and all cart, an event that recognized a prominent business person, elk heart, and recognized outstanding faculty at the IU southbound Leighton school. Art was a past winner of this work. Art is loved by faculty, staff and students at IU self bin and the community at large. Will miss our great friend. I use South Bend and the latent school, offer condolences to the TCO family. Thank you all for being with us today. Please watch for our next year's program. It's likely going to be the second Friday in November, but the official date has not yet been set. Wishing you all health, prosperity, and safety for the upcoming year.

Panelists

Contact Info

For more information, contact Kathi Highland at 574-520-4487 or kathruss@iusb.edu .

Indiana Business Outlook Panel: South Bend

Outlook 2021: South Bend

8 am on Friday, November 13

Panelists

Contact Info

Indiana Business Research Center social media channels