Transcript www.ibrc.indiana.edu

Economic Assessment and
Manufacturing Perspective
Indiana Economic Development Forum
Portage, Indiana
December 11, 2002
William A. Testa
Vice President and
Director of Regional Programs
Federal Reserve Bank
of Chicago
GDP growth surged in the third
quarter
Real gross domestic product
percent
9
8
Quarterly change (saar)
Percent change from year ago
7
6
5
4
3
2
1
0
-1
-2
-3
-4
1990
'91
'92
'93
'94
'95
'96
'97
'98
'99
'00
'01
'02
'03
Investment spending is picking up
Contribution to GDP growth
10.0
% contribution
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
I-00
II
III
IV
I-01
GDP
II
III
IV
I-02
Consumption
II
III
IV
Investment
I-03
II
Manufacturing has been hit
hardest--this time
Manufacturing employment
percent change from year ago
6
4
Midwest
2
0
U.S.
-2
-4
-6
-8
-10
1990
'91
'92
'93
'94
'95
'96
'97
'98
'99
'00
'01
'02
'03
Manufacturing jobs
Total Manufacturing Payroll Employment (SA)
1.05
1
0.95
0.9
0.85
0.8
1998
1999
2000
2001
2002
Index 1998 Q1 = 1.00
Source: Bureau of Labor Statistics
Indiana
Midwest
United States
2003
Manufacturing Job Declines by Region
Percent Decline in Mfg. Employment 2003-1998 by BEA Region
Plains
Southw est
Rocky Mountain
Great Lakes
Southeast
United States
Mideast
New England
Far West
0
0.05
0.1
0.15
0.2
0.25
0.3
Employment growth
Total employment
percent change from year ago
4
3
U.S.
2
1
0
-1
-2
Midwest
-3
1990
'91
'92
'93
'94
'95
'96
'97
'98
'99
'00
'01
'02
'03
Payroll jobs…Indiana vs. MW vs U.S.
Total Non-Farm Payroll Employment (SA)
1.08
1.06
1.04
1.02
1
0.98
0.96
0.94
1998
1999
2000
2001
2002
Index 1998 Q1 = 1.00
Source: Bureau of Labor Statistics
Indiana
Midwest
United States
2003
Unemployment rate deterioration greater here,
due to mfg. greater concentration in Midwest
Unemployment rates
percent
8
7
6
U.S.
5
4
Midwest
3
1990
'91
'92
'93
'94
'95
'96
'97
'98
'99
'00
'01
'02
'03
Indiana Unemployment
Unemployment Rates: Indiana vs U.S.
9.0
8.0
7.0
Percent
6.0
5.0
4.0
3.0
2.0
1.0
0.0
1990
1991
1992
Source: Bureau of Economic Analysis
1993
1995
1996
Indiana
1997
1998
U.S.
2000
2001
2002
Manufacturing and the Midwest
Today
 Long term….a very successful Midwest
 Long term….a productivity paradox and
development /challenge
 Short term (worries and concerns)

–
–
–
–
new technology industries
autos moving south?
overseas?
“investment overhang”
“Before you go any further, let me reiterate that I, for one, see
nothing wrong with killing the messenger.”
Source: Business Law Today, March/April 1998
?Indiana looking back to see the top of the
hill? (not really)
Per Capita Personal Income 1929-2002: Indiana vs Midwest
1.3
1.2
Midwest
1.1
United States
1
0.9
Indiana
0.8
0.7
0.6
1929
1935
1941
1947
1953
1959
1965
1971
1977
United States=1.00
Source: Bureau of Economic Analysis
Indiana
Midwest
United States
1983
1989
1995
2001
What will be manufacturing’s ultimate role in
the U.S. economy?
Industry Employment as percent of Total Employment: 1900 - 1997
50
45
40
35
Percent
30
25
20
15
10
5
0
1901
1911
1921
1931
Sources: Historical Statistics of US, BLS, USDA
1941
1951
Year
1961
Manufacturing/Total
1971
1981
Agricultural/Total
1991
Much like the nation, Midwest mfg. output
climbs with little or no growth in labor
Indexed Mfg Employment and Productivity
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
1984
1986
1988
1990
1992
Productivity
1994
1996
Employment
1998
2000
2002
Midwest incomes derive from the mfg. sector
to a greater extent than the nation
Manufacturing Jobs as percent of Total
Employment
35
30
Percent
25
20
15
10
5
0
1969
1973
1977
1981
Indiana
1985
1989
1993
United States
1997
2001
Northwest Indiana Morphs out of
Manufacturing
percent
Manufacturing Employment as Percent of Total
Non-Farm Employment, 1969-2001
45
40
35
30
25
20
15
10
5
0
1969
1973
1977
NW Indiana Counties
So urce: B ureau o f Eco no mic A nalysis
1981
1985
1989
Great Lakes
1993
1997
United States
2001
Manufacturing and the Midwest
Today
 Long term….a very successful Midwest
 Long term….productivity paradox
 Short term (worries and concerns)

–
–
–
–
new technology industries
autos moving south?
overseas?
“investment overhang”
Manufacturing job levels are volatile;
downturns often stretch longer than recessions
All Employees: Manufacturing
SA, Thous
20,500
19,500
18,500
17,500
16,500
15,500
14,500
13,500
12,500
Jan-58
Jan-62
Source: Bureau of Labor Statistics
Jan-66
Jan-70
Jan-74
Jan-78
Jan-82
Jan-86
All Employment, Manufacturing, SA (thousands)
Jan-90
Jan-94
Jan-98
Jan-02
On net: auto corridor has been
extending south
Auto Share of Gross State Product by State
0.18
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
1980
1985
US Average
1990
IL
IN
1995
WI
MI
OH
2000
KY
TN
Who is likely to reduce assembly
capacity?
Big Three vs Foreign Nameplate Share
100%
90%
80%
70%
60%
69
73
73
68
62
50%
40%
30%
9
20%
10%
22
17
19
12
15
15
12
15
19
1993
1996
1999
2002
0%
1990
Big Three U.S. Production
Foreign Nameplate U.S. Production
Imports
Source: Ward’s
Automotive Yearbook
Economic Development--Can Manufacturing
be cast aside?
No, Indiana remains a manufacturing
economy
 Manufacturing has bounced back before and
there are indications that the present period
is not unprecedented
 Yet, the ongoing challenge is to re-make our
communities
