Economic Update | Higher Mortgage Rates…For Now

by with No Comment 1si NewsEconomic Development

submitted by
Uric Dufrene, Ph.D., Sanders Chair in Business, Indiana University Southeast

As last year ended, the market was expecting several rounds of interest rate cuts. The Fed alone had indicated it would reduce rates three separate times over 2024, and the market was expecting double that. It was around October of 2023 that Fed Chair Jerome Powell uttered that the Fed was about done hiking rates. Equity markets rejoiced and began a 4th quarter surge. From October 2023 to March 2024, the S&P 500 added more than 300 points, increasing by about 28%. The tech-heavy NASDAQ increased by 30%. Since late March and through April, we’ve seen an abrupt reversal. The S&P 500 trimmed 5.5% and the NASDAQ is already down 7%. The culprit is linked to inflation. 

Higher inflation puts upward pressure on the 10-Year Treasury yield, the benchmark for consumer financing costs, including mortgages. In early 2024,  the yield had declined to 3.88 percent. After a series of higher-than-expected inflation reports, the 10-Year Treasury yield is almost hitting 5%, closing at 4.61% last week. Higher rates are supposed to suppress demand because it ultimately affects the cost of financing for both business and consumer loans, including mortgages.    

After hitting almost 8% for a 30-year mortgage in October 2023, mortgage rates had been on a decline since then and hit a recent low of 6.7% in late 2023.  Since the higher-than-expected inflation reports and the upward trajectory of the 10-year Treasury yield, mortgage rates have been climbing since December and have since crossed 7% in April. Excluding the time when rates surpassed 7% late last year, 7% mortgages last appeared in the early 2000s. Rates remaining above 7% will adversely impact building activity, exacerbating the housing supply problem, and placing continued upward pressures on home prices. One of the key reasons for higher inflation is linked to housing, with the last CPI report showing the cost of shelter increasing by 5.7% from the previous year. 

Another reason for higher rates is a continued strong economy. Inflation pressures remain, but higher yields are also driven by a very resilient macroeconomy, driven by the consumer. The last retail sales report showed strong continued spending by consumers, placing additional upward pressure on the 10-year yield. While consumers continue to spend, there are emerging signs of distress.  Delinquencies on credit cards are the highest since 2012, and consumer loan delinquencies now exceed the pre-pandemic level.   Thirty days past due delinquencies for 30-year mortgages have also been increasing since hitting a bottom in June 2021, and are at the highest in four years.

The preferred Fed inflation gauge will be out this month, and the FactSet consensus is for a year-over-year rate of 2.6%, with a core (inflation minus the cost of food and energy) reading of 2.7%. If actual rates come in higher than expected, we can expect significant additional stock market choppiness and additional upward pressures on the 10-year yield.  If it is indeed a hotter number, we will see a growing narrative for another rate hike this year, and equity markets will shed additional losses. 

What will it take to reverse the recent climbs of the 10-year yield? A weak employment report would be a significant boost to lower rates, along with softer inflation readings. Weaker average hourly earnings increases, along with a reduction in the number of job openings would also work to reverse the climb of the 10-year. All this sounds like bad news, and that is exactly what markets would like to see.  Bad news would put the Fed back on a schedule of rate reductions, and markets would rally. The best combination is weaker inflation reports, along with employment that remains resilient. This would put the nation’s economy back on track for a soft landing. 

Nonprofit Spotlight | Brandon’s House

by with No Comment 1si NewsNonprofit Spotlight

Brandon’s House Counseling Center
1618 Beeler Street
New Albany, IN 47150
Business Phone:     812-929-2499
Website:  www.brandonshousein.com  

Contact Person:  Wade Thaxton, Executive Director
Contact Email:  WadeThaxton@brandonshousein.com                                  

Please use 300 words or less to describe your agency and your impact in the community.

Brandon’s House is the only counseling center specifically for teens that provides completely free counseling.  We have removed the financial barrier, by providing free counseling, that often keeps young people from getting the mental health help they so desperately need.  We have served, through counseling, thousands of teens & their families throughout our 30 years and never once have we charged the client for the counseling we’ve provided.  The impact we’ve had is hard to measure, however we have been a place of hope & healing at a pivotal point in an individual’s developmental stage in life. 

