One Southern Indiana welcomes the following members that joined or rejoined during the month of September 2025.
Submitted by Uric Dufrene, Ph.D., Sanders Chair in Business, Indiana University Southeast
The first Friday of every month is a day that economic watchers eagerly anticipate. It’s the Super Bowl of all economic indicators — the Bureau of Labor Statistics’ (BLS) Employment Situation Report. This single report tells us more about the economy’s health than any other monthly release. It reveals whether the labor market is running hot or cold, whether inflation pressures might intensify or cool, and whether the economy’s next move is up or down.
The employment report comes from two surveys. The establishment survey provides the headline jobs number — whether companies are expanding payrolls or cutting back. The household survey gives us the unemployment rate. Together, these two components form the backbone of how we understand the nation’s economic momentum.
Unfortunately, we didn’t get that crucial report last Friday because of the federal government shutdown. No jobs number. No unemployment rate. And a bit of darkness on the economic trajectory.
We do have some data released before the shutdown, along with several private-sector indicators. Collectively, they paint a mixed picture, but the weight of evidence continues to tip toward slower growth.
Let’s start with the broadest measure, Gross Domestic Product (GDP), the economy’s scorecard. The most recent report showed growth of 3.8% from the prior quarter, a figure that looks quite strong at first glance. But as is often the case, it pays to look under the hood.
During the first quarter, there was a surge in imports as manufacturers and retailers rushed to bring in goods ahead of potential tariffs. Because imports are subtracted from GDP, that surge artificially reduced GDP by 0.6%, even though the underlying economy was not actually shrinking. Pundits quickly seized on that number to fit whatever narrative they favored.
Fast-forward to the second quarter, and the pattern reversed. Imports fell sharply — the mirror image of the earlier spike — which mathematically added about five percentage points to GDP growth. That swing turned what would have been roughly –1.2% growth into a headline gain of +3.8%. In other words, much of the “strength” in that report came from the accounting effect of lower imports, not necessarily from genuine economic acceleration.
Several private indicators reinforce that slowdown narrative. The ADP National Employment Report, which tracks private-sector payrolls, showed a decline in September.
While the ADP and BLS reports often diverge month to month, the weakness in ADP’s data will likely strengthen the case for the Federal Reserve’s next rate cut.
Meanwhile, the Institute for Supply Management (ISM) released its twin surveys on manufacturing and services. The ISM Manufacturing Index remained below the critical 50 mark, signaling contraction. Manufacturers continue to struggle with higher borrowing costs and renewed supply chain uncertainty tied to tariffs. The ISM Services Index, which has been in expansion territory for nearly all of the post-COVID recovery, slipped to exactly 50, the lowest since the pandemic and below expectations. The index has been trending downward since late 2024, suggesting that service-sector growth is also losing momentum.
Taken together, these reports indicate that the economy is still expanding, but at a slower and more uneven pace.
If there’s one consistent source of strength, it’s the American consumer. Despite dour headlines and shaky confidence readings, consumer spending remains resilient. Shoppers haven’t shut their wallets, particularly at the upper end of the income scale, and that spending has been a key driver of economic growth.
Still, this resilience has limits. The one report that could quickly change sentiment is the employment report itself. A weaker labor market, fewer jobs and slower wage growth, would likely cause consumers to pull back. Without the BLS report, we’re flying partly blind. But the private-sector clues are increasingly pointing toward a softening labor market.
Even without the government’s data, the broader picture is coming into focus; an economy that is cooling, not collapsing. Manufacturing remains weak, services are slowing, and consumer spending is steady but fragile. When the next jobs report finally arrives, it will likely confirm what these early signals are already telling us. The economy is moving toward slower growth.
The more influential rate when it comes to driving the broader economy, and struggling sectors like manufacturing and housing, is the 10-Year Treasury yield. Long-term financing, including mortgages, is tied closely to this rate. When the 10-Year yield falls, mortgage rates follow. When it rises, so do borrowing costs.
We saw this dynamic in 2021, when the 10-Year yield dropped below 1% and mortgage rates hovered near 3%. That environment fueled a surge in home purchases and refinancing, leaving a large share of American homeowners with mortgages under 4%. That’s one reason supply in the housing market has remained tight; you’re less likely to sell and trade up or down when it means replacing a 3% mortgage with a 6% one.
