Louisville-based manufacturer to expand into Southern Indiana

Conco, Inc. opening a new facility and investing over $54 million in Scottsburg.

Scottsburg, IN. (August 14, 2023)

Southern Indiana is celebrating the growth of another manufacturing company in the region. Conco, a full-time, full-service supplier of ammunition containers and related services, plans to invest $54.5 million to establish a second facility in the region, this one located in Scottsburg, Indiana. The company’s investment includes over $36 million in new equipment, furnishings, fixtures, hardware, and software; $11.5 million to purchase the former Tokusen USA space; and $6.9 million in improvements to the existing spaces. 

This investment will result in up to 175 new full-time positions at the Scottsburg location, including Production Team Members, Quality Technicians, Welders, Paint Technicians, Process Technicians, Controls Technicians, Tool & Die, Industrial Maintenance, Electricians, Engineering and Administration at an average wage of $28 per hour.

Conco has served the United States Armed Forces as a supplier since 1967. With a strong reputation for high-quality products, on-time delivery, and tech support, they continue to meet military needs and develop innovative products to adapt to ever-changing requirements. Conco is also a designated “return site” equipped to store, de-militarize, and prepare container models for reuse and resale. Their specialized products include insensitive munitions, rectangular containers, square bell containers, and round bell containers, in addition to their refurbished container options.

“We are excited to join the Southern Indiana region with our new facility in Scottsburg,” said Karen Paschal, President and CEO of Conco, “When looking at locations, the former Tokusen USA space was a perfect fit for what we needed to expand, and we look forward to working with the State of Indiana, the City of Scottsburg, and its residents to create additional growth for the region.”

The Indiana Economic Development Corporation (IEDC) has committed to an investment in Conco of up to $1.925 million 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. In addition, the City of Scottsburg is offering the company personal and real property tax abatement, phasing in over five and ten years, respectively.

“Indiana’s defense sector continues to grow, and we’re excited to welcome Conco to our network of advanced manufacturers that are contributing to and supporting our nation’s armed forces,” said Governor Eric J. Holcomb. “Conco’s decision to locate in Scott County is a testament to the region’s skilled workforce and vibrant communities, and the company’s presence in southern Indiana will further advance new patriotic career opportunities for families for years to come.” 

“The City of Scottsburg is thrilled to be working with Conco and helping them establish a home in Scottsburg,” said Terry Amick, Mayor of the City of Scottsburg. “We are proud to support their efforts as they expand their services for the United States Armed Forces and are excited to see the local community growth they will bring to the area.”

“Southern Indiana has seen major manufacturer growth over the last several years with projects expanding or new locations opening in the region,” said Wendy Dant Chesser, President and CEO of One Southern Indiana. “Conco’s decision to expand and open a new location in Scottsburg shows that our region remains a prime location for manufacturers – big and small, current and new. 1si is excited to see what Conco will bring to the manufacturing region and look forward to continuing this partnership and assisting them in any way we can.”

About Conco, Inc.
Conco is a designated “small business” with 50 years of experience dedicated to the ammunition container market and is ISO 9001:2015 certified. Conco is centrally located in Louisville, KY, and is currently the prime contract container supplier for several U.S. Army ammunition programs. For more information, visit concocontainers.com. If interested in a position at Conco, email resumes to resumes@concocontainers.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:

Conco, Inc.

Karen Paschal, President & CEO

kpaschal@concocontainers.com

502-962-2121

 

One Southern Indiana
Brittany Schmidt, Content Marketing and Media Relations Manager

BrittanyS@1si.org
812-945-0266

 

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Economic Update | The Resilience of the Consumer

submitted by

Uric Dufrene, Ph.D., Interim Executive Vice Chancellor for Academic Affairs, Sanders Chair in Business, Indiana University Southeast

One of the reasons why we have not seen a recession this year, and likely for the rest of the year, has to do with the consumer, driver of almost 70% of the U.S. economy. So, what is happening with the consumer will often provide clues about the direction of the U.S. economy. Last year, for example, the economy was seeing 40-year high rates of inflation.  Skyrocketing inflation was expected to break the backs of the consumer, and a recession would then follow. Additionally, consumer sentiment was in the doldrums, not only due to higher prices but also the collapse in both stock and bond values. Stock market indices saw significant erosion, and bond values declined due to increasing interest rates.  Consumer conditions were not favorable, and a recession was almost certain, as also evidenced by an inverted yield curve (short-term bond yields are higher than long-term bond yields), a reliable predictor of past recessions.    

