Economic Update | The Southern Indiana Economy

by with No Comment Economic Development

—More diversified from 20 plus years ago, and the importance of exports 

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

Whatever is the outcome, changes in trade policy will have implications for the Southern Indiana economy. In 2023 alone, four of the five counties (Floyd, Clark, Harrison, and Washington) had total exports of approximately $1.1 billion. Total wages paid in the five Southern Indiana counties are approximately $1.5 billion. One conclusion we can draw from this is that exports are a key piece of the business model for many companies located across the region.    Disruptions to this model, such as retaliatory tariffs, will have implications for Southern Indiana business and industry.    

A look back at the Southern Indiana economy will help us understand the changes to key industries like manufacturing, and whether manufacturing has been “hollowed out” as described by some.   

In 2001, total payrolls across Southern Indiana stood at 77,310 with an average weekly wage of $513. Total wages, the collection of all wages paid by establishment firms, were $603 million. Manufacturing was the largest industry back in 2001, with almost 21,000 employees earning an average weekly wage of $637, or 124% higher than the overall average weekly wage. The largest industry in manufacturing was furniture and related product manufacturing, with 23 firms and an average weekly wage of $516. Total wages in manufacturing were about 29% of total wages paid. Think of this as manufacturing being responsible for 29% of all wages paid across the region.   

Let’s jump to 2024, the most recently available data year. Total payrolls across the Southern Indiana metro counties have grown considerably since 2001, now totaling 107,000, and with average weekly wages of $1,113, double the level that existed in 2001. Manufacturing is no longer the largest sector, however.  Total employees in manufacturing are now a little over 15,000, with average weekly wages of $1,226. The wage premium in manufacturing has declined from 2001, now at 110% of the average weekly wage. As a percentage of total wages, manufacturing represents about 16% of total wages paid by establishments across the region. The largest industry in manufacturing is no longer furniture and related products. The top spot is now occupied by, surprisingly, wood products manufacturing, with average weekly wages of $1,035.    

While this is lower than the share in 2001, it is also a sign of greater diversification in the regional economy, an important defense to any national slowdown in the macroeconomy. The largest industry is now healthcare, with over 17,000 employees and an average weekly wage of $1,145.    

How have wages grown compared to wages across Indiana? Relative to Indiana, and given the decline in the share of manufacturing jobs, have we progressed relative to Indiana, or declined? In 2001, Southern Indiana average weekly wages were 86% of the state average. In 2024, average weekly wages in Southern Indiana are up to 95% of the state average. So, despite the decline in manufacturing jobs, average weekly wages have improved relative to Indiana wages.  With a more diversified economy, Southern Indiana has grown to have higher-paying jobs in the service area, like professional and business services, and financial activities.   Both industries employ 2,000 more people than in 2001, and at wages that are significantly higher than manufacturing and overall average weekly wages. 

Much is being said about the loss of automotive manufacturing jobs in Detroit, and the need for protective tariffs to help restore the lost jobs in the automotive capital. 

Since 1995, the change in transportation equipment manufacturing (automotive manufacturing is part of this industry) in ten automotive-producing states was a negative 149,000, with Michigan alone making up 130,000 of that decline. In the nine other states combined, the decline is 19,000, representing an average of just over 2,000 jobs per state. One fact that is indisputable is that technology has made manufacturing more advanced today than in 1995. Manufacturers employ robotics, are more automated than in 1995, and consequently more productive. On a per-automotive basis, manufacturers need fewer people as a result.   

Tariff proponents like to offer Detroit as an example of why tariffs are key to protecting and revitalizing domestic manufacturing.  When we hear talk about restoring the lost automotive jobs in Detroit, then they also need to talk about moving jobs from states like Indiana, Missouri, Kentucky, Alabama, Mississippi, and a few others, because that’s where some of those Detroit jobs likely ended up. 

Economic Update | Will Uncertainty Cause a Slowdown?

by with No Comment 1si NewsEconomic Development

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

With consumers making up 2/3rds of the U.S. economy, they have a large sway over the macroeconomy trajectory.  Over the past year, for example, economic growth remained strong largely due to consumer spending. Making up one of four components of GDP (gross domestic product), along with investment, government spending, and net exports, it was consumption that drove the strong economic growth of the past year. Given the outsized role and the contributions to last year’s growth, consumers will have a large say in what happens to the economic landscape over 2025.       

In a nutshell, signs are beginning to point to some hesitation. Both soft and hard economic indicators show that consumers may balk. 

