Southern Indiana faces economic challenges next year, including job loss and decreased retail sales, financial experts said Tuesday.
Forecasters at the 2009 Economic Outlook breakfast held at Indiana University Southeast in New Albany said there could be light at the end of the tunnel despite these bleak predictions.
"You're going to have to have a big stomach to handle this market," said John Boquist, business professor at Indiana University's Kelley School of Business in Bloomington. He told the group of business professionals - representing banking, realty and other financial sectors - that the economy needs to be spurred.
Boquist suggested President-elect Barack Obama's plan to invest in rebuilding infrastructure and the Wall Street bailout could get the economy's wheels turning.
Yet what Boquist described as the "perfect storm" of failed mortgages, lending freezes and unemployment still provide potent obstacles to overcoming what other officials described as recession-like conditions.
"I have some friends who still haven't opened their third-quarter results," Boquist said, predicting a best case scenario of a third- or fourth-quarter economic rebound in 2009.
Uric Dufrene, Sanders chair in business at IUS, estimates unemployment in Southern Indiana will rise above the peak of 6.5 percent during a mild recession in 2002.
"We'll see the local rate exceed 7 percent, and it wouldn't be a stretch to see it exceed 8 percent," he said.
Dufrene points to decline in sales from the leisure and retail fields in the Louisville MSA. Retail has cut 5,000 jobs in the area since 2000 and Dufrene predicts that number will increase in 2009.
Retailers such as Circuit City, Value City and Kmart in Clarksville recently have announced plans to close.
There are conflicting reports about how many jobs the area has actually gained since 2007, Dufrene said. While more positions show up on payrolls, that amount is nearly 15,000 jobs less than what has been added over the same time frame in recent years for the area, he said.
He said the decline in new jobs and the increase in unemployment could continue into 2010.
James Smith, business professor at IU's Kelley School of Business, said the nation needs to average about 140,000 new jobs a month to keep up with new entrants to the employment market, such as college graduates.
In 2005, 210,000 jobs were being added a month nationwide. In 2008, the U.S. is losing about 118,000 jobs a month, according to Smith. Job loss is one of the reasons Smith has a dim view for the upcoming year financially.
"When we talk about the outlook for 2009, we don't really have a lot of good news," he said.
Smith warned managers and company owners in attendance they could be forced to lay off employees, including their friends, if financial predictions hold for 2009.
The panelists for the event agreed the auto industry stands to take a big hit, with several automakers already announcing layoffs. However, Honda Motor Co. on Monday dedicated its first Indiana car assembly plant in Greensburg. The plant cost about $550 million and could employ as many as 2,000 workers.
Indiana Business Research Center Director Jerry Conover said "clouds are on the horizon" for Indiana, which behind Ohio and Michigan, has experienced the slowest Gross Domestic Product, or GDP, growth of any state since 2000.
Conover said losses in manufacturing have been the biggest contributor to the slow GDP growth in Indiana.
For 2009, Conover predicts "a very modest GDP growth, if any."
Indiana is not immune from problems facing Wall Street or other countries, Conover said.
"As long as these much larger economies are struggling, Indiana will too," he said.
With foreclosures and bank failures fostering conservative lending, building permits are down by 30 percent in Indiana and are at half the level of 2005, Conover said.
Smith said increasing prices in the housing market would be an indicator of economic recovery in 2009. Other signs would be retail sales this Christmas and the amount of jobs added each month.