Are Green Shoots Starting to Emerge After a Three-Year Manufacturing Drought?

by with No Comment 1si NewsEconomic Development
Submitted by Uric Dufrene, Ph.D., Sanders Chair in Business, Indiana University Southeast

 

Since October 2022, the ISM Manufacturing Index has been above 50 only once, a January reading that barely cleared the expansion threshold. Higher interest rates were the initial culprit behind the sector’s decline, followed more recently by tariffs, or at least the threat of tariffs. Regardless of the cause, manufacturing has remained in contraction territory for an extended period.

For manufacturing-rich regions such as Louisville Metro, Indiana, and Kentucky, this prolonged slowdown has mattered. Recent economic data, however, suggest the sector may be on the cusp of expansion, improving the outlook for these regions.

The latest encouraging signal comes from the ISM Index itself. The Institute for Supply Management’s monthly reading rose to 52.6, not only above 50 but also higher than the prior month and stronger than anticipated. Key subcomponents showed that both new orders and production moved into expansion territory, pointing to a more favorable near-term outlook.

The employment subindex also improved from the prior month, but it continues to signal contraction, now for 36 of the past 37 months. As we’ve discussed in prior columns, economic expansion does not necessarily translate into labor growth. The latest ISM report reinforces that view.

This divergence between growth and hiring helps explain recent productivity gains. The latest data show that unit labor costs declined by nearly 2 percent in the most recent quarter, while productivity rose by almost 5 percent. Workers are producing more output, and doing so more efficiently, which is helping to drive unit labor costs lower. These productivity gains, driven largely by investments in capital goods, support profitability while also helping to keep inflation in check.

The groundwork for these gains was laid years ago. In 2021, the economy experienced a near-gargantuan surge in industrial machinery investment, the largest one-year increase in more than three decades. Coming out of the pandemic, job openings far exceeded the number of available workers. Employers were forced to pivot, relying more on capital than labor simply because labor was scarce.

We are now beginning to see the payoff from those capital investments made five years ago. Some will attribute today’s productivity gains to artificial intelligence, but the shift toward capital-intensive production was set in motion well before AI became the latest headline. Growth in manufacturing accompanied by limited labor growth is likely to persist. Any reshoring of manufacturing back to the U.S. will require a competitive cost structure, and that means even more investment in automation, or capital over labor.

Productivity gains will be a key factor influencing the next Federal Reserve chair and could help justify additional rate cuts later this year, beyond what markets currently anticipate.

Turning to the labor market, the February employment report was delayed due to the brief government shutdown. The latest private-sector ADP report showed continued softness in hiring, with just 22,000 jobs added, well below expectations of 50,000. At the same time, unemployment claims remain at historically low levels, suggesting layoffs are not accelerating, despite recent high-profile announcements. Job openings, however, saw a steep decline from the prior month, hitting the lowest level since the Covid year. The job creation engine of the U.S. economy continues to sputter.

Closer to home, preliminary estimates suggest Louisville Metro will finish the year roughly flat in terms of job growth. The largest declines were seen in leisure and hospitality, which shed about 3,000 jobs, followed by transportation and warehousing, down roughly 2,000. The largest gains were in education and health services, and primarily healthcare, which added about 1,000 jobs.

As we start 2026, green shoots appear to be emerging in both manufacturing and the service side of the economy. Job growth may not fully reflect that improvement, which helps explain why the Federal Reserve may ultimately cut rates more aggressively than the two reductions currently priced into markets.

For Immediate Release: Global Polymers to Relocate and Expand Operations in Charlestown, Indiana

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CHARLESTOWN, Ind. (Feb. 2, 2026) — Global Polymers LLC, a Kentucky‑based, industry leader in recycled Polypropylene resins, announced plans to relocate and expand its operations to Charlestown, Indiana. Backed by strong support from the City of Charlestown and regional partners, the company will reactivate an existing facility at 100 Quality Court, strengthening its manufacturing footprint and positioning the business for continued growth.

The expansion will strengthen Global Polymers’ recycling and manufacturing capabilities and reinforce its commitment to customers. The company also operates Global Freight LLC, a for-hire transportation business supporting its logistics operations.

