Economic Update: Good news in the employment situation - Indiana tops the nation

-10.23.2009

Good news this week on the Indiana employment situation.    The Bureau of Labor Statistics released state employment numbers, and Indiana recorded the largest month over month employment increase in the nation.    According to the report, Indiana gained over 4,000 jobs from August to September.   On a year over year basis, we also saw a significant deceleration in employment losses (See Figure 1).    Employment gains were attributed to manufacturing, professional and business services, and government.  

Figure 1

National indicators continue to point to a recovery in manufacturing, and as we have discussed previously, we believe this manufacturing recovery is primarily driven by inventory restocking.   Following the inventory re-stocking phase, manufacturers will need to turn to exports to sustain the recovery.   The American consumer will not be able to provide the ammunition for steady growth beyond this period of inventory re-stocking.

We have to view the positive month over month change in professional and business services as an early barometer of a recovery.    Two-thirds (2/3) of professional and business services gains were in employment services (temporary labor services).   Prior to making a long-term commitment to new hires, employers might rely on temporary labor services initially.   Once a stronger recovery is underway, employers then rely on permanent hires.   So this increase in labor services should be viewed favorably.

Another way to look at the severity of the current recession is to observe job changes from January to September of each year.   In other words, we take the number of jobs in September, and we subtract the number of jobs in January.     This gives us a change within each year.  As you can see from Figure 2, absolute changes this year are the steepest since 1990.

Figure 2

The unemployment rate for Indiana is now less than the national average (Figure 3).   The size of the labor force actually increased from August to September, and the number of unemployed decreased.   Combining these two nuggets of information should also be viewed favorably.   The unemployment rate declined due to workers actually finding jobs as opposed to dropping out of the labor force. 

Figure 3

This good news is only from one month of data, but it is good news, and hence warrants attention.  On the downside, Indiana reported new claims for unemployment this week that exceeded 4,000.   So while the employment report was positive, unemployment claims increased.   Nationally, new claims for unemployment also increased unexpectedly.

If you may have noticed, we continue to hear mixed economic news on a daily basis.  One day, we hear of a positive report, followed by a negative report the next day.    In my view, this is characteristic of a U-shaped recovery.    We have discussed the challenges with the consumer previously, and the combination of less spending, higher savings, and less tolerance for debt will serve as strong headwinds against a V-shaped or rapid recovery.

Suggestions

If you have any suggestions on future columns or research about specific industries or other economic data, please send me an email at udufrene@ius.edu.

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This information is provided by

Uric Dufrene. 

Uric Dufrene, Ph.D. holds the Sanders Chair in Business in the School of Business at Indiana University Southeast.  He conducts research on local and regional economic trends, and teaches corporate finance at the undergraduate and graduate levels.   He previously served as dean of the School of Business.