Economic projections for Indiana's metro areas in 2024

As the calendar flips to a new year, economists in the Hoosier state have set their sights on how the economy and financial markets will fare in 2024. Throughout the month of November, the Futurecast tour (formerly called the Business Outlook Panel tour) stopped in 11 cities across Indiana, sharing economic forecasts for Indiana’s metropolitan statistical areas (MSAs). Several common themes emerged from the accompanying Outlook articles, including continued high inflation, recent increases in interest rates by the Federal Reserve, the resumption of student loan payments and geopolitical turmoil due to the Russia-Ukraine and Israel-Hamas wars. These factors will play a crucial role in guiding the economic trends of 2024.

Below are some highlights and excerpts taken from the metro forecasts featured in the Outlook issue of the Indiana Business Review. Visit the publication website for full analyses from our panel of experts.

Anderson

Dr. Lonnie Leeper, Anderson University

The average annual unemployment rate for 2022 (3.3%) marks a decade low for Madison County and also marks the smallest gap (0.3%) between Madison County and the state. 

Average weekly wages increased from $830 per week in the first quarter of 2022 to $898 per week in the first quarter of 2023, representing an 8.2% increase in wages. Most industries experienced increases year-over-year, with the exception of the arts, entertainment and recreation industry (which saw decreases in average weekly wages in amusement, gambling and recreation) and the finance and insurance industry.

The decade-low unemployment rate and moderate increase in wage growth are bright spots for Madison County. Given the Federal Reserve’s signal that inflation remains too high, recent geopolitical uncertainty may impact how the Fed approaches 2024. The unemployment rate in 2024 for Madison County should be expected to rise moderately if interest rate hikes continue beyond the Federal Reserve’s current expectations. Wage growth should be expected to continue at a slower pace than 2023.

Bloomington

Carol O. Rogers, Indiana Business Research Center

The Bloomington metropolitan area (Monroe and Owen counties) boasts a large number of jobs, as measured by payroll employment, that is expected to grow to nearly 80,000 by the last part of 2025. Year-to-year growth was most significant when Bloomington came out of the pandemic shutdowns that heavily affected hospitality and leisure businesses. The quarterly growth of jobs began to decelerate in the waning months of 2022 and our forecast models show a slight decline of less than 1% in the last months of 2023 and the early months of 2024. Growth will be small through the fall of 2025, which probably speaks directly to a net loss of jobs -- that is, we anticipate some businesses closing and others either not replacing positions, not hiring for new positions or a combination of both.

The outlook for the Bloomington metro in 2024 is muted. We don't see drastic swings upward or downward over the next couple of years. But this in itself can serve as a wakeup call. There are constraints to growth in the county, particularly around new housing. Today's environment calls for the attraction and retention of talent, and a mix of housing types will be a critical factor for those choosing to live in the region.

Columbus

Dr. Steven H. Mohler, IUPUC
Dr. Jon Padfield, IUPUC
Dr. Ryan Brewer, IUPUC

As a durable goods manufacturing-based economy, the Columbus MSA experienced significant economic volatility due to global supply chain issues and fluctuations in consumer spending related to the pandemic. Columbus concluded 2022 with lower annual average unemployment than 2021. During 2023, the unemployment rate moved to 3.0% or higher during five of the first eight months. Current expectations are for local economic output to increase during 2023 in light of vehicle production and sales projections.

Columbus may experience declining real GDP between 2.0% and 5.0%, similar to the 2013-2016 time period. Weakness in the automotive and durable goods sector, fueled by continued supply chain issues and high interest rates, combined with declining consumer confidence, would be key to this scenario.

Unemployment may increase to between 4.0% and 5.0% in 2024 due to slack in the manufacturing sector and the addition of up to 1,500 new entrants into the job market. In this scenario, the number of employed is expected to decrease by between 0 and 1,000 in 2024. We expect this economic weakening to materialize in the first half of 2024.