So, movements in the 10-Year yield will be instrumental in determining the fate of housing and other interest-sensitive industries like manufacturing.
A key driver of the 10-Year yield is expected inflation. Bondholders want to protect their purchasing power, so when inflation expectations rise, so do interest rates. We saw this clearly in 2022 and 2023, when inflation reached 40-year highs and the 10-Year yield climbed toward 5%. Mortgage rates peaked at 7.9% in October 2023.
As inflation cooled after the Fed’s rate hikes, the 10-Year yield began to drop, ending September 2024 at 3.75%. Mortgage rates followed suit, approaching 6%. The Fed then kicked off this latest cycle with a 50-basis-point (0.5%) cut to the Fed Funds rate in September 2024. But instead of continuing to fall, the 10-Year yield climbed again, reaching 4.8% by January 2025. Mortgage rates responded, nearing 7%.
The 10-Year yield briefly dipped below 4% following the latest employment report. When the economy weakens, investors anticipate lower inflation and flock to bonds, which drives yields down. That’s exactly what began to unfold after a string of weak jobs reports in July.
But following the September rate cut, the 10-Year began rising again. If yields continue upward, mortgage rates, which were inching closer to 6%, could reverse course and rise once more.
If the job market continues to weaken, we’ll likely see the 10-Year fall further, easing mortgage rates and providing support for housing. And if the economy does soften, which still seems likely, the Fed will continue to prioritize employment over inflation. That will bring additional rate cuts and downward pressure on yields.
However, if growth surprises to the upside — or if bond investors grow more anxious about fiscal deficits and persistent inflation — we’ll see the opposite: higher yields and renewed upward pressure on mortgage rates.
Submitted by Uric Dufrene, Ph. D., Sanders Chair in Business, Indiana University Southeast
The Summer of 2025 may go down in the economic history books as the start of the self-inflicted recession. The temperatures may have been hot, but job creation was ice cold. Over the past three months, the nation has averaged just 29,000 new jobs per month, one of the weakest three-month stretches since the Great Recession. That level of job growth is usually seen either heading into or coming out of a recession.
The chill became even more apparent with the latest Bureau of Labor Statistics report released this past Friday. Only 22,000 jobs were added in August, and the unemployment rate rose to 4.3%, the highest since 2021. While a 4.3% unemployment rate isn’t alarming in isolation, a three-month average below 30,000 jobs is a red flag, no matter how it’s spun.
The leading sector? Healthcare, which added 31,000 jobs. Some back-of-the-envelope math shows that without gains in healthcare; overall job growth would have been negative. The economy isn’t on stable footing if it’s only adding jobs in one sector.
It’s been about six months since the “Liberation Day” announcement of reciprocal tariffs. Since then, multiple versions have emerged, but signs of their impact are now showing up in employment data. Manufacturing, the intended beneficiary of tariffs, lost another 14,000 jobs in August. Wholesale trade, a sector heavily involved in domestic and international commerce, declined by 12,000 jobs.
The trend is not new. Manufacturing is down 78,000 jobs over the past year, and wholesale trade has shed 32,000 jobs since May. Wholesalers primarily sell goods to other businesses. So, a decline in this space can signal falling business-to-business demand, with ripple effects across the broader economy.
Labor market health is always important, but it’s especially critical at this point in the economic cycle. The current recovery has been driven largely by consumer spending, and consumption has been the main engine of GDP growth. In fact, over the past 3½ years, consumption’s contribution has equaled or exceeded total GDP growth in 6 quarters.
That means any pullback in consumer spending would significantly slow the economy, and what triggers that slowdown? The labor market.
That’s why Treasury bond yields fell sharply after the jobs report, with the 10-year yield seeing a significant drop. Investors are now pricing in a near-certain September rate cut, with momentum building for two additional cuts before year’s end. In an Eye of the Economy earlier this year, we anticipated three cuts and a pivot by the Fed toward employment concerns over inflation. We may be seeing that shift play out.
If the next CPI report comes in cooler than expected, we could even see a 0.5% rate cut in September. A hot CPI will produce a significant down day in the equity markets.
Falling job creation and a rising unemployment rate will rattle consumer confidence. That hesitancy can stall spending and slow the economy. Back in our Mid-Year Outlook this past May, we projected slower growth for the remainder of 2025, but didn’t anticipate a recession. That forecast is now in question.