Despite challenges, consumers have held up, steering the economy clear of a recession, at least for this year. Consumer spending on services has not slowed down. It took almost two years to recover from the decline in spending due to Covid, but spending has been increasing since. Goods spending saw astronomical gains coming out of Covid but has been normalizing since. Goods spending peaked in April 2021, and has decelerated since, but that was to be expected. Households can only make so many home repairs and buy so many couches, refrigerators, and RVs!

Higher mortgage rates were expected to also thwart the consumer, but most households with mortgage balances had already locked in an ultralow mortgage rate, immune from subsequent rate increases. Most are not eager to replace a low-rate mortgage with a higher rate, and this is one of the reasons why the housing supply, or homes available for sale, continues to be challenged.  Existing home sales, at the national level, are down more than 30% from a year ago.  Higher mortgage rates have impacted some industries, like real estate, housing, and mortgage finance, but the impact on most consumers has been minimized. 

One of the contrary benefits of higher mortgage rates is the impact on supply.  Restricting supply is providing support to home prices, when normally, higher mortgage rates might adversely impact housing values, like the housing crash that ultimately brought about the Great Recession of 2007.  Strong home values are providing a boost to homeowner’s equity, building wealth, and supporting a resilient consumer. Since the Great Recession, home equity loans have been on a continued downward slope, but since last year, home equity loans rebounded, allowing homeowners to tap into this wealth to support consumer spending.

This added equity to the household balance sheet is also giving consumers the confidence to take on more debt.  Consumer debt dipped coming out of the Covid recession but started climbing around mid-2021.  Debt continues to increase, but the rate of growth has subsided. Household debt ratios had dropped to a 30-year low in March 2021 and began climbing to a pre-pandemic high in late 2022.  Since then, household debt ratios have declined slightly, providing more ammunition for subsequent consumer spending. A red flag is beginning to emerge on the consumer debt side, however. While delinquency rates are lower than pre-pandemic levels, and significantly below rates associated with the Great Recession, delinquency rates on consumer loans and credit cards have been climbing.   

Household checkable deposits have declined from a peak in September 2022, but remain considerably higher than pre-pandemic levels. Consumer sentiment continues to climb from the trough of June 2022 but is at levels that historically coincide with recessions. Inflation continues to moderate, and the last report showed a decline in the core rate, previously referred to as “sticky”. The progress made on inflation is supporting consumer sentiment, one of the reasons why sentiment has been trending upward. The labor market has softened a little but is still very tight.  Job openings continue to exceed the number of unemployment and the growth in earnings now exceeds the rate of inflation.  We are still expecting a slowdown in the economy, but the overall shape of the consumer is one of the reasons any economic contraction will be mild.  

Economic Update | More Progress on Inflation and Growth

submitted by

Uric Dufrene, Ph.D., Interim Executive Vice Chancellor for Academic Affairs, Sanders Chair in Business, Indiana University Southeast

The U.S. economy grew more than expected during the second quarter of this year.  The BEA released preliminary estimates of GDP and it showed that the nation’s economy grew at 2.4%, exceeding the consensus estimate of 2%. Consumer spending was the largest driver of growth, contributing 1.12 of the total 2.4% growth. Spending on services was the primary driver of consumer spending, exceeding the contributions from goods spending. The economy imported more goods than exported, subtracting from the overall GDP growth. On the investment component of GDP, non-residential investment was the largest contributor of gross private domestic investment, specifically, investment in equipment and structures.   Residential investment contributed negatively to the overall change in GDP. Government investment also contributed favorably to growth, with local and state government spending contributing the most. The GDP report was a boost to the idea of a soft landing. Even though the GDP report is a look at the economy through the rear-view mirror, it provided further evidence that the economy is inching toward the so-called soft-landing scenario.   

The big news from the past couple of weeks was out of the Fed and the Bureau of Labor Statistics. The Fed announced another increase in the targeted Fed Funds rate to 5.25%.  This increase was largely expected, but followers were more interested in Fed statements and of Jerome Powell for clues on subsequent rate hikes. The CME Fed Watch Tool now places an 80% probability of no change in rates at the next September FOMC meeting, and a 20% probability of a quarter percent hike. All this will rest on data over the next couple of months, with a greater focus on inflation indicators and the labor market. 

