While Indiana’s economic outlook looks stable, Monroe County’s issues could continue in 2026.
Business experts from Indiana University shared the region’s annual economic forecast, called Futurecast. They said Indiana will likely see modest growth next year.
Monroe County and the 11-county southern Indiana Uplands region are facing a tougher future. Recent cuts to higher education impact IU, a major employer in the region. But the private business sector looks brighter in 2026.
Phil Powell, executive director of the IU's Indiana Business Research Center, said there’s going to be uncertainty in 2026, but the economy will grow.
“This is not 2008,” Powell said. “We are not staring down an economic abyss. We are not forecasting a recession in 2026.”
The event was hosted in partnership with the Bloomington Rotary Club and the Greater Bloomington Chamber of Commerce. The annual Futurecast has been reported since 1972. The full report will be available in December.
Private businesses save the day after troubles in education
Powell said Bloomington is having a rough year, and next year’s growth might not be much better.
“If we're lucky to have 1 percent here in the region, it will have been a good year for Bloomington,” Powell said. “I'm thinking more zero to 0.5.”
The current average weekly wage in Monroe County sits at about $1,121, according to data collected by the federal government in August.
Wages in the U.S grew 3.7 percent in 2025, and Indiana wages increased by 5.6 percent, Powell said. Meanwhile, wages in Bloomington fell by 6.2 percent.
“In terms of our employment, while it grew in the state and nation, it fell almost 2 percent,” Powell said. “This is in one year.”
Powell said the reasons lie with one of the largest employers in the region: IU. The university makes up about 20 percent of the region’s employment. External forces in the U.S. such as cuts to research funding and skepticism of higher education have come to bear at IU and forced retrenchment, Powell said.
Leaders at IU are working through policy and industry changes, but the university will probably continue to pull back in 2026.
“If you're feeling some economic pain in your markets and your customers, it's happening right here, folks,” Powell said. “It's driven by what’s happened in higher ed.”
There’s still a silver lining.
Powell said the local private sector is much more resilient, and that will see the region through in 2026.
Small businesses are growing at more than three times the national rate. Tourism and hospitality industries have taken off, and the professional business sector also saw growth, Powell said.
“God bless the main street businesses here in the metropolitan area,” Powell said. “You are helping to cushion what is tough times in higher ed.”
The life science and microelectronics industries are growing, Powell said. Plus, he said these industries pay well.
“Those are two industries where, if we see expansion in employment long term, the Bloomington wage can increase, and that can more quickly bring prosperity to the region,” Powell said.
Unemployment will probably sit below 5 percent in 2026, Powell said.
Powell said there’s a lot of potential in Bloomington. He recognized recent efforts, such as creating a Trades District, that could bolster development and drive momentum.
“Economists will tell you that the way that you bring economic vibrancy to a region begins and ends with one thing, and that is that you shower with love and resources, the industries that make you globally competitive,” Powell said. “Bloomington is blessed with some very strong industries that can drive it forward.”
Indiana to see ‘modest growth’ in 2026
Carol Rogers, director of the IBRC, said Indiana had a remarkable year.
“Don't get too comfortable, because next year we do predict or forecast that our economy is only growing about 1 percent,” Rogers said. “So, we anticipate it's going to be low.”
Along with a modest projection for growth, Rogers said IBRC experts predict Indiana’s unemployment rate will rise from 3.6 percent in 2025 to 4.4 percent in 2026.
In 2025, Indiana fared better than the U.S. as a whole — which isn’t always the case.
“Our Gross Domestic Product, in real terms, grew by 2.6 percent, and that was compared to national growth of 2.1 percent,” Rogers said.
Unlike neighboring states, Rogers said the labor force, population and non-durable goods production increased.
Despite the federal government shutdown, Rogers said some data is available, such as the number of people applying for unemployment benefits.
“They are running lower this year than they did last year on a weekly basis,” Rogers said. “And we are not seeing anything that is contrary to the typical trend in terms of layoffs.”
The semiconductor, medical device and pharmaceutical industries could bolster Indiana’s economy. Manufacturing has always been a bright spot for the state, Rogers said.
“Construction was a big grower over the past year in terms of GDP, some of that was starting data centers,” Rogers said. “One of the things that we witnessed in Indiana is a pretty significant growth of building in that area.”
Nationally, experts predicted artificial intelligence — and the energy infrastructure that powers it — will bolster the U.S. economy. But they also feared that the bubble could burst.
Increasing tariffs and global trade pressure could also cause economic trouble for Americans.
IBRC experts predicted unemployment will rise to 4.8 percent in the US. next year.