“This relocation and expansion mark an important milestone for Global Polymers,” said Barry McRoberts, Founder and Managing Member of Global Polymers LLC. “As demand for our products continues to grow, this investment will enhance our ability to serve customers through expanded capabilities and new product offerings. We appreciate the support of the City of Charlestown, One Southern Indiana, and the Indiana Economic Development Corporation, whose partnership has been critical to advancing this next phase of growth.”

The company plans to create up to 30 new jobs by 2030 at the Charlestown location, with an average hourly wage of $31.17—well above the current Clark County average wage. Global Polymers also plans to invest more than $8.5 million in the facility through new machinery and equipment, building improvements, special tooling, and other capital expenditures.

“We are excited that Global Polymers has chosen Charlestown for this significant investment,” said Mayor Treva Hodges. “The revitalization of this facility reinforces the strength of our workforce, quality of our community, and highlights our commitment to fostering smart growth and high-quality job opportunities in our community.”

Based on the company’s job creation plans, the Indiana Economic Development Corporation committed an investment in Global Polymers of up to $290,000 in the form of incentive-based tax credits. These incentives are performance-based, meaning the company is eligible to claim state benefits once jobs are created. 

“Indiana’s pro-growth business climate and robust small business ecosystem are attracting quality investments that will further support our economy and residents,” said Governor Mike Braun. “We are proud to welcome Global Polymers to our state and to our southern Indiana community, where the company will have the skilled talent needed to grow.”

“Global Polymers’ decision to stay in the region and grow in southern Indiana demonstrates their confidence in both Charlestown and our regional advantage,” said Lance Allison, President and CEO of One Southern Indiana. “Southern Indiana continues to be a premier hub for advanced manufacturing and logistics, and we’re proud to support this expansion and the quality jobs and products it will create.”

In addition to state support, Global Polymers has received local support through an estimated tax abatement savings of $65,000 over five years from the City of Charlestown on qualifying personal property.  This allows the company to phase in its new taxes over time as operations expand.

For more information about Global Polymers, visit www.globalpolymerscorp.com.

About Global Polymers LLC 

Global Polymers LLC, founded in 1992 by J. Barry McRoberts, is a 9001:2015 certified manufacturer of recycled Polypropylene resins and a recognized authority in closed-loop recycling and certified destruction. The company specializes in mechanical recycling hard-to-recycle polypropylene (PP) materials, including post-consumer (PCR) and post-industrial (PIR). Global Polymers provides molders with a reliable supply of superior-quality recycled resins. Global Polymers’ mission is to provide sustainable solutions for the plastics industry.

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. 

MEDIA CONTACTS

Global Polymers LLC
J. Barry McRoberts
Email: Barry@globalpolymerscorp.com
Phone: 502-552-2050

Indiana Economic Development Corporation
Ashley Gibbons
Email: comms@iedc.in.gov

One Southern Indiana
Ellinor Smith
ESmith@1si.org 
Phone: 217-320-4832

For Immediate Release: PC3 Health Expands Operations to Indiana, Creating 40 New Jobs in Jeffersonville

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JEFFERSONVILLE, IN. (1/29/2026) – Indiana leaders announced that Physician Care Coordination Consultants LLC (PC3 Health), a growing health care services company, is expanding into southern Indiana with a new office location in Jeffersonville. The expansion will create 40 new premium wage full-time jobs as the company establishes operations at 903 Spring Street in Jeffersonville, Indiana.

The new Jeffersonville location will support PC3 Health’s continued growth as it partners with hospitals and health systems across the country to improve utilization management, case management, and overall clinical and financial performance.

“Indiana’s robust life sciences sector and talent pipeline are primed to support health care services providers like PC3 Health,” said Governor Mike Braun. “PC3 Health joins a growing list of innovative and tech-enabled companies, from small businesses to Fortune 500 firms, choosing Indiana and its communities for long-term growth.”

The company’s new office will house a range of professional positions, including physician advisors, case managers, data analysts, and administrative support staff. The Jeffersonville site allows PC3 Health to tap into the growing health care and life sciences workforce in the region while remaining closely connected to hospital partners throughout the Midwest and beyond.

“We are excited to expand our footprint into Indiana and become part of the Jeffersonville community,” said Karan Shah, M.D., managing partner of PC3 Health. “Our mission is to provide strategic guidance and clinical expertise to hospitals navigating the increasing complexity of payor relationships, utilization, and case management. This expansion positions us to better serve our partners while creating meaningful, well-paying jobs in the region.”