Markets and the Federal Reserve did get some reassurances about inflation with the release of two recent price reports:  the CPI and PCE price index.  First, the Consumer Price Index (CPI) declined to 3%, down from the prior month of 4%. The core rate, CPI minus food and energy, came down to 4.8%, from the prior month of 5.3%. The monthly changes for both the headline CPI and the core rate came in under the market consensus. The monthly change of .2% in the headline CPI is consistent with an annual rate of 2.4%. As we’ve mentioned on these pages, the rate of inflation is coming down, and the CPI report provided a significant boost to that argument. The Fed’s preferred gauge on inflation, the PCE Deflator, showed additional disinflation in both the headline rate and the core. The headline rate declined to 3% and the core moderated to 4.1%, down from the prior month of 4.6%. The quarterly Employment Cost Index (ECI) was also released the same day as the PCE Deflator, and it too showed moderation in employment costs, providing additional support for moderating inflation. 

While still above the Fed’s preferred inflation target of 2%, the past two weeks provided additional data in support of moderating inflation. We will likely not see a rate increase in September, or the rest of this year.   The July rate increase may be the last. If the last quarter sees a significant slowdown in the labor market, either through a higher unemployment rate or a reduction in monthly job creation, the Fed could even begin reducing interest rates later this year. I think that scenario is highly unlikely, however.  The labor market remains tight, and employers are reluctant to let go of employees.  Unemployment claims are not pointing to any labor market slowdown, and households have been quite resilient, providing support to overall growth. No recession for this year, and moderating prices, along with a tight labor market, will continue to pave the way for a soft landing. 

This Friday is the Super Bowl of economic indicators, the national employment report.   Payroll gains have moderated from last year but are still above historical monthly gains. In the past couple of years, we’ve observed that “good news” reports resulted in negative stock market reactions due to the impact on Fed Reserve interest rate changes.  A “good news” report implied that the Fed would have to increase rates to slow down the economy and temper inflation. “Bad news” reports had the opposite effect. A “bad news” report produced a positive stock market reaction. If we see a strong report this Friday, it may produce a positive reaction in the markets.  A strong report will provide further support for no recession, and as inflation continues to moderate, the markets will place greater emphasis on growth, over the Federal Reserve’s impact on interest rates. 

Economic Update | On Final Approach for a Soft Landing?

submitted by

Uric Dufrene, Ph.D., Interim Executive Vice Chancellor for Academic Affairs, Sanders Chair in Business, Indiana University Southeast

The big data point over the past two weeks was the print on CPI (Consumer Price Index). The Bureau of Labor Statistics reported that the annual change in the CPI declined to 3.0% in June, down from the prior month of 4%.  The 3.0% was less than expected and equity markets finished higher on the day. The core rate, which is CPI less food and energy, also declined, from 5.3% in May to 4.8% in June. The “stickiness” of inflation, sometimes described by officials and economists, refers to this core rate. The core for June came in under the consensus estimate and declined ½% from May to June.  The month-over-month change was .2%, compared to .4% in the prior month. Even though the core rate had been declining since September 2022 when it peaked at 6.7%, this was the largest monthly drop since. The reason why this was a significant report is that the narrative for two additional interest rate changes this year changed almost instantaneously. Yields on 2-year and 10-year Treasuries dropped as soon as the report was released.  The CME Fed Watch Tool is pricing another hike in July, but the probabilities favor this to be the last hike.  Prior to the CPI release, two additional hikes were on the table. While two hikes are still possible for the rest of the year, that scenario is now unlikely. 

More evidence of disinflation came the next day with the release of the PPI (Producer Price Index).   The year-over-year change in the PPI was 2.4% in June, down from 2.6% in May.    Taking the monthly change of .1% in June and stretching this out over a year would produce a year-over-year change of 1.2%.      