Coming out of the pandemic, a combination of government stimulus and supply shortages caused inflation to accelerate to a 40-year high. Consumer sentiment plummeted as a result, reaching historical lows. In fact, consumer sentiment was even lower than levels associated with prior recessions, but the U.S. escaped any recession. As inflation decelerated, consumer moods were improving, and sentiment began an upward climb. Consumer confidence, another measure that is tilted more toward the effects of the labor market, also was down, but with the strong job market, levels were not at historically low levels.     

Following the election, optimism, as measured by both consumer confidence and sentiment, surged. It was not just consumers.  Small business optimism had one of the largest spikes in the history of the series.  The last time a similar spike had been observed was after the 2016 presidential election.    

Then uncertainty emerged, kryptonite to markets and the economy. Administration messages of tariffs on and tariffs off. Tariffs up, and tariffs down. Carve-outs and exemptions. The off-and-on-and-ups and downs introduce something called risk. Throw in more risk, especially risk that was not necessarily anticipated, and this will serve as the killer to any stock market. Higher risk means lower asset values, and the NASDAQ moved into correction territory.  Just like that, trillions of value destroyed.  And capital likes to flow to the highest rate of return, other things equal, and the result is an exodus of capital from the USA.  A recent fund manager survey showed the biggest drop in US equity allocation on record, with the US showing the largest decline and the Eurozone showing the largest gain in equity allocations.    

What does this have to do with the economy and the consumer?  As we’ve written in the past, two of the main reasons for consumer resiliency were the labor market and household net worth, driven by a combination of home values and equity investments, i.e., the stock market. Corrections have happened in the past and are part of historical stock market patterns, but investment behavior is also influenced by expectations, and the current level of uncertainty, along with stock market declines and volatility, were not exactly expected.     

We see the impact of uncertainty on consumer activity here in Louisville Metro. Examining foot traffic for seven consumer-related industries, restaurants, shopping centers, home improvement, theaters and music venues, hobbies, gifts and crafts, hotels and casinos, and clothing, we see a stark change in behavior from early December (when expectations were running high) to late February. In early December, five out of the seven industries were running above trend with foot traffic, compared to the year before. The latest data show that six of seven are now running below trend, with negative changes compared to the previous year.  Only hobbies, gifts, and crafts are just slightly above trend. Puzzles anyone? 

Other spinoffs of uncertainty. In the latest NFIB survey, only 12% of owners reported it was a good time to expand their business.  This was down 5 points from the previous survey, and was the largest decline since April 2020, during the height of the Covid recession.   And only 37% of the respondents expect the economy to improve, down 10 points from the previous month. All this is the product of uncertainty, as the uncertainty index rose another four points, the second highest level of uncertainty since the early 90s. With uncertainty, small business owners are less likely to take risks, seek financing, or commit to major capital investment. This will act as a squeeze on the economy, contributing to a slowdown in overall growth.  The latest Atlanta Fed GDP Now estimate of GDP for the first quarter is a minus 1.8%.  A big driver of this is the surge in imports due to the threat of tariffs.  But negative is negative, and that’s where the latest estimate stands. If this holds, it will be the first negative change in GDP since the first quarter of 2022, and who knows, maybe one of the fastest pivots in the economy, from U.S. exceptionalism to a self-inflicted slowdown.   

Economic Update | Southern Indiana Payrolls Accelerate

by with No Comment 1si NewsEconomic Development
–Slower growth emerging for nation 

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

It has been an exhausting roller coaster ride for the past couple of weeks.  As we mentioned in the two updates, we are seeing changes in the indicators that point to a pivot in the economy, from solid to slower growth, and a reversal of optimism, from upbeat to diminishing.   Before we start with some of the emerging negatives, let’s take a quick look at some good news: the latest data on Southern Indiana. 

County payroll data were recently released, and the results were very favorable for Southern Indiana. Payrolls, or jobs located in the five Indiana counties of the Louisville Metropolitan area, surged for the 3rd quarter of 2024, increasing by 1,816 compared to the prior year.  Health care once again led all job gains, with the industry adding over 1,000 jobs.  Transportation and warehousing added almost 700 jobs.  Since Covid, this industry has gained over 2,000 jobs.  Other industries increasing by 200 payrolls, plus or minus, include wholesale and retail trade, professional, scientific and technical services, and educational services.    The growth of all these industries points to a strong Southern Indiana economy in the second half of 2024.    

Other notable positives in the report include the increase in establishments and wages. Establishments increased by 138, the largest increase since the first quarter of 2023. Total wages, an accumulation of all wages paid by establishments located in the five Indiana counties of the Louisville MSA region, saw the largest increase on record. Total wages increased by $231 million, partly driven by the largest increase in average weekly wages of $139.   As a comparison, the largest increase prior to this level was $170 million back in 2022.  A closer look at the data indicates that these wage gains were driven primarily by the retail trade sector, showing a significant jump in average weekly wages. The jump is unusual, so this might require some additional scrutiny.   

