Economic Analysis - Fort Wayne Economy

8/3/2019 Economic Analysis - Fort Wayne Economy

1/12

85902820.doc 1

ECONOMIC ANALYSIS

Regional Economy: The Fort Wayne Metropolitan Statistical Area (metro) consists ofAllen, Wells and Whitley counties in northeast Indiana as shown below:

The Fort Wayne metropolitan area lost three counties in the 2003 redefinition by the CensusBureau, contrary to the expansion that occurred in most other metro definitions across the country.

Adams, DeKalb and Huntington counties, all formerly part of the Fort Wayne metro, are notgrowing any less metropolitan, but their statistical data are now a part of the Micropolitan StatisticalArea (micro) covering Decatur, Auburn and Huntington, respectively. Those three, plus theKendallville micro (Noble County), are still a part of the Fort Wayne metro, but now are included instatistics for the Fort Wayne-Huntington-Auburn Combined Statistical Area.

The city of Fort Wayne is the second largest in the state with a 2004 population of 223,341,which is up from 219,495 for 2003. The 2003 population was approximately 1,000 less residentsthan reported in Census 2000. Returning to the three-county metro definition of Allen, Wells andWhitley counties, the region had approximately 502,141 people in 2004, with the vast majority(344,006) living in Allen County. Allen Countys population increased to 347,364 for 2005, but theincrease is due more to annexations and natural population increase as there is presently a negativeout-migration rate reported at 1,045 residents in 2005. Fort Wayne is the largest city in AllenCounty, which has 7 other incorporated areas, but Fort Wayne represents almost 65 percent of thetotal for Allen County, with 28 percent living in unincorporated areas and about 7 percent being inthe other seven smaller incorporated areas.

At 2.5 percent, the Fort Wayne metro population growth rate exceeded the state averagebetween 2000 and 2003. Whitley County led the increases with a 3.1 percent growth, surpassingIndiana by 1.2 percentage points. Allen County added 8,304 residents, a growth of 2.5 percent.


2/12

85902820.doc 2

Combining the population loss in the city of Fort Wayne with the gains made by Allen Countyduring the same time period, indicates a significant trend toward suburban growth in the outskirts ofAllen County. Population change by township illustrates the pattern best (see Figure 1).

Projections from the Indiana Business Research Center indicate that the Fort Wayne metrowill grow 10.4 percent from Census 2000 levels by 2020, adding just over 40,700 residents. WellsCounty is expected to lose a bit of its metro share, with growth around 28 percent, compared to a 52percent growth in Whitley County and a 42 percent growth in Allen County. Fort Wayne and AllenCounty have the greatest influence on the metropolitan area. Fort Waynes population increasedfrom 17,718 in 1870 to 26,880 by 1880. As a booming manufacturing center, the City grew rapidlyfrom its start in the mid-1800s to 1930. Growth slowed substantially during the Great Depression,

but remained positive. The Citys population grew at a moderate rate from 1940 to 1970, butdeclined slightly by 1980 as the impact of rising energy costs coupled with the closing of severallarge manufacturing plants, including International Harvester, with over 5,000 employees had asevere impact on the local population. In the 1960s the trend toward suburban out-migration fromthe urban core has been apparent, and has become very significant for Allen County over the past 25years. New home construction in areas of Allen County outside the city of Fort Wayne significantlyoutpaces that for areas within the city limits of Fort Wayne.


3/12

85902820.doc 3

Looking at the larger Fort Wayne MSA, growth in recent years has also been relatively slow,but still higher than that in the city of Fort Wayne. This is indicative of the fact that the majority ofthe limited growth in the metro area is occurring in the suburban communities and not within theurban core. The long-term population trend, according to U.S. Census data from 1890 to 2000,indicates the following population growth occurred in Allen County and the city of Fort Wayne:

Allen County City of Fort Wayne Statewide

Year Population % Change Population % Change % Change

1890 66,689 N.A. 35,393 N.A. N.A.