The economy is not yet in a recession, and one is not likely in 2023. National manufacturing, however, continues to be in a slump.  The last employment report saw manufacturing gain only 7,000 jobs, higher than the previous decline of 3,000.  The ISM manufacturing measure declined to 46, from the previous month of 46.9;  under 50 shows a contraction in manufacturing, and above 50 shows expansion.  The number has been under 50 since October 2022.   Both new orders and the backlog of orders have been trending down all year.  Even though the overall index has been declining for almost a year now, it is not quite yet at a level that coincides with a recession. The lower 40s range is closer to recessionary territory. While national manufacturing is seeing a slowdown, we are not seeing the same in the Louisville Metro region.    Preliminary payroll data show that manufacturing payrolls are growing at a rate that exceeds overall payroll growth. One possible reason is the pent-up demand that we are seeing in automobile sales and the impact on area manufacturers. 

The national slowdown in manufacturing was anticipated due to the surge in goods spending experienced during the pandemic and the months following.  As the economy reopened and spending transitioned from goods to services, goods spending had to normalize. The services economy continues to grow, however.  The last ISM services index came in at 53.9, compared to 50.3 the prior month, and higher than the consensus estimate of 51. As inflation continues to moderate, consumer optimism will increase, providing further support to the service economy.  The latest Michigan consumer sentiment survey saw a big jump in optimism, with the index coming in at 72.6 compared to 64.4 in the prior month. To be sure, consumers are still in the doldrums when we compare current levels of sentiment to historical levels.  But the optimism is on the upswing.   The Conference Board consumer confidence measure is more favorable and has been trending upward since July 2022.

We’ve heard a lot about soft and hard landings over the past year. With indicators over the past couple of weeks, the narrative is going to move in the direction of a soft landing. We will see no recession for the remainder of 2023.  If we continue to see moderating prices, and I think that is the case, there will be no additional hikes past July. Disinflation will support consumer moods and  spending, and a tight labor market will serve as a buffer from a slower economy, which is still expected.  A soft landing may in fact be the best-case scenario of 2023 and into 2024.    

Economic Update | The Fed is Just About Done

submitted by

Uric Dufrene, Ph.D., Interim Executive Vice Chancellor for Academic Affairs, Sanders Chair in Business, Indiana University Southeast

After more than a year of interest rate increases, the Federal Reserve finally issued a pause. While such a decision was not absolute, the market was mostly expecting one and had already incorporated in stock prices.  The interesting takeaway was that the Fed indicated that two more rate hikes were likely for the rest of the year. While two more rate hikes are possible, market participants doubt that such rate increases will occur. Current pricing is predicting one additional increase for the remainder of the year, followed by cuts in 2024, with the first reduction coming in January 2024.

The Fed did not have any choice but to talk tough. Even though this last meeting came with a pause, the Fed had to open the door for additional rate increases the rest of the year. Due to credibility challenges, linked to a delayed response in initially hiking rates, the Fed was not able to say that it would pause indefinitely or reduce rates this year. Two rate increases, however, are suspect. The labor market does remain tight, but signs continue to point in the direction of softening. The last report for unemployment claims came in at 264,000, the highest since October 2021. This level of unemployment claims does not signal that we are in a recession now, but claims are trending higher.  As we approach the 300,000 level, the economy will continue to soften and over 300,000 weekly claims will point closer to a recession. 

The inflation story is going to be the major factor in setting the stage for no additional hikes and an extended pause, or another hike or two for the rest of this year. The latest report on inflation showed that the headline number for inflation, the Bureau of Labor Statistics Consume Price Index (CPI), continued to show deceleration.  The headline number, which includes the cost of food and energy, increased by .1% in May. The annual rate was 4%, compared to a rate that was approaching 9% just a year ago. A monthly increase of .1% is equivalent to a 1.2% inflation rate, significantly under the preferred Fed inflation target of 2%. The core rate, which excludes food and energy, is a bit stickier, coming in at 5.3% on an annual basis; last May it was 6%. This is the primary reason why the Fed has indicated that it intends to increase rates further beyond the pause of last month.  When you remove the cost of shelter and used cars and trucks, the rate declines to 4.2%. Given that shelter makes up a significant chunk of overall CPI, we will continue to see deceleration in the annual rate of inflation as the cost of shelter continues to moderate, primarily due to rentals. So, while there is still additional progress that needs to be made, the scales will tip more toward inflation deceleration, and not acceleration. That’s why the Fed’s intent on increasing rates further will erode as we go through the year. We may see one more increase, but two is going to be very doubtful. 