Agency Mission Statement or Description:

Our mission is simply to be a safe place for teens to be heard, find hope and to get equipped for today’s many challenges.  We do that by providing completely free counseling to any teen & their family in our community. 

Year established: 1993 (30th anniversary this October)

Counties/regions serviced: All of Southern Indiana & Louisville, KY

Focus areas: Mental Health for Teens & their families

Impact in community: We have served, through counseling, thousands of teens & families in Southern Indiana throughout the last 30 years. 

Volunteer Opportunities: Mostly with fund & friend-raising

How 1si members can help your organization: By spreading the word of the free counseling we provide to teens.  Or by covering the cost of a teen’s counseling with us.  The average teen comes for 12 visits over a 3.5 month period.  Each visit costs $125 per session (an hour long).  So the total cost of a typical teen’s counseling is $1,500.  Maybe a group of people come together to cover the cost of a teen’s counseling. 

Additional information: In 2021 we served 147 teens & families.  In 2022 we served 233 teens & families.  This year we are on pace to serve over 300 teens & families.  Essentially we’ve more than doubled our impact in just the last 2 years. 

Economic Update | Fewer Interest Rate Cuts This Year

by with No Comment 1si NewsEconomic Development

Coming into 2024, stock market investors were expecting 6 interest rate reductions by the Fed throughout the year. Year-over-year inflation had fallen, and Federal Reserve officials had signaled that cuts would likely begin this year. Inspired by lower interest rates, the stock market surged. In late October 2023, the S&P 500 Index was at 4,117. Fast forward to early April 2023, and the S&P was over 5,200, representing a 26% gain since the October low. While the market was expecting six rate cuts, the Fed had signaled only three for 2024. Market expectations and sentiment dominated the Fed view, and markets continued climbing.   

The impetus behind lower rates was tied to inflation. At the start of 2023, the Consumer Price Index registered a year-over-year change of 6.6%. In October, when the market began its surge, the CPI had declined to 4.0%. In three quarters, inflation was trimmed by 2.6%. Since then, the progress on inflation has slowed considerably. From October 2023, when the market began its upward trajectory, the CPI is only lower by a magnitude of only .08. Basically, the CPI has been stuck just above 3%, not quite at the level of the Federal Reserve target of 2%.   

Since disinflation has basically come to a halt, the market is now pushing the first rate cut back to July, with mixed probabilities for additional cuts beyond July. The last Fed Reserve meeting in March continued to point to three cuts for this year, but that was by a very slim majority. In that meeting, the Fed upped growth estimates of the economy and its inflation projections yet maintained an estimate of three cuts for 2024. Some suggested that this was counter-intuitive;  higher inflation estimates, but no change in rate reductions. Since the Federal Reserve March meeting, some Fed officials are on record calling for fewer than 3 cuts:  one recently calling for none, and a historically dovish one calling for only one cut. The yield on the 10-year Treasury is knocking on the door of 4.5%, up from 3.9% at the start of the year. This will keep interest rates on credit cards, auto loans, and mortgages higher for longer. 

By the time you may be reading this, the latest CPI report will have been released (release is scheduled for Wednesday, April 10th). If we get a hot CPI number, meaning it comes in higher than expected, this will push interest rate reductions back even further. Markets will likely reduce rate reductions from 2 to perhaps one, or none. The stock market will likely be volatile. If the CPI comes in less than expected, markets will likely surge. One of the reasons for this surge started with last Friday’s U.S. payrolls report. The U.S. employment report was indeed a Goldilocks report. Jobs created surpassed all expectations, with the economy adding 303,000 jobs in March. Both the labor force and labor force participation rate increased by sizeable margins. Household employment also surged, reversing previous declines. Average hourly earnings slowed from the previous month, a key ingredient for the softer inflation story. The average workweek also increased, which when combined with the number of jobs and average wages, points to more fuel for the spending consumer. 

