Forecast: Indiana economy to outpace national growth rate | Crain's Indianapolis

Forecast: Indiana economy to outpace national growth rate

Vibrant sectors such as the life sciences should help the metro area outpace Indiana and perhaps the nation in the percentage of economic growth next year, according to an Indiana University forecast. | Photo by Robert K. Elder

Indiana should outperform the nation in percentage of gross domestic product growth in 2017, while the Indianapolis area will lead much of the state thanks to vibrant sectors such as health and life sciences.

That’s the gist of the annual economic forecast presented Thursday by the Indiana University Kelley School of Business.

But the panel of professor prognosticators cautioned that their forecast could be “wishful thinking” and expect the U.S. economy to grow next year only a little over 2 percent.  

The metro area appears to have an edge over the rest of the state. 

One sector driving growth in the metro economy is the life sciences, where a number of companies have been making new investments, said Kyle Anderson, clinical assistant professor of business economics at IU in Indianapolis.

In June, the Biotechnology Industry Organization and TECeconomy Partners said Indianapolis now ranks No. 5 in the nation for employment in drugs and pharmaceutical sectors.

Employment in this realm statewide has grown 22 percent since 2001, to 265,000 jobs, ranging from nurses to scientists.

Just this week, for example, Indianapolis-based health care technology firm TriMedx said it will add 100 jobs by 2020 as part of a $21.5 million expansion,

Growth is also taking place in the metro tech sector. Earlier this year, San Francisco-based Salesforce.com announced 800 new jobs here by 2021 as part of a $40 million expansion of the former ExactTarget operation downtown.

“There are a couple of areas that are pretty good” in terms of growth, Anderson said.

The panel didn’t get too granular about the metro market. But Timothy Slaper, research director of the Indiana Business Research Center, said in a statement that the life sciences and global transportation sectors statewide each could grow from 2 percent to 6 percent in 2017.

Of course, much of that is predicated on availability of labor. Indianapolis-based life sciences initiative BioCrossroads has sounded alarm bells over the need to hire about 12,000 people annually in the sector in Indiana through 2022.

“A potential drag on the economy is that (some) firms are going to have a hard time hiring,” Anderson said.

The upside is that wages could grow for some of the most in-demand jobs. Life sciences jobs pay an average annual salary of $97,000, according to BioCrossroads.

Even with strong job growth and low unemployment in some industries, average real wages have been flat in the last few years. Anderson said much of the job growth has been in lower-paying industries or in sectors where wages have fallen, such as healthcare.

Manufacturing remains a strong segment of the city’s economy, according to Anderson, despite highly visible events such as Carrier Corp.’s plans to close its west-side factory and eliminate 1,400 jobs as it shifts production to Mexico.

Some of the manufacturing strength is not measured in new jobs, however, as increased productivity and plant efficiencies have helped, even if that blunted demand for new jobs.

The panel said the Indianapolis-Carmel metro region is at full employment and that low interest rates should stoke residential construction, which has been on the rise this year.

In contrast, rural parts of Indiana likely won’t fare as well. Educational attainment levels are higher in the urban and suburban areas, Anderson noted.

As 2016 winds down, Indiana should reverse a trend over the last four years in trailing the nation in GDP percentage growth, finishing at 3 percent versus 1.6 percent to 2 percent nationwide, the IU panel said.

In a statement issued Thursday morning, Slaper said he expects Indiana “to grow at a slightly faster rate than the U.S. through 2018.”

The panel prefaced expectations on a sour note, however, saying the U.S. economy this year has underperformed, “even relative to our diminished expectations a year ago.”

The forecast was presented at the Conrad Indianapolis. A full report on the outlook will be published next month in Indiana Business Review.

November 3, 2016 - 11:33am