1900 77,270 15.87% 45,115 27.47% 14.78%

1910 93,386 20.86% 63,933 41.71% 7.33%

1920 114,303 22.40% 86,549 35.37% 8.50%

1930 146,743 28.38% 114,946 32.81% 10.51%

1940 155,084 5.68% 118,410 3.01% 5.85%

1950 183,722 18.47% 133,607 12.83% 14.77%

1960 232,196 26.38% 161,776 21.08% 18.51%

1970 280,455 20.78% 177,671 9.83% 11.43%

1980 294,335 4.95% 172,196 -3.08% 5.67%1990 300,836 2.21% 173,072 0.51% 0.98%

2000 331,849 10.31% 220,468 27.39% 9.67%

The 2004 population for Allen County was 342,168, which reflects an increase of about 3.1percent (10,319 residents) from 2000 to 2004. The population is projected to reach 346,653 by2010, which would be an increase of 4.5 percent from 2000 to 2010. The population of AllenCounty increased 10.31 percent from 1990 to 2000, while Fort Wayne increased 27.39 percent.Nearly all of the increase is due to aggressive annexation by the city of Fort Wayne, and this trendcontinues still, as the planned annexation of a large part of Aboite Township in 2007 is expected toadd another 30,000 plus residents to the population within its city limits. There are proposals to

merge the county and city governments that would make all of Allen County become the city of FortWayne in terms of population, which would dramatically change many characteristics in terms ofgovernment funding.

Historical Overview

Fort Waynes existence is closely tied to the unusual confluence of three rivers, the St.Joseph, the St. Marys, and the Maumee. Historically, these three rivers provided access to theGreat Lakes, central Ohio, and central Indiana. In addition, a short portage between the Maumeeand Wabash river to the west offered access to the Mississippi River, opening up the remainder ofIndiana and much of Illinois. This extensive natural trade network gave Fort Wayne distinct

advantages for commerce and settlement

For centuries, Native Americans in the mid-west had used the confluence of the St. Joseph,St. Marys, and Maumee rivers as a trading post. Historical records indicate that the NativeAmerican town of Kekionga was flourishing at the site when the first French settlers arrived in thelate 1600s. These early French trappers and traders were attracted by the profitable fur trade, andalso set up series of temporary trading posts at the confluence to trade with the Native Americans.

In 1794, following the Revolutionary War, the United States built a permanent trading


4/12

85902820.doc 4

outpost at the site, and named it Fort Wayne. Realizing the regions commercial and strategic value,the U.S. Government pursued a series of treaties with regional tribes that effectively gave the UnitedStates title to lands surrounding the confluence. In 1823, the U.S. Land Office sold those lands forsettlement to a group of merchants from the East Coast, who filed the plat for the Town Site. AllenCounty was created later that year, and Fort Wayne was named the County Seat. Due to the Townsstrategic location for trade, the small settlement grew rapidly.

Development was enhanced by the construction of the Wabash & Erie Canal in the 1830s.The Canal promised great commercial possibilities, and brought an influx of immigrants to the area.A bustling commercial district grew up along the waterfront, where warehouses were filled withagricultural and manufactured goods from throughout the United States. In the 1850s, rail lineswere laid that connected Fort Wayne with the industrial centers of Pittsburgh and Chicago, and FortWayne evolved from a trading post to a manufacturing center. Immigrant laborers flowed into thecity as it boomed through the turn of the century. By 1930, the Citys population had grown to over115,000 residents.

The Great Depression slowed growth in the region, however, Fort Wayne fared better than

most cities. Several new companies opened their doors during the depression years, and newbuildings were constructed. Downtown Fort Wayne as an activity center peaked during the 1940s,as hundreds of businesses, from small to large department stores, thrived in the Citys centralbusiness district. Manufacturing remained the mainstay of the citys economy as Fort Wayne areaplants geared up to supply the war effort.

Following WWII, urban sectors of many American cities, including Fort Wayne, lost theirappeal to middle class workers. The focus shifted away from downtown as people and capital beganto flow toward the suburbs. Although manufacturing remained a dominant influence in FortWaynes Economy, most of the new population growth took place outside of the citys core, andincreased commuting became an influence on expanding the local network of highways. Many

outdated mills and plants were shut down and abandoned during this period, and new facilities werebuilt in suburban communities. Fort Waynes neglected downtown neighborhood began todeteriorate. Downtown Fort Wayne is receiving significant renovation and redevelopment, but mostnew construction has been public buildings, with the recent expansion of the Allen County PublicLibrary nearing completion, and the completion of the expansion of the Grand Wayne ConventionCenter in 2005.

In the 1970s, a national recession and high energy prices hit the manufacturing sector of theFort Wayne economy. International Harvester, one of the largest employers in the region,consolidated its facilities and closed one of its largest plants. Due to a shortage of jobs in the area,the Citys population actually declined during this period. In the early 1980s, the local economybegan to recover with the addition of a large General Motors truck manufacturing facility. Severeflooding caused millions of dollars in damage to downtown buildings, and the gap between urbanand suburban communities increased.