Locally, Louisville Metro is seeing the slowest job growth since early 2020. Preliminary estimates from the Bureau of Labor Statistics show that Louisville Metro gained 3,500 jobs from February 2023 to February 2024. As a comparison, the metro area added approximately 15,000 jobs on an annual basis in early 2023. On a percentage basis, this puts Louisville Metro last among the Kentucky metro areas.  In Indiana, three metro areas (Bloomington, Columbus, and Elkhart-Goshen) are observing negative changes in payrolls from the prior year. As we have discussed in previous columns, both states continue to face labor force growth challenges. The latest BLS metropolitan employment report showed that Louisville Metro also saw a decline in the labor force from the prior year.  To be sure, these data are subject to revision, but the early data does show a slowing of job growth in the metro region. 

Thank You for Renewing Your Membership | March 2024

by with No Comment 1si NewsThank Your for Renewing Your Membership

One Southern Indiana would like to thank the following members for renewing their membership during the month of March 2024.

Quarter Century Club (25 Years or More)Member Since
H&H Design-Build1976
City of Charlestown1985
Schuler Bauer Real Estate Services1985
LifeSpring Health Systems1986
WAVE 3 News1988
The Salvation Army1996
  
Ten to 24 Years 
River Ridge Development Authority2001
Nicholson Insurance Agency2003
Budget Services & Supplies, LLC2004
Old National Bank2004
Cherry Bekaert (MCM CPAs & Advisors)2006
Nu-Yale2008
Delaco Kasle Processing Indiana2008
Scot Mailing and Shipping Systems2008
Delta Services LLC2009
Arctic Minerals2011
Rauch Industries2011
Frost Brown Todd, LLP2012
Air Hydro Power2013
Community Montessori Charter Public School2013
Nugent Sand Company2013
  
Five to Nine Years 
C2 Strategic Communications LLC2015
HMC Service Co.2015
Red7e2015
Cardinal Pointe Financial Group2016
W.M. Kelley Company, Inc.2017
A1 Porta Potty2019
Naked By Sunday2019
PayFWDs2019
  
Two to Four Years 
Makarios Consulting, LLC2020
CRG Automation2021
Miranda Construction 2021
Videobred, Inc.2021
Brookstone Financial LLC2022
Carpet Specialist, Inc.2022
HRS Global LLC2022
Lead Well Strategic Consulting2022
  
One Year 
AG Master Tile & More2023
Chanel Nicole Co.2023
Ellis & Badenhausen Orthopaedics2023
Innovators Inurance Group LLC2023
Kaczmarek Contracting LLC2023
Louisville Painting Company LLC2023
Patriot Mobile Wash2023
Patriot Mobile Wash2023
Prosser Alumni Association Inc. 2023
Pylons2023
Rise Foundation, Inc.2023
Rural 1st2023

Welcome New Members | March 2024

by with No Comment 1si NewsWelcome New Members

One Southern Indiana would like to welcome the following businesses that joined or rejoined during the month of March 2024.

Economic Update | Has the Soft Landing Come and Gone?

by with No Comment 1si NewsEconomic Development

submitted by
Uric Dufrene, Ph.D.,  Sanders Chair in Business, Indiana University Southeast

The monthly national jobs report released showed another big gain in job creation.  The Bureau of Labor Statistics report showed that the nation’s economy gained another 275,000 jobs during February,  much higher than consensus estimates of 200,000. Revisions from the prior two months did show that payrolls were reduced by a combined 167,000, pointing to some softness in previous strong reports. While the overall report was favorable, looking beyond the headline numbers can find potential clues on the overall trajectory of the economy. 

While the headline 275,000 jobs number from the survey of establishments was favorable, numbers from the household survey pointed to potential concerns about the economic outlook. Employment declined by 184,000, and this marks another consecutive decline since November 2023. Since November 2023, employment has declined by nearly 900,000. The decline in employment showed up in the uptick in the nation’s unemployment rate, from 3.7% to 3.9%. The increase in the unemployment rate was due to an increase in unemployed workers of 334,000. Since the same time last year, the number of unemployed workers has increased by close to 500,000.     

