Recovery taken hold in state? Data suggest ‘no’

The American economy is a mosaic of 381 metropolitan economies, which account for nearly 90 percent of the nation’s inflation-adjusted gross domestic product.

Although the U.S. Bureau of Economic Analysis has released GDP preliminary data for 2014, it will be months before we learn the figures for the states and metro areas. Today, we’ll have to make do with 2013 data.

The national recession started as a mild 0.7 percent decline of real GDP between 2007 and ’08 for all metro areas in the country; fewer than 60 percent of the metro areas saw a drop in real GDP.

Six of the 15 metro areas that include Indiana counties escaped that early downturn. These were Columbus, Bloomington, Lafayette, Evansville, Indianapolis and South Bend. However, Elkhart-Goshen fell 12.6 percent in 2008, and Kokomo suffered a 16.9 percent decline.

By 2009, all Indiana metro areas, except Bloomington, were producing below their 2007 levels. In Columbus, real GDP was down 14 percent from 2007, Elkhart-Goshen was down 33 percent and Kokomo was off by 44 percent.

Yet the economy often follows the unusual maxim, what goes down will come up. From those lows of 2009 to 2013, Kokomo zoomed to first in the nation, leading real GDP growth with 61 percent. Elkhart-Goshen followed in fourth place nationally at 48 percent and Columbus came in sixth with a 30 percent growth.

With the recession over, the question arose: Are we back to where we were in 2007? In seven Indiana metro areas, the answer is yes and more so. Columbus in 2013 stood 11.3 percent above its 2007 level. Indianapolis was up 6 percent with other positive results for Cincinnati (includes Indiana’s Dearborn, Ohio and Union counties), Bloomington, Lafayette, Fort Wayne and Louisville (includes Indiana’s Clark, Floyd, Harrison, Scott and Washington counties).

Small (less than 1 percent) shortfalls remained for Elkhart-Goshen, Evansville, Muncie and Chicago (includes Indiana’s Lake, Porter, Jasper and Newton counties). Deficits of 2 to 4 percent were found in South Bend, Michigan City and Terre Haute. However, Kokomo was still below its 2007 real GDP level by nearly 10 percent.

Nationally, two of every five metro areas were below their 2007 levels. We’ll see if the 2014 numbers wipe out those negatives.

Another way to evaluate a metro area’s performance during the recession and recovery looks at that area’s share of the national metropolitan economy. That share rises if its percentage growth exceeded the average metro area growth rate of 4.5 percent.

Only four Indiana metro areas increased their share of the nation’s real GDP — Columbus, Indianapolis, Cincinnati and Bloomington. The remaining 11 areas, including Chicago and all those in the northern half of the state, declined in their share of the nation’s output.

Does this matter? We hear from state and local officials and economic developers how competitive our state is.

The facts do not seem to support such claims.

Perhaps the state legislature and the governor’s office might forget their many embarrassing proposals and get down to the real business of making all of Indiana attractive to business.

Morton Marcus is an economist, formerly with the Indiana University Kelley School of Business.