The unemployment rate for Indiana inched upward in May, moving to 3.1%, compared to April’s 3.0%. Last May, the state’s unemployment rate was 2.9%. The labor force saw small gains, and the number of unemployed edged upward, thus explaining the uptick in the unemployment rate. The number of payrolls increased by almost 11,000, with most of this growth coming in the government sector. Manufacturing payrolls declined by about 2,000 as the nation’s manufacturing sector experiences softening. The latest ISM (Institute for Supply Management) measure came in less than 47, which denotes contraction in national manufacturing. Industrial production, which is a measure of the economy’s industrial strength, saw additional deceleration, and the year-over-year change is approaching negative territory.  A negative change in industrial production, while not always (the period ranging from 2016 to 2017 being the exception), usually coincides with a recession. 

We’ll likely escape a recession for 2023, but softness will continue to emerge in various corners of the economy.  Inflation will continue to ease, and in the end, two additional rate hikes from the Fed are in doubt.

Economic Update | Another Strong Report for Southern Indiana

Soft landing confidence growing

submitted by

Uric Dufrene, Ph.D., Interim Executive Vice Chancellor for Academic Affairs, Sanders Chair in Business, Indiana University Southeast

The BLS released the monthly employment report last Friday, and the headline number surpassed all expectations. The jobs report showed that the economy gained 339,000 jobs in May.  The consensus estimate was under 200,000. For the past couple of years, a “good news” report was usually met with a swift negative reaction in the equity markets. “Good news” from economic indicators provided additional justification for the Fed in hiking interest rates. Conversely, “bad news” was often met with positive reactions in the equity markets.  In this case, equity markets were overwhelmingly positive, with the Dow finishing up more than 2% for the day.      

However, the report did have some evidence supporting a possible Fed pause in June.  The unemployment rate increased by 3/10ths of a point, jumping from 3.4% to 3.7%.  Unemployment rolls swelled by 440,000, and the labor force saw an additional 130,000.  So, the household survey supported the argument of continued softening in labor markets. This was not a recession marker necessarily, but additional data in support of a continued slowing of employment growth. Another piece supportive of a rate pause at the next Fed meeting came with the earnings data.   Average hourly earnings declined by a tenth of a point from April, and the May number was slightly under consensus.   Recent Fed speakers also signaled a pause for the June meeting. The CME Fed Watch Tool is currently showing about a 75% probability of a pause for the June meeting.   So, the combination of robust job growth, and concomitantly, with an eventual softening of labor markets and wages, resulted in the breakout market reaction.

Job openings had been declining the past several months, but the last Job Openings and Labor Turnover Survey showed a reversal in this trend. The report showed that openings increased back to over 10 million, and 625,000 more than the number expected. This tightness also shows up in unemployment claims, with numbers showing no significant acceleration in claims.   

The BLS released the last quarter of 2022 county level employment data, and Southern Indiana continues to see steady payroll growth. Almost 4,000 jobs were gained compared to the previous year, marking seven consecutive quarters of payroll growth. Excluding the large change in jobs that appeared in 2021 due to base effects, this last quarter of 2022 is the second highest level of payroll growth since the negative Covid-induced job changes.   

Leading the way was accommodation and food services, gaining more than 1,500 jobs.  This industry has fully recovered with respect to payrolls levels, and jobs now exceed the number that existed just prior to Covid by more than 1,000.  Health care and social services added 1,200 jobs, followed by solid growth in manufacturing of 450. The region did see a decline in average weekly wages, the first decline since 2017. This decline is likely due to the large increase in accommodation and food services for the quarter. Accommodation and food services is about one half of overall average weekly wages.  So, a big pick up in accommodation and food services will bring the overall average down.

How can we put all this in a nutshell? The economy continues to show resilience. We are not in a recession, and more confidence is setting in that there will be no recession this year. Everything is not that rosy.  Indicators are still pointing to some slowing in the economy, but it looks like any slowdown will be quite shallow. For what it’s worth, my economic outlook from this past November expected a recession in the last quarter of 2023 or the first half of 2024. Confidence is growing that any recession is pushed back to 2024, and a soft landing is looking better and better.   