Examining unemployment rates by occupation might also offer signs about the economy. The unemployment rate data by occupation is non-seasonally adjusted. So, we need to examine the year-over-year change in the unemployment rate to ascertain any relevant information about potential trends. One occupation with signaling potential is sales and related occupations, with the unemployment rate usually undergoing a noticeable change prior to and during a recession. Simply speaking, employers need more sales-related occupations when an increase in sales is anticipated and need fewer on the converse. The unemployment rate for sales-related occupations increased from 4% of February last year to 4.7% in February 2024. In the tech-led recession of 2001, the unemployment rate for sales occupations increased from 3.3% to 4.9% just prior to the recession’s start. The Great Recession did not see any declines in sales-related occupations until the actual start of the recession, with the unemployment rate increasing from 5.2% to almost 9% by the end of the recession.  While the current change is a noticeable uptick, we need to see sustained increases for definitive conclusions on growth projections and more conclusive statements on any pending recession.

One industry that can provide potential hints on the economic trajectory is professional and business services, specifically temporary employment services.  As the economy heats up, employers will first expand with temporary labor. To the contrary, when employers are anticipating or experiencing declines in economic activity, temporary workers are usually the first to experience layoffs. Temporary labor services are part of the professional and business services sector, and the unemployment rate has increased from 4.2% to 5.1%.  Just as recently as October 2023, the unemployment rate in professional and business services was 3.2%.  Additionally, the February jobs report did show a decline in temporary labor services of 15,400. As a comparison, the 2001 recession saw the unemployment rate in professional and business services increase from 4.1% to 5.9% just prior to the economic slowdown. For the Great Recession, professional and business services saw an increase in unemployment from 4.8% to 6.4%. There has been a noticeable increase in unemployment, but still not the kind of changes that might coincide with a recession. This is another number that warrants watching. 

My economic outlook for 2024 called for “slower growth” and a pullback in consumer spending. We are seeing emerging signs of softer growth along with consumer spending, but we are not close to calling for a recession. Over the next several months, we will hear more talk about various forms of stagflation, a combination of higher prices and slower growth. As the inflation rate approaches the Federal Reserve’s desired level of 2%, getting from 3 plus percent down to 2% is facing headwinds, implying that interest rates will be higher for longer.  The soft landing may have come and gone as the  “last mile” of inflation remains stubborn, and signs of softer growth emerge. 

Advocacy-Update-Email-Header2

Advocacy Update | 03.13.24

by with No Comment 1si NewsAdvocacy

Advocacy-Update-Email-Header2

The 2024 Legislative Session is officially over! If you want to see our earlier Advocacy updates, please click here. As a reminder, this year’s Call to Action continues the conversation with talent attraction and retention, focusing mainly on housing development, availability and affordability of childcare and eldercare, incumbent worker training options, employability of people with disabilities, and eliminating worker shortages.

New this Week:

HB-1183 passed and was signed by the President of the Senate on 3/12/2024. This bill will have an impact on economic development projects for our region, but we as 1si are still learning about what that impact will be. The Advocacy Leadership group will continue to monitor the bill and will provide an update once more information is received by the State.

SB-2 passed and was signed by the President of the Senate on 3/12/2024. The childcare bill makes it easier for childcare workers to find subsidized care for their children and makes families whose income is lower than the state’s median eligible for childcare vouchers and programs. The bill also requires a compensation study done on early childhood educators and caregivers for out-of-school programs and make that data available for review. Click here to read the most up-to-date version of SB-2.

Bills 1si is Monitoring:

  • HB-1121 – Local Income Taxes
    • Passed and was signed by the President of the Senate on 3/12/2024.
  • HB-1183 – Foreign Ownership of Agricultural Land
    • Passed and was signed by the President of the Senate on 3/12/2024.
  • HB-1199 – Repeal of Economic Enhancement District Law
    • Passed and was signed by the President of the Senate on 3/12/2024.

Current List of Bills 1si Supports or Opposes:

Supports: SB-2 – Child care

  • Passed and was signed by the President of the Senate on 3/12/2024.

Thank you for following along with us on this session. If you’d like more information on our 2024 Advocacy Agenda, or to download a copy of it, please visit www.1si.org/advocacy or download a PDF copy here.

