Economy improving

Publication date:
Thursday, November 13, 2003

SOMETHING TO SMILE ABOUT: Jerry Conover and Kathy Parkison chuckle during a meeting of Indiana University Economists who came to IU Kokomo Wednesday to share their economic predictions for the coming year. (KT photo by Tim Bath)

By SHEA VAN HOY

Tribune business editor

The members of Indiana University's Business Outlook Panel said they understand the common question of "Where's the jobs?"

The panel -- moderated by Morton Marcus and comprised of IU economists and business department

educators -- made its 24th annual stop at Indiana University Kokomo Wednesday to assess the past year economically and, more importantly, look toward the coming 12 months.

About 95 people attended the Business Outlook & Public Policy Panel Discussion at IU Kokomo, where members talked of positive economic signs in many facets of the economy, save the creation of many new jobs.

Aside from a stagnant job market, especially in Indiana, the economists said, prospects for economic growth are good. They predict a 4 percent gain in Gross Domestic Product for country in 2004.

Looking locally

Dr. Kathy Parkison of IU Kokomo said that despite job losses over the past year, she senses Kokomo's economy has turned a corner.

"Indiana was ahead of the nation in terms of slipping into the last recession and Kokomo was even ahead of Indiana -- and that's not a category you want to win," Parkison said. "I think we're behind the country and state in pulling out of it as well."

She said the Kokomo Metro Statistical Area has seen unemployment drop to a current level of around 5 percent.

According to labor statistics, the Kokomo MSA lost about 1,800 jobs from September of 2002 to the same month of this year.

Parkison said she is seeing more "help wanted" signs around town, even if they aren't for particularly high-paying jobs.

"The business owners who I've been talking to have been saying they're seeing more foot traffic or shipments -- however they define increased production individually," she said.

Parkison added that manufacturing jobs have been vanishing in Kokomo as they have everywhere else, and cautioned the crowd concerning the auto industry.

"Autos have been doing well because of the incentives, but those aren't going to last forever. Also, DaimlerChrysler's numbers haven't been that good," she said.

Parkison said she expects the local economy to grow at a rate of between 2 and 4 percent in the coming year. Parkison pointed to the developing high-tech business incubator as a positive locally.

"It's nice to report things are looking up," she said. "They might not be as good as before the recession, but it's nice to see."

State of the state

Jerry Conover, director of IU's Indiana Business Research Center, echoed Parkison's statements concerning a jobless recovery. He said Indiana has lagged behind the United States in terms of recent growth.

"Are we worse off than the nation as a whole? Yes. We've lost 159,000 jobs in Indiana since March of 2000," he said. "We're not in nearly as attractive a position as the rest of the nation. Only Michigan has lost a larger percentage of jobs."

Conover said that manufacturing now comprises 20 percent of all non-agricultural jobs in Indiana, down from 22.2 percent from March of 2000. On a positive note, unemployment in Indiana has stayed below the national average.

Conover noted increased productivity by manufacturers.

"It could be a case that as demand picks up, these companies won't need to rehire as many workers as they had before [the recession]," he said. Conover said that a couple of bright spots have been education and health services and government employment.

"For 2004, we see a modest upturn of about 1 percent, or 28,000 jobs," Conover said, adding that he expects the unemployment rate to drop from 5.3 percent to around 4.6 percent.

National outlook

IU's Bill Witte called 2003 a pretty good economic year, with a GDP growth expected to finish at about 3.5 percent.

"As it has been throughout the recession, consumption has been the primary support in the economy," Witte said, adding that national unemployment currently sits at 6 percent. "The coming year should be similar -- but better."

Witte predicted the GDP would grow at a 4.5 percent rate in 2004 and the unemployment rate should fall to the mid-5 percent range.

"We are expecting business investment to increase which is important to help out the consumption," he said.

Witte said the largest problem the country faces economically is large governmental deficits.

"At some point, these are going to have to be dealt with, but it won't happen in an election year," Witte said. He added that he expects the Federal Reserve Board to raise short-term interest rates soon and top out at about 1.8 percent by year's end.

Pushing world growth

Andreas Hauskrecht, IU professor, said the U.S. would remain the only real growth engine worldwide in 2004.

"[Growth in] Europe is very slow. In Germany, it's even expected to be flat. The Germans were excited about an 0.2 percent growth this year," he said.

He said Japan's economy grew unexpectedly by 2 percent in 2003, and he predicted a 1.4 percent growth for 2004.

Hauskrecht said the big numbers in terms of growth can be found in China and India. The former's economy grew at a 7.5 percent rate in 2003 and the latter by 6 percent.

"Those are good numbers, but it's not enough to make a global impact. Combined, those two countries GDP's are equal to only 16 percent of the U.S. GDP. It's not enough beef," he said.

He said changing foreign interest in U.S. Treasury Bills and Bonds could impact interest rates here.

On the mark

IU Kokomo School of Business Dean Dr. Niranjan Pati said after the breakfast discussion that the forecasters' predictions for 2003 were accurate.

"What they said last year for this year was on the mark and they were validated today for that," Pati said. "As they said, there are a lot of signals that the economy is moving in the right track. This is a presidential election year, and there shouldn't be much drastic action. The nation looks good. In Indiana, things aren't that sanguine."

Shea Van Hoy may be reached via e-mail at shea.vanhoy@kokomotribune.com or by phone at (765) 454-8599.