Manufacturing, suffering from the nationwide manufacturing slump, lost more than 700 jobs, now 6 consecutive quarters of payroll declines. Outside of recessions, the most recent time of slower manufacturing growth occurred in 2018 and 2019. Recent national developments point to a deteriorating environment. The latest ISM report, a measure of the state of manufacturing and developed from surveying purchasing managers, edged closer to contraction again, but more alarmingly was the significant drop in new orders and a spike in prices.   

This leads us to the national economy. Uncertainty, largely driven by the seemingly daily changes in tariff policy, is having an impact on consumer and business sentiment.  The latest Conference Board Consumer Confidence number, a series that had been more positive than the alternative Michigan consumer sentiment measure, dropped, and the decline was larger than expected. Consumer spending, measuring both goods and services spending, dropped 2/10ths of a percent, the largest decline since February 2021. The decline would have been even higher without the large increase in housing and utilities, reflective of higher rent payments and home ownership costs.   

The last national employment report showed a solid increase in payrolls. Even though the change was less than expected, an increase of 151,000 provided some confidence that the labor market is maintaining some strength. Unemployment claims spiked to 242,000 the week before last but fell back to a level closer to 200,000. The household component of the employment report was less favorable. Employment declined by more than 500,000, and the labor force participation rate, an important input to the supply side of the economy, declined by 2/10ths of a percent. The result was an increase in the unemployment rate from 4% to 4.1%. 

The Beige Book, the Federal Reserve publication based on feedback and input from business organizations throughout each district, shared light to some of the concerns around uncertainty. The St. Louis District portion of the report, which covers Southern Indiana and Kentucky, cited that “contacts across multiple industries expressed uncertainty about the impact of policy changes and were holding off investment until further clarity.”  Contacts indicated that the “outlook has declined from slightly optimistic to neutral.”  The volatility in equity markets, connected to policy uncertainty, along with a decline in confidence and optimism by both consumers and businesses, will push slower growth over the near term.  Treasury Secretary Scott Bessent indicated in a recent interview that one of the goals of the administration was to decrease the rate on the 10-Year Treasury.   The 10-Year is in fact, declining, but for the wrong reasons, slowing growth and now a recession on the horizon. One positive is that reductions by the Federal Reserve may now be back on the table sooner than expected from just two weeks ago.    

Economic Update | The Economy Pivot

by with No Comment 1si NewsEconomic Development

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

The consumer represents 2/3rds of the economy, and despite record-high inflation, has been the major driver of the macroeconomy’s economic growth. Preliminary estimates show, for example, that the last quarter of 2024 would have seen negative growth had it not been for the robust consumer. Even with consumer sentiment hitting lows that previously were associated with recessions, the consumer was not deterred, and the economy forged ahead. Our last Economic Update introduced the possibility of fading consumer optimism and the impact on the overall economy. For example, small business optimism saw one of the largest increases following the election. More recent surveys are now pointing to a decline in optimism, and more troubling, is a significant spike in uncertainty.      

The most recent consumer sentiment survey showed a further decline in consumer optimism, along with expected price increases a year out, the highest reading since 1995.  Sentiment data have shifted to the expectation of higher prices, added confirmation with the release of the most recent Consumer Price Index (CPI) report showing hotter than expected inflation. As Economic Update pointed out last year, we will likely see fewer interest rate reductions this year, if any. The latest inflation data, inflation expectations, and the labor market have pushed any rate changes back until the earliest of the 4th quarter of this year.    

Are we about to see a pivot with consumers and the recent behavioral patterns connected to consumer optimism?  The last retail sales report saw one of the steepest drops in retail spending since 2020. Walmart, the nation’s largest retailer, saw sales and earnings per share come in weaker than expected.  More alarming, however, was the guidance issued expressing concerns with uncertainties in consumer behavior, global economic conditions, and geopolitical factors. Walmart stock plummeted as investors reacted to the slower growth forecasts.   

Emerging from the pandemic, the goods economy was quite strong. Goods spending boomed, and manufacturing benefited as a result. Indiana and Kentucky saw strong growth in payrolls. Since then, goods spending subsided, manufacturing entered a slump, and the service side of the economy propelled growth. Cracks are beginning to surface with services, the engine of the overall economy. A recent survey of purchasing managers saw the largest decline in the index since mid-2022.  The index remains above 50, indicating expansion, but the magnitude and abruptness of the decline could indicate an emerging shift in the economy. While the overall index signifies overall expansion in the economy, the services component of the index showed contraction. If there was a silver lining, pricing in the service sector cooled, with prices showing the smallest monthly increase since the pandemic.   