Nonprofit Spotlight | Family & Children’s Place

by with No Comment 1si NewsNonprofit Spotlight

Family & Children’s Place
1 Quartermaster Ct.
Jeffersonville, IN 47130
Business Phone: 502-893-3900
Website:  www.famchildplace.org

Contact Person: Kristen Millwood, Director of Development
Contact Email:  kmillwood@famchildplace.org                                    

Agency Mission Statement or Description:
Our mission: We protect and heal children and families.  Our vision is happy, healthy children and families…freed from abuse.  Family & Children’s Place guides families through life’s challenges school-based, mental health counseling, and child advocacy services. We provide resources that build skills for children, families, and communities to use now and for generations to come.  

Year established: 1883.  We are 140 years old this September!

Counties/regions serviced: Clark, Floyd, Scott, Harrison, Washington, Jackson

Focus areas:  

  • Child Advocacy Centers: Comprehensive, child-friendly, treatment and evaluation centers for abused children providing families with compassionate, coordinated intervention and investigation of child abuse.
  • Counseling Services: individual, family, group, and school-based services using evidence-based, proven interventions for children and families who have experienced trauma.
  • School-Based Services (SBS): family-centered out-of-school-time programs designed to improve academic success and strengthen families, build character and social competency, and bolster relationships between the student, family, and school.

Impact on community:
We are the region’s leading organization serving children and families impacted by abuse, neglect, and community violence. We provide services in a 17-county region encompassing Southern Indiana and Louisville, KY. When the unthinkable occurs, Family and Children’s Place provides a refuge that allows children to heal in a supportive environment and our team is with families every step of the way.  We also promote initiatives to bring child abuse prevention to the broader cultural conversation to create healthier communities. Our School-based services promote regular engagement and participation, improved social and life skills and improved academic performance. 

Volunteer Opportunities: Family & Children’s Place offers several different types of volunteer opportunities for those looking to help us better our community.  This includes administrative volunteers, event volunteers and program volunteers.

How 1si members can help your organization: Report abuse if you suspect it.  In Indiana call 1-800-800-5556.  Refer people who may need our services: 502-893-3900. Advocate by sharing our social media – we’re at /famchildplace on Facebook, LinkedIn and Instagram and Twitter.  Work for us!  We have several positions open.  And last but not least, give, if you can: www.famchildplace.org.

 

Charging Up: Global Technology and Engineering Provider Coming to Southern Indiana

by with No Comment 1si News1si Press ReleaseEconomic Development

MKS Global, an ISO 2013-certified company, is opening operations in Jeffersonville.

Jeffersonville, IN. (March 4, 2024)

MKS Global, Inc., is expanding! The global technology and engineering provider will move to a new location to grow its production capacity, including new production with aerospace maintenance technology and electric charging stations. The company will invest over $2.8 million into the region by leasing a building on Centennial Boulevard in Jeffersonville and purchasing new equipment. The location will also add up to 40 new jobs at an average wage of over $45.00 per hour, with the company providing training for each employee. The new facility will also serve as the company’s headquarters for the U.S.  

MKS Global, Inc., is a global technology partner with a full spectrum of IT, digital technology and engineering services with supply chain resources that support a variety of industries, including health care, information services, aerospace, automotive, and other technology manufacturing. With a focus on providing services that enable businesses to reach their goals, MKS Global has a 98% referral rating and a presence in six countries.

“Our team couldn’t be more optimistic about the future as we establish Jeffersonville, IN, as our headquarters and newest facility for MKS Global,” said CEO William Moon. “This new location affords us an abundance of growth opportunities by dramatically expanding internal prototyping capabilities. This investment will accelerate innovative product partnerships in a variety of high-impact industry sectors such as automotive, aerospace, renewable energy, and beyond.”

Based on the company’s job creation plans, the Indiana Economic Development Corporation (IEDC) committed an investment in MKS Vision Group, Inc. of up to $800,000 in the form of incentive-based tax credits. These tax credits are performance-based, meaning the company is eligible to claim incentives once Hoosiers are hired.