If job creation remains weak, job openings continue to shrink, and sectors like manufacturing stay soft, we may indeed be headed for a downturn. But there is a silver lining: a softening economy could bring falling interest rates and lower mortgage rates, a much-needed lifeline for the housing sector.
One Southern Indiana welcomes the following members that joined or rejoined during the month of August 2025.
One Southern Indiana would like to thank the following members for renewing their membership during the month of August 2025.
| Quarter Century Club (25 Years or More) | Member Since |
| AT&T Indiana | 1976 |
| Geo. Pfau’s Sons Company, Inc. | 1976 |
| Bachman Auto Group | 1976 |
| AAA Hoosier Motor Club | 1984 |
| MAC Construction & Excavating, Inc. | 1992 |
| Nimlok Kentucky | 1994 |
| Monroe Shine & Co., Inc., CPA’s | 1994 |
| Community Foundation of Southern Indiana | 1995 |
| Renaissance Design Build, Inc. | 1999 |
| Ten to 24 Years | |
| Heartland, A Global Payments Company | 2004 |
| Youth Link Southern Indiana | 2004 |
| Highlander Point Center | 2006 |
| Impact Sales Systems | 2007 |
| Bowles Mattress Co., Inc. | 2007 |
| Talis Group, Inc. | 2007 |
| Gilda’s Club Kentuckiana | 2008 |
| Prosser Career Education Center | 2009 |
| Stoll Keenon Ogden PLLC (aka SKO) | 2009 |
| C3 Tech | 2009 |
| American Beverage Marketers, Inc. | 2009 |
| Jimmy John’s | 2011 |
| Stumler’s Catering | 2011 |
| The Center for Women & Families | 2011 |
| Heritage Engineering, LLC | 2012 |
| Lotus Sign & Design | 2012 |
| LifeSpan Resources, Inc. | 2012 |
| ProMedia Group, LLC | 2013 |
| Culver’s of Jeffersonville | 2014 |
| Estes Waste Solutions, LLC | 2014 |
| Ronald McDonald House Charities of Kentuckiana | 2015 |
| Five to Nine Years | |
| Cornell Harbison Excavating, Inc. | 2016 |
| Infinite Solutions, LLC | 2016 |
| H & H Metal Products, Inc. | 2016 |
| South Central Regional Airport Authority | 2016 |
| Trinity Dynamics, Inc. | 2016 |
| KFC | 2017 |
| Louisville Water Co. | 2017 |
| Volunteers of America Mid-States | 2017 |
| PMC Regional Hospital | 2017 |
| ARC Janitorial Supply | 2018 |
| Shepherd Insurance – New Albany | 2018 |
| KY-IN Paralyzed Veterans of America | 2018 |
| Franklin Pest Solutions | 2018 |
| Hanover College | 2018 |
| KCC Manufacturing | 2019 |
| Hollenbach-Oakley | 2019 |
| Martin’s Body Shop | 2020 |
| Conrad Brothers Moving & Storage | 2020 |
| Two to Four Years | |
| Benchmark Family Services | 2021 |
| Stein Law | 2021 |
| Harry’s Taphouse and Kitchen | 2021 |
| Kentuckiana Mortgage Group Inc. | 2022 |
| Unbreakable Bonds Catering LLC | 2023 |
| Spectrum Reach | 2023 |
| Clarksville Little Theatre | 2023 |
| AJ Business Consulting | 2023 |
| Premier Homes of Southern Indiana, Inc. | 2023 |
| Classic Truss and Wood Components, Inc. | 2023 |
| Spherion Staffing & Recruiting | 2023 |
| ATTC Manufacturing, Inc. | 2023 |
| Alee Solutions | 2023 |
| One Year | |
| P.U.S.H. Transportation Company LLC | 2024 |
| Legacy Commercial Property | 2024 |
| Foundation Home Loans Inc | 2024 |
| Connect-Abilities | 2024 |
| American Roofing & Metal Co. | 2024 |
| Hitchcock Design Group | 2024 |
| Airtech Heating and Cooling Services | 2024 |
| University of Louisville Athletic Department | 2024 |
| Schiller | 2024 |
| Town of Utica | 2025 |
Submitted by Uric Dufrene, Ph. D., Sanders Chair in Business, Indiana University Southeast
Indiana’s economic health continues to move in tandem with national manufacturing trends. As one of the top five states for manufacturing job concentration, Indiana gains when manufacturing booms — and feels the sting when it stalls. Today, high interest rates and inflation pressures are weighing on durable goods output, leading to a slowdown in manufacturing activity. With payrolls shrinking across the U.S. and right here in Indiana, and key indicators such as the ISM Index and industrial production flashing caution, the Federal Reserve’s expected rate cuts can’t come soon enough for this vital sector.
