Gary metro grew by relatively high 2.9 percent this year

Micah Pollak, assistant professor of economics at Indiana University Northwest, gives his regional economic forecast for 2016 while agricultural economist Corinne Alexander, of Purdue University in West Lafayette, listens.

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Northwest Indiana's economy grew by an annualized rate of 2.9 percent to $30.4 billion in 2018, growing nearly twice as fast as it has in recent years.

"This growth reflects a significant improvement compared to recent years," Indiana University Northwest Assistant Professor of Economics Micah Pollak wrote in the Indiana Business Review's 2019 economic forecast for the Gary metropolitan area. "Following the end of the 2007-2008 financial crisis, Northwest Indiana’s economic output has grown at the anemic rate of 1.5 percent nominal growth per year on average, in contrast to 4.2 percent nominal growth per year for the state of Indiana and 3.8 percent per year nationally over the same time period."

Big, systemic problems Northwest Indiana has faced have included declining income and a dwindling population.

"Northwest Indiana has also been subject to several concerning trends, particularly declining employment in traditionally high-paying goods-producing jobs in manufacturing, construction, and steel, which has only poorly been offset by a rise in low-paying service sector jobs, as well as a continuing decline in total population with the highest decline among important demographic groups," Pollak wrote.

But there's hope on the horizon.

"While economic growth has been relatively slow for Northwest Indiana following the Great Recession, in 2018 — for the first time in almost a decade — there are signs of significant economic improvement and accelerating growth," Pollak wrote. "Since the 1970s, as well as during the years following the Great Recession, Northwest Indiana has been experiencing a structural shift from goods-producing to service-providing jobs, which has led to continued declines in real income per person for the region. However, in the last year, there are signs of this structural change slowing and potentially shifting to a healthier sector employment mix."

The Region added 1,149 jobs in the last year, compared to an average of 1,153 jobs from 2012 to 2017. Northwest Indiana however lost an average of 634 jobs in manufacturing and construction during that period.

"As a result of the replacement of higher-paying goods-producing jobs with an average income of $80,000 per year with lower-paying service-providing jobs with an average income of $39,000 per year, real income per person fell by 0.6 percent in Northwest Indiana, but rose 13.3 percent nationally and 19.1 percent for the state of Indiana over the same period," Pollak said. "In the last year, this trend reversed, with job growth being driven primarily by goods-producing industries. Between the first quarters of 2017 and 2018, Northwest Indiana added 918 jobs in goods-producing industries and 231 jobs in service-providing industries. This shift in job creation is one of the factors underlying the strong economic growth for Northwest Indiana in 2018."

The Region's population also stabilized in 2017 after years of decline.

"Another significant concern for the future of Northwest Indiana has been the continued decline of population," Pollak wrote. "Between 2012 and 2016, the population of Northwest Indiana fell by 0.2 percent per year, while the population of the state of Indiana rose by 0.6 percent per year. The population decline for Northwest Indiana was especially pronounced in 2016 when it fell by 0.3 percent and in 2015 when it fell by 0.4 percent. However, in 2017, Northwest Indiana’s population remained stable, losing only 26 people."

Even the steel industry has been booming of late, which has resulted in $750 million in investment in U.S. Steel Gary Works and 14 percent raises for workers over the next four years.

"Finally, one of the most prominent industries in Northwest Indiana, the steel industry saw substantial gains in 2018," Pollak said. "While primary metal manufacturing employs just 6 percent of workers in Northwest Indiana, it accounts for 12 percent of all earnings. The series of tariffs imposed on foreign steel imports in 2018 drove prices of U.S. domestic steel up by 11 percent and foreign prices down by 4.8 percent. As a result of increased prices, profits for the major steel producers in Northwest Indiana rose."

In 2019, he predicts growth of 1.8 percent to 2 percent in 2019, the creation of 2,500 jobs, a slight decline in the unemployment rate, and between $550 million to $610 million in additional economic output for the Region.

"In 2018, Northwest Indiana saw some of the most promising and widespread signs of stronger economic growth since the end of the Great Recession," Pollak wrote. "Economic output grew by 2.9 percent to $30.4 billion, and there were signs of improvement across the board in sector employment mix, population growth, residential construction, retail sales, labor force participation rate and the steel industry."

The Indiana Business Review is a quarterly publication of the Indiana Business Research Center at Indiana University's Kelley School of Business. Visit www.ibrc.indiana.edu/ibr for more information and to ready Pollak's full report.

This article originally ran on nwitimes.com.

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