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Thursday, December 5, 2019 2:55 PM

How’s business? “Wonderful,” is the answer you’ll probably get from those who only know the stock market continues to rise. 

How is business in Indiana or in your sector of the economy? That answer is often hard to find. 

  • INDIANAPOLIS – We are deluged with “news” that the American labor market is a shambles. Business owners say, “We can’t get people to work, even with higher wages and improved benefit packages.” Well maybe, just maybe, workers have had it with low wages and inadequate respect, and the worm has turned. Maybe, COVID didn’t make people lust for the days of old when workers were commodities instead of individuals. Or, perhaps, the whole labor shortage is that mountain made from a convenient mole hill. “People today just aren’t willing to work!” Strange, but the size of the national labor force (those employed or seeking employment) was down in 2021 by just 1.4% from its pre-COVID 2019 peak. Of course, it’s more impressive if we say the labor force is down by 2.3 million persons and then fail to mention the base we’re talking about is in excess of 163 million persons.
  • INDIANAPOLIS – Want to sign up to be an inflation fighter? Don’t think it’s just something for the Fed, Congress, and Big Business to do? It’s like being a forest fire fighter. Inflation is a blaze that’s hard to contain once it gets going. It can be started by careless people on the ground as well as by strikes of lightning from above. Our current inflation is a result of two efforts by the Fed, the Administration, and the Congress (including both parties) to avoid economic disasters in 2008 and 2020. In 2008, Wall Street imploded, and the entire credit system of the U.S. was endangered. The credit system enables us to buy a car, a house, and our daily groceries with our credit/debit cards. It enables the car dealer to have a selection of cars on the lot and the grocer to have a variety of goods on the shelves.
  • INDIANAPOLIS – We continue to hear it whispered where once it was shouted, “Manufacturing isn’t dead yet, but it is certainly dying.” If growing is a signal of dying, then there is no hope for anything. From 2009 to 2019, the best years available for comparisons given the COVID crisis, the U.S. economy, as measured by Gross Domestic Product (GDP) grew by 51% and manufacturing by 39%. Those are current dollar figures, not adjusted for inflation, but inflation was not a significant factor in those years. For Indiana, those growth figures were 46% for the state’s economy and 44% for manufacturing. In both years, manufacturing accounted for 29% of Indiana’s economy, a percentage no other state exceeded. Nationally, in those 10 years, manufacturing added one million jobs and 100,000 of those were in the Hoosier state. Only Michigan added more manufacturing jobs (168,000) than did Indiana. Together, these two neighbors accounted for one-quarter of the entire increase in American manufacturing jobs.
  • INDIANAPOLIS – The March Consumer Price Index (CPI) convinced many an economic cosmic cataclysm is about to occur. Yes, an 8.5% increase over the same period last year is startling. That’s why inflation led off the evening news and dominated newspaper headlines. Yet, when the U.S. Bureau of Labor Statistics (BLS) announced its March CPI figure, it also reported the March 2022 CPI figure exceeded the February 2022 number by 1.3%. This 1.3%, this short-term number, was the one often headlined in the past. If prices sustained that monthly growth rate, they would be 16.8% higher by the end of 12 months. Clearly, a 16.8% prospective inflation rate is scarier than an 8.5 retrospective rate. Both rates are technically correct, but many CPI components are highly variable, and the purpose of the Index is to tell us where we have been, not to forecast the future.
  • INDIANAPOLIS – The preamble to the U.S. Constitution declares the intent of the document: “to form a more perfect Union.” They weren’t talking about labor organizations. Fragmentation was a major issue faced by the founding fathers. Political fragmentation of the 13 contentious states, not the human fragments they avoided of women, slaves, native Americans. Despite progress, those issues remain evident today throughout Indiana. Consider just the political fragmentation. You would think Hamilton County, which is probably 60 years behind the times, would not be thinking like Lake County which is 100 years behind the times. At this point, Myrtle my Muse, reading over my shoulder, whispers, “You’ve just lost whatever friends you have left in two important Indiana counties.”
