Indiana at a Crossroad?Indiana Business Research Center NABE Spring Conference – March 5 -7, 2017 – Washington, DC 3 INDIANA OUTLOOK

NABE Spring Conference – March 5-7, 2017 – Washington, DC 1Indiana Business Research Center

Timothy F. Slaper, Ph.D.Director of Research

Indiana Business Research CenterKelley School of Business

Indiana University


Contents• Forecast (outlook) for this year and the next…• What to make of offshoring?

– Trends in FDI related job flows

• International Trade Deals…– Indiana exports by country and industry

• Indiana makes stuff…so what?– Manufacturing job trends– Carrier deal– What happens to the redundant manufacturing workers?

• How can Indiana gain ground?


INDIANA OUTLOOK


-2%

0%

2%

4%

6%

8%

2010 2011 2012 2013 2014 2015 2016

Indiana U.S.Personal Income(Year/year growth)

-3%

-2%

-1%

0%

1%

2%

3%

2010 2011 2012 2013 2014 2015 2016

Indiana U.S.Payroll Employment(Year/year growth)

4%

6%

8%

10%

12%

2010 2011 2012 2013 2014 2015 2016

Indiana U.S.

Unemployment RateFrom 2010 to 2012 Indiana’s labor market mostly outperformed the nation as a whole, especially in the early part of the recovery.

• During this period Indiana benefited from strong growth in manufacturing payroll employment

During the recovery from the Great Recession, Indiana’s personal income growth rate was mostly on par or stronger than the national rate.

• However, from 2013:Q3 to 2015:Q4, Indiana’s average personal income growth rate lagged behind the nation’s rate each quarter


Indiana PCPI lags the nation

$0

$10

$20

$30

$40

$50

$60

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

PCPI

(in

thou

s., c

u$)

Indiana U.S.


Indiana Forecast

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2014 2015 2016 2017 2018 2019

Indiana U.S.

Payroll Employment(growth, annual rate) -2% 0% 2% 4%

Total Employ.

Manufacturing

Durables

Fab. Metals

Motor Veh.

N.-Durables

Construction

Services

Retail Trade

Professional

Health Care

Leisure

2016 (Q4) - 2017

• Employment growth expected to track with U.S.

• Over the next year expect 10 of 11 sectors to add jobs.

• But manufacturing is expected to experience annual job losses in 2018 and 2019, in alignment with longer trends.

• Overall, expect about 35,000 new jobs a year through 2019.


FOREIGN DIRECT INVESTMENTThe jobs that are coming. The jobs that are leaving…or will not be created in Indiana.


0 200 400 600 800 1000 1200 1400 1600 1800

Marion County (IN)

Madison County (IN)

Boone County (IN)

Lake County (IN)

Gibson County (IN)

Clark County (IN)

Decatur County (IN)

Shelby County (IN)

Montgomery County (IN)

Putnam County (IN)

Hancock County (IN)

Bartholomew County (IN)

Johnson County (IN)

Jackson County (IN)

Allen County (IN)

Morgan County (IN)

Elkhart County (IN)

Porter County (IN)

Hendricks County (IN)

Vigo County (IN)

