Recent columns have examined Indiana’s GDP in isolation and in mid-level detail (21 subsectors). Now let’s widen and narrow the view.

How was Indiana doing before COVID, which threw everything out-of-whack for a while? Between 2009 and 2019, Indiana’s Real Gross Domestic Product (GDP) grew from $280 billion to $338 billion, after adjustment for inflation. That’s a $59 billion jump, a 21% increase (allowing for rounding off the numbers).

Over the same decade, the nation advanced by 25%. The difference seems small. But when we’re dealing with billions of dollars in constant buying power, that’s $10.8 billion foregone in the value of our output, and roughly $5.5 billion in personal income.

Not keeping pace with the nation has its price, as well as its benefits. Why didn’t Indiana keep pace with the nation? Let’s look at just one cluster of industries where we were “deficient.”

Computer technology is what many studies and their authors label as “High-tech.” In terms of the U.S. Bureau of Economic Analysis, there are three of 65 industrial groups that qualify:

_Computer and electronic product manufacturing

_Data processing, hosting, and other information services

_Computer systems design and related services

Please note, most studies and economic development press releases refer to jobs. We are using GDP actually produced. Jobs may include many occupations that, in themselves, are not High-tech. For example, a firm may employ an economist and a janitor.

Further, there is often nothing else identified as “High-tech,” although the news is filled with articles about what is considered “High-tech” in biology, chemistry and physics. I imagine economic developers use this more inclusive definition.

The three groups above had a 128% increase in the value of output (GDP) nationally over ten years, while Indiana’s increase amounted to 79%. That increase accounted for 16% of the total increase in Real GDP for the nation, while contributing only 6% to the growth in Indiana.

Data processing and hosting led all of the 65 industrial groups in the U.S. in its rate of growth; System design ranked third. Indiana mirrored the nation with Data processing and hosting ranking second among the 65 Hoosier growth rates, system design ranked fourth.

To satisfy curiosity, growth rates for Motor vehicles, bodies and trailers, and parts manufacturing ranked second in the nation and first in Indiana.

Please remember, 2009 was the bottom of the housing finance bust of 2008 and cars were not selling well because of joblessness and tight credit. Hence the high ranking of the Motor vehicle group reflects a cyclical circumstance rather than a trend.

What’s ahead? The GDP of individual Indiana counties. If no one is complaining, we’ll move into demographics or housing, or both … or any of many other areas of our state’s profile.
Morton J. Marcus is an economist formerly with the Kelley School of Business at Indiana University. His column appears in Indiana newspapers, and his views can be followed his podcast.

© 2022 Morton J. Marcus

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