Economic Update | Mixed Signals

submitted by
Uric Dufrene, Ph.D., Interim Executive Vice Chancellor for Academic Affairs, Sanders Chair in Business, Indiana University Southeast

The one indicator that was moving toward the recession camp was unemployment claims.  The Labor Department releases new unemployment claims every Thursday morning at 8:30 a.m. and claims had been inching higher the past several months.  New claims hit a bottom of 182,000 in September 2022 and climbed to 264,000 in early May 2023. Last Thursday, the report showed that claims for unemployment dropped to 242,000. This was support to the soft-landing crowd and bear market investors were likely not pleased. Levels need to be closer to 350,000 for the declaration of a recession. This is not a rule; only observation from historical patterns. Claims could potentially see a rapid climb, but that is unlikely.  Consequently, as we mentioned in the last column, a recession in 2023 is getting increasingly unlikely.

The Bureau of Labor Statistics also released the monthly report on state employment and unemployment last week, and Indiana gained 15,800 jobs in April, one of the largest increases among the 50 states. On a year-to-date basis, Indiana has added 38,000 jobs. In the past three recessions, Indiana saw a precipitous decline in payrolls. During 2023 however, jobs have been added at an increasing rate. Professional and business services, education and health services, and leisure and hospitality were responsible for a significant amount of the payrolls gains. The state’s unemployment rate declined to 3%.  Kentucky saw an addition of 7,000 jobs and an unemployment rate decline to 3.7%.

We have more information on inflation since the last column.   The CPI declined to 4.9%, still above the Fed preferred range of 2%.  The core inflation rate (CPI minus food and energy) came in at 5.5%, suggesting more stickiness in the core rate, which is of greater interest to the Fed. The CPI came in a little less than expected, and the NASDAQ approved with a significant gain for the day. The CPI coming in a little less than expected suggested a pause in Fed hikes for the next meeting, a more favorable condition for growth-oriented stocks. The produce price index (PPI) was released a day after CPI, and it also showed additional slowing of producer inflation. The annual rate declined to 2.3% and was under the expected rate of 2.5%. These two series are highly correlated and historically do not move counter to the other.  With a PPI of 2.3%, we can expect CPI to continue the downward trend.

And now for the bad news. The Federal Reserve released the results of the Senior Loan Officer Opinion Survey.  The results show a clear tightening of credit standards for consumer and commercial and industrial loans. Along with credit tightening, the results also revealed softening loan demand. When you place this data in a graph, you see a significant increase in credit tightening and a significant decrease in loan demand. Such a graphic pattern is usually followed by a recession. So, as the recession continues to be pushed back further, the senior loan officer opinion survey supported the notion that one will likely occur. To be continued…

Bluegrass Supply Chain Services to Invest Over $16 Million in Jeffersonville. 

NEW ALBANY, IN (May 15, 2023) Southern Indiana continues to build on its momentum in the logistics industry, as Bluegrass Supply Chain Services, LLC and Bridgeport Partners REIG, LLC announce plans for a new facility at 1205 Bridgeport Drive in Jeffersonville, Indiana.  The Bowling Green, Kentucky-based companies plan to invest $15,931,000 in the new facility, along with an additional investment of $835,000 in machinery and equipment.  The new facility will add up to 25 new employees at an average hourly wage of $27.22, which is above the average hourly wage for Clark County, Indiana.   

“We’re extremely excited to bring this new, state-of-the-art logistics center to Jeffersonville,” said John Higgins, CEO of Bluegrass Supply Chain Services, LLC and Bridgeport Partners REIG, LLC. “Supply chain management, logistics, and advanced innovation plays a critical role in the economic health and vibrancy of our country.  This new facility positions us to combine the best of breed technology with integrated solutions to continue playing a key part in this vital area.  We appreciate all the efforts made from the State of Indiana, the City of Jeffersonville, and One Southern Indiana to help us expand our footprint and our workforce with job wages at or above the Clark County average.”

The company was approved for over $1.3 million in tax abatements from the City of Jeffersonville, including $1,299,680 in real estate taxes over the next five years, and $11,693 in personal property taxes over the same period, as approved by the Jeffersonville City Council during its May 1 meeting. The Indiana Economic Development Corporation (IEDC) is supporting this project by expanding their existing 2018 incentives to incorporate this additional investment in Indiana. 

