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SCHERERVILLE — A quartet of Indiana University professors gave an economic forecast Friday that began with an optimistic international view but added caveats and concerns the closer it got to home.
The global economy will grow 3.7 percent, the U.S. economy 2.5 percent, Indiana’s 2.8 percent, and Northwest Indiana’s barely more than 1 percent, they predicted.
The annual forecast was hosted by the Lake County Advancement Committee. It was one of 10 presentations by IU faculty members around the state this month.
Ellie Mafi-Kreft, a business economics and public policy professor in IU’s Kelley School of Business, said the world economy is moving on from three shocks of the past decade: the Great Recession-inducing financial crisis, the fiscal crisis in the Euro zone and a commodity price crash.
In 2018, “virtually no country is expected to experience a recession,” she said. “The growth is generalized to advanced, emerging and developing economies.”
The Kelley School forecast for the American economy includes an early boost from hurricanes Harvey and Irma recovery. Job creation will average 180,000 per month, inflation will surpass the Federal Reserve’s 2 percent target and energy prices will remain low, according to the forecast, which will be available online next month at www.ibrc.indiana.edu/ibr/.
Ryan Brewer, a finance professor, said the economic impact of the hurricanes, particularly Harvey, will be felt in Indiana particularly in regard to the half-million automobiles that need to be replaced.
But Brewer said the IU forecast shows the state continuing the “tepid, slow-growth pattern” it’s been in recently.
He cited two risks. The prominence of manufacturing — which accounts for nearly one-third of the state’s economic output — makes the state’s business cycle more pronounced than the country’s overall.
And the labor market has tightened to a point that employers are having trouble filling jobs. Unemployment is about 3.8 percent in Indiana as compared to 4.2 percent nationally, Brewer said.
“It’s potentially a problem to growth going forward,” he said, noting that the opioid crisis has become a factor in constricting the job force, with thousands of potential workers unavailable because of opioid misuse.
Brewer suggested boosting educational attainment — Indiana ranks 42nd in the percentage of adults holding a baccalaureate degree — as a way to help boost growth. Every 1 percent increase in degree-holders produces 2 percent more output, he said.
Surekha Rao, an economics professor at IU Northwest, said the $30 billion economy of Lake, Porter, Newton and Jasper counties should grow somewhat more than 1 percent in 2018.
But per capita income has declined the last five years, she said, with higher-paying manufacturing and construction jobs being replaced by lower-wage retail and food service jobs, among others.
Rao also cited population decline, particularly among younger cohorts, as a problem.
“We have much smaller numbers here than the rest of the country,” she said of the millennial generation.
Brian Callahan, a finance professor at the Kelley School, ended the presentations on a more positive note: “Keep your money in the stock market for ’18.”
“The returns for the past year have been out of sight,” he said. “There’s optimism across the board.”
Dow Jones Industrial Average growth over 20 percent this year likely won’t be matched next year, Callahan said, but if corporate earnings remain robust the market should perform well.
Long-term, Callahan cited federal debt as a threat, and a corporate tax cut as a potential benefit to stock values.