Rest of State

Announced FDI Jobs by Top 20 Counties, 2014-2016

Total for State 2014 to 2016: About 9,600

Average ≈3200 annually

Source: fDIMarkets


0 500 1000 1500 2000 2500 3000 3500 4000

JapanFrance

GermanyCanadaIreland

Hong KongAustria

ItalyUK

SwitzerlandSouth KoreaNetherlands

ThailandIsrael

SwedenSpain

South AfricaLuxembourg

Norway

FDI Jobs by Source Country, 2014-2016

Source: fDIMarkets


0 500 1000 1500 2000 2500 3000

Automotive ComponentsFood Processing

MetalsBusiness Services

Consumer ProductsPlastics

Industrial Machinery, Equipment & ToolsSoftware & IT services

Automotive OEMChemicals

RubberEngines & Turbines

PharmaceuticalsMinerals

AerospaceMedical Devices

Ceramics & GlassCoal, Oil and Natural Gas

Electronic ComponentsAlternative/Renewable energy

All other Industries

FDI Jobs by Industry Sector, 2014-2016

Source: fDIMarkets


0

500

1000

1500

2000

2500

3000

3500

4000

4500

2014 2015 2016

Num

ber o

f Job

s

FDI Announcements by Year and Source Country, 2014-2016

Japan Germany France Ireland Canada Israel Italy

Netherlands Switzerland South Korea Austria Sweden UK All Other

Source: fDIMarkets


Total by Industry China India Mexico

South Korea Japan Brazil

Malaysia Canada UK Ireland Italy

Singapore

Total by Country 5510 4603 4407 3715 2917 2017 1725 1084 1060 764 517 452Commercial & institutional building construction (Simon Property) 10,966 1356 3295 2712 1481 1648 474Engines & Turbines (Cummins) 5,514 1620 1312 416 420 205 427 380 21Motor vehicle gasoline engines & engine parts (mostly Cummins) 2,716 600 676 263 410Motor vehicle electrical & electronic equipment (mostly Cummins) 1,867 259 1500Medical equipment & supplies (Zimmer, Hill-Rom, Cook) 1,228 225 237 39 334 264Pharmaceutical preparations (Lilly) 969 350 80 236Paints, coatings, additives & adhesives (Uniseal) 918 125 711General purpose machinery 777 186 268 3 16 13Biological products (except diagnostic) (Lilly mostly) 773 704 69Other motor vehicle parts 758 758Basic chemicals (Vertellus Specialties) 752 214 528Medicinal & botanical (Lilly) 740 130 100 510Software publishers, except video games (Interactive Intellegence) 580 100 26 77 230 16 19Petroleum bulk stations & terminals 102 102

Outward Indiana FDI/job Flows, 2010-2016

Source: fDIMarkets

About 34,000 announced jobs out……but excluding real estate ≈ 23,000


Outward USA and Indiana FDI/job Flows

Source: fDIMarkets

2015-2016 2010-2016Industry Sector China India Mexico China India Mexico

TOTAL 72152 138047 76078 5510 4603 4407Aerospace 7023 2432 3924Alternative/Renewable energy 217 405 202Automotive Components 5360 819 24907 600 935 2989Automotive OEM 3101 775 1093Beverages 743 6424 4084Biotechnology 1017 158 704 69Building & Construction Materials 1417Business Machines & Equipment 561 734 100Business Services 4637 17490 411 80 156 24Ceramics & Glass 3293 207 281Chemicals 2520 4715 538 339 1239Coal, Oil and Natural Gas 1130 489 130Communications 1031 6427 2797Consumer Electronics 3085 19 1361Consumer Products 1161 12924 1682Electronic Components 5605 1804 4428Engines & Turbines 85 500 368 1620 1312 416Financial Services 1391 1756 600Food & Tobacco 3387 2525 3337


Outward USA and Indiana FDI/job Flows

Source: fDIMarkets

2015-2016 2010-2016Industry Sector China India Mexico China India Mexico

TOTAL 72152 138047 76078 5510 4603 4407Healthcare 784 1102 462Hotels & Tourism 553 1070 2270Industrial Machinery, Equipment & Tools 3170 6211 958 186 545 268Leisure & Entertainment 683Medical Devices 1097 721 902 225 237Metals 695 915 3367 50Non-Automotive Transport OEM 1313 411Paper, Printing & Packaging 3030 148Pharmaceuticals 1728 542 28 350Plastics 767 334 4132 10 172Real Estate 3192 4296 5882 1356Rubber 1511 1170Semiconductors 5548 7273Software & IT services 3923 50484 3606 100Textiles 468Transportation 592 1125 2038 306Warehousing & Storage 102 102Wood Products 194