Because of this close connection, national manufacturing performance directly influences job creation in Indiana. When national manufacturing is on the upswing, so are jobs here. And when manufacturing slows, the impact is felt with a reduction in jobs added.
One persistent drag on manufacturing over the past two years has been the higher interest rate environment — prompted by elevated post-pandemic inflation and a Federal Reserve that responded late. Longer-lasting manufactured durable goods are interest rate sensitive, and higher rates curb production, while lower rates provide a boost. The sector should receive a lift due to a September interest rate cut now more likely.
The national manufacturing slowdown shows up in different indicators. For example, since October 2022, the ISM Manufacturing Index has indicated contraction — hovering below the 50 threshold with a brief exception in February this year. That makes it nearly three years (excluding February) of sub-50 readings, the longest stretch since the early 1990s — around the time of the 1990 recession. The downturn during the Great Recession and the sharp fall during the COVID shutdown were notable but relatively brief. The New Orders component of the index has been declining since January 2025.
Industrial production tells a similar story. Year-on-year growth has trended downward since October 2022, and has generally hovered near or below zero since late 2023 — a meaningful warning sign given that recessions often follow when industrial production slips into negative territory. Although, historically, there are rare exceptions (e.g., 2015, 1956, 1952) where production dipped without triggering a recession, those are the exception — not the rule.
The national manufacturing slowdown is mirrored in regional payroll data. U.S. manufacturing job growth has been negative year-over-year since October 2023. In Louisville Metro, manufacturing payrolls have declined since early 2024; statewide, Indiana’s manufacturing payrolls have been declining since early 2023.
On the inflation front, recently released Consumer Price Index (CPI) and Producer Price Index (PPI) came in on the hot side, with core rates showing significant increases from the prior month. Core rates (inflation minus food and energy) for both CPI and PPI exceed 3%.
Despite elevated inflation, labor market concerns are likely to gain more attention over the next several months, prompting a September cut by the Fed and likely two additional cuts the rest of the year. As we look ahead, interest rate cuts could offer needed momentum.
Submitted by Uric Dufrene, Ph.D., Sanders Chair in Business, Indiana University Southeast
The Super Bowl of economic indicators – the national jobs report – came out last week, and it was hard to find much to cheer about.
Over the past three months, U.S. payroll growth has averaged just 35,000 jobs per month. That average includes the 73,000 jobs added in July, but even this figure may be revised lower, as May and June saw steep downward revisions totaling more than 250,000 jobs. Excluding the losses during the COVID recession, we have to go back to the Great Recession (2007–2009) to find job growth as weak.
Following the latest employment report, expectations for a Fed rate cut in September surged. Markets are now pricing in three cuts before year’s end — September, October, and December. As noted previously, the Fed should have cut in July. Two Fed Governors, Waller and Bowman, dissented at that meeting, but the majority kept rates unchanged.
The household survey, which gives us labor force data, offered no relief. It showed employment down by 260,000 and the number of unemployed up by 221,000. The unemployment rate ticked up from 4.1% to 4.2%, and the labor force participation rate slipped from 62.2% to 62.1%. That decline is the opposite of what’s needed to expand the supply side of the economy — a key part of the administration’s growth strategy, especially to offset the drag from higher tariffs.
The promised boost to manufacturing from the highest tariffs in decades hasn’t appeared in the data. In fact, the numbers suggest the opposite. Manufacturing payrolls fell by 11,000 in July, the third straight monthly decline. Since February, the number of unemployed in manufacturing has climbed from 459,000 to 641,000. Year-over-year manufacturing job growth has been negative since October 2023, and the pace of decline has accelerated this year. This will have implications for Indiana and Kentucky.
The ISM Manufacturing Index, considered to be soft data based on a survey, fell to 48.0 in July, below the expected 49.5 and marking the fifth consecutive month in contraction territory. An ISM reading below 50 signals contraction; above 50 signals expansion. The index briefly topped 50 in January and February — the first time since 2022 — but has been stuck in contraction since. New orders, a component of the overall index, have shown some recovery since March but remain below 50. The latest factory orders report showed a decline of nearly 5% last month.
