An Indiana State University professor believes the Wabash Valley economy may turn a corner this year after enduring “a long economic malaise.” Robert Guell took part in the Terre Haute Chamber of Commerce's annual Groundhog Day Economic Forecast. He says lower energy prices lead him to be optimistic about growth.
February 4, 2015
Terre Haute, Ind. — After what Robert Guell described as “a long economic malaise,” defined by its surge in oil prices, rise in unemployment and a labor market struggling to adapt to change, the Indiana State professor of economics says there are signs the economy may turn a corner in 2015.
“Had the Terre Haute Chamber of Commerce had a program in 1983 called the Groundhog Day Forecast and wanted an 18-year-old, budding economist from the University of Missouri to give that speech that's what I would have said and what I'm going to say today,” Guell said at the annual Groundhog Day Economic Forecast on Tuesday.
Guell was among the event's panelists, which also included David Oppedahl, keynote speaker and senior business economist at the Federal Reserve Bank of Chicago, Brian Conley, owner of Conley Real Estate Appraisals, Steve Witt, president of Terre Haute Economic Development Corp., Bart Colwell, president of Terre Haute Savings Bank, and Brien Smith, dean of the Scott College of Business.
Like in February 1983, Guell said there has been a structural realignment in energy that is a plus for employers.
“In 2015, it's directional drilling and fracking that have permanently changed the prospect for oil and gas prices because we are drilling in new, exotic locations, like under Central Presbyterian Church in Terre Haute, Ind.,” he said. “It will be several years before we see $100 for a barrel of oil and that is unambiguously a good thing.”
While many unknowns could tilt the scales, including the global market, consumer confidence and fallout from the Affordable Care Act, Guell was willing to go out on a limb and be optimistic with his 2015 economic predictions.
“It is my expectation that this year we will break the nine-year string of sub-3 percent growth,” he said. “At a local level, we have an extraordinarily healthy set of institutions. Indiana State is healthy, Rose-Hulman is healthy, the two hospitals and health systems are healthy, in terms of economic fortunes. One of the good things that sets Terre Haute apart is that our per capita personal income has risen substantially over the course of the past decade, exceeding the growth in personal per capita income, even of the Indianapolis area.”
An optimistic outlook isn't necessarily a crazy notion as the economy has experienced three “pretty strong last quarters,” Oppedahl said. In the two-thirds of 2014, he added, the number of jobs generated reached above pre-recession levels.
But with a 7.5 percent unemployment rate in Vigo County, compared to nearly 6 percent statewide, Brian Conley, owner of Conley Real Estate Appraisals, said having people employed with “good, permanent jobs” could go a long way in helping the local real estate market.
There were 989 single-family homes sold through the Terre Haute Area Association of Realtor Multiple Listing Service in 2014, a decrease of 6.37 percent from 2013. But that isn't exclusive to Terre Haute, as sales down statewide by 1.6 percent as well as being down nationally.
“Although unemployment in Vigo County has gotten better, employment is the No. 1 factor that continues to be a concern,” Conley said, adding that historically low interest rates are a positive but the need for good credit scores is still a hurdle for homebuyers. “As with most areas in the U.S and the Midwest, jobs – specifically good-paying, permanent jobs – are needed for people to make the commitment to pay for a big ticket item, such as a house.”
Some of the willingness and ability to make such a purchase may be improved if Oppendahl'sprediction that there will be around a 3 percent increase – or a little above – in economic growth for 2015 and 2016 is correct. The Federal Open Market Committee also predicts that the unemployment rate will fall toward 5 percent, he added.
“We've been expanding our economy a long time now…since late 2009,” Oppendahl said. “It's really been kind of an unusual recovery in that even though there's been growth people haven't really noticed it. So, it's been a challenging period from that slow growth, intermittent growth perspective.”
Source: Indiana State University