Local and regional community leaders also welcomed the announcement, noting the importance of attracting health care and professional services employers to the city’s downtown corridor.

“PC3 Health’s decision to locate in the City of Jeffersonville is yet another victory for our growing community and we welcome their presence and partnership,” said Mayor Mike Moore. “This announcement brings new premium high-wage jobs for our residents, reactivates a key commercial building on Spring Street, and further reinforces Jeffersonville’s reputation as a destination for innovation.”

“Health care and life sciences remain priority sectors for southern Indiana,” said Lance Allison, President & CEO of One Southern Indiana Chamber & Economic Development. “PC3 Health’s investment underscores the region’s ability to support fast-growing, high-impact companies that invest in their people, customers, and community.”

PC3 Health specializes in utilization management and case management services for hospitals, helping reduce claim denials, improve patient throughput, and enhance financial performance. The Jeffersonville expansion represents the company’s next phase of growth as demand for its services continues to increase nationwide.

For more information about PC3 Health, visit www.pc3health.com

About PC3 Health 
PC3 Heath are the approvals champion. We fight for better outcomes and brighter futures for healthcare organizations and the patients and communities they serve. We are physicians, nurses, and administrators who have experienced what healthcare organizations experience. We know how to help them get more yes, to ensure providers get the support they need to deliver the quality care patients need today and in the future. By working hand-in-hand with healthcare organizations, we leverage an innovative blend of data analysis, technology and human interaction to go beyond simply overturning payor denials and build strategies for future prevention.

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. 

MEDIA CONTACTS

PC3 Health
Nicole Yates
Nicole.Yates@pc3health.com
(812) 987-6266

One Southern Indiana
Ellinor Smith
ESmith@1si.org
217.320.4832

Strong Output, Slower Hiring: A Look at Recent Economic Trends

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

The current macroeconomy has been described by some as a “no hire–no fire” economy. Gross domestic product (GDP), a measure of the market value of goods and services produced, has been strong, with third-quarter estimates now at 4.4%. In the most recent quarter, growth was driven primarily by a combination of the resilient consumer, and a reversal of the import surge observed during the first quarter of the year.

Despite the strong growth, comparable gains have not followed in the labor market. Payroll growth has slowed significantly from last year, and hiring activity has declined. Layoffs, however, have not surged. In fact, layoffs remain at historically low levels and well below arecession threshold of roughly 350,000 initial claims per week. Employers, it seems, are holding onto workers, but are increasingly reluctant to add new ones.

Closer to home, we are observing similar patterns across the State of Indiana. The latest state GDP report shows robust 5.1% growth in the third quarter, the strongest quarterly growth since late 2023. Yet job gains for both 2024 and 2025 are running at the slowest pace of the past decade, excluding the sharp losses associated with the COVID recession. Year over year, Indiana payroll employment is ahead by roughly 19,000 jobs, below both pre-pandemic and post-pandemic averages of approximately 27,000 and 38,000 jobs, respectively.

Interestingly, 2019 produced the third-weakest year for job growth over the past decade, with payrolls rising by only about 20,000 jobs. That year followed the implementation of tariffs in 2018, including those on steel and aluminum, an important point of reference for today.

Nearly all the jobs added over the past year in Indiana came from healthcare, which accounted for roughly 17,000 of the 19,000 net jobs gained. Other notable gains came from professional and business services, which added about 9,000 jobs, and construction, which contributed another 3,000.

Indiana remains a national hub for both manufacturing and logistics. Both sectors are particularly sensitive to trade policy, and both struggled in 2025. Transportation and warehousing shed approximately 4,000 jobs over the year, while manufacturing employment was essentially flat. For manufacturing, however, 2025 represented something of a stabilization year following losses of roughly 14,000 and 10,000 jobs in the prior two years.

Turning to Louisville Metro, the latest data show that payroll growth has modestly accelerated in the second half of the year. While the most recent figures show a net gain of about 2,000 jobs over the year, average monthly gains in the second half exceeded those seen earlier in the year. Unlike Indiana, healthcare is no longer the dominant job-creation sector in Louisville Metro, adding fewer than 1,000 jobs in 2025. Last year, Louisville healthcare drove a significant component of overall job growth.