By the mid-1990s, the regional economy had fully recovered and unemployment in FortWayne fell below 5 percent, and has remained fairly stable at from 4.5 to 5.5 percent through today.Population growth due to in-migration is minimal, and has been low throughout the Fort Waynemetro area since 2000. Allen Countys total residential labor force for 2004 was approximately178,654 with a 5.5 percent average unemployment rate. The labor force increased to approximately


5/12

85902820.doc 5

179,272 for May 2005. Out of approximately 203,980 private sector jobs in 2004 (202,243 in 1983)for Allen County, manufacturing was the dominant industry with 13.4 percent of total jobs and 20.9percent of total earnings. Government employment represents 10.0 percent of total employment andit contributes 10.0 percent of total earnings. Reaffirming the importance of manufacturingemployment in Allen County is this sector of employment having the second highest averageearnings per job in Allen County at $62,855. Information jobs are highest at $77,108 per job, butthere are only 3,704 Information jobs in Allen County and there were 30,291 Manufacturing jobs in2004.

In 2004, approximately 5.2 percent of the workforce commuted to jobs outside of AllenCounty, and 11.6 percent commuted into Allen County. Major employers in Allen County are:

Employer/Company Employment Sector EmployeesParkview Health Health Care; Hospitals 5,039Lutheran Health Network Health Care; Hospitals 4,872Fort Wayne Community Schools Public School System 4,161General Motors Truck & Bus Group Vehicle Assembly 2,981Allen County Government County Government 1,964

ITT Aerospace Communications Division Electronics Manufacturing 1,910City of Fort Wayne City Government 1,905Indiana/Purdue University of Ft. Wayne Undergraduate College 1,506Scotts Food Stores, Inc. (Super Value) Grocery Stores 1,500Shambaugh & Sons, Inc. Construction 1,500Verizon Communications Communications 1,459Lincoln Financial Group Financial Planning/Insurance 1,491International Truck & Engine Group Vehicle Assembly 1,380B.F. Goodrich Tire Company, Inc. Tire manufacturing 1,325East Allen County Schools Public School System 1,307Raytheon Systems Company Electronics/Communications 1,188U.S. Postal Service Federal Government 1,100Southwest Allen County Schools Public School System 915OmniSource Corporation Metals Recycling 883

Norfolk Southern Corporation Railroad Freight Transportation 800B.A.E. Systems Platform Solutions Communications 738Parker Hannifin Corporation Automotive Parts 720Cole/Fort Wayne Foundry Metal Fabricating 690C & M Fine Pack Electronics 650

Industrial Mix and Jobs

Manufacturing accounted for 17.7 percent of Fort Waynes employment in the fourth quarterof 2003, and is the largest employment sector for the greater Fort Wayne metro area, but the ratio isa slightly smaller percentage than that for the state of Indiana, which was approximately 20 percent.Figure 2 shows that from 1990 to 2003 manufacturing jobs declined 17.2 percent in Allen County

and 10.3 percent in Whitley County. Meanwhile, Wells County gained 4.2 percent. This yields adecline for the entire metro of 15 percent, compared to a 6 percent drop across the entire state ofIndiana during that same time period. Falling from a 1995 peak of 47,186 jobs, manufacturingaccounted for 36,566 jobs in the Fort Wayne metro in 2003, and declined to 30,158 jobs for 2004.The trend toward declining employment in manufacturing is part of a long-term trend and isexpected to continue, although it appears the newer manufacturing jobs have greater pay levels dueto increasing technological applications allowing greater productivity per worker. The difficulty is


6/12

85902820.doc 6

the social impact of plant-closings, or job losses, as many industrial facilities are major employers insmaller communities and the economic impact on communities has been devastating in many ways.

General Motors Truck Group andBF Goodrich Tire both remain major manufacturers in theFort Wayne metro region. General Motors recently announced it is considering investing $175million into its Fort Wayne plant, which makes Chevrolet Silverado and GMC Sierra full-sizepickups, although that expansion is just in the planning stages. Recent public announcements ofCounty Tax Incentives indicate the expansion may be larger, as part of the next-generation pick-uptruck parts sequencing operation may be brought in-house from an outside vendor. Recent record

losses in corporate earnings announced by General Motors for 2005 initially appears to jeopardizethese expansion plans. However, this is a much newer and highly productive assembly plant, andbetter able to meet changing production needs, which together with the possible realignment of itsoutside vendor operations, could become a larger expansion.