Closer to home, Louisville Metro ended the year with a gain of 6,000 plus payrolls and an unemployment rate of 4.4%, close to the Economic Update forecast of 8,000 payrolls and an unemployment rate of 4.5%. These data are preliminary, but the takeaway is that payroll growth was softer in 2024 than prior years. Healthcare led to all job gains, and without the sector’s strong growth, Louisville would have seen flat to negative job growth. 

The Economic Update outlook was favorable for 2025 and expecting stronger growth from 2024. That will likely change, as the economy pivots, perhaps unexpectedly, to a self-inflicted slower growth phase, along with sticky prices. Not a good combination for consumer optimism.   

Economic Update | Is Optimism About to Fade?

by with No Comment 1si NewsEconomic Development

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

–Will consumer spending finally take a hit? 

The last economic update pointed to the surge in small business optimism as measured by the NFIB Small Business Optimism Index. The last report showed one of the largest increases in optimism on record. We also provided a rationale for resilient consumer spending, driving a significant portion of the nation’s economic growth over the past year. In our view,  consumer spending has been driven primarily by stronger household balance sheets and a labor market that continues to run strong. Changes to overall optimism, along with cracks in the labor market, could begin to adversely impact consumer spending, raising challenges for the overall macroeconomy. 

Preliminary reports suggest that consumer mood may be starting to recede. Preliminary estimates of the University of Michigan Consumer Sentiment Survey were released last week, and there was a sudden drop in consumer sentiment with the Index coming in much weaker than expected. Digging through some of the details in the survey also shows potential consumer red flags. When asked about future business conditions one year out, the index also declined, adding to the prior month’s drop. While not the largest consecutive decline in the past 30 years, the two-month drop would rank in the top 10%. When asked about prices one year out, there was also a significant increase, with inflationary expectations increasing by a full percentage point. In the past ten years, there are only two instances where the expected inflation in a year was higher than a 1 percent increase.    

Since September, investors started pricing in higher rates on the 10-Year yield. A combination of growth and inflation would push government yields higher because of Trump pro-growth policies. This trend persisted until January 10th, with the yield peaking at 4.8%.  Since then, the 10-Year Treasury declined to 4.5%, dropping by 30 basis points in less than a month. With the 10-Year now showing some retreat, are markets now pricing in lower inflation, since the 10-Year reflects a combination of growth and inflation? Going back to September again, inflationary expectations 5 years out were at 1.98%, or close to the Fed’s desired goal of 2%. With the most recent pricing of 5-Year Treasuries and TIPS (Treasury Inflation Protected Securities), inflation expectations five years out have risen to 2.6%. The recent Michigan survey showed a significant pickup in inflation expectations one year out, and bond markets show a pick-up in inflation as well. Hence, lower 10-Year yields, in the presence of increasing inflationary expectations, could imply slower growth ahead, upending some of the “Trump trades” markets were betting.     

One month is not a trend, but we did see softer payroll growth with the most recent jobs report.  The BLS reported that the economy added 143,000 jobs, short of the 170,000 that was expected. Payroll growth from the establishment survey was softer, but the household survey showed a big jump in the labor force and employment, resulting in a tick down in the unemployment rate.  The labor force participation rate edged upward, a favorable development for crucial labor force growth.  The Job Openings and Labor Turnover Survey (JOLTS) provided additional signs of a cooling labor market.  The number of openings declined by about 600,000, getting the closest to the number of unemployed since 2021.     

After being in contraction since 2022, manufacturing finally emerged in expansionary territory with the latest release of the ISM Report on Business. The latest ISM Index came in at 50.90, pointing to expansion, and the first month above 50 since the last quarter of 2022. New orders were very strong, moving above 50 in November, and showing increases in December and January. Manufacturing growth will be crucial, especially if we see a slowdown in consumer activity.  Any rebound in manufacturing will support payroll growth for both Indiana and Kentucky economies. 

Back in 2022, consumer sentiment hit one of the lowest records in the history of the survey, largely due to 40-year high inflation. While consumers were in a foul mood, they continued to spend. Will any reversals in consumer sentiment finally begin to hit consumer spending, the largest segment of the economy? It bears watching.   