Like Indiana, Louisville is both a manufacturing region and a logistics hub, and both sectors experienced job losses over the past year. Manufacturing employment declined only slightly, but transportation and warehousing shed approximately 2,000 jobs. Construction, by contrast, added more than 2,000 jobs.

Taken together, 2025 stands out as one of the slowest years for job growth for both Indiana and Louisville Metro. Higher interest rates initially weighed on manufacturing activity beginning in 2022. More recently, however, the impact of tariffs appears to be a growing headwind for both the Indiana economy and the Louisville Metro area. Tariff-sensitive sectors such as manufacturing and transportation and warehousing have borne the brunt of these effects. With GDP growth running strong and consumer spending remaining resilient, tariffs increasingly stand out as a key factor holding back job growth.

A Growing Economy, a Stalled National Labor Market

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

The “dot-com” recession of the early 2000s and the Great Recession of 2007 to 2009 have both been described as “jobless recoveries.” In each case, economic growth, as measured by GDP, returned to positive territory as the recession ended, but job growth lagged for years afterward.

During the 2001 tech-driven recession, employment continued to decline through mid-2003, even though the economy had already resumed growth. Following the housing-led Great Recession, employment did not return to its pre-crisis level until 2014, nearly five years after the recession officially ended.

Fast forward to today.

We are now approaching the one-year anniversary of so-called “Liberation Day,” when a sweeping and unprecedented increase in taxes on consumption — in the form of tariffs — was rolled out with the stated goal of “liberating” the American worker and bringing jobs back to the United States, particularly in manufacturing. At the time, press accounts highlighted optimistic projections from officials, who spoke confidently about sizable job gains in the second half of 2025 driven by reshoring and small-business hiring.

Instead, as we enter early 2026, the U.S. economy appears to be on the verge of something different — a jobless boom.

Why jobless, and why a boom?

Start with the labor market. Payroll growth slowed dramatically in the second half of 2025, nearly grinding to a halt. On a year-over-year basis, job growth remained below 1 percent throughout the second half of the year, with the most recent report showing growth of just 0.4 percent.

To put that in historical context, we must go all the way back to the early 1980s to find a similar combination of sub-1 percent job growth occurring outside of an active recession. Even then, that period was sandwiched between two back-to-back recessions. Outside of that episode, year-over-year job growth below 1 percent has almost always been associated with the lead-up to a recession, the recession itself, or the immediate aftermath.

And yet, we are not currently in a recession.

GDP growth did turn negative in the first quarter of 2025, but for a very specific reason. Faced with the looming implementation of tariffs, businesses and consumers rushed to stockpile imported goods. Because imports subtract from GDP, that surge temporarily pulled growth into negative territory. Once that front-loading faded in subsequent quarters, GDP growth rebounded.

In fact, growth came roaring back. Heavy investment in artificial intelligence and data-center infrastructure, along with resilient consumer spending, pushed third-quarter GDP growth above 4 percent. The Atlanta Fed’s GDPNow tracker currently projects growth above 5 percent for the fourth quarter of 2025. In short, while the labor market is clearly showing strain, the broader economy is anything but recessionary.

So how do we reconcile robust growth with such weak job performance?

On the growth side, the answer lies in a combination of strong consumer spending, massive AI-related investment, and the unwinding of trade distortions tied to tariffs. In the third quarter alone, consumer spending and net exports accounted for roughly 93 percent of total GDP growth.

The labor market, however, tells a more troubling story beneath the surface. Initial unemployment claims remain subdued and well below recessionary levels, suggesting that widespread layoffs are not occurring. But continuing claims continue to rise, increasing by 56,000 in the most recent report. The number of long-term unemployed, those out of work for 27 weeks or longer, has climbed by nearly 400,000 over the past year. The number of people working part-time for economic reasons has increased by almost one million, and those not in the labor force who still want a job are up by nearly 700,000.

These are not recession numbers, but they are not healthy numbers either.

The fundamental question now is how long the consumer can continue to carry the economy in the absence of meaningful job growth. Whether the forces at work are AI-driven productivity gains, tariff-related uncertainty, inflation fatigue, or some combination of all three, a sputtering job engine will eventually constrain household income growth. And without sustained income growth, consumer resilience will fade.