Franklin Electric Company in Wells County manufactures submersible water and fuelingsystems motors, and is one of just two Indiana companies to makeForbes Magazines list of the 200best small companies in 2004, with a rank of 150. The other Indiana company is CohesantTechnologies in Indianapolis, and it ranked 149th. Another small company isAutoliv in WhitleyCounty (producing seat belts, airbags and other automotive safety products) which recentlyannounced plans to invest $24.5 million to double its facility size and triple its workforce (currently

about 320 employees) over the next five years.

A recent report released by the Brooking Institution for July 2006 reports the extent of joblosses in manufacturing from 1995 to 2005 throughout the seven-state Great Lakes Region (Illinois,Indiana, Michigan, New York, Ohio, Pennsylvania and Wisconsin) of the United States. This reportreveals that over one-third of the nations loss of manufacturing jobs occurred in the Great LakesRegion. Nationwide the United States lost approximately 3,031,000 manufacturing jobs from 1995-2000, with nearly all of the job loss occurring from 2000-2005. The Great Lakes Region accountedfor 37.5 percent of these job losses, with Michigan losing the most manufacturing jobs from 2000-


7/12

85902820.doc 7

2005 (nearly 218,000 jobs), followed by Ohio, Illinois, and Pennsylvania. Increasing productivityhas kept manufacturing as a major portion of the national and regional economy of the Great LakesRegion. Productivity in the national manufacturing sector increased 38 percent from 1997-2004,which compares to 24.4 percent growth in productivity for all non-farm businesses during the sameperiod.

Manufacturing job losses have been pervasive in the 25 largest metropolitan areas within theGreat Lakes Region, with many declines at a faster rate than the nationwide average. The data forthese largest metropolitan areas include Fort Wayne, which in 2005 had approximately 17.2 percentof total jobs in the manufacturing sector, and had the seventh highest concentration of the 25 largestmetropolitan areas in the study. The state of Indiana was ranked sixth of the seven states in totalmanufacturing job losses, losing 92,300 jobs compared to 3,031,000 jobs lost nationwide, and hadthe lowest percentage decline for 1995-2005. Fort Wayne was one of eighteen cities that lost ahigher percentage of their manufacturing jobs from 1995-2005 than did the nation. All of the cities,except Fort Wayne, gained advanced service jobs from 1995-2000, with seven of them gainingadvanced service jobs at a rate exceeding the national average, including Indianapolis. Fort Waynewas found to be the only city which lost advanced service jobs. From 1995-2000 Fort Wayne lost

9,700 manufacturing jobs, and 900 advanced service jobs, for a total of approximately 10,600 totaljobs lost.

Total employment in the Fort Wayne metro area increased at a moderate rate prior to thenational economic recession in 2001, posting most of its gains in the two-year period from 1996 to1998. A total of 11,300 jobs (+5.5%) were added from 1995-2000, then after declines in 2001 and2002, total employment has grown each year. However, the growth has not overcome the job lossesfrom 1995-2000. From 2000-2005, a decline of 3,700 jobs (-1.7%) occurred. During the entireperiod from 1995-2000, total employment increased by 3.7 percent (7,600 jobs), which isconsidered only a minor increase relative to the national average job growth rate.

Manufacturing employment changed very little from 1995-1998, then declined from 1998 to2004, with 2005 showing minor growth. The Fort Wayne metro area lost 2,000 manufacturing jobs(-4.3%) from 1995-2000, and an additional 7,700 jobs (-17.3%) from 2000-2005. During the entiredecade (1990-2000), the Fort Wayne Region lost approximately 9,700 jobs in the manufacturingsector (-20.9%), which is a rate of decline that was greater than the national average. Manufacturingaccounted for more than the total of all jobs lost since 2000, but this may be reversing as 700manufacturing jobs were added in 2005 to the Fort Wayne metropolitan area.