“We’re thrilled to partner with Bluegrass Supply Chain Services on this project,” said Jeffersonville Mayor Mike Moore.  “It’s yet another example of Jeffersonville’s vibrant business climate, and further evidence of our quality resident workforce in the area which supports economic growth across our region.  We look forward to assisting in any way we can to bring this exciting project to fruition.”

Wendy Dant Chesser, President and CEO of One Southern Indiana said, “This is wonderful news for Jeffersonville and Southern Indiana.  We continue to attract dynamic companies at the forefront of their industries, and with their focus on innovation, technology and continuous improvement in logistics, Bluegrass Supply Chain Services is certainly no exception.  1si is delighted to be a part of this process, and we look forward to watching their progress.”   

About Bluegrass Supply Chain Services
Bluegrass Supply Chain Services offers a full suite of value-added warehousing services and transportation management solutions to enhance operational efficiency. By offering expanded capabilities and capacity, reducing time touch and travel, and improving on-time performance, they help companies expand their customer base, venture into new markets, and create positive consumer experiences, so they can focus on core business and becoming more competent, and competitive, in the market. 

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:

Wendy Dant Chesser
President & CEO, One Southern Indiana
Wendy@1si.org
812.945.0266

John Higgins
CEO
Bluegrass Supply Chain Services, LLC
Bridgeport Partners REIG, LLC
jhiggins@bsc3pl.com
270.535.7010

Economic Update | The 100% Recession Delayed Again

submitted by
Uric Dufrene, Ph.D., Interim Executive Vice Chancellor for Academic Affairs, Sanders Chair in Business, Indiana University Southeast

Last year saw close to unanimity regarding the 2023 outlook and a chance of a recession.     In fact, the 2023 recession may have been one of the most predicted recessions.   The 100% chance of a recession has yet to arrive, and with last Friday’s labor report, the recession that everyone expected will be delayed once again.

The consensus estimate for job gains was around 180,000 and the report showed an addition of 253,000.   Even a gain of 180,000 would be considered very strong and the reported result exceeded that.   The largest job changes occurred in professional and business services (+43,000), health care (+40,000) and leisure and hospitality (+31,000).  Manufacturing added 11,000 jobs, even with the latest ISM report on manufacturing showing contraction in the  sector.  The unemployment rate remained little changed at 3.4% and there was no change to labor force participation. Perhaps the worst part of the report was about the revision of March payrolls.    March was revised downward, from 236,000 to 165,000.

This Wednesday brings the Consumer Price Index release.   The report is expected to show additional moderation in inflation, but core inflation (inflation minus the cost of food and energy) may be sticky, one of the driving factors behind the last interest rate increase of 25 basis points.  The preferred Federal Reserve indicator on inflation, the PCE Deflator, showed additional deceleration, but the numbers came in a little higher than expected.  Despite the Fed concerns about inflation and guidance that shows the continued maintenance of higher rates, markets are expecting the Fed to begin cutting rates later this year.  This is driven by the market view of an expected recession or slowdown later in the year.

Unemployment claims continue to run at levels that do not coincide with a recession.   The labor market is showing some signs of slowing or softening, but with new claims running at 242,000, more layoffs need to occur before we get close to the declaration of a recession.  Job openings plummeted last week with the release of the JOLTS report but remained higher than the number of unemployed.  The latest report showed that approximately 1,7 jobs exist per unemployed person.

Locally, the metro area is approaching 700,000 non-farm payrolls.  The latest metro employment report (subject to subsequent revisions) showed that metro area payrolls are at the highest in history, at 689,000.  This is about 9,000 higher than the level that existed just prior to the pandemic.   The unemployment rate for the metro region is at 3.1%, among the lowest in the past 30 years.

The most anticipated recession has yet to arrive.   Unless there is a dramatic fall in job changes, a recession this year is getting increasingly unlikely.   There are risks to the economy, and I continue to believe that a slowdown is coming.   A slowing economy may still escape an official recession, however, at least for this year.

Economic Update | Fed Policy and Local Housing Activity

submitted by
Uric Dufrene, Ph.D., Interim Executive Vice Chancellor for Academic Affairs, Sanders Chair in Business, Indiana University Southeast

One could argue that housing has perhaps been most impacted by current Federal Reserve monetary policy. With inflation at a forty-year high, the Fed finally began lifting the target Fed Funds rate, with the goal of suppressing demand and thus slowing down the rate of inflationary growth.  Fed policy impacts mortgage rates, which bottomed out in early January 2021 at 2.74% and peaked in late 2022 at 6.81%.

