The Journal Gazette
Wednesday, March 25, 2020 1:00 am

Income earned in durable goods falls

Decline in state as neighbors flourish

BRIAN FRANCISCO | The Journal Gazette

Personal income derived from the manufacture of durable goods fell $91 million last year in manufacturing-heavy Indiana, according to preliminary estimates released Tuesday by the U.S. Bureau of Economic Analysis.

By comparison, earnings from the durable goods sector grew by hundreds of millions of dollars in 2019 in neighboring Ohio and Michigan, although their rates of growth slowed from the previous year. Among all states, only Indiana, Idaho and the District of Columbia saw income shrink in that sector.

Durable goods are products expected to last at least three years, including automobiles, appliances and furniture.

Indiana personal income across all industry sectors rose 3.8% last year, about the same rate as in Ohio and Michigan. But Indiana's per-capita personal income of $48,657 lagged those neighbors and ranked 36th nationwide.

Income increase rates were generally lower among Great Lakes states than for those in the Northeast, West and parts of the Southeast. Growth ranged from 6.1% in Colorado to 2.8% in West Virginia.

Nationwide, state personal income was up 4.4% last year, the Bureau of Economic Analysis said, compared with 5.6% in 2018.

Indiana government leaders and policymakers “have made a policy choice to be a relatively low-skilled workforce, and we are seeing that in the numbers. ... We have made a policy choice that puts us at a structural disadvantage,” Rachel Blakeman, director of the Community Research Institute at Purdue University Fort Wayne, said in a telephone interview.

Blakeman said increased automation is a constraint on manufacturing employment and income.

“Hoosiers, in general, are very proud of their manufacturing history. The problem is, the future does not look like the past,” Blakeman said. “I have no doubt that Indiana is going to continue to make lots of things for a long time. The challenge is how many people they need to do that.”

The report from the Bureau of Economic Analysis showed that nine industry sectors topped durable goods manufacturing in nationwide earnings growth last year. The leader was professional, scientific and technical services, followed in order by health care and social assistance; state and local government; finance and insurance; construction; transportation and warehousing; administrative and waste management services; accommodations and food services; and information.

Blakeman said manufacturing income potential is greatest at companies requiring highly skilled research and development staffs, such as the cluster of orthopedic implant makers in Kosciusko County.

On the flip side, product sales and paychecks in northern Indiana's recreational vehicle industry are especially fragile because an RV “is a remarkably discretionary purchase,” she said. Several months before the coronavirus pandemic that has shut down much of American commerce, some economists warned of a possible recession after RV shipment orders plunged 20% last summer.

“We keep going back to what has worked for us in the past, and it's hard to change gears,” Blakeman said about Indiana manufacturing.

The Bureau of Economic Analysis did report fourth-quarter earnings increases in durable goods manufacturing in nine states, including Indiana, which the agency said partly reflected the October end of the United Auto Workers' strike against General Motors. 

But Indiana's overall personal income growth during the quarter – 2.4% – was much less than in neighboring states led by Michigan's 4.7%.

Farm earnings dropped in 18 states last year in a sector hurt by spring flooding and U.S. trade wars with China and other nations. Indiana's $243 million decrease was tied for fifth-highest in the nation. 

Personal income increased in all other industry sectors of the Hoosier State. By far the largest surge was $1.34 billion in health care and social assistance.

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