Economic Update | Consumer Spending and Small Business Optimism

by with No Comment 1si NewsEconomic Development

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

The Atlanta Federal Reserve maintains the GDPNow tracker, a tool that provides a running estimate of upcoming GDP. As data are released throughout the period, GDPNow changes to reflect the release of the most recent data.  The tool is useful as it provides an ongoing estimate of GDP, and an early snapshot of the economic picture of the economy. The latest GDPNow is indicating that 2024 4th quarter GDP is at 3%, just about at the long-run quarterly average of GDP growth.      

For the first 3 quarters of 2024, the consumer was the main driver of economic growth, responsible for about 75% of the percent change in quarterly growth. This strong consumer spending occurred during a period when consumer sentiment was quite weak, brought about by prices that were about 20% higher than the start of the pandemic. Higher rates of interest made housing more expensive, in addition to the financing of consumer durables. Despite these consumer headwinds, spending continued and drove a good bit of economic growth from last year. We’ll offer a possible explanation.   

There are two primary factors that help explain the robustness of the consumer:   the labor market, and household balance sheets.  First, consumers remain confident about the labor market.  The Conference Board Consumer Confidence measure reflects consumer views of the labor market and has been running quite strongly, compared to the Michigan survey of consumer sentiment. While the nation’s unemployment is higher than a year ago, rates are still at historically low levels. Monthly job creation continues to forge ahead, with last month’s number surprising analysts to the upside.  Job openings, which have declined from a post-pandemic high of 11.7 million, continue to exceed the number of unemployed. Since August 2024, job openings have increased by approximately 1,000,000.  

While the labor market continues to run strong, there are increasing challenges to employment seekers. Hires have declined from a post-pandemic high of 6.8 million down to 5.2 million. And job quits, which can be viewed as another confidence measure, have declined from a post-pandemic high of 4.5 million down to 3 million.  Employees are less confident in finding employment, and hence job quits are lower. While hires and quits have declined, the labor market remains tight.  The hires-to-openings ratio, a measure of labor market conditions, remains under 1, indicating labor market tightness. To be sure, there are more labor market challenges today than a year ago, but tightness remains, and consumers maintain overall confidence, helping feed consumer spending. 

The second reason for sustained consumer spending is the household balance sheet. Assets are equal to liabilities plus equity, and equity represents the net worth of the household.   We can view net worth as a summary measure that captures the impact of consumer assets and liabilities.    Equity, or household net worth, is the highest on record.  During Covid, net worth declined by almost 7%, as equity markets plummeted, but quickly bounced back. Since that time, household net worth has increased by a staggering 52%. This is not universal across all households but at the economy-wide macro level. Stronger net worth across households, coupled with a strong labor market, have fueled consumer spending, and this is one of the reasons why consumer spending dominated GDP growth last year.   

Small Business Optimism, CPI, and the Supply Side 

The National Federation of Independent Businesses conducts a monthly survey of small business members, and a closely watched measure from this is the Small Business Optimism Index. Most of the job creation in the economy emanates from small business.  So, the optimism of small business owners could be viewed as an early signal of future business conditions. The most recent Optimism Index showed the largest monthly increase in the Index, at least going back to 1995. There was a similar surge after the 2016 election, but not as large as the most recent.  Small business owners are optimistic that the new administration will introduce policies that are supportive of small business formation and growth, such as a deregulatory environment, and tax policies favorable to small business.        

During the first Trump administration, the optimism trend of small business owners was largely positive until the first set of tariffs implemented in early 2018.  Tariffs were first implemented in early 2018, but the second round of tariffs on $16 billion of Chinese goods came in late August. Small business optimism peaked around August of 2018, and then plummeted. There was a collapse of optimism during the Covid pandemic, and then the trend was largely negative during the Biden administration,  attributed to the 40-year high inflation that followed supply shocks and government stimulated demand. In fact, in response to the question of “the single most important problem” of small business owners, inflation received the highest recorded response since 1995, in mid-2022, the height of inflation. The most recent surge in the optimism index is the highest level since 2018, and its sustainability depends on fulfillment of high expectations of a more favorable climate for small business, including deregulation, tax cuts, and curtailing inflation.       

After a volatile December and the absence of any Santa Claus rally,  the equity markets showed some recovery with the recent release of two inflation indicators, the Producer Price Index (PPI) and the Consumer Price Index (CPI).   Both measures came in a bit softer than expected, and equity markets liked what they saw. Since the release of the PPI, the market has added almost 1,000 points to the Dow.   The softer inflation shows up in the retrenchment of the 10-year Treasury yield. After this latest round of softer inflation reports, the 10-year yield did retreat off the recent high of 4.77%. This is important because of the link between the 10-year yield and what customers ultimately pay to finance assets, such as consumer loans and home mortgages. If disinflation continues,  the 30-year mortgage rate will resume the downward trend that we saw in the 3rd and 4th quarters of 2024. 

