Indiana’s unemployment rate edged up to 3% in October, according to new estimates from the Bureau of Labor Statistics. Each version of the BLS provides a preliminary issue which is revised the following month.
This is the first month to hit the 3% threshold since September 2021. However, the rate is still low compared to the nation and Indiana historical rates.
“Historically, labor markets are surprisingly healthy now,” said Michael Hicks, an economist at Ball State University, noting that wages are up in many industries. “Which is just a really good place for low-wage workers, especially, right now.”
For example, the average retail wage in Indiana was nearly $18 per hour in October 2022, according to the Bureau of Labor Statistics. That’s significantly higher than the pre-pandemic average wage, which peaked at $15.69 an hour in November 2019.
“So while we should anticipate some downturn in the coming months, we are starting from a very good place,” he said.
The reason he and other economists are anticipating the “slowdown” in the labor market comes down to inflation and the efforts of the Federal Reserve to fight it by raising interest rates on loans. Businesses are expected to borrow less money and therefore reduce production.
This will reduce demand on the global supply chain and reduce exorbitant prices now seen for things like turkey.
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But the Federal Reserve itself acknowledges that this reduced production will likely also lead to layoffs and reduced wages, which will hurt workers. The belief is that current inflation hurts more people, more significantly.
Hicks and other economists strongly emphasize the value of further education in times like these. They say higher levels of education can help shield workers from the impact of a recession or get them back on their feet faster.
But Indiana workforce largely lacking in credentials and, he said, it may already be too late for many workers to get one before a downturn hits.
“If I can just put this in historical context,” Hicks said. “The last time we really went into a recession, because the Federal Reserve was raising rates to reduce inflation, was in 1981 or 1982. So if you were alive and remember that time , and especially here in the Midwest, it was a surprisingly painful recession.
The difference, he said, is that unemployment and inflation rates were much higher at the start of this recession than they are now.
“So the level of lost demand we need to do to correct inflation expectations is much lower. The global economy,” he said. “Thinking back to 1981-82, it’s the same dynamics at play.
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But manufacturing and construction tend to play a larger role in Indiana than in the country as a whole. Manufacturing alone has the greatest number of workers major categories of state industries.
While the total number of Hoosier manufacturing employees increased in preliminary October estimates, several major layoffs have already hit parts of this industry in recent months.
“So even if it’s a nationwide soft landing, or a very slight slowdown, the effect can be quite significant in these manufacturing-intensive, heavy-duty places across Indiana. “, said Hicks.
Across all industries in Indiana, the total number of layoffs and other layoffs remained stable, with a preliminary estimate of 31,000 in September 2022. This is the last available month of the BLS Data on Job Openings and Labor Turnover (JOLTS). From January to July, that number had remained at or below 26,000 – with an all-time low of 11,000 in May.
“When livelihoods are at stake and you hear that unemployment has gone up or more people are being made redundant. This is very concerning,” said Victoria Prowse, an economist at Purdue University. “[But] I think we have to remember that these are a small number of observations in the context of a larger situation.
She points to the number of people leaving jobs in the state, which JOLTS preliminary estimates rose in September to 96,000.
“Higher unemployment could also be due to people quitting their jobs to look for another job to try and get a raise,” Prowse said.
Over the summer, it appeared the number of quits was starting to decline, falling below 90,000 after months of near or above 100,000.
bow and other economists at the start saw the decline in resignations between May and July as a sign that the “great resignation” may soon be coming to an end. Now she’s not so sure anymore.
“It doesn’t sound like screaming that we’re heading into a recession, it’s more like a very tight labor market,” she said. “The direction the future is taking, I think, is a bit unstable because of the inflation setting. It’s uncharted water, at least lately, but I don’t think it’s alarming in any sense.
The total number of job openings in the state for August and September was well below the majority of the past two years, according to JOLTS estimates. The number of new hires also fell slightly in September.
“Opens have come down a bit, but they’re still high in the larger context,” Prowse said. “So I think it’s the workers who really have the power here – [at] less in terms of jobs, perhaps not in terms of wages or living conditions, and it is the companies that are struggling to hire and fill their positions.
Preliminary September estimates had even fewer job seekers than job vacancies, about 5 to 10. That’s a slight change from previous months which had about three or four seekers for every 10 openings.
READ MORE: Some companies still planning major hiring efforts despite tight labor market and economic warning signs
“We often take [job openings] as a leading indicator, maybe it gives us a glimpse into the future,” Prowse said. “Openings are down a bit, but still high in the larger context.”
In the years leading up to 2021, it was much more common for monthly estimates to have fewer openings than job seekers.
Ball State economist Hicks notes that a tight labor market isn’t necessarily a good indicator of the quality of jobs people are getting or their ability to weather an economic downturn.
“It’s just people changing companies to get a sign-on bonus, because those companies will give you a sign-on bonus, but they’re very reluctant to raise wages,” he said. “And so that kind of turnover at the lower end of wages gives the impression of a very buoyant economy when in fact there’s not a lot of underlying economic growth here in Indiana.”
The data tells us that Indiana’s very tight labor market could soon see major changes. But the numbers don’t tell the whole story. Does it affect you, your family or your business? Share your story with reporter Adam at arayes@wvpe.org or on Twitter at @arayesIPB.
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