Economic uncertainty looms as Indiana’s “hot” job market heads into 2023

The key economic tension to watch for in 2023 will likely be the balance between employment levels and the cost of living, experts say.

Indiana Unemployment Rate has steadily increased since June, peaking at 3 percent in October and November.

“About a year ago we found ourselves in a red-hot job market. So has it gotten a little softer? Yes. But what I would say is that the softening goes from white heat to red heat,” said Rachel Blakeman, director of the Community Research Institute at Purdue Fort Wayne. “So I would hardly say that at this point we see concerns about unemployment numbers and the workforce and things like that.”

December unemployment data will be released later this month the Bureau of Labor Statistics. Blakeman reckons these numbers likely won’t be much different from November.

“I think one of the interesting things is that the unemployment rate isn’t even distributed across the state. So that tells me we have full employment statewide,” she said. “We see a trend of labor shortages.”

The proportion of people of working age who are actively working or looking for work has fallen slightly over the past year latest preliminary estimates from the BLS, up to 63.2 percent. Compared to August 2022, there were almost 7,000 fewer workers in the country in November.

People drop out of the workforce for all kinds of reasons, experts say. For example, parents, often women, cannot find enough childcare to work.

This fact combined with the low unemployment rate, a high number of Hoosiers quitting jobs and start-ups as well as a large number of job offers from employers paint a picture of a labor market that does not exist enough people to meet the needs of the companies.

READ MORE: Job market appears strong in new data as Indiana officials brace for possible ‘mild’ recession

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This can give workers a lot of bargaining power to negotiate better wages and working conditions, or to find a new employer that better suits their needs.

“But what we really want to remember here is that we’re looking at a lagging indicator of the economy,” she said. “So for everyone who was trying to say, ‘OK, what do the numbers tell us in November?’ Honestly, nothing about what lies ahead.”

Blakeman and other experts say there are reasons to believe the economic tide could turn against workers by 2023. Especially as the Federal Reserve tries to lower inflation by raising lending rates and forcing companies to reduce production. That means people could lose jobs, but the cost of milk and other goods might go down again.

In a speech last August Reserve Chairman Jerome Powell acknowledged the Fed’s Aggressive handling of inflation could injured American workers, however, argued that allowing inflation to run wild could do more harm.

For the past two years, Indiana University Northwest economist Tin-Chun Lin has asked his students whether they are more concerned about inflation or employment.

“They said yes, the prices are very high, but I can avoid it,” Lin said. “But if I don’t have a job, I don’t even have an income.”

Their answers were not surprising, he said. He suspects similar feelings, especially among younger generations, which is why the Republicans News focuses on inflation during the 2022 general election brought no political gains many expected for the party nationwide.

Lin said he wonders if the Federal Reserve is taking the right approach to curbing inflation. Rising interest rates aim to lower costs by lowering demand, he said.

“Reducing demand can help this economy, but then again, so can it [will] harm this economy,” he said.

For example if the Organization of Petroleum Exporting Countries OPEC “If production increases, the price of gasoline falls,” he said. “Our problem is on the supply side, not the demand side.”

Employees may have to deal with the issue of their own rising wages, Lin said. Many industries saw wage increases as employers try to attract talent by offering paychecks that help them better manage inflation.

However, he said some employers may not be able or willing to pay those wages if interest rates continue to rise.

“Once you increase workers’ wages, it is impossible to reduce their wages to the initial level [level],” he said. “To solve this problem [employers] could just hire temps to cut costs.”

Blakeman sees a slightly brighter possibility.

“I just look at the sheer volume of job openings. And so the question becomes, how much of that is going to be just not filling vacancies?” she said. “And so we could land with a soft landing, there could be a possibility because they just stopped filling vacancies. Of course, if you now have plant closures and things like that, it becomes more difficult.”

Both Blakeman and Lin agree that when a downturn hits, manufacturing is likely to be hit the hardest. So even if it’s just a mild recession or a “soft landing,” industry-heavy states like Indiana are likely to fare worse than the rest of the nation.

“We just don’t know what the future holds,” Blakeman said.

Contact Reporter Adam at [email protected] or follow him on Twitter at @arayesIPB.

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