By GREG GAPSIS, New Albany Tribune
gapsis@news-tribune.net
NEW ALBANY — The regional economy has better prospects than the state’s lackluster 2006 outlook, according to experts who spoke Thursday at Indiana University Southeast’s annual Economic Outlook Forum in New Albany.
But even the local economy could suffer if the specter of a possible General Motors Corp. bankruptcy descends on Indiana.
That was part of the mixed news heard by the 365 people who filled the Hoosier Room for the popular annual presentation by local faculty and those from Indianapolis and Bloomington’s Kelly School of Business.
“I am cautiously optimistic about economic conditions in southern Indiana in the coming year,” said IUS Associate Professor of Economics Dagney Faulk, who described how local conditions included Louisville’s regional job market.
“Over the past year, average employment increased by 6,600 jobs in the metro area, which includes an increase of over 1,000 jobs in the southern Indiana counties of the metro area,” Faulk said. “These jobs are being added in transportation, warehousing, health care and social services.”
While Faulk’s figures show a less than robust local economy — with slower growth in retail spending, a cooling of regional home sales and tightening credit — it still outpaced projections for Indiana’s economic performance in 2006.
“Indiana is ambling along like an old, tired hound dog taking long naps sleeping on the couch,” said IUPUI Professor of Business Economics and Public Policy Philip T. Powell. “We are falling behind, folks.”
Powell pointed to the creation of only 30,000 jobs in the state during the last year, only one percent of 3 million created nationwide, and an economic growth rate of only 7.1 percent since 2000, “the 44th fastest growing (economy) in the country.”
Personal income is falling, four percent in the last four years. Two-thirds of the country is doing better. The only good news is in retail trade, transportation and utilities. Unfortunately, most of those are only low to medium pay jobs.”
Powell pointed to the challenges higher fuel costs, interest rates and decreased consumer spending will have on traditionally strong sectors of the state economy — manufacturing, agriculture and retailing. But he cautioned about fall out from General Motor’s uncertain future.
“The chance for General Motors to go bankrupt is a huge question hanging over the economy,” Powell said. “It would have a ripple effect throughout the manufacturing sector, which makes up 20 percent of the state’s economy. And if, like the airlines, they use bankruptcy court to dump the UAW pension obligations on U.S. taxpayers, we could have another savings and loan type crisis.”
Faulk, Powell, and IU Kelley School of Business professors James Smith and William Sartoris, praised regional assets as reasons for local optimism. They included good schools, technical training opportunities at the Prosser School of Technology and Ivy Tech State College, major health care institutions and recent entrepreneurial workshops offered by IUS.
“We also have high quality of life attributes and it is proven those are essential to attracting high tech and advanced manufacturing operations to an area,” Faulk said. “Being part of the Louisville area also makes things a little more positive. A large percentage of our residents work in Louisville and there is also a large number who are cross commuting to southern Indiana businesses.”