Indianapolis economy remains in the race, despite the yellow flag
Although it is showing signs of fatigue, the Indianapolis economy is continuing to exhibit positive, albeit modest, growth midway through the year. Indianapolis has to-date faired much better than many of its mid western neighbors two reasons: (1) the metro area’s below-national-average sub-prime mortgage exposure; and (2) its comparative advantage as the most centrally located of the largest 100 cities in the United States.

In June 2008, while there was no change at the national level, year-over-year employment was up 0.6% in Indianapolis. Meanwhile, the metro area’s 4.5% unemployment rate was a full percentage point below the national rate of 5.5%.

The depreciation in the U.S. dollar versus most other major currencies has brought sustained growth in goods exports. As a major transportation and logistics hub, Indianapolis has benefited significantly from this growth, more so than most other major metro areas.

Manufacturing activity in the greater metro area should also soon get a boost when production starts at the recently completed Honda plant in Greensburg. Indiana, just on the outskirts of Indianapolis.

Honda plans to hire 2,000 employees directly and the plant will also provide a significant boost to employment in local businesses. This relatively positive outlook is reinforced by the most recent Manpower Employment Outlook Survey (Q3/2008) for Indianapolis. That report indicated that, while net hiring plans were weaker than a year ago, they were up on a quarter-over-quarter basis.

Looking forward, the combined impact of the nationwide collapse in housing demand and an unprecedented escalation in energy prices is causing a national economic chill. As a result, the Indianapolis economy is likely to retreat somewhat during the second half of this year and into 2009.

However, Indianapolis’ modest year-to-date decline in house prices and its well-diversified economy point to a comparatively rapid recovery that will begin early next year and extend through 2010.

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