Advanced service employment peaked in 1998 for Fort Wayne, and has declined every yearsince. During the entire decade, Advanced Services lost 900 jobs (-2.4%), although from 1995-2000 advanced service employment increased by 3,100 jobs (+8.4%). From 2000-2005, theadvanced service sector lost 4,000 jobs (-10.0%). It is not clear this trend has ended, as many olderindustrial manufacturing facilities are closing, and companies are opting to construct new facilitiesor significantly renovate existing manufacturing facilities. This trend is also being prompted by thenumerous economic incentives being offered to companies that can show the ability to expandemployment. In many smaller rural communities, a large manufacturing facility can be a majoremployer, and the competition to entice new companies to locate in a new community is havingmany communities offer economic incentive packages that temper the attractiveness of gains inmanufacturing employment. On a long-term basis, this is consistent with the trend of increasingproductivity through technological innovations, but the cost has been increased functional


8/12

85902820.doc 8

obsolescence for older buildings and the social impact of losing low-productive jobs for newer high-pay jobs continues to affect many smaller communities in the Fort Wayne metro area.

Economic Development

Fort Waynes economic development officials are targeting the transportation, distributionand logistics (TDL) sector for further economic development. In 2005, the Indiana legislaturepassed temporary tax abatements on new logistics and information technology equipment forbusinesses in six counties along Interstate Highway 69, providing a useful incentive for attractingand supporting businesses. TDL seems a good fit for the Fort Wayne area because of the existinginfrastructure, the number of manufacturers in the region who need to transport their goods, as wellas the number of renowned TDL companies already in the metro area. Triple Crown has rankedfirst among inter-modal service providers by the Logistics Management and Distribution Report forthree straight years, andKitty Hawk, providing wholesale airport freight transportation, has a state-of-the-art sorting hub at the Fort Wayne International Airport.

The benefits of TDL are that many of its jobs are not susceptible to outsourcing (tied as theyare to physical location and transportation), wages are relatively high, and the sector is expandingnationwide. Locally, SIRVA, a global relocation and moving-services company, continues to investand add jobs at its Allen County operation. Federal Express built a new 56,000 square-foot groundoperations center in New Haven in 2003. Triple Crown and TransWorks (providing computer-basedtransportation tools) are both expanding. Those two operations are subsidiaries ofNorfolk SouthernRailroad, which has invested $2.7 million to build an additional half-mile of track in New Haven toeliminate a bottleneck where two tracks converged.

Major infrastructure enhancements possibly in Fort Waynes future include the extension ofInterstate Highway 69 from south of Indianapolis to Evansville in southern Indiana, which furthersthe goal of a NAFTA Superhighway, and the building of a mostly new U.S. 24 to connect Fort

Wayne to the port on Lake Erie in Toledo, Ohio. The portion of U.S. Highway 24 in Indiana has amajor interchange with I-65 in Tippecanoe County near Lafayette planned for construction, alongwith re-alignment of the segment from Logansport to Lafayette. Planning is underway to acquireright-of-way for the segment extending northeast from Fort Wayne to the Ohio state line. Theseplans could possibly influence the flow of traffic on U.S. Highway 24, which at present extendsthrough the central downtown business district of Fort Wayne.

Wages and Income

The average weekly wage in Fort Wayne was $667 $8 less than the state for the fourth

quarter of 2003. By employment sector, these wages ranged from $216 in accommodation and foodservices to $1,102 in management of companies and enterprises. While those managers make themost in the Fort Wayne metro area, those wages are more than $200 less per week than statewide.Only four industries in the Fort Wayne metro had average wages exceeding the statewide averages:(1) Information; (2) Real Estate Rental and Leasing; (3) Health Care and Social Services and (4)Manufacturing. Figure 3 shows the wage differences for the Fort Wayne metropolitan areas largestindustries.


9/12

85902820.doc 9

Figure 3 reveals Fort Wayne near the statewide averages for wages, but slightly less in nearlyall employment sectors. The data shows stability in wages, and this contributes toward greaterstability in the unemployment rate. Transportation and Warehousing is a growing employmentsector, along with Health Care and Social Services and the distribution is shifting so they maybecome the major employment sectors in the future. Health Care and Social Services was 14.2percent of total employment in Allen County for the fourth quarter of 2003). Parkview HealthSystems and theLutheran Health Networkare two of Allen Countys largest employers, and bothcontinue to expand their facilities in Allen County. This is helping to diversify the local Fort WayneEconomy, as Parkview continues to expand its north campus at the northeast quadrant of I-69 andDupont Road, and has long-term plans for a large 400-500 bed hospital to be constructed as it hasassembled large amounts of acreage to accommodate these plans over the past five years, and haspurchased an office building for its corporate headquarters. Lutheran Hospital continues to expandits campus to the south at I-69 and West Jefferson Boulevard. Dupont Hospital (Lutheran HealthNetwork) at the southwest quadrant of I-69 and Dupont Road on the north side of Fort Wayne hasrapidly become a prominent regional medical campus, with several medical office buildingsconstructed around its perimeter in the Dupont Business and Medical Office Park in which it islocated.