A jobless recovery is one thing. A jobless boom may be something entirely new, and far more fragile.

From Dot-Coms to Data Center: What Past Booms Can Teach Us About AI

by with No Comment 1si NewsEconomic Development
submitted by Uric Dufrene, Ph.D., Sanders Chair in Business, Indiana University Southeast
 

Are there similarities between what we are seeing today with artificial intelligence, and the massive investment required to build the data-center infrastructure that supports it, and the dot-com collapse or the housing crisis that led to the Great Recession? It’s a reasonable question, and one worth examining.

To answer it, we need to go back to the late 1990s.

As the calendar approached the year 2000, companies poured billions of dollars into technology upgrades to prepare for Y2K. Dire predictions circulated about elevators failing and planes falling from the sky when the clock rolled over to January 1, 2000. None of that happened. But the investment surge was real.

At the same time, the internet was rapidly gaining traction. Businesses were building websites, consumers were beginning to shop online, and entirely new business models emerged that relied exclusively on the internet. Innovation was real, but so was speculation. Stock prices soared, especially in technology shares. The NASDAQ Composite nearly doubled between 1998 and its peak in early 2000.

When earnings and profits failed to match lofty expectations, valuations collapsed. Remember the infamous pets.com. The NASDAQ ultimately fell nearly 80% from peak to trough, contributing to the 2001 recession. It would take roughly 15 years for the index to fully recover the value lost during the dot-com implosion.

As always, investors then went searching for returns elsewhere. Capital flows to the highest rate of return, adjusting for risk.

In the mid-2000s, that search increasingly led to structured mortgage products, most notably mortgage-backed securities and collateralized debt obligations. These instruments pooled mortgage payments and passed the cash flows through to investors. Because housing prices had risen steadily for decades, these securities were widely viewed as lower risk.

Demand surged. To meet it, lenders originated more mortgages, often with weaker underwriting standards. Adjustable-rate mortgages proliferated, loan-to-value ratios climbed, and in some cases mortgages exceeded the value of the homes themselves. As long as home prices kept rising, the system appeared stable. 

That stability proved illusory. When interest rates reset higher and borrowers began missing payments, the cash flows supporting these securities deteriorated. Losses spread quickly through the financial system, triggering the 2008 financial crisis and the Great Recession, the most severe economic contraction since the Great Depression. The pets.com implosion years earlier ultimately turned into the Great Recession. 

So how does artificial intelligence fit into this historical comparison?

Once again, we are witnessing massive investment tied to transformative technology. Hundreds of billions of dollars—and potentially more than a trillion globally over the coming decade—are being invested in data centers, power infrastructure, and advanced semiconductor capacity to support AI. These investments are helping fuel equity markets, with a small group of large technology firms—the so-called “Magnificent Seven”—accounting for a disproportionate share of recent stock market gains.

As in prior cycles, leverage is playing a role. Much of this build-out is being financed with debt. While some of that debt is long-term, concerns are emerging about mismatches between financing structures and the underlying assets. Data centers may last decades, but the chips inside them often have useful lives measured in just a few years. Financing rapidly depreciating technology with long-dated debt introduces risk.

Markets have already shown sensitivity to that risk. Recently, disappointing news from a handful of AI-infrastructure firms triggered sharp reactions in equity prices. High expectations are embedded in today’s valuations, and much must go right for projected returns to materialize. Ultimately, someone must service the debt and deliver returns to capital providers.

That does not mean an AI-driven collapse is inevitable. There are important differences from past cycles. Many of today’s leading technology firms are profitable, cash-rich, and generating real revenue growth. AI is delivering tangible productivity gains, not just speculative promise.

Still, history offers a cautionary lesson. Periods of transformative innovation are often accompanied by overinvestment, financial excess, and unrealistic expectations. When returns fail to materialize as quickly or as broadly as hoped, markets adjust—sometimes abruptly.

The risk is not artificial intelligence itself. The risk lies in how aggressively it is being financed, how optimistic the assumptions have become, and whether capital discipline is maintained. History doesn’t repeat, but it often rhymes—and investors would be wise to remember that as the AI investment cycle continues to unfold.