The 10-year yield is a function of growth and inflation expectations in the economy.  If market participants are optimistic about economic projections, this will typically lead to higher interest rates, due to higher expected growth and inflation expectations.  With strong optimism, and a robust economy, what will it take to put the inflation genie back in the bottle?   

The key is on the supply side of the economy.  Policies of the new administration will need to stimulate both labor and capital.  Policies that encourage investment and capital formation will increase the nation’s productive capacity, providing additional headwinds to inflation. Policies that result in an expanding labor force, by increasing the labor force participation rate, will place downward pressure on the growth of average hourly earnings, providing additional headwinds to price hikes. Reducing the taxation on capital will increase the return on capital and thereby motivate and attract capital investment.  Jobs are created when entrepreneurs and investors are rewarded for capital they place at risk. There is a reason why shareholders are referred to as residual claimants of the firm. They are compensated for the investment of capital only after employees, suppliers, interest, and taxes, are paid. Shareholders are last in line, and their residual claim is often pennies on the dollar. Rewarding capital through higher returns will motivate the investment of additional capital,  going a long way to expand the supply side of the economy.  Optimism is riding on it.      

Packaging Progress: Genpak Invests $6.69M in Southern Indiana

by with No Comment 1si News1si Press ReleaseEconomic Development

Scottsburg, IN. (Jan. 13, 2025)

Genpak LLC, a leading food service packaging manufacturer, will undergo a $6.69 million capital expenditure expansion at its Scottsburg facility as it builds polystyrene operations. The expansion will result in 45 new jobs by 2028, with opportunities for employees to earn an hourly wage above the current county average. The new jobs will add to the company’s 138 existing employees.

Genpak’s total training expenditure will be $173,000 for new business activities. Beyond employee investment, Genpak will also expand its existing infrastructure through multiple equipment upgrades that will bolster manufacturing operations.

Anyone interested in applying for a position with Genpak, located at 845 South Elm Street in Scottsburg, Indiana, can visit the company’s careers webpage by clicking here.

“Genpak is proud to invest in our Scottsburg location, a strategic imperative that strengthens our operations and fosters our talented workforce,” said Jeff Hebert, president of Genpak. “We greatly appreciate the strong support from the city, the Indiana Economic Development Corporation, and One Southern Indiana.  A packaging leader for over 50 years, we are committed to delivering outstanding products to the foodservice industry now and well into the future.”

Based on the company’s Indiana job creation plans, the Indiana Economic Development Corporation   committed an investment in Genpak of up to $425,000 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. 

 “Indiana’s small businesses are lifting up the state’s economy and our Hoosier communities,” said Ann Lathrop, chief strategy officer at the IEDC. “Thanks to the ingenuity and commitment of companies like Genpak, our entrepreneurs and small businesses are paving the way forward, developing new solutions, supporting quality career opportunities and investing in our workforce, adding to the vibrancy of our communities across the state.” 

“We are elated about the expansion of Genpak here in our community,” said Scottsburg Mayor Terry Amick. “Their decision to make continued investments in their Scottsburg facility and add 45 new jobs emphasizes the attractiveness of Scottsburg’s business environment. We look forward to supporting their continued growth and success.”

“We are thrilled to see Genpak’s continued growth and investment in southern Indiana,” said Lance Allison, President of One Southern Indiana. “Genpak’s dedication to expanding operations and creating high-quality jobs highlights southern Indiana’s reputation as a center for innovation and manufacturing excellence. This expansion continues Genpak’s leadership in food service packaging and underscores their strong partnership and commitment to our community.”

About Genpak

Founded in 1969, Genpak is a leading manufacturer and innovator of foodservice packaging. From compostable containers and premium tableware to versatile hinged packaging, Genpak serves a multitude of restaurant operators and retail establishments across North America.  The company’s dedication to innovation, versatile food packaging solutions, and commitment to maintaining excellent customer relationships efficiently serve the ever-evolving demands of the foodservice 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.

Contact:
Genpak
Jeffrey Hebert | Genpak
Jhebert@genpak.com | 980-256-7729

One Southern Indiana
Ellinor Smith | Content Marketing and Media Relations Manager
Ellinors@1si.org | 812-945-0266

Economic Update | Interest Rates and Indiana Manufacturing

by with No Comment 1si NewsEconomic Development

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

The Fed reduced the Fed Funds rate by another quarter point, as expected. This marked the 3rd reduction during 2024, but as we suggested some time back, we will now see a slowdown in the number of Fed interest rate reductions for 2025.  We can expect a hold at the next Fed meeting, or no change to the current Fed Funds rate of 4.5%. This means that interest rates will likely be higher for longer. Higher interest rates have had a significant impact on interest-sensitive sectors like real estate and durable goods manufacturing. Manufacturing has had a greater impact on states like Indiana and Kentucky, where it often reigns as one of the largest economic sectors across state locales. Since higher interest rates ensued back in 2022, Indiana manufacturing employment is down by about 22,000. Kentucky fares better, with a gain of about 3,000 manufacturing jobs since that time. Indiana is a manufacturing-intensive state, with the highest percentage of manufacturing employment in the nation. Kentucky is also in the top 10.    

