More workers in Indiana lost their jobs than in any other state last month, with the unemployment rate jumping from 5.3 percent to 5.8 percent. According to the Indiana Department of Workforce Development, this translates into a loss of 17,900 jobs, the largest increase in unemployment in the U.S. in June.
Slowdowns in manufacturing and flooded construction sites contributed greatly to the jump in unemployment, according the department. The Indiana Department of Workforce Development states the employment rate in these sectors dropped almost 7 percent since May 2007, following a trend in manufacturing slowdowns over the past several years.
"Manufacturing is still is a very important part of Indiana's economic base, more so than other states," Ball State University economics professor Cecil Bohanon said.
The domestic production of automobiles and RVs has been hit particularly hard because of increasing gas prices, he said. General Motors announced in June almost 400 of its 4,300 workers in Indiana accepted buyouts at its Indianapolis and Bedford plants. This comes after the news that the Monaco Coach Corporation will close three plants in Indiana by September, displacing 1,400 workers.
Plant closings, however, are a limited occurrence. Gary Abell, press secretary for the Indiana Department of Workforce Development, said workers who have been temporarily laid off make up the majority of the recently unemployed.
Abell said the downsizing companies are those that have placed all their chips on the domestic market. These companies have little foreign presence, and because domestic spending has decreased, their sales have, too, he said. On the other hand, those companies in Indiana that have access to large foreign markets have actually seen an increase in overseas demand.
Delaware County has a high unemployment rate compared to the rest of the state with a rate of 6.9 percent. Anderson is the only city seeing more, with a rate of 7 percent, according to the Bureau of Labor Statistics.
Bohanon said Indiana's business-friendly environment allows employers to pay lower wages. This environment, coupled with an economy that has diversified, allowed Indiana to stay ahead of the curve. This diversification creates a number of non-manufacturing related job fields such as the biotechnology and logistics and distribution centers, he said.
But despite diversification and other factors, Indiana still relies heavily on manufacturing much more than other states, Bohanon said.
Abell said manufacturing is an unstable sector, which puts Indiana in a vulnerable position.
Both Bohanon and Abell said the key to remedying the situation was to wait and hope the economy turns around without entering an inflationary period during which the dollar's value decreases dramatically. Both also agreed that the worst situation would be for the country to enter "stagflation," where both economic stagnation and inflation simultaneously increase. While prices increase, it makes production less profitable. When prices go up, so must salaries, further increasing prices and entering the economy into a price/wage spiral.
Bohanon's advice for policies to help stabilize the market includes ensuring government services for businesses are as effective as possible, local taxes and business climate are friendly, and taxes are kept low.
When looking to the future, Bohanon and Abell said it's possible the economy can get worse before it gets better.
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