  • INDIANAPOLIS – A new convention facility is stirring hopes in Terre Haute for economic expansion. New downtown visitors and new businesses are foreseen in conjunction with the realization of a casino. The band is practicing, “There’ll be a hot time in the old town tonight.” Once upon a time, Terre Haute was a transportation hub. Barges brought cargos up the Wabash River to be transferred to smaller vessels or to overland carriers headed to the growing mid-sections of Indiana and Illinois. Then, rail lines made Terre Haute a passenger and freight crossroad. Later, U.S. 41 was to be the major route for trucking from Chicago to Miami. However, it was not finished in Indiana until after I-65 was complete, delivering a blow to the western Indiana counties. King Coal lost its crown in the kingdom of energy. I-70 skirted downtown Terre Haute; downtown went down. 
  • INDIANAPOLIS – Kevin of Kokomo is not known in economic development circles, but he is a titan among the state’s fashion designers. During the COVID pandemic, when we all had to remain at a distance from others, Kevin clothed models in sandpaper impregnated with camphor. It was most effective. Well, Kevin sends me an email a few days ago and says our General Assembly and governor blessed Hoosiers with a boost in an emerging niche industry. You know how we’ve tried to get ahead of the curve on medical technology, pharmaceuticals, electric vehicles, and tomato paste. Kevin says the new law – actually not new, but new to INdiana – lets folks carry handguns where and when and how they so choose, without a license. It’s just the economic boost we’ve got to take advantage of before we are aced out by other fashion-conscious states.
  • INDIANAPOLIS – Dottie Data called to share her observations about the latest population estimates released last week by the Census Bureau. “I downloaded every county in the U.S.,” she said excitedly. “Whatcha wanna know?” she said, imitating a carnival barker. “First and foremost,” I said, “tell me about Indiana and how we fared in 2021.” “Indiana,” she intoned, “added 20,341 persons to its number in 2021, for a 0.3% increase that translated in a 21st place ranking among the 50 states.” “What?” I asked. “Isn’t that a puny percent increase?” “No way, pal,” she responded. “The U.S. grew by just 0.12%. If you recall, we still had lots of folks dying from COVID last year. Yet, births did exceed deaths nationwide and in Indiana.”

  • INDIANAPOLIS – In the complex culture of the United States, March is dedicated to Irish-American heritage, women’s history, the Red Cross, and frozen foods. (Lest we be neglectful, March also offers special days for certified nurses, single parents, and poultry.) This recognition of frozen foods began when Congress authorized President Ronald Reagan to declare March 6, 1984, as Frozen Foods Day. No doubt, the AFFI (American Frozen Food Institute) played a role in expanding a day of recognition into a full month. County Business Patterns for 2019 lists only 1,928 establishments and their 166,000 workers producing frozen foods in the U.S. The number would be larger were it not for the exclusion of ice cream and ice in their many forms from the frozen foods category. This quirk in the data arises because those products are intended to be consumed as frozen. Go figure. Frozen foods are a minor, but increasing, portion of total food consumption by households. However, business and institutional uses of frozen foods are also of considerable and growing importance.
  • INDIANAPOLIS – March is Women’s History Month and March 24 is Equal Pay Day according to the U.S. Census Bureau. That is the day working women finally make up the difference between what they earned last year and what men earned last year. That’s more drama than one expects from the Census Bureau. Other groups have later dates, but there’s no need to quibble over a publicity stunt meant to highlight a social and statistical reality. How big is the gap between the median earnings of men and of women? For all women workers compared with all men workers, the Census Bureau reports the gap in 2020 was 27.4%, a sum equivalent to $13,551 for the year. However, the gap closes to 17% or $10,435 when we consider only full-time year-round workers. These figures are substantial improvements on the data  from 50 years ago. Then, in 1970, the gap for all workers was 61.8% and $26,380 in 2020 buying power after adjustment for inflation. Similarly, the gap in 1970 for full-time, year-round workers was 40.6% ($21,732 in 2020 dollars).