The “No-Hire, No-Fire” Economy: What the Latest Data Really Shows

by with No Comment 1si NewsEconomic Development
Submitted by Uric Dufrene, Ph.D., Sanders Chair in Business, Indiana University Southeast
 

We are finally beginning to see key economic data emerge following the nation’s longest government shutdown. While some releases are more dated than usual, they still shed important light on the current state of the U.S. economy.

The phrase “a no-hire and no-fire economy” remains fitting and describes today’s labor market well. Conditions are clearly softer than a year ago. The unemployment rate, at 4.3%, is still historically low, but the nation’s job creation engine continues to cool. The September BLS report showed a gain of 119,000 jobs, with only 97,000 coming from the private sector. Revisions for July and August moved both months downward, with August now showing a decline of 4,000 jobs.

Healthcare again led the way, adding 43,000 jobs, accounting for nearly half of all jobs created. Food services and drinking places was the second-strongest contributor.

But weakness is visible across several economically sensitive sectors. Transportation and warehousing lost 25,000 jobs. When the economic engine is accelerating, we normally see strong gains here, as goods are produced, shipped, and stored. Manufacturing lost another 6,000 jobs, continuing a trend that has yet to show any meaningful benefit from tariffs. Professional and business services, a key leading indicator of broader economic activity, fell by 20,000, with temporary labor accounting for 16,000 of that decline. Employers tend to cut temporary labor first when conditions weaken, and add those workers back first when the cycle turns. So, these losses are noteworthy.

Digging deeper, the lowest unemployment rate by occupation group was in management, business, and financial operations, interesting given the headlines about AI-driven job destruction. The highest unemployment rates were in farming, fishing, and forestry (7.4%), followed by transportation and material moving (5.5%), and production occupations (4.7%).

Initial claims for unemployment continue to run at historically low levels, but continuing claims are not declining. These combined statistics suggest that it is taking longer for the unemployed to find work. Those unemployed for 15 weeks or longer have increased by 350,000 since last year.

The bottom line: This is an economy that is not generating a significant number of jobs, and that is the primary reason the Federal Reserve is likely to cut rates again in December. As we noted several columns ago, the Fed would eventually shift its concern toward the labor market. At that time, we projected three additional rate cuts in 2025. We have now seen two cuts, with one meeting left this year. The CME Fed Watch Tool shows an 86% probability of a December cut, a jump that followed comments from New York Fed President John Williams signaling support for further easing.

Turning to consumers, early Black Friday reports indicate spending will surpass last year’s levels. Black Friday continues to blend value-driven shopping with experiential activity, so it is still too early to declare the full holiday season’s performance. However, the National Retail Federation is projecting growth, and the initial data support that outlook. Wage growth continues to outpace inflation, additional fuel for consumer spending.

Still, the Fed is justified in cutting rates in December, especially with rising concerns about the labor market. The economy has been propped up by strong consumer spending, but consumer strength ultimately depends on employment. The latest retail sales report showed a decline, and consumer confidence has taken another hit. Continued labor market weakness could eventually derail the resilient consumer and tip the economy into recession. We are not there yet, but the Fed is wise to act now to help prevent that outcome.

What to Expect in 2026: Regional Strength Meets National Softening

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

–A summary of my Louisville–Southern Indiana 2026 forecast as presented at this year’s Futurecast.

The 2025 economic outlook anticipated faster payroll growth and an unemployment rate near 4 percent. We also expected the U.S. to avoid a recession, supported by continued resilience from the American consumer. As of late 2025, that assessment has held up. Payrolls in the Louisville Metro area are up about 5,000 jobs from a year ago—though this excludes a few months of data due to the federal shutdown—and the unemployment rate remains at 4 percent. Consumers continued spending throughout 2025, but recent indicators suggest a possible shift in the type and pace of spending as we move into 2026.

Outlook for 2026

For 2026, the region should not expect a significant acceleration in growth. A softening national labor market is likely to ease consumer spending, and because Louisville’s economy closely mirrors national trends, local growth will moderate. Payroll gains will likely fall below 10,000 jobs, compared with close to that number in 2025. The unemployment rate is expected to rise modestly, drifting toward 4.5 percent and possibly approaching 5 percent by year-end. This represents a slowing, not a reversal, of local economic momentum.

