State GDP data includes good, bad news

By Michael J. Hicks

The Department of Commerce recently released data on gross domestic product (GDP) for metropolitan areas.

This is an important snapshot of regional economics, because the GDP is the broadest measure of economic activity. GDP is the measure of the value of all the goods and services produced in a region.

No measurement is perfect, and the GDP is no exception. Still, it is very good for comparing regions across time. Because metropolitan GDP was not reported prior to 2001, the ensuing 15 years of data begins to provide a snapshot of some important trends that Hoosiers must take seriously.

First the good news. Over the past decade and a half, many of Indiana’s metropolitan areas did well. The Elkhart-Goshen and Columbus metropolitan areas, along with the Louisville suburbs, grew faster than the nation as a whole. Kokomo and Indianapolis both grew at just beneath the national average, while West Lafayette, Bloomington and the suburbs of Cincinnati also saw respectable growth, though slower than the nation as a whole.

Fort Wayne has continued to grow over this period and is one of the few metropolitan areas to have grown over the past 15-, 10-, 5- and one-year periods. The Chicago suburbs in Indiana and the South Bend-Mishawaka areas experienced much slower growth over this time period. Terre Haute and Evansville areas have had effectively no economic growth since 2001.

This comes with caveats. While Chicago’s economy is doing well, Lake County’s economy is much less robust. Conversely, the Indiana side of the Evansville metro area is doing much better than the Kentucky side, as is also the case in Louisville, where the Indiana side is beginning to boom.

The outlier is Muncie. GDP growth over the past 15 years in Muncie was the fourth worst in the nation out of 382 metro areas, and Muncie is one of only 19 cities to decline over the last 15-, 10-, 5- and one-year periods. The Muncie metro population has declined by 3.4 percent while GDP is down by 10.6 percent. That means the inflation-adjusted standard of living has declined by more than 8 percent.

Nearly all of Indiana’s rural places are likewise shrinking, with economic decline outpacing population losses. These stark facts should occasion a serious reconsideration of policy in cities and towns and at the statehouse. This type of regional inequality is unhealthy, and the legislature needs to take some steps to help communities sort out problems, even if they are largely of their own making.

The first lesson is that the traditional economic development policies haven’t worked. In Muncie, where tens of millions of dollars have been spent luring businesses, a full 1.51 percent of all jobs here today are the result of firm relocation from outside the county since 1990. That is tens of thousands of taxpayers’ dollars per job. Sadly, that is roughly the statewide average, which should shock the senses.

The second lesson is that the places that are doing well have shifted their focus to attracting people. In 2001 Kokomo was a tad bit smaller than Muncie. Kokomo faced a deeper recession, and yet its economy is now larger and area has actually stemmed its population losses. Ideas matter, but ideas without effective leadership don’t make a difference.

The third lesson is that the places that are doing well or have good future prospects are all focusing on regional development. Indy, Fort Wayne, Elkhart-Goshen and South Bend, Evansville, and the Louisville suburbs all have strong regional groups. These groups help pool resources, shoulder non-governmental activities and support excellence in local government.

It is time to take these lessons to city halls, county councils and the statehouse.

Michael J. Hicks is the director of the Center for Business and Economic Research and an associate professor of economics in the Miller College of Business at Ball State University. Send comments to letters@dailyjournal.net.