Read full Columbus article »

Evansville

Dr. Mohammed Khayum, University of Southern Indiana

In 2024, the number of jobs is projected to increase by 1,280, nominal personal income growth is forecasted to increase by 4.3%, real output is expected to decrease by 0.25% and the unemployment rate is forecasted to be 3.6% (by 2024 Q3).

Given the relatively high share of nondurable manufacturing employment (as a percent of total manufacturing employment) and the role of the manufacturing sector as a significant driver of economic activity, the Evansville economy in 2024 will be shaped by labor market conditions, production conditions and inflation risks associated more with this segment of manufacturing than developments in the overall manufacturing sector. The nature of the adjustments by businesses to changes in unit labor costs, interest rates and consumer spending will be a key determinant of the economic performance of the Evansville region in 2024.

Fort Wayne

Rachel Blakeman, Purdue University Fort Wayne
Dr. Heather L.R. Tierney, Purdue University Fort Wayne

Despite remarkable resilience over the past three-and-a-half years, key indicators are starting to show a softening economy. For example, the Fort Wayne metro area’s unemployment rate was 3.1% (not seasonally adjusted) in September 2023 compared to 2.2% a year earlier, with almost 2,000 additional unemployed workers since September 2022, according to the Indiana Department of Workforce Development. While the increase may look unsettling after many years of the unemployment rate being below the 5% “full-employment” mark, there are more job openings in the Fort Wayne area than available workers to fill them.

Assuming that disinflation continues at a gradual rate and assuming there are no big shocks to the overall Fort Wayne MSA economy, the unemployment rate is expected to increase less than one percentage point by the end of 2024 under this model (to between 4.2% and 4.4%). This could be very stressful for employers wishing to expand, but after years of labor shortages in the Fort Wayne area, the lack of workers no longer feels like an exigent circumstance, but rather a routine business operation. We can continue to expect to see reduced hours for consumer-facing businesses, delays in scheduling without available workers and goods-producing or goods-moving industries looking to automation to increase productivity.

Gary

Dr. Micah Pollak, Indiana University Northwest

Between 2017 and 2022, the population in Northwest Indiana has grown 2.9% (or 0.58% per year) and this growth is forecasted to continue in the coming years. The reversal of this out-migration trend can be attributed primarily to two factors. First, Northwest Indiana has become a stronger economic environment for both workers and firms. Second, Northwest Indiana has made significant investments in quality of place, which are starting to pay dividends in attracting and retaining workers and their families to the region.

While the labor force participation rate in the region has yet to return fully to pre-pandemic levels, we will need more than these workers returning to the labor market to fill vacancies. As with the “brain drain” challenge, attracting more workers, and particularly young, educated and skilled workers, to Northwest Indiana will help alleviate pressure on the tight labor market and give firms a stronger pool of workers. For 2024, we can expect labor market conditions to remain tight with historically low unemployment rates (between 4.5% and 5.5%).

Indianapolis-Carmel-Anderson

Dr. Phil Powell, Indiana University

On a per capita basis, real GDP in the Indianapolis metropolitan area is expected to fall by 0.2% in 2023 and 0.4% in 2024. This fall is mathematically explained by population growth that is slightly larger than real GDP growth. In economic terms, shrinkage in per capita real GDP confirms continued economic stagnation in Indianapolis.

Unemployment is expected to average 4.3% nationally, 3.9% in the state and 3.5% in the Indianapolis metropolitan area during 2024. Even with slower-than-normal real GDP growth, employment opportunities will remain abundant for residents of the Indianapolis metropolitan area. Accelerated transition of older workers into retirement, smaller annual cohorts of high school graduates and lower-than-expected labor force participation by working-aged men will make competition for talent intense among Indianapolis employers in 2024. The average worker, though, will earn measurably less per hour than workers in metropolitan areas with economies that are blossoming.

Kokomo

Dmitriy V. Chulkov, Indiana University Kokomo

Throughout 2023, the labor market continued to stabilize and return to normal levels of employment and unemployment. The unemployment rates for most of the region’s counties showed slight increases over the year and stayed in the range between 3% and 4%. The labor force and the numbers of both the employed and unemployed were generally quite steady in 2023.

