Economic sluggishness follows well-established trend

Indiana will be safe for another year. We will retain our regressive social agenda as the General Assembly stays busy passing meaningless, divisive legislation. Although politicians of all stripes recognize the need to attract progressive, educated people, our leaders insist on doing nothing of consequence to strengthen the underpinnings of the Hoosier economy.

Just last week, the U.S. Bureau of Economic Analysis released data contradicting the empty assertions that 2014 was a great year for Indiana’s economy. In terms of personal income growth, our state ranked 45th in the nation (or sixth from the bottom). Indiana grew by 2.5 percent (before accounting for inflation) while the U.S. advanced by 3.9 percent.

The sluggishness of Indiana’s economy followed a well-established trend: In the early years of recovery from a recession, Indiana does moderately well compared to the nation. Yet when the national economy loses the initial thrust of recovery, Indiana falters.

For instance, in 2011, Indiana had a 0.10 percentage point lead on the nation in growth of personal income (6.32 percent over 6.22 percent). The next year, Indiana’s advantage dropped to 0.03 percentage point, then fell to minus 0.22 and, in 2014, fell again to minus 1.43.

We could say, “Well, that was just the influence of the farm sector where earnings fell by 40 percent in Indiana last year yet dropped merely 17 percent nationally.” However, farm earnings account for just 2.6 percent of Indiana’s total earnings and 1.2 percent nationally. Farming cannot bear the blame for our lackluster performance.

The weakness in Indiana’s economy, compared to the U.S., was widespread in 2014. Private, nonfarm earnings in the nation grew by 5.0 percent, but only 3.3 percent in the Hoosier state. Construction earnings advanced 7.8 percent nationally but fell by 3.1 percent in Indiana.

Yes, in 2014 manufacturing earnings grew by 4.4 percent in Indiana compared to 3.6 percent nationally. But we are hard-pressed to find other important sectors where Indiana fared better than the U.S. Our earnings growth did not match those of the nation in wholesale or retail trade, transportation and warehousing, finance and insurance, education and health care services to name a few major sectors. We trailed the country in professional, scientific and technical services (3.8 compared to 6.4 percent) as well as in information services (0.2 vs 4.6 percent).

Of course, it is no surprise that earnings from state and local government services within our Hoosier Holyland were flat (actually down 0.01 percent) while growing nationwide by 1.4 percent. With pride, Indiana can be cheaper than our sister states in paying public workers.

All this was achieved with typical Hoosier lassitude. This way we don’t worry about new construction blocking streets or old sewer and water pipes being replaced. Our kids are too busy preparing for yesterday’s challenges to dream about the opportunities of tomorrow. All the while, the majority in our legislature works hard to restore 19th-century conformity.

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