Morton Marcus: Indiana's economic roller coaster
Thursday, December 15, 2016 10:28 AM
INDIANAPOLIS – After the 2016 election, some people saw sunshine ahead with a return to greatness. Others expected moonless nights with a great nation degraded.
Indiana has few anticipations. We really don’t know Governor-elect Eric Holcomb. Is he the second coming of Mike Pence, as his supporters believed? Or is he Pence 2.0 as the billboards of his opponents declared? This much we do know, the state’s public relations folks aren’t as enthusiastic about the latest state economic news as they were just six months ago.
Last week the U.S. Bureau of Economic Analysis reported Indiana’s real Gross Domestic Product (affectionately known as GDP, the inflation-adjusted value of goods and services produced in the U.S.) grew in the Spring or second quarter of this year by a 1.25-percent annual rate. This was a smidge over the 1.16 percent at which the whole country grew.
We enjoyed a very slim lead over Montana for the honorable 25th place in growth among the states. Contrast this with the ballyhooing last June when Indiana’s GDP growth was reported as first among the nation’s 50 states during the last quarter of 2015.
First! The air up there was so rarified, the height alone caused shivers down the Hoosier spine from South Bend through Plymouth, Kokomo, Franklin, Columbus, Crothersville, all the way to Jeffersonville. We were “booming” according to Gov. Pence and then-Lt. Gov. Holcomb. However, the thrill was gone when the data were, as usual, revised. Indiana sank from first to 13th place for 2015 Qtr4. Now more air is out of the state’s balloon as we have dropped to 25th place in 2016 Qtr2.
Hoosiers still wonder, “How hard was the hit when the Great Recession took us down? How much of a rebound did we have?”
The last peak, before the U.S. and Indiana economies began to contract, was in 2007 Qtr4. Then, Indiana ranked 16th in economic size with 1.92 percent of the nation’s output. By the bottom of the recession, in 2009 Qtr2, Indiana had lost $27 billion in constant 2009 dollars, or 9.5 percent of its pre-recession output. During the same six quarters, the nation’s GDP fell only 4.2 percent.
Since that economic trough, Indiana’s GDP grew by 17.2 percent, helping us retain 16th place in size, but with a slightly smaller share of the nation’s total output, which grew by 14 percent. Over the course of this business cycle, Indiana’s real GDP grew by only six percent compared with the U.S. advance of nine percent.
If we feel we’ve been on a rollercoaster, but not gone far, it’s true. Our decline was the fifth most severe in the nation, but our upward movement since then has been the 10th strongest. Only Michigan had a more dramatic fall and bounce back.
Less volatility might be soothing, but our total experience was better than that of 23 other states and far better than the three least volatile states, Louisiana, Maine and Mississippi.
Mr. Marcus is an economist, writer, and speaker who may be reached at email@example.com.