INDIANAPOLIS (Inside INdiana Business) — An annual economic forecast from the Indiana University Kelley School of Business shows the economy will remain “somewhat resilient” amid challenges stemming from the pandemic, such as the supply chain. However, Kelley economists say labor shortages will continue to be a major concern, not only in the Hoosier State, but across the U.S.
In an interview with Inside INdiana Business, Kelley Assistant Professor of Business Economics Kyle Anderson said there are mixed signals.
“There are some really good signs, some really healthy parts of it. Indiana is doing pretty well in the national economy. But there are significant challenges, especially on the on the supply side on the labor side,” said Anderson. “These things pose limits to how much growth we’ll see over the next year.”
The economists predict the U.S. economy may average only about 300,000 in added jobs each month. Over the past 12 months, it has been doing so at an average rate of about 450,000 per month.
“This will be about two-thirds the rate during the past year, but it will be enough to put year-end employment above its pre-pandemic level,” said Bill Witte, author of the Kelley School’s U.S. forecast.
Witte says total employment remains 4.5 million below its pre-pandemic level. He says the deficit is not a result of deficient demand for labor, but rather a “severe decline” in labor force participation. He notes there are currently nearly 11 million job openings in the U.S.
“There are businesses in almost every industry having trouble hiring. So, that’s going to be a limiting factor for growth in the state and of the companies right now. That’s the biggest thing that’s holding them back, along with obviously some of the supply chain disruptions,” said Anderson
Kelley says Indiana has seen about 60,000 workers drop out of the labor force. It expects labor growth in 2022 to about two percent with most of the job gains in service industries.
“We hope to see the workforce recover in Indiana by the end of 2022. Many factors will affect the recovery, including stimulus, supply-chain restoration, labor participation rates, and continued demand for goods and services,” said Timothy Slaper, co-director of the Kelley School’s Indiana Business Research Center.
While this forecast takes a national look at the economy, it also provides insight into state and municipal economies. Indianapolis represents about one-third of state employment and income. Anderson says downtown Indianapolis may need to reinvent itself as fewer people return to the large office buildings for work.
“Tourism and convention business should pick up in 2022, bringing in welcome dollars from across the country,” said Anderson, who adds the challenge is getting workers from the suburbs to return downtown. “I think that we’re all coming to grips with the idea that work from home, at least in part, is going to be around for quite some time. I think business infrastructure relies too much on people coming in from for eight to five to downtown Indianapolis and leaving. That’s not what downtown Indianapolis is going to be going forward.”
IU says a detailed report on the Kelley outlook for 2022 will be published in the winter issue of the Indiana Business Review.