“Southeast Indiana is quickly growing its reputation as a premier destination for technology providers and technology-enabled firms thanks to the investment of companies like MKS Vision Group,” said Ann Lathrop, chief strategy officer at the IEDC. “As a state, we are committed to supporting this expanding ecosystem through our partnerships with regional leaders and through strategic investments in innovation, community development and talent, paving the way for continued economic growth and career opportunities for years to come.”

“The City of Jeffersonville enthusiastically welcomes MKS Global to our growing community of innovative technology-driven companies,” said Jeffersonville Mayor Mike Moore. “This facility will include a state-of-the-art prototyping center, supporting a number of high-growth industries and creating 40 new jobs with an average wage above $45 per hour which is nearly double the Clark County average wage.”

“MKS Global’s investment further recognizes the regional advantage we offer to industry partners,” said John Launius, Vice President and Director of Economic Development at One Southern Indiana. “We are confident MKS Global will find continued success by offering premium product design and engineering services, now leveraged with increased prototyping capabilities which make them an ideal industry partner.”

About MKS Global, Inc.

MKS Global is a solutions company, combining global network engineering, digital technology, and supply chain expertise with a focused partnership experience. They exist to provide increased efficiencies and flexibility that accelerate business performance by adapting the latest cutting-edge technologies for their customers. Their services deliver tangible benefits with efficiency and agility. For more information, visit www.mksglobal.com.

About One Southern Indiana
One Southern Indiana (1si) was formed in July of 2006 as the economic development organization and chamber of commerce serving Clark and Floyd counties. 1si’s mission is to help businesses innovate and thrive in the Southern Indiana / Louisville metro area via the three pillars of Business Resources, Economic Development, and Advocacy. For more information on One Southern Indiana, visit www.1si.org.

Contact:

MKS Global, Inc.
Andrew Brinker, General Manager
Andrew.brinker@mksglobal.com
810-434-0820

One Southern Indiana
Brittany Schmidt, Content Marketing and Media Relations Manager
BrittanyS@1si.org
812-945-0266

Advocacy-Update-Email-Header2

Advocacy Update | 03.07.24

by with No Comment 1si NewsAdvocacy

Advocacy-Update-Email-Header2

We’re almost to the end of this session! If you want to see our earlier Advocacy updates, please click here.

As a reminder, this year’s Call to Action continued the conversation with talent attraction and retention, focusing mainly on housing development, availability and affordability of childcare and eldercare, incumbent worker training options, employability of people with disabilities, and eliminating worker shortages.

New this Week:

Bills continue to move throughout the Senate and House this week, as both are on their third readings for bills that are still active.

Two bills that 1si has been monitoring are now labeled as “inactive”; SB-61 and SB-295.

1si continues to monitor HB-1183 as it moves through the process, as additional amendments have been added.

Bills 1si is Monitoring:

  • HB-1121 – Local Income Taxes
    • Passed third reading in the Senate on 3/4/2024 and returned to the House with amendments. The House dissented from those amendments on 3/5/2024.
  • HB-1183 – Foreign Ownership of Agricultural Land
    • Passed third reading in the Senate on 3/5/2024 and returned to the House with amendments. The House dissented from those amendments on 3/6/2024.
  • HB-1199 – Repeal of Economic Enhancement District Law
    • Passed third reading in the Senate on 2/29/2024 and returned to the House with amendments on 3/1/2024.
  • SB-61 – Tourism Improvement District
    • Currently labeled as “inactive”
  • SB-295 – Indiana Economic Development Corporation
    • Currently labeled as “inactive”

Current List of Bills 1si Supports or Opposes:

Supports:

  • SB-2 – Child care
    • Passed third reading in the House on 3/4/2024 and returned to the Senate with amendments on 3/5/2024. Motion to concur was filed same day, and the Senate concurred in House amendments on 3/6/2024.

Opposes:

  • The one bill that 1si opposes, HB-1157 – Non-Disclosure Agreements in Economic Development, has been labeled as “inactive.”

We’ll keep you updated, but if you’d like more information on our 2024 Advocacy Agenda, or to download a copy of it, please visit www.1si.org/advocacy or download your PDF copy here.