Sector Performance

Education and health services remain the region’s strongest sector. It added nearly 2,000 jobs last year and 6,000 jobs over the past two years, almost half of all net new jobs in that period. Professional and business services, the region’s second-largest sector, grew by just under 1,000 jobs. Retail trade added roughly 1,000 positions, reversing last year’s decline, while construction continued its strong performance with about 2,000 new jobs, supported in part by major projects such as the Meta facility in Clark County.

Manufacturing, Louisville’s third-largest sector, remains in positive territory but only slightly. Tariffs, slower global demand, softening new orders, and weaker unfilled-order levels continue to weigh on the sector. The ISM Manufacturing Index remains below 50, signaling contraction, and both the employment and production components have fallen back into negative territory after brief improvement early in the year. Transportation and warehousing, a major economic pillar for the region, also posted job losses of around 1,000, reflecting a slowdown in global shipping tied to tariffs and supply-chain adjustments. Leisure and hospitality declined by roughly 1,000 jobs after strong post-pandemic growth.

National Indicators and Local Implications

With limited BLS data during the federal shutdown, alternative indicators point to a broader national slowdown. The ADP report showed private-sector job gains of only 42,000 in October, the first positive reading since July.  Small businesses, those employing fewer than 20 workers, are hiring at the slowest pace since the Great Recession. Firms with 20 to 49 employees have had negative year-over-year job growth all year, the weakest since 2011. The NFIB survey shows declining small-business optimism and reduced hiring plans. Challenger, Gray & Christmas reports layoffs at the highest levels since the Great Recession, excluding the pandemic.

Why does this matter for Louisville? Because nearly half of U.S. workers are employed by small businesses, and small-business pullbacks often signal broader economic cooling.

Consumer spending has carried the U.S. economy for three years, even through 40-year-high inflation in 2022. Personal consumption expenditures have outpaced overall GDP in six separate quarters since then. But consumer sentiment indicators are weakening: households report the worst financial conditions in six years, buying conditions for durable goods are near 15-year lows, and concerns about job loss are the highest since the pandemic. A softening labor market or a decline in equity values could prompt households to reduce spending, which would affect Louisville’s consumer-driven sectors.

Local foot-traffic data across Louisville Metro already show signs of restraint. Restaurant visits are down 3.2 percent, bars and pubs down 9 percent, liquor stores down 5 percent, and beauty and spa visits down 2.4 percent.

Southern Indiana

Southern Indiana continues to be one of the region’s bright spots. It leads all Indiana metro areas in net domestic migration, supporting labor-force expansion and employment growth. The region has avoided overall payroll declines since 2021. Early 2025 data show modest declines in manufacturing, transportation, and professional services, but health care and social services added 935 jobs in one quarter—more than the net gain for the region—continuing a three-quarter trend of sectoral dominance.

Long-Term Challenges

Indiana’s college attainment levels remain a structural concern. While the number of U.S. workers with bachelor’s degrees rose from 36 million in 2001 to 66 million in 2025, the number of workers with only a high-school diploma remained flat. Indiana’s attainment rate of 29 percent ranks 43rd nationally, and the state’s college-going rate has fallen from 65 percent to just over 50 percent. Over the past five years, Indiana employers posted 900,000 jobs requiring a high-school diploma but 1.35 million requiring education beyond high school. Long-term economic competitiveness will depend on reversing these educational trends.

Conclusion

For 2026, the Louisville Metro and Southern Indiana region should expect slower but still positive growth. Payrolls will rise modestly, unemployment will edge higher, and consumer activity will soften. While tariff uncertainty and national cooling present challenges, a recession is not currently in the outlook. The year ahead will be defined by sub-trend growth, cautious hiring, and heightened sensitivity to national economic signals.

The Consumer Engine Is Still Running – But for How Long?

by with No Comment 1si NewsEconomic Development

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

After a long drought of government economic releases, we finally got a key update last week: the Consumer Price Index (CPI) from the Bureau of Labor Statistics. The report came a little later than usual because of the government shutdown, but it was important enough to call BLS staff back to work to calculate the annual cost-of-living adjustment for Social Security recipients.

Inflation inched up slightly from the prior month, with the annual rate rising back to 3%. That was a bit less than expected, and Wall Street celebrated. The Dow surged nearly 500 points on the day, as investors bet that the softer inflation data boosted the odds of a Federal Reserve rate cut next week. The probability of an October cut now sits near 100%, and markets are also pricing in another cut by December with odds above 90%.