EXPORTSTrade in the pre-Trump Era


Source: WISERTrade

$- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000

Canada

Mexico

Germany

China

Japan

United Kingdom

France

Italy

Netherlands

Australia

Balance of all other

Indiana Export Destinations, 2016 ($M)


Source: WISERTrade

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000

Vehicles, Except Railway Or Tramway, And Parts Etc

Industrial Machinery, Including Computers

Electric Machinery Etc; Sound Equip; Tv Equip; Pts

Plastics And Articles Thereof

Mineral Fuel, Oil Etc.; Bitumin Subst; Mineral Wax

Iron And Steel

Pharmaceutical Products

Optic, Photo Etc, Medic Or Surgical Instrments Etc

Articles Of Iron Or Steel

Printed Books, Newspapers Etc; Manuscripts Etc

Balance of Other

Canada: Exports 2016 ($M, 2-d)


Source: WISERTrade

$- $2,000 $4,000 $6,000 $8,000

Gear Boxes For Motor Vehicles

Pass Veh Spk-Ig Int Com Rcpr P Eng > 3000 Cc

Mtr Veh Trans Gds Spk Ig In C P Eng, Gvw Nov 5 Mtn

Trailers And Semi-Trailers For Housing Or Camping

Crude Oil From Petroleum And Bituminous Minerals

Parts And Accessories Of Motor Vehicles, Nesoi

Pts & Access Of Bodies Of Motor Vehicles, Nesoi

Trailers & Semi-Trailer F Trans Cds Nesoi

Pass Veh Spk-Ig Int Com Rcpr P Eng >1500 Nov 3m Cc

Civilian Aircraft, Engines, And Parts

Balance of Other

Canada: Exports 2016 ($M, 6-d)


$- $500 $1,000 $1,500 $2,000


Vehicles, Except Railway Or Tramway, And…

Electric Machinery Etc; Sound Equip; Tv Equip;…


Miscellaneous Chemical Products


Articles Of Iron Or Steel

Optic, Photo Etc, Medic Or Surgical Instrments…

Sugars And Sugar Confectionary

Iron And Steel

Balance of Other

Mexico: Exports 2016 ($M, 2-d)

Source: WISERTrade


Source: WISERTrade

$0 $1,000 $2,000 $3,000

Compression-Igntn Int Combustion Piston Engine Etc


Parts And Accessories Of Motor Vehicles, Nesoi



Supported Catalysts W Prec Metal/Prec Mtl Compnd

Medicaments Nesoi, Measured Doses, Retail Pk Nesoi

Pts & Access Of Bodies Of Motor Vehicles, Nesoi

Suspension Shock Absorbers For Motor Vehicles

Spark-Ignition Int Combustion Piston Eng Pts Nesoi

Balance of Other

Mexico: Exports 2016 ($M) 6-d detail


Source: WISERTrade

$- $100 $200 $300 $400 $500 $600 $700





Aircraft, Spacecraft, And Parts Thereof



Rubber And Articles Thereof

Art Of Stone, Plaster, Cement, Asbestos, Mica Etc.


Balance of Other

Germany: Exports 2016 ($M, 2-d)


Source: WISERTrade

$- $50 $100 $150 $200 $250 $300 $350 $400 $450









Special Classification Provisions, Nesoi

Wood And Articles Of Wood; Wood Charcoal

Balance of Other

China: Exports 2016 ($M, 2-d)


Source: WISERTrade

$- $100 $200 $300 $400 $500

Vehicles, Except Railway Or Tramway, And Parts…








Special Classification Provisions, Nesoi

Wood And Articles Of Wood; Wood Charcoal

Balance of Other

Japan: Exports 2016 ($M, 2-d)


$0 $2,000 $4,000 $6,000 $8,000 $10,000








Organic Chemicals


Mineral Fuel, Oil Etc.; Bitumin Subst; Mineral Wax

Balance of Other

Indiana Exports by Industry, 2016 ($M, 2-d)