Indianas unemployment rate was reported at 5.2 percent in August 2006, which is upslightly from 5.0 percent for August 2003. Fort Waynes unemployment rate was 4.6 percent,which is down from 4.8 percent in September 2005. Allen County averaged 5.3 percentunemployment in 2004 compared to the statewide average of 5.4 percent. The median home valuein Allen County was $88,700 in 2000, as Fort Wayne has a very affordable housing market. Percapital personal income averaged $30,725 for 2004 (101.7% of statewide average), up slightly from$30,509 in 2003 (105.8% of statewide average). Median household income declined from $43,077for 2002, or 102.4 percent of the statewide average, to $42,974 for 2003, and ranked 34 th out of 92


10/12

85902820.doc 10

counties in Indiana. About 10.2 percent of the population was earning below the poverty rate inAllen County versus a statewide average of 10.0 percent for 2003.

National Economy: The nations economy, as measured by Gross Domestic Product (GDP)accelerated substantially in the first quarter of 2006 at a 5.6 percent rate, which was the strongest in2- years. Growth slowed to 2.6 percent in the second quarter, and has slowed further to 2.2percent for the third quarter. The slowdown in expansion appears to be partially due to thedownturn in national housing. Investment in home-building was cut by the largest amount in 15years. Despite this strong downturn, the national economy appears resilient so far, and this slowingis seen as good for maintaining a steady expansion. Consumers boosted spending 3.1 percent, upfrom 2.6 percent in the second quarter. Businesses increased spending on equipment and software ata 6.4 percent pace in the third quarter of 2006, which is a significant increase from the 1.4 percentdecline in the second quarter.

Investment in new plants, office buildings, and other commercial construction rose at a brisk14.0 percent, following a 20.3 percent increase in the second quarter of 2006. Spending on home-building decreased 17.4 percent in the third quarter, which is the largest decline since the first

quarter of 1991, and it is reported the housing slump reduced the overall economic growth 1.12percentage points for the third quarter gross domestic product, which is the most in almost 25 years.

Jobs and factories continued to expand at a modest pace, as employers added 128,000 payrolljobs in August according to the Labor Department. The annual jobless rate declined slightly to 4.7percent, which is its average for all of 2006. Pay gains slowed as hourly earnings rose just 2-centsin August. However, July wages were revised up slightly, and year-over-year pay has climbed 3.9percent a five year high. This may keep consumer spending strong but also creates inflationconcerns. An ominous situation may be developing in that the savings rate has been negative for thepast five quarters. If consumers have been supporting increased spending through home equityloans, the downturn in housing that is appearing may have a more significant influence on the

national economy.

Manufacturing growth remains solid, as the ISM Manufacturing Index for U.S. Factories fell1.6 points to 52.9, which is above the 50.0 level and considered expanding, but is a 13-month lowthat is reflecting slower manufacturing of home-building products. It is also the 40th straight monthit has remained above 50, supporting a fairly strong expansion in the manufacturing sector of theeconomy. Retailers continue to shed staff, suggesting a weakening, but same-store sales amongretailers remain strong, as 13,500 jobs were lost in August in retail and 95,000 have been lost overthe past five months. Factories shed 11,000 jobs in August, adding only 3,000 so far this year. Theauto sector remains manufacturings black sheep as Ford and General Motors plan big fourthquarter production cuts. Ford and Chrysler reported big August sales declines, and General Motorsreported a record loss for 2005. Ford is expected to have poor profitability, as it has reported asignificant loss for the first three quarters of 2006, and has indicated it may have a record loss for allof 2006. Lackluster sales of new vehicles could be due to the high fuel costs in the second half of2005 and first quarter of 2006, as Sport Utility Vehicles have been a large part of new vehicle salesvolume for the past ten years, but these are also the worst performing in terms of fuel efficiency, andcar-buyers have shown reluctance to purchase Sport Utility Vehicles over the past 12-18 months.