The origins of the current housing market take us back to early 2020.  The Covid pandemic threatened economic collapse, along with high levels of uncertainty.   This was not the same as the Great Financial Crisis or prior recessions.  There was not really a playbook.   The Fed responded with a drop in the Fed Funds target rate from 1.75% in March 2020 to 1.25%.  The rate would be lowered again to .25% by the end of the month.

In early 2020, the 30-year mortgage rate was approximately 3.6%.   Looser monetary policy drove rates down to 2.8% almost a year later.   Record low mortgage rates, along with significant government stimulus, combined to ignite home prices. In early 2020, the median selling price for existing homes, using National Association of Realtors data, was $272,800.   Home prices peaked in June 2022 at a whopping $420,900!

As the old expression goes, hindsight is 20-20, and there is never a shortage of armchair quarterbacks.   But any rational economic thinker can only wonder how the Fed could manage to make such a glaring policy error.     In early 2020, the target Fed Funds rate was reduced to almost 0, and with the economic shock that nation’s economy was experiencing, you could make the case that this was necessary.    For the next 18 months, the policy decisions are nothing less than bewildering.  The target Fed Funds rate of  .25% was held at that level all the way until March 2022.   In early 2020, inflation, as measured by the CPI, was less than 1%.  No doubt, the Fed feared the onset of deflation, a crippling phenomenon that devastates profits and magnifies the impact of any leverage.   The looser monetary policy was very justified during this early phase of the pandemic.

After hitting bottom around May 2020, inflation then started to creep up again.  Recall the supply chain issues and the gargantuan government stimulus that stoked demand.    A year later, the CPI would be running at almost 5% inflation.    Inflation was running hot, but the Fed refused to budge on the Fed Funds rate.   In May 2021, the Fed Funds rate was still at .25%.   By the end of 2021, inflation would be running at 7.2%.  The Fed Funds rate was still at .25%.    Inflation peaked  June 2022 at 8.93%, but the Fed did not increase the target Fed Funds rate until May 2022, a month before hitting the peak in inflation.

We can see the impacts of these national decisions on local housing, although the impact has not been as severe as the national landscape.   Over the first quarter of 2023, national existing home sales have dropped 38% compared to the first quarter of 2022.  In Clark and Floyd county, home sales have only declined by 14.2% and 6.8% respectively.   Home prices are on the decline nationally, as mortgage rate increases have snuffed out demand, and owners of low mortgages are reluctant to sell, thus impacting the supply of homes.   The National Association of Realtor’s price data show that the average price of existing home sales is about flat from first quarter 2022 to the first quarter of 2023.     This year- over-year comparison does not capture the June 2022 peak of $420,000.   Prices have fallen fast since June but remain flat when compared to early 2022. In Clark and Floyd, home prices are up 5.7% and 15% respectively.   Despite higher mortgage rates, local home prices remain in positive territory, likely due to the supply of homes available for sale.   Homes available for sale have increased, with the months supply of inventory increasing to 1.6 and 1.4 for Clark and Floyd respectively.   This is up from 1.0 and .8 from a year ago, but still at very low levels.

Locally, we do see the impact of federal policy on building permits, having a definite impact on activity.   Clark County has always been the leader in building permit activity, given its role as the most populous county among the five Southern Indiana metro counites.   In 2021, Clark County generated 1,626 building permits, with 716 of that level in 5+ units multi-family housing.   In 2022, permit activity declined to 761, with only 154 in 5+ unit multi-family structures.    So, building permits were cut by more than half in just a year.  In Floyd County, building permits increased from 248 to 260, with multi-family units driving the increase from 2021 to 2022.

The Fed may be approaching the last rate increase at its next meeting in May.  There is an outside chance that there will be a pause, but an increase of 25 basis points is likely.    The rate of inflation growth is falling, with the last CPI headline number running at 5%.    After the pause in rates, the Fed will hold for some time, keeping mortgage rates elevated.    Some participants are pricing Fed rate declines later this year, but that is not certain.    As the economy slows, this will push interest rates down, bringing further relief to mortgage rates.