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What's next for Indiana's labor market?

"A very big economic disruption this year"
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Posted at 7:15 PM, Jan 26, 2021
and last updated 2021-01-26 19:16:00-05

INDIANAPOLIS -- Economist Michael Hicks has served as the Director of the Center for Business and Economic Research at Ball State University for 13 years. During that time, he has seen two recessions, but he said the one happening during the pandemic is far worse than the Great Recession.

“We're really talking about an economic event that is more like the Great Depression, especially for workers at the lower third or lower half of the income category,” Hicks said.

In 2020, he the said 550-600,000 jobs statewide were lost and it happened in three ways:

  • traditional loss of jobs
  • workers who left the labor force — particularly parents of school-aged children
  • workers in industries that are sensitive day-to-day demand.

Even before the pandemic, Hick said Indiana’s job market as a whole was getting worse. “2019 as a benchmark year is pretty bad. Because 2019, Indiana — much of the Midwest — was sliding into a recession because of the trade war,” he said.

Short-term, Hicks believes labor markets will improve, but slowly. Events like NCAA March Madness, he said, will spark a demand in some of the hardest hit industries.

“We're projecting the economy, which we think will have dropped about four-and-a-half percent in 2020, which has been the worst year since that first year after World War II. We expect this year the economy to recover, we think growth will exceed two percent in 2021,” Hicks said.

The growth, however, is not without a hit to some industries like the service sector. Hicks said “automation of labor markets” is “far more likely in the coming months.”

“I would be unsurprised, if as many as 20% of displaced workers -- so that's 100,000 workers here in Indiana, probably half of those in Central Indiana -- are at risk of not having those jobs returned after COVID,” Hicks said.

Long-term, Hick fears it may be three to five years before fully recovering. He said he hopes low interest rates will create new positions and more people will explore post-secondary education opportunities to set themselves up for “more stable jobs.”