The economic situation in Kokomo is forecasted to improve in 2024 and 2025. As the other Indiana MSAs see slowing employment growth, the Kokomo MSA is expected to show 4% annual growth in employment over the next two years. The unemployment rate in the Kokomo MSA is expected to decline to around 4% in 2024 and 2025. As the unemployment rates in other areas of the state come closer to long-term average levels, Kokomo is also expected to be closer to the state’s average.

Lafayette

Tanya Hall, Purdue University

Looking forward to 2024, it is anticipated that a slight uptick of employment may occur in comparison to the 2023 data. The MSA will likely maintain a tight labor market, with employers competing for workers in a limited pool of candidates. It is possible for the unemployment rate to stay steady in the 3% or 4% range as the economy continues to slowly grow with the persistently higher inflation rates, increased labor costs and costs of goods.

Given the rapid wage growth in the past two years, the average weekly wage growth will likely begin to cool to coincide with slower economic growth. Growth will likely hover around the 2% to 5% range and be varied across industries, depending on business demand.

Louisville

Dr. Uric Dufrene, Indiana University Southeast

A recession chance is eliminated for 2023, but slower growth is only delayed to 2024. The impact of higher interest rates will weigh on consumers and eventually, we will see a pullback in consumer spending and business investment. Slower growth will occur in 2024, but the economy may escape a full-blown recession. If any recession is declared, we are not expecting it to be severe. For the Louisville metro, we will see unemployment rates around the 4.5% level and the metro area will add about 8,000 jobs, representing a slight slowdown from 2023. Southern Indiana payroll growth is also expected to decelerate from the strong payroll growth of 2022 and early 2023.

Muncie

Dr. Dagney Faulk, Ball State University
Cade Deckard, Ball State University

The unemployment rate is higher than it was a year ago, but has decreased over the past few months. Nonfarm employment increased overall (and in most industry sectors) compared to the previous year, and most industry sectors have experienced positive inflation-adjusted wage gains. Residential construction has slowed while the housing market remains tight, even though mortgage rates have increased substantially. Food stamp usage remains much higher than pre-pandemic levels.

The most recent forecast from Indiana University’s Center for Econometric Model Research shows employment growth of 1.86% over the next two years. Personal income is expected to increase 3.13% through 2025 and population is expected to decrease 0.25% over the same period.

Richmond

Dr. Oi Lin Cheung, Indiana University East

The average January-to-August monthly labor force of the region grew by half a percent to 96,584 people in 2023 compared to the year before. Over the same eight months in 2023, the overall average monthly unemployment rate for the region was 3.56%, up by 0.35 percentage points from the year before.

Taking into consideration that the U.S. inflation rate is still higher than the Fed’s long-run target of 2%, global supply-chain disruptions are still present (caused by two ongoing wars and other factors) and the labor force’s post-pandemic adjustment to jobs requiring physical presence at the workplace, businesses in the region continue to face some hardships in their operations. As a result, we project that the unemployment rate for the region will be around 3% through 2024, with some variation across industry sectors.

South Bend-Mishawaka and Elkhart-Goshen

Dr. Hong Zhuang, Indiana University South Bend

In 2023, the labor markets in the South Bend-Mishawaka and Elkhart-Goshen MSAs exhibited a modest degree of loosening. The size of the labor force either remained stable or experienced a decline in regions marked by higher unemployment rates. Despite an uptick in wage rates in both areas, overall labor costs were mitigated by a reduction in working hours. Within the context of these dynamics, housing prices in St. Joseph County continued their upward trajectory, even as new single-family home construction and sales of existing homes experienced a notable decline.

The South Bend-Mishawaka MSA may see its unemployment rate rise to a range of 4.5% to 5.0% in 2024. The Elkhart-Goshen MSA may experience a rise in unemployment rates ranging from 5.0% to 5.5% in 2024.