Source: WISERTrade


Source: WISERTrade

$0 $5,000 $10,000 $15,000 $20,000 $25,000

Medicaments Nesoi, Measured Doses, Retail Pk…


Antisera And Blood Fractions, Immun Products

Pass Veh Spk-Ig Int Com Rcpr P Eng > 3000 Cc

Civilian Aircraft, Engines, And Parts

Compression-Igntn Int Combustion Piston Engine Etc


Trailers And Semi-Trailers For Housing Or Camping

Artificial Joints And Parts And Accessories Therof


Balance of Other

Indiana Exports by Industry, 2016 ($M, 6-d)


MANUFACTURING IN INDIANAAre manufacturing jobs gone-gone?


616159

442412

492085

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Man

ufac

turin

g Em

ploy

men

t

Indiana Employment:Manufacturing on the Decline

Balance MFG

Source: US BLS and IDWD: QCEW


0%

5%

10%

15%

20%

25%

0

5,000

10,000

15,000

20,000

25,000

Manufacturing Job Losses by County and Change in Manufacturing ShareIndiana's Top 20, 2001-2013

Mfg_delta ShareMfg_d

Source: US BLS and IDWD: QCEW; IBRC analysis


-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

0

500

1000

1500

2000

2500

3000

3500

4000

2007 2008 2009 2010 2011 2012 2013

Perc

ent c

hang

e in

em

ploy

men

t

Empl

oym

ent

333415 -- Air-Conditioning Equip. etc.Indiana Employment

Indiana Indiana_d_%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

0

20,000

40,000

60,000

80,000

100,000

120,000

2007 2008 2009 2010 2011 2012 2013Pe

rcen

t Cha

nge

in E

mpl

oym

ent

Empl

oym

ent

333415 -- Air-Conditioning Equip. etc. USA Employment

USA USA_d_%

Carrier Industry Comparison: US versus Indiana

Source: US BLS and IDWD: QCEW; IBRC analysis


The Carrier Deal: Awesome or Atrocious?

Trump and Pence negotiated a deal with Carrier to retain workers• How many workers? • How much in incentives?• Who pays?• Who gains?• Lot’s of hand-wringing on both sides of the political poles• At least two economists in the state were asked if it

was a “good deal”


The back of the envelope calculation (early Dec.)

• Two economists, two rival state universities, two independent calculations

• $30 an hour => state taxes at 3.3% is ≈ $1.00 an hour• $1 million a year in state incentives

– 1920 hours per year * 1000 workers = 1.92 million hours p.a.– $10 million for ten years, $1 M p.a.– $ 1,000,000 / 1,920,000 ≈ $ 0.52 per hour in incentives

• Cost of $0.52 versus benefit of $1.00• The two economists must have used the same envelope


Fortune article includes other federal revenues, not just the state tax

Doesn’t include additional costs such as unemployment insurance or trade adjustment assistance

Shortly Thereafter (Dec. 13)


Who is right? The IU/Purdue economists? Or Kwatinetz?

• Kwatinetz (Fortune article) assumed $20 an hour average wage

• Statewide, over $30 an hour• Less than 1,000 “saved” jobs• Closer to 800• Kwatinetz reports $700K per year

incentives• Reduces the per hour cost to

$0.46 for the state

Source: US BLS, https://data.bls.gov/cgi-bin/dsrv?en

Quarterly Census of Employment and WagesOriginal Data Value

Series Id: ENU18000505333415State: IndianaArea: Indiana -- StatewideIndustry: NAICS 333415 AC, refrigeration, and forced air heating

Owner: PrivateSize: All establishment sizesType: Average Annual PayYears: 2005 to 2015

Year Annual hourly average2005 $46,920 $23.942006 $45,349 $23.142007 $45,693 $23.312008 $49,852 $25.432009 $52,061 $26.562010 $53,846 $27.472011 $56,085 $28.612012 $56,367 $28.762013 $61,593 $31.432014 $66,781 $34.072015 $60,406 $30.82

https://data.bls.gov/cgi-bin/dsrv?en

https://data.bls.gov/cgi-bin/dsrv?en


WHERE DO THEY GO?Only 800 Carrier jobs were saved. Some 1300 will still be lost.