The Federal Reserve Board left interest rates unchanged for the third straight meeting onOctober 25th as the federal funds rate remained unchanged at 5.25 percent. The Fed expects the


11/12

85902820.doc 11

national economy to expand at a moderate pace for the rest of 2006 based on a slowing housingmarket. Inflation remains a top concern, with core inflation reported at 2.9 percent above year-agolevels, which is above the 2.5 percent rate they have preferred in the past. The market does notexpect a rate hike for at least the next three meetings. Bond prices rallied with the ten-year U.S.Treasury Bond yield down 6.0 basis points to 4.77 percent, which is maintaining favorably lowinterest rates. Meanwhile housing activity continues to weaken as September existing home salesfell 1.9 percent to an annual rate of 6.18 million units, which is the lowest since January 2004according to the National Association of Realtors. Total home sales fell 14.2 percent versus oneyear prior. Existing home prices declined 2.2 percent versus one year ago, and are expected to keepfalling as prospective buyers are thinking twice about purchasing a high-priced home that may losevalue.

A positive indicator is that the total homes for sale fell for the second consecutive month,suggesting some stabilization ahead. The local economy is significantly influenced by nationaltrends in manufacturing, especially as related to the automotive industry. Many leading economicindicators are showing mixed signals as to sustaining the past couple years of economic expansion,although the recent downturn in GDP is not seen as a precursor of a recession. The specter of

volatile energy prices, and the poor performance of the automotive industry over the past coupleyears is keeping markets wary, and businesses cautious on spending or expansion plans. At thebeginning of 2006 economic forecasts were for a strong expansion into 2007, but this is proving toooptimistic, as many economists and analysts are revising their forecast to more moderate levels forthe second half of 2006, and into the first quarter of 2007.

The economic downturn during the early portion of this decade hit the northeast Indianaemployment base with a hammer. The Fort Wayne Metropolitan Statistical Area (MSA)forpurposes of this article, we will use the old definition of the MSA (including Adams, Allen, DeKalb, Huntington, Wells, and Whitley counties)lost jobs at a rate approximately twice that of thestate of Indiana from the point of peak employment (March 2000 for the Fort Wayne MSA and May

2000 for the state) through September 2004. The MSA lost 6 percent of its employment base, asidentified in the Bureau of Labor Statistics Current Employment Statistics (CES), compared with a3.3 percent drop in employment across all of Indiana. For the Fort Wayne MSA, that represented aloss of 16,750 jobs.

Not surprisingly, the vast majority of jobs lost were in the manufacturing sectorbothstatewide and in northeast Indiana. Between February 2000 and September 2004, manufacturingemployment in the Fort Wayne MSA was down by 15,740 jobs. That is a 21 percent decline in theindustrial sectoreven steeper than the 15 percent manufacturing employment decline experiencedstatewide. Durable goods manufacturing was hit the hardest, losing 13,600 jobs in the MSA betweenMarch 2000 and September 2004.

Job loss in Indiana began to level off in late 2002 and throughout 2003. Between September2002 and September 2003, Indiana experienced a net loss of 6,000 jobs; but the Fort Wayne areacontinued to lose jobs at a much faster pace, with a net loss exceeding 6,500. For the twelve-monthperiod leading up to last years forecast, job loss in Indiana (after factoring out the Fort WayneMSA) had come to a halt. But the pain continued in this corner of the state. However, during thepast twelve months, the news has been bettermodestly betterfor both the state and for northeastIndiana. During that period, Indiana gained approximately 14,000 jobs, and the Fort Wayne MSAgain included 2,475 of that total. Given that this MSA represents about 8.3 percent of the total state


12/12

85902820.doc 12

population, the Fort Wayne area more than doubled the proportion of state employment growth itmight have expected to share. Nearly half of that regional gain was in the educational and healthservices sector. Another 500 jobs were created in the leisure and hospitality sector.

As seen in Figure 1, several counties in this part of the state derive more than 50 percent oftheir total payroll from manufacturing jobs (compared with the 27 percent statewide and 13 percentnationally). Given the fundamental economic transformation that is underway throughout the entireUnited States, and especially in the Midwest United States, it is becoming apparent local economiescannot continue to rely on manufacturing as a major portion of their respective economic base.

Figure 1Northeast Indiana Manufacturing Payroll as a Percentage of Total Payroll by County, 2003

Economic Analysis - Fort Wayne Economy

Documents

Transcript of Economic Analysis - Fort Wayne Economy