submitted by
Uric Dufrene, Ph.D., Sanders Chair in Business, Indiana University Southeast
Coming out of Covid, the Southern Indiana economy has been seeing some of the strongest job growth in the past 20 years. Not counting the outsize numbers that occurred during 2020 and 2021, the past several quarters have generated some of the most impressive job gains. There was only one other period in the past 20 years where job gains were higher, 2015 and early 2016. Manufacturing, retail trade, and administrative and support, waste management, and remediation industries were the largest contributors to job growth during that period.
New data are out at the county level, and it showed a noticeable deceleration in job growth for the five Southern Indiana counties of Clark, Floyd, Harrison, Scott, and Washington. This is a rear view of the economy since county payroll data have about a 6-month lag but can contain some useful information about the current state and trajectory of the economy. For the 3rd quarter of 2023, the Southern Indiana region gained 544 jobs compared to the previous year. Throwing out the Covid-related job losses, this would be the weakest since the 3rd quarter of 2019.
When we break job activity down by industries, we see that the greatest losses occurred with industries that had the strongest gains during the high job growth year of 2015. Both manufacturing and administrative and support, waste management, and remediation (temporary labor services falls in this industry) suffered the largest job losses, losing 745 and 1,159 jobs respectively. Health care and social services added the most, boosting payrolls by 1,185. For the four quarters leading up to 2023:Q3, health care was the dominant job creator across Southern Indiana.
Transportation and warehousing saw another drop in payrolls. Back in 2021 and 2022, transportation and warehousing led all industries in job growth across the region. The nation’s economy saw a goods spending bonanza, driving demand for transportation services to carry goods from manufacturers to the consumer’s doorstep. The latest data show that the strong gains in transportation and warehousing had vanished, with the industry seeing negative changes for three consecutive quarters.
Strong growth in transportation and warehousing was not just a Covid effect. Back in 2018, transportation and warehousing saw job gains that exceeded 2,000 for four consecutive quarters. For 10 quarters up to 2023:Q3, the average job change in transportation and warehousing was just 125 jobs. This almost standstill in transportation and warehousing is linked to both challenges and opportunities coming out of Covid. Record-breaking goods spending by consumers, along with all-time highs in freight rates, invited more trucking capacity and this necessitated the hiring of workers. This explains the large increase in transportation and warehousing jobs back in 2022.
Since then, consumers have shifted more spending back to services, while freight rates have declined to levels that existed back in 2021, after hitting a record peak in 2022. Declining freight rates, along with current excess capacity in the industry have contributed to what some referred to as a “freight recession”. Local numbers in transportation and warehousing reflect part of this slowdown.
Despite these challenges, truck driver occupations are still among the highest in job postings. A closer look, however, shows that job posting intensity, a measure of how hard employers work to fill positions, is the highest across all job postings and higher than the regional average. It was difficult to fill truck driver positions prior to Covid, and this difficulty has only intensified since.
Other areas of weakness in the 2023 3rd Quarter release dealt with wages. Average weekly wages declined by $20, but more concerning was the decline in total wages for the region, the first decline since the 2nd quarter of 2020, the start of the Covid recession. Three industries contributed to the overall decline in wages: manufacturing, transportation and warehousing, administrative and support, waste management, and remediation services.
The 3rd quarter of 2023 turned out to be a slower period for Southern Indiana, consistent with the subdued growth expected in our 2023 economic outlook. There is a macroeconomy explanation to this 3rd quarter story. National manufacturing was in contraction all of 2023, and transportation and warehousing are still feeling the effects of a Covid boom and subsequent bust.
We move to the national jobs report this Friday, the Super Bowl of economic indicators. Watch for the size of the monthly job gains, changes in average hourly wages, and labor force growth. All will provide additional clues about inflation pressures, and subsequent actions, including delayed rate reductions, by The Fed.
The history of Brinly-Hardy is an interesting one, tracing all the way back to “Little John Brinly,” a blacksmith from Simpsonville, Kentucky. He first crafted the “Brinly” plow with a wooden moldboard, cast iron front, point and heel bolt around 1805. From there the family tradition continued, as his son, Mr. T.E.C. Brinly, created a one-piece steel plow from a saw blade. This was considered the first manufactured steel plow in this region of the country. The popularity of his innovative plows spread through farms across Kentucky and beyond. The story goes that he even entered his plow into hundreds of fairs and contests, and it never lost a competition. In 1859, Mr. Brinly moved his plow factory to Louisville, Kentucky, and in 1863, Mr. James Edward Hardy joined the firm. By 1900, the company name was incorporated as Brinly-Hardy Company.