The higher interest rate impact of slower manufacturing on Indiana is lessened through diversification of an economy, and we can point to regional economies in Indiana for examples.  Kokomo, with 41% of its workforce employed in manufacturing, is experiencing an unemployment rate that exceeds 9%, and the region has added fewer than 1,000 payrolls since last year. Other heavy manufacturing metro areas, like Elkhart-Goshen and Columbus, are also seeing slow payroll growth. Elkhart-Goshen is down slightly and Columbus is under 1,000. The metro area with likely the greatest diversification is perhaps Indianapolis. Less than 10% of the Indianapolis workforce is now employed by manufacturing, and the largest sector, healthcare and social services, employs just under 12% of the workforce. Since last year, Indiana added 45,000 jobs, or a 1.4% growth rate. This is down from a couple of years ago, and largely due to the slowdown we are seeing in manufacturing. Indianapolis, on the other hand, added 30,000 jobs, representing a growth rate of 2.5%;  U.S. payroll growth was only 1.4% over that same period. Indianapolis holds about ½ of all payrolls in Indiana, but since last year, is responsible for 2/3rds of the job growth.   

Interestingly, there are two Indiana metro areas with a heavy concentration of manufacturing, and with job growth rates higher than Indiana and the U.S. Why are these two metro areas achieving higher growth rates in jobs, even with manufacturing being the largest sector in both regions? One possible link might be to education. Both regions are home to major research universities, and college attainment rates are higher than the Indiana average.   

The latest report on metropolitan employment shows Louisville Metro is up by 8,500 payrolls since last year, or 1.2% growth, under Kentucky growth of 1.5% and U.S, growth of 1.4%.  While manufacturing growth in Louisville has slowed, it does not explain the overall slower growth of total payrolls. Back in 2022 and 2023, leisure and hospitality were the major drivers of Louisville Metro payrolls, reaching growth rates as high as 16%, and in both years, leisure and hospitality growth exceeded overall payrolls. During this past year, however, leisure and hospitality growth has slowed, now negative year-over-year for the past 6 months. Two sectors, education and health services along with professional business services, explain about 70% of the job growth over the past year.     Manufacturing still maintains a significant position in Louisville Metro but is no longer the largest industry. Louisville Metro is a service town, with education and health services and professional and business services making up the two largest sectors. 

The latest ISM (Institute for Supply Management) report on manufacturing came in just under 50, slightly under expansion.    New orders and production were both expanding, however, showing some green shoots in manufacturing. Despite higher interest rates, this could be early signs of a nascent recovery in manufacturing for 2025. 

 

Anne Keller headshot

Long-Standing One Southern Indiana Employee Wins Inaugural Economic Development Award

by with No Comment 1si News1si Press ReleaseEconomic Development

Anne Keller, Sr. Director of Business Development, won the Excellence in Local Economic Development award. 

New Albany, IN. (December 13, 2024) 

Anne Keller headshotOne Southern Indiana (1si) is proud to share that Anne Keller, Senior Director of Business Development, has received the inaugural Excellence in Local Economic Development award, presented by the Indiana Economic Development Corporation (IEDC), in honor of her hard work and dedication throughout the state of Indiana.  

Keller, who has been with 1si for over eleven years, works exclusively to provide detailed and critical information to site selectors and vendors to match them with site opportunities in Southern Indiana. Her work has helped bring projects such as Conco, Inc., Meta, and Canadian Solar to the region. In addition to working with site selectors and vendors, Anne is part of several committees and organizations, including the 1si Pearls of Wisdom committee, the 1si Economic Development Council, and serves as the Treasurer for the South Central Indiana Economic Development group. 

The IEDC Excellence in Local Economic Development award, a statewide recognition, is an honor given to an individual who has shown great initiative in business attraction efforts in the state of Indiana. The inaugural award was presented at the Indiana Economic Development Association’s (IEDA) Annual Conference in Indianapolis, Indiana.  