  • INDIANAPOLIS – It’s ugly and unfair to compare Vladimir Putin with the leadership of the Indiana General Assembly. But how else can we explain the crass stupidity and irresponsible bullying Hoosiers have ignored from a super majority now bent on destroying civility and democracy in Indiana? How does democracy thrive? By educating people, then encouraging the desire and enabling the opportunity to govern. Over the past few decades, our legislature has allowed education to deteriorate, and pressed down hard on the ability for local communities to enjoy self-government.  Just consider the recent proposal to have the Indiana Economic Development Corporation (IEDC) take tax revenues from local governments and use them for what the IEDC defines as “economic development.”  It took resolute action by the House to modify this over-reaching legislation. However, the final bill has not passed and this “Father knows best” legislature is not done with revisions.
  • INDIANAPOLIS – I write about economic development in Indiana. Others write about environmental delights, limitations and desecration by humanity. Both the environment and the economy are too often conceived as big lumps of amorphous matter, too big, too complex, and too mysterious to be understood. Here’s a more understandable framework: When a tree falls in the forest it makes a sound, whether or not anyone is there to hear it. There is an unmeasured cost associated with the fall of a tree as well as an unmeasured benefit from a tree rotting in the forest. These benefits and costs may be imagined by some people, but they are real for the plants, animals, and micro-organisms living in that forest.
  • INDIANAPOLIS – Young Norman Neumann sits opposite me. “I’m Norman,” he says. “I know I’m not supposed to be talking to you, but I thought….” “First,” I say, “no names. Second, I’m not talking to you. You’re listening to me. Got it?” Norman nods. I continue, “Considering both full- and part-time employees, what was the annual rate of growth in the average wages and salaries of Hoosier workers from 2009 to 2020?” “It was 2.8% compared with 3.0% nationally,” Norman looks at his notes. “But the U.S. average annual compound rate of inflation was 1.7%.”
  • INDIANAPOLIS – At dinner last week, an attorney from Valparaiso asked what I taught in my 33 years at the Kelley School of Business. “Economics,” I replied. “And,” I continued, “I studied the Indiana economy.” “Does Indiana have an economy?” he asked in all seriousness. I did not have a chance to reply as he turned to answer a question from another person. But for several days following that dinner the question has remained on my mind. Does Indiana have an economy? How could you doubt it? Does a person have an anatomy? a personality? Of course, Indiana has an economy that is different to some degree from the rest of the nation, even from its neighbors. That economy is the result of investments made by Hoosiers of the past, influenced by national and international events and trends.
  • INDIANAPOLIS – Flora and Fred Fetid have been neighbors for decades. Today, they are giving me cautious advice. “Don’t do it,” Fred says. “Realtors will get defensive.” “People our age will be offended,” Flora tells me. “Sparkle, that’s what folks want.” Nonetheless, here goes. Indiana is now engaged in a war upon itself. We’re seeking to attract people to settle in our state. We’re looking for talented, well-educated earners from elsewhere and young people from here. But first we had to convince ourselves our workers were not well-prepared for today’s jobs and our communities were not appealing to young people.
  • INDIANAPOLIS – I’ve been reading a 309-page story that could become a delightful movie about corporate deceit and anti-social behavior. The managers of JUUL would be hilarious, if played by the Marx brothers. Sadly, those managers caused widespread teen addiction and added costs for our schools. Remember when cigarette smoking was readily accepted in public places? When the U.S. surgeon general submitted a report in 1964 on the link between cancer, heart disease and cigarettes, we increased regulations on “coffin nails.” Twenty years later, smoking was banned from public areas including airplanes, hospitals, and restaurants. In the 1990s, attorneys general across America sued tobacco companies and won massive awards for the states in compensation for health care provided to smokers. Since 1999, Indiana has received $2.9 billion for smoking cessation and related programs, including $146 million in 2021. Then, along came vaping, the process of heating a chemical solution producing a gas which, like cigarettes, contains nicotine and can be inhaled. Quickly, JUUL’s products captured the market. This was achieved by targeting children in junior and senior high schools.
