BY SUSAN ERLER. Times of Northwest Indiana
serler@nwitimes.com
SCHERERVILLE | The economy managed to ride out Hurricane Katrina but could be on course for turbulence in 2006.
That was the forecast Friday when a panel of experts from Indiana and Purdue universities stopped in Schererville on its annual economic outlook tour. Breakfast and lunch sessions were held at Teibel's Restaurant.
The economy held steady in the face of rising interest rates and Katrina's pounding of the Gulf coast, said Morton Marcus, director emeritus of the Indiana Business Research Center at Indiana University.
"The economy is doing remarkably well, considering ... ," Marcus said.
The expert panel was modestly optimistic about the coming year, but warned "the outlook is highly uncertain."
The nation will add jobs, but not necessarily high-paying ones. Interest rates will continue to rise, pushing mortgage rates to near 7 percent against creeping inflation and stagnant job growth in some sectors.
Indiana will continue to trail the nation in terms of per-capita income and growth of gross state product. And Northwest Indiana will continue to lose manufacturing jobs, trailing the rest of the state.
The outlook was not all gloom and doom.
Northwest Indiana will add jobs in the service sector, particularly in health care related fields, Donald Coffin, Indiana University Northwest economics professor, said.
The health-care field will account for up to 1,000 new jobs next year, out of about 3,000 total in the service sector, Coffin said.
At the same time, the earnings level will shift to reflect the move from manufacturing to service sector jobs. An average $70,000 in wages and benefits will drop closer to $30,000, he said.
The steel industry will benefit from the boom in construction, but will be hurt by cutbacks in auto manufacturing.
People will keep investing in housing, with baby boomers continuing to flex their economic muscle, Marcus said.
Large numbers of baby boomers have not yet moved into their dream homes, Marcus said. "This keeps pressure on the housing market."
New home construction is helping fuel a boom in the construction industry, which has more than tripled in Indiana, said Jerry Conover, director of the Indiana Business Research Center.
Indiana added about 40,000 jobs this year, Conover said, and is close to recovering from an economic downturn that cost the state thousands of jobs in past years, Conover said.
But the state isn't growing jobs as fast as other states, and is falling behind in growth of domestic output as well. "Other states will pass us by," Conover said.
There were other danger signs.
Hoosiers earn only 91 cents to the dollar earned by the average American, Conover said. "We have strong work to do if we're going to rebuild this economy."
Indiana farmers will see weakening incomes as better-than-expected corn and soybean crops this year dumped additional grain on markets strained by 2004's bumper harvests, said Purdue University Professor Corinne Alexander.
Farm income is expected to plummet to below $1 billion next after scaling $2.4 billion in 2004, Alexander said.
IU finance professor Robert Neal was encouraged by the choice last month of Ben Bernanke to succeed Alan Greenspan as Federal Reserve chairman.
The new chairman was "a terrific choice," who is expected to bring new openness to the job, Neal said.
The run-up in energy prices in 2005 will turn up as the wild card in the coming year, Neal said.
"How long will it take to show up in other goods, in steel, in chemicals? That's something we just don't know," he said.