Indiana's economy has remained pretty strong in 2023’s first six months despite recent large manufacturing layoffs and high inflation. The state’s federally estimated unemployment rate has hovered around 3 percent, a near-historic low, for 20 months straight.
The Bureau of Labor Statistics' monthly employment estimates don’t really explain themselves.
For example, BLS data suggests Indiana lost manufacturing jobs in each of the last three months compared to the same months last year, but workforces in other industries grew and overall employment remained strong. The numbers don’t tell us why that’s happened.
Tin-Chun Lin, Indiana University Northwest economist, said he believes there is one strong possible explanation.
“I think it is possible, those workers that got laid off, they moved to other industries,” he said. “Since they are essential workers, not professional workers, it’s easy for them to move.”
Lin defined “essential” jobs as those in which workers can mostly learn on the job, as opposed to “professional” jobs that require years of formal post-secondary education like doctors and lawyers. “Mobility” between industries is easier as an “essential worker,” he said.
The reason manufacturing is shedding more workers than most other Indiana industries likely also has to do with inflation, Lin said. It’s now at 3 percent in the U.S., down from 9 percent a year ago — but, he said, it still has an impact.
“The manufacturing industry is a labor-intensive industry,” Lin said. “[Inflation] means everything is more expensive. So workers' living costs become more expensive, their real income decreases. So in that situation, employers are forced to increase wages.”
Lin said he believes many manufacturers are struggling to afford maintaining the growth in their workforce and wages seen last year. According to the federal Bureau of Economic Analysis, durable manufacturing employers paid more than $27 million in total wages and benefits to workers in the first quarter of 2023. That's almost the highest quarterly since the turn of the century. It is only beaten by the total wages and benefits paid during each of the last three quarters of 2022.
Many companies, he said, are likely slowing down production in the U.S. in order to move it to places where workers cost less.
There is one other industry that has posted year-over-year losses for the past few months: information. That industry, which includes broadcasters, librarians and computer programers, has shrunk every month since 2023 began. The highest loss was in March 2023, with a negative 3.7 percent change compared to March 2022.
“But where did the [information and manufacturing workers] go?” Lin said. “Of course the data does not show you.”
The “mobility” Lin described for “essential workers” may also partly explain uneven unemployment and industry totals across Indiana’s metro areas and counties, said Rachel Blakeman, Purdue University Fort Wayne Community Research Institute director.
“There might be some opportunities for people who are unemployed to find employment in surrounding counties,” Blakeman said. “So for Lake County does somebody want to travel into Illinois? Does somebody in Kokomo want to travel into another county?”
Industry-level monthly data isn’t available for counties, but it is available for metro areas. The year-over-year manufacturing workforce losses have been more pronounced in metro areas like Elkhart. But some parts of the state like Indianapolis saw their manufacturing workforces grow in these preliminary estimates compared to last June.
Company sizes may also play a role in which parts of the state an industry sees growth or losses, IU Northwest economist Lin said.
“Employers in Indianapolis are large,” he said. “If your company is large enough, you may be able to pass this hurt. But for the small small cities, I think their companies are smaller … So they may not be able to afford this pain.”
At the end of the day, Blakeman said, “it comes down to aligning jobs with workers and worker skill sets.”
“You may know somebody who left a job, maybe their office got downsized, things like that. And they've been searching for a job for 90 days, 180 days … and not finding anything,” she said. “And it may be simply because their skill set doesn't align well with the job market in their respective community.”
Blakeman added 5 percent unemployment is a threshold signifying to her that a labor market is shifting to favor employers, rather than giving employees the wage-increasing opportunity to shift jobs easily — or even just threaten to do so.
But, the labor market outside those few counties is still pretty tight overall.
“We started to see the high inflation and the Federal Reserve was raising interest rates a year ago and the thought was, are they going to bring the economy to a grand halt as interest rates went up? That has clearly not happened,” she said. “The job market has sustained some level of stability, if not growth … So I'm not prepared to say that we're going to have a soft landing. I'm not prepared to say that we are going to avoid a recession, but it's not looking likely right now.”
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Important notes about the data
There are a few important things to know about the state and local labor market data the federal Bureau of Labor Statistics releases every month.
They're old numbers. They measure the labor market a month or two months prior — not the current market.
Also, the data are estimates. So while these are often the best numbers available, there is room for error. The newest estimates are always preliminary — meaning they're rechecked and potentially revised in the next month's release.
But those revisions aren’t always perfect either. BLS sometimes re-revises the monthly numbers years later. For example, the estimated unemployment, employment and labor force numbers at the state and local level for every month between January 2018 and December 2021 was revised again this March.
And some estimates are not seasonally adjusted, meaning they don’t account for the natural ups and downs of the labor market that come with any part of the year – like seasonal jobs that only exist in the summer. That means the non-seasonally adjusted unemployment rate for January, for example, can’t be compared to the December rate. But non seasonally adjusted January rates can be compared to every January in prior years. This mostly affects local-level estimates, as most statewide estimates in these monthly releases are seasonally adjusted.
Adam is our labor and employment reporter. Contact him at arayes@wvpe.org or follow him on Twitter at @arayesIPB.