TEM/PMM

Other Industry

No Wage Record

0

25,000

50,000

75,000

100,000

125,000

150,000

175,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Num

ber o

f Wor

kers

TEM and Primary Metals Manufacturing 2002 Cohort

33.4%

34.3%

Source: Indiana DWD and IBRC analysis

WhereDidThe

TEM&PMMWorkers

Go?


Where Did They Go?

Associate degrees

52%Bachelor's degrees

22%

Master's degrees

10%

Awards at least 1 but less than 2 academic years

12%

Cohort Postsecondary Degrees Earned after 2002


Degree Degrees EarnedAssociate’s 2,629Bachelor's 1,098Master's 521Awards at least 1 but less than 2 academic years 582Awards of less than 1 academic year 167Other 44

Total 5,041

Out of some ≈100,000 workers who no longer work in TEM, ≈ 5,000 went back for additional education and training


Where Did They Go?

69

85

99

136

199

203

222

241

769

773

18

23

24

31

53

72

73

117

620

804

0 100 200 300 400 500 600 700 800 900

EngineeringMechanic and Repair Technologies

Precision ProductionEducation

Construction TradesLiberal Arts and Sciences

Computer and Information SciencesHealth Professions

Engineering TechnologiesBusiness, Management, and Marketing

PsychologyPublic Administration

Law Enforcement, Firefighting, and Protective ServicesLegal Professions

Engineering TechnologiesComputer and Information Sciences

EducationLiberal Arts and Sciences

Business, Management, and MarketingHealth Professions

Male

Fem

ale

Top Fields of Study for Females and Males

Females:

• Health care• Business

Males:

• Business• Engineering

Technologies



Return to Manufacturing

2118

775

233 201 136 131

558

0

500

1,000

1,500

2,000

2,500

Manufacturing Healthcare andSocial Assistance

EducationalServices

Administrativeand Support

Services

Retail Trade Construction Other Industries

Num

ber o

f Wor

kers

Industry Employment after Credential/Graduating



Why Leave Manufacturing?

$61,068

$68,554

$37,080

$27,284 $25,396

$37,412

$28,748

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

TEM PMM Hospitals EducationalServices

Ambulatory HealthCare Services

Nursing andResidential Care

Facilities

Administrative andSupport Services

Median Wage after Graduating (Annualized)

Median Wage after Graduating Median Wage 01-02

Median wage (red bar) in 2001/02: $37,944



WHAT IS HOLDING INDIANA BACK?


Occupational (and Educational) Mix

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

-0.07

-0.05

-0.03

-0.01

0.01

0.03

0.05

0.07

Annu

al W

ages

and

Sal

arie

s in

Indy

Diffe

renc

e in

Occ

upat

ion

Shar

e

Indy-USA (left axis) State-USA (left axis) W&S_median (right axis)

Comparing occupation share of Indiana and Indianapolis with the US averages


Educational Attainment versus PCPI

0

10

20

30

40

50

60

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Porp

ortio

n of

Pop

ulat

ion

25+

with

a B

ache

lors

or H

ighe

r

PCPI

(cu$

)

Maryland PCPI (left axis)United States PCPI (left axis)Indiana PCPI (left axis)Maryland (right axis)United States (right axis)Indiana (right axis)


Timothy F. SlaperDirector of Research

Indiana Business Research CenterIndiana University

[email protected]

www.statsamerica.org/ii2/

http://www.ibrc.indiana.edu/

mailto:[email protected]

http://www.statsamerica.org/ii2/

Documents

Indiana at a Crossroad?Indiana Business Research Center NABE Spring Conference – March 5 -7, 2017 – Washington, DC 3 INDIANA OUTLOOK