IU Forecast Projects Growth, But Challenges Remain

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(photo courtesy Indiana University) (photo courtesy Indiana University)

While labeling the growth "tepid," researchers behind the 2018 Indiana University Kelley School of Business economic forecast expect the Indiana economy to outpace the nation next year. The forecast projects 2.8 percent Gross Domestic Product growth, but researchers also say the ongoing effects of opioid drug abuse pose a "significant risk" to continued economic growth.

The IU forecasters say national labor markets exceeding expectations led to a "small tinge of optimism" for 2018. The report says job creation over the first nine months of 2017 has topped the forecasted monthly rate of 150,000. Associate Professor Emeritus of Economics Bill White says a 0.3 percent labor force participation rate increase through September has translated to about 55,000 extra jobs per month.

Researchers say the unemployment rate likely won't fall much below the current rate, since the state remains at or near full employment. Indiana University-Purdue University Columbus Associate Professor of Finance Ryan Brewer says "attracting new opportunities for additional job growth becomes more difficult as the labor market tightens further."

Forecasters say continued hurricane recovery spending in Texas and Florida will contribute to national economic growth. Indiana Business Research Center Research Director Tim Slaper says the auto industry specifically stands to benefit, since about 500,000 cars and trucks were destroyed by Hurricane Harvey.

The report says, along with the "standard risks" such as international and trade developments, the opioid drug epidemic is becoming an increasingly large hurdle to economic growth. In addition to the human toll, Brewer says people who misuse opioids, estimated to be 70,000 in Indiana, "are estimated to be unemployed at a rate 389 percent higher than the unadjusted regional rate of unemployment across the country." He says that further tightens an already-challenging labor market.

The Kelley School released the forecast the morning in Indianapolis and will present it again today in Bloomington. A panel of economists will tour the state over the next two weeks to present the national, state and local economic forecasts. You can find more on the statewide tour by clicking here.