  • INDIANAPOLIS – Indiana public schools are in trouble. You can blame whomever you please, but the facts remain. Except in a few burgeoning suburbs, school enrollments are down as Hoosiers have fewer children. In larger districts, parents have turned their backs on the public schools and opted for charter or private schools. Students have become more difficult to teach for cultural, technological, and economic reasons. Teaching has become less attractive as a career, with compensation and social status in relative decline. This listing ignores the increase in curriculum standards necessitated by an explosion of knowledge and the magnified diversity of our population. Now, once-prosperous communities have declined in population and wealth.
  • INDIANAPOLIS – Last week in this space, data showed Indiana performed well compared to most other states in the COVID-induced economic decline and rebound of 2020-21. Today, consider a longer period of time, 2007 through 2019. Why this 12-year span? The year 2007 was the last before the financial debacle required massive and novel recovery measures. The year 2019 was the last before the worldwide COVID pandemic from which we are still recovering. While the shorter-run is important, the longer period tests our state’s economic development policies. Jobs are the favorite economic talking point for many politicians. How did Indiana do adding jobs from 2007 to 2019? Nationally, the number of jobs grew by 9.3% and by 6.0% in Indiana. But that national figure gives more weight to the bigger states than the smaller ones.
  • INDIANAPOLIS – Cartoonists again have represented the new year of 2022 as a baby in diapers. More appropriately, 2022 peeks in cautiously, wearing a mask, standing in a circle with a 12-foot diameter, and a certificate of vaccination in hand. The old year, 2021, is seen wheezing, bedraggled and heading toward eternal rest in an overcrowded hospital emergency room. We know the tragedy and turmoil of the COVID pandemic. Unemployment and simultaneous staffing shortages, plus supply chain disruptions and selective inflation, get the headlines. What we may not appreciate is the actual performance of the economy during nearly two full years of COVID. Clearly, COVID hit the economy in both the U.S. and Indiana in the first half of 2020. However, Real Gross Domestic Product (GDP), the market value of goods and services, adjusted for inflation shows there was already economic weakness evident. In the last quarter of 2019, private sector growth rates for the nation and Indiana were moving toward zero. 
  • INDIANAPOLIS – In 2007, 143.2 million wage and salaried employees in the U.S. were paid $6.4 trillion. That averaged out to $44,652. Time passes. Prices rise. By 2019, the Consumer Price Index (CPI) had increased by 23.3%. To keep pace with inflation, workers would get $55.056 a year, a 23.3% increase. The total of wages paid to those 143.2 million employees would then be $7.9 trillion. That did not happen. In 2019, 156.5 million wage and salaried employees in the U.S. were paid $9.3 trillion, an average of $59,474. The money bucket used to pay workers had an additional $1.4 trillion in it to be paid out to the previous 143.2 million workers plus to 13.4 million new workers.
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  • Biden on Uvalde massacre: 'Where is our backbone?'
    “As a nation we have to ask, when in God’s name are we going to stand up to the gun lobby? Where in God's name is our backbone? Why are we willing to live with this carnage? These kinds of mass shootings rarely happen anywhere else in the world. Why?”- President Biden, reacting to the slaughter of 19 kids & 2 teachers in Uvalde, Tex. Democratic Senate nominee Thomas McDermott Jr., said, “Todd Young has done nothing since Sandy Hook. Young has done nothing since Pulse, Parkland, Indianapolis, Buffalo, and now Uvalde – and thousands of Americans have lost their lives. As we grieve the loss of our students and teachers in Texas, Todd Young is sitting in his office collecting donation after donation from the NRA to keep the status quo – all while wishing for thoughts and prayers in hollow statements. Senator, it’s time to act or get out of Washington for those – like me – who do want to stop this violence and save our loved ones’ lives.” 
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