At first glance, the latest GDP report seems like a bright spot, with Q2 growth at 3.0%. But looking under the hood reveals a different story. Most of the gain came from a sharp drop in imports, which mechanically boosts GDP. This followed a Q1 surge in imports as businesses tried to get ahead of new tariffs. Real final sales to domestic purchasers — a better measure of consumer and business demand — rose just 1.2%, down from 1.9% in Q1 and the weakest since late 2022.
As I’ve written before, the outlook comes down to the consumer and the labor market. Right now, neither is strengthening. The U.S. remains a service-driven economy, but service sector growth is showing signs of slowing as well. While inflation remains on their radar, weaker growth will likely take priority, and softer price increases will follow. The September cut seems all but certain — the question is whether it will be soon enough to avoid a recession.
One Southern Indiana would like to thank the following members for renewing their membership during the month of July 2025.
| Quarter Century Club (25 Years or More) | Member Since |
| Lee Building Products | 1976 |
| Clark County REMC | 1976 |
| paco manufacturing | 1976 |
| First Savings Bank | 1976 |
| Water Tower Square | 1977 |
| Goodwill of Central & Southern Indiana, Inc. | 1982 |
| The Marketing Company | 1985 |
| Chase | 1988 |
| Southern Indiana Works | 1988 |
| Commercial Kentucky, Inc. | 1988 |
| Rasmussen Chiropractic LLC | 1990 |
| AssuredPartners – Jeffersonville | 1993 |
| Taco Bell | 1994 |
| Pro Laminators | 1995 |
| Kentucky Derby Festival, Inc. | 1997 |
| Ten to 24 Years | |
| The Stemler Corporation | 2001 |
| Radiology Associates, Inc. | 2002 |
| LMH Architecture | 2002 |
| Health Insurance by Design | 2003 |
| Harrison County Convention & Visitors Bureau | 2007 |
| Federal Reserve Bank of St. Louis | 2007 |
| Timmel Associates, LLC | 2009 |
| Security Pros, LLC | 2009 |
| Fox Insurance & Investments, LLC | 2012 |
| AccessiCare Elder Home Care | 2012 |
| Crown Staffing | 2012 |
| First Financial Bank | 2014 |
| Elite Printing Resources, LLC | 2014 |
| HWC Engineering | 2014 |
| Clark Dietz, Inc. | 2014 |
| Shoe Sensation #973 | 2015 |
| Taylor Siefker Williams Design Group | 2015 |
| Five to Nine Years | |
| Church, Langdon, Lopp, Banet Law | 2016 |
| Bubba’s 33 | 2016 |
| River Valley Resources | 2016 |
| Habitat for Humanity Clark & Floyd Indiana | 2016 |
| J & C Technologies | 2016 |
| Kaiser Home Support Services, Inc. | 2016 |
| River Heritage Conservancy, Inc. | 2017 |
| Spencer Machine & Tool Co., Inc. | 2019 |
| Board and You Bistro | 2020 |
| Two to Four Years | |
| Avant-Garde Turnstiles | 2021 |
| Silver Creek School Corporation | 2021 |
| Clark/Floyd System of CARE & Prevent Child Abuse | 2021 |
| Louisville Bats Baseball Club | 2021 |
| Guerin Woods | 2021 |
| HRS Global LLC | 2022 |
| Riverbend Financial Group LLC | 2022 |
| Shrewsberry & Associates, LLC | 2022 |
| EightTwenty | 2022 |
| Louisville Low Voltage LLC | 2022 |
| CertaPro Painters of Kentuckiana | 2022 |
| Ramada Inn | 2023 |
| University of Louisville Shelby Campus Conference Center | 2023 |
| Henry Rose Consulting | 2023 |
| Phoenix Theatres Entertainment | 2023 |
| Lilys SoftWash LLC | 2023 |
| Black Diamond Pest Control | 2023 |
| One Year | |
| Incipio Workforce Solutions | 2024 |
| ennu | 2024 |
| PuroClean of Southern Indiana | 2024 |
| Ernstberger Orthodontics | 2024 |
| IEC – Independent Electrical Contractors | 2024 |
| Lewellyn’s Sealcoating | 2024 |