“Anne Keller is a vital part of 1si and the Southern Indiana region,” said Lance Allison, president and CEO of 1si. “Anne continues to be instrumental in bringing projects to Clark, Floyd, and Scott County, and her dedication to business attraction is shown with the quality of work and projects. We are excited for Anne and this phenomenal accomplishment!”  

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.   

  
Ellinor Smith, Content Marketing and Media Relations Manager  

EllinorS@1si.org  | 812-945-0266  

Economic Update | Growth versus Inflation – a match shaping up for 2025

by with No Comment Economic Development

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

Will the economy cause the Fed to slow rate cuts?  The probability of another Fed rate cut in December has come down from upwards of 80% to about 66%. As we move into 2025, the pace of cuts is expected to slow, counter to expectations at the advent of the rate-cutting cycle.  There are two primary reasons for the expected slowing of cuts:  a strong economy and the stickiness of inflation. 

The Fed led the cutting cycle with an unexpected reduction of 50 basis points. This was in the middle of an existing strong economy and inflation, while lower than the start of the year, had still not reached the target of 2%. The Fed will reduce in December, but expect January odds to come down after the release of economic data, shifting the odds to no reduction in January.    

For the strength of the economy, we can look at gross domestic product (GDP), which is the market value of goods and services produced by the macroeconomy.  The latest figures show that GDP increased by 2.8%, from the 2nd to the 3rd quarter of 2024. This is well above the average quarterly growth since 2022. And the consumer is driving this growth, responsible for a whopping 85% of the 2.8%. 

While consumer sentiment remains depressed, largely due to the negative effects of inflation, consumers remain confident due to a couple of ongoing dynamics.  One is the labor market.  While the labor market has softened, the unemployment rate remains at relatively low levels and job openings continue to exceed the number of unemployed.  Layoffs, as measured by new claims for unemployment, are at historically low levels. Current levels are just over 200,000 weekly, and these are nowhere near levels needed for any hints of a recession. The other factor driving consumer spending is household balance sheets. The net worth of households is at an all-time high, driven by home values and the equity markets. During the Great Recession, it took about 5 years to recover the net worth lost during the housing crash and equity market losses. Coming out of Covid, household wealth suffered declines in 2022 but has been climbing since. Strong balance sheets encourage spending, and this is showing up in sustained consumer spending, the big driver of gross domestic product. 

Since the Fed began its rate-cutting cycle, inflation is higher than it was at the end of September. The post-Fed cut inflation rate was 2.41% at the end of September and the most recent data places headline CPI at 2.6%. The core rate, CPI minus food and energy, is even higher at 3.3%. We see the impact of this sticky inflation on the 10-year yield, higher now than levels that existed just prior to the September Fed rate reduction. For the consumer, this means elevated mortgage rates compared to the recent low of 6.1%.    

In summary, the Fed will likely cut in December. The absence of a cut would signal the mistake that was made in September, but unless the data deteriorates considerably, expect a pause for January.   

Regional Updates 

As 2024 comes to an end, the Louisville Metro area will see slower payrolls this year compared to 2023. Latest preliminary estimates show that Louisville payrolls are up about 3,700 from the prior year, and the unemployment rate about 3/4% higher than 2023, 4.2% compared to 3.5% last year. The region saw gains in education and health services, transportation and warehousing, and professional and business services. However, losses in leisure and hospitality, manufacturing, financial activities, retail and information provided headwinds to overall payroll growth. 

We see similar patterns in Southern Indiana. The most recent county data show that Southern Indiana gained over 1,000 jobs in the second quarter of 2023, compared to the prior year. Healthcare and transportation and warehousing were the dominant growth sectors and manufacturing saw another decline, over 1,000 payrolls. 

These most recent changes for Southern Indiana are consistent with the pattern that emerges from pre-Covid to now. Since 2019, the year prior to Covid, the largest gainer for Southern Indiana is transportation and warehousing, followed by health care and social services.  Accommodation and food services is up just over 1,000 positions. The greatest loss is observed for manufacturing, down more than 2,500 jobs since 2019. Even with this significant decline, both total wages and average weekly wages are higher, pointing to productivity gains in regional manufacturing.  Despite the decline in payrolls, manufacturing also remains as the sector with the highest level of total wages across Southern Indiana, reinforcing the role as an impactful economic development sector. 

As we exit 2024, the region can expect an acceleration of payroll growth and an unemployment rate that remains relatively flat.    Expect volatility in the markets, but the U.S. will avoid a recession.   

As the macroeconomy accelerates in growth, the battle between growth and inflation will ensue. Supporting both growth and disinflation will be a supply side boost to the economy, brought about by a deregulatory environment, and incentives that boost labor force participation and capital investment.