With the shutdown delaying federal releases, labor-market data have been limited. The most recent ADP report (a private sector employment report) showed national payrolls declining in September, and the August figures were revised down from a modest gain of 54,000 jobs to a small loss of 3,000. While ADP and BLS numbers often diverge, if this pattern holds when the next BLS report eventually appears, it would point to a labor market beginning to feel some strain.

Why does the labor market matter so much for growth? As we’ve noted before, consumers account for roughly 70% of the U.S. economy—and they’ve carried an outsized share of that growth recently. In three recent quarters, consumer spending contributed more to GDP than overall economic growth itself, meaning that without strong consumer spending, GDP would have been much weaker. Any disruption to that engine, particularly from a softening labor market, could spell trouble for the broader economy.

Consumer sentiment, meanwhile, has been mired in pessimism since inflation reappeared in 2022. Yet despite complaining about higher prices, consumers have kept spending. Strong stock-market gains and rising home equity have boosted household wealth, creating tailwinds for spending. The labor market also provided confidence, at least until recently, when job openings far exceeded the number of unemployed workers. That gap has now closed, and the number of unemployed has overtaken total job openings for the first time in several years.

While layoffs remain relatively modest, job growth has clearly slowed. We’re no longer seeing the robust hiring of a year or two ago, and recent indicators even suggest the possibility of job declines.  That’s significant, because inflation didn’t stop consumers from spending, but the fear of job loss will.

The story of the past year has been one of remarkable consumer resilience. But resilience has its limits. If the labor market weakens further, it could finally cool the consumer engine that has kept the economy humming. The next few months will reveal whether the Fed’s anticipated rate cuts arrive in time to cushion the landing, or if consumers start to tap the brakes.

Sazerac Announces Expansion in New Albany 25 new jobs to be added and $38 million to be invested 

by with One Comment 1si News1si Press ReleaseEconomic Development

New Albany, Ind. (October 16, 2025) – Sazerac of Indiana, LLC, doing business as Northwest Ordinance Distilling, today announced plans to expand its operations in New Albany, following today’s approval of a local property tax abatement by the New Albany City Council. The project represents a capital investment of more than $38 million, including over $35 million in new equipment and over $2 million in real property improvements. 

The expansion will enable the company to increase production capacity to meet growing demand for its distilled spirits products. The project will also create 25 new full-time positions, while ensuring the continued employment of the company’s existing 357 team members in New Albany. 

“This expansion marks an exciting next step for our New Albany operation,” said Jake Wenz, CEO and President at Sazerac. “As demand for our products continues to grow, this investment will help us better serve our customers while reinforcing our commitment to the New Albany community. We’re grateful to the City of New Albany and One Southern Indiana for their ongoing partnership and support, which make growth like this possible.” 

“We’re proud of Sazerac’s continued success here in New Albany and for their confidence in our community to make these significant investments,” said Mayor Jeff Gahan. “This expansion reflects the strength of our local workforce and exemplifies the city’s ongoing commitment to supporting quality job creation.” 

Sazerac of Indiana has been operating in New Albany since 2017, when it located and revitalized the former General Mills facility on Grant Line Road. Since then, the company has achieved significant growth, made substantial capital investments, and drawn upon the strength of the local workforce while expanding its team. 

Sazerac Company, one of the nation’s oldest privately held and family-owned distillers, operates the New Albany facility—Northwest Ordinance Distilling—where it bottles a diverse range of spirits for nationwide distribution. 

“Sazerac’s continued growth in southern Indiana underscores both their confidence in this community and the region’s long-term strength as a global hub for manufacturing and logistics,” said Lance Allison, President and CEO of One Southern Indiana (1si). “We’re proud to support this expansion and the quality jobs it brings to southern Indiana.” 

Construction and equipment installation are expected to begin later this year. 

About Sazerac of Indiana, LLC / Northwest Ordinance Distilling 
Sazerac of Indiana, LLC, operating as Northwest Ordinance Distilling, is a wholly owned subsidiary of the Sazerac Company, one of the largest distillers in the United States. The New Albany facility produces a variety of distilled spirits for distribution across the U.S. and internationally. 

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.