Mixed economic signals in Southern Indiana

Juanita Sneed was in her late 40s working as a line technician at the Colgate-Palmolive plant in Clarksville when its closure was announced in 2005.

"I spent my whole life in manufacturing," she said. "I knew it would be very difficult to obtain employment you can survive on, and I still had years left before my retirement."

Colgate provided its workers with help finding new employment or more education, so when the plant finally closed after two years, Sneed began taking classes at Ivy Tech.

Sneed, now 50, lives in Pekin and takes primarily computer-based classes. She does not work and receives financial aid through Trade Adjustment Assistance.

"The economy does concern me because I will graduate in May," she said. "I picked business administration (for a major) because I thought there would be plenty of job opportunities when I graduated, but I'm afraid the job market will be diminishing."

She is not alone. One-third of likely voters in the United States are worried about losing their jobs, while half worry they will not be able to keep up with mortgage and credit card payments, according to an Associated Press-Yahoo News poll released two weeks ago.

So is the fear justified?

While most economists agree that the nation is now in a recession and the stock market has seen unprecedented fluctuation, local leaders and economists differ about how well the local economy is doing.

Unemployment rate rising

There have been significant jumps in unemployment for Clark and Floyd counties this year, according to Indiana Department of Workforce Development statistics.

Unemployment is at 5.4 percent in Floyd County and 5.9 percent in Clark County for September. For September of last year, Floyd County's unemployment rate was 3.9 percent, while Clark County's was 4.1 percent.

By comparison, the national unemployment rate increased from 4.7 to 6.1 percent during that same time period.

"But when you look over the year, our local labor market is beginning to show some stress," said Indiana University Southeast Professor Uric Dufrene.

Dufrene said the reason for high unemployment rates is that the growth in employment has not been able to keep up with the growth of the labor force.

Dufrene points out that unemployment claims for Southern Indiana show a 67 percent increase from August 2007 to August 2008 in individuals relying on unemployment insurance.

"This represents one of the largest increases in unemployment claims since the last recession of 2001," Dufrene said.

In Louisville Metro, which includes Clark and Floyd counties, the number of unemployed individuals has increased from approximately 29,000 to almost 42,000, from August 2007 to August 2008.

Dufrene listed several reasons the local economy has struggled. He said the manufacturing sector has actually been hurt by the strengthening dollar making exports more expensive, while manufacturing and transportation industries are threatened by the cut back in national consumer spending. He said consumers are spending less because of losses in the stock market and real or perceived lack of wealth among consumers.

New businesses being added

Michael Dalby, executive director of One Southern Indiana, said local businesses are actually doing well compared to other states.

"We are very fortunate. We are not seeing a lot of negative impacts in our businesses," Dalby said. "We haven't reported any large scale layoffs or company closures recently."

Since July 2006, One Southern Indiana has announced the creation of between 3,805 and 4,105 projected new jobs from companies expanding or moving into Clark and Floyd counties.

Dalby said housing construction has pulled back dramatically but other areas - such as the automotive industry and companies that provide equipment - are doing well.

"We're very cautiously optimistic that we've been able to ride through this rough water and that our businesses will continue to find markets for their goods," Dalby said.

Linda Wood, director of the Southeastern Indiana Small Business Development Center, said some small businesses have struggled but no more than other regions of the country.

"We're doing as well or maybe a little better than the rest of the country," Wood said.

Wood said the biggest challenge facing small businesses is that banks are not willing to loan money as freely as they have in the past. Presidents of local banks have said they have the money to loan but are being more careful about who they loan to.

Other businesses like consignment shops and rental property owners are doing well though, Wood said.

David Clifton, an associate professor of business at Ivy Tech, believes the national economy does affect the local economy. He pointed to the recent announcement that Value City is in bankruptcy and closing its Clarksville store.

He said the merger of PNC and National City banks also causes "some unsettling" in the economy as people wait to see what changes will take place.

Clifton said all indications are showing that holiday spending will be down this year too. Although "Now Hiring" signs are popping up across Southern Indiana, Clifton said it will be interesting to see how many hours workers are given if sales are down.

"With a lot of smaller businesses especially, we have to keep a handle on the cash or cash management," he said. "It may mean tightening your belt and not using part-time people."

Local real estate market down

Suzann Slayton, president and CEO of the Southern Indiana Realtors Association, said the local real estate market is much stronger than the national market.

"I think part of the difference is this is the Midwest, and people are more conservative," Slayton said, explaining that not as many people in this region took out risky loans.

She said real estate activity has only been down slightly this year and that October's numbers may actually show a slight increase.

Still, the market has been friendlier to buyers than sellers, according to Barbara Popp, owner and CEO of Schuler Bauer Real Estate Services.

She said residential sales in Clark, Floyd and Harrison counties are down 27 percent. Popp said people are scared to buy because of fear caused by the media.

"In our area, the economy is really quite strong, so there's a lot of fear factor," Popp said.

The main difference has been the amount of time it takes to sell. The time between a home being listed and being sold was 60 to 90 days on average, whereas it now takes five to six months, Popp said.

Popp and Slayton agreed this is the best time to buy a home because of low interest rates.

"If this isn't the bottom, we're getting close," Slayton said. "The value today is the best I've seen, and I've been doing this 35 years."

Building permits declining

Another negative sign for the local economy has been the decline in building permits, especially in Clark County. Through August 2007, there were 847 building permits issued, compared to only 245 issued through August 2008, according to the State of the Cities Building Permits Database. In Floyd County, there were 182 permits issued through August 2007 and only 155 for the same time period this year.

Statewide, there has been a steady decline in the number of building permits issued for several years now. The number of permits issued decreased from 35,184 to 21,551 from 2005 to 2007 and is on pace to be much lower this year.

While this means less construction work, this can be good news for potential sellers.

"There is a silver lining," Dufrene said. "A decline in permits will help place some upward pressure on existing home values by allowing existing homes to clear the market."

However, Dufrene believes economic struggles will continue. He expects to see even slower job growth in the near future and even an overall decrease in non-farm payroll jobs.