Region business leaders say jobs still missing jolt from recovery
Northwest Indiana business executives are seeing the signs of a sustained—yet slow—economic recovery in the region this year.
But the 22-member Times Board of Economists is split on how quickly challenges such as elevated unemployment will be resolved to provide a boost for sectors such as manufacturing, entertainment and real estate.
“What is our spark right now?” said Bill McCabe, broker/owner of Century 21 Executive Realty in Schererville. “That is our problem. We don’t have a spark to create jobs and get things going.”
McCabe was among the board members at a Feb. 9 meeting at the Radisson Hotel at Star Plaza in Merrillville to discuss the outlook for their sectors in 2011.
McCabe said stagnant low housing prices, elevated unemployment and government regulation to correct past mistakes are reasons why the market hasn’t recovered quickly. However, he expects a “modest” improvement in the market this year, although housing prices locally will be near levels seen in 2000.
However, a different story is being told on Wall Street. Bruce Quint, vice president and resident director of Merrill Lynch’s Merrillville office, said conditions for investing in equities have been “nirvana,” since the midterm elections.
Quint said between 1926 and 2009, the average return on investment on the Standard & Poor’s 500 Index was 11.8 percent. Last year, it was 11.9 percent.
Quint said in 2011 he expects stock prices to continue rising along with commodity prices, while bonds—which had been a safe haven for investors during the recession—will lose value.
In the most recent survey, board members rated performance in their sectors locally at six out of 10 and the local economy a 5.7 on average. Both rankings are up from the previous quarter’s survey results. A year from now, the board members expect their sectors to perform locally at a 6.6 level. A score of one means very poor performance, and a 10 means excellent performance.
Opinions from board members mirrored results of a new statewide business survey earlier this month showing 65 percent of respondents had a positive outlook on Indiana’s economy in 2011. However, only about 40 percent of people were convinced hiring would increase despite improved sales for businesses.
The nation’s unemployment rate fell to 9 percent in January from 9.4 percent a month earlier. The most recent state data pegged Indiana’s unemployment rate in December at 9.5 percent, which is only 0.2 percentage points lower than the December 2009 mark.
Signs of optimism
Tim Roper, who owns three Northwest Indiana dealerships, said vehicle sales depend on employment, but dealership profitability and higher sales forecasts are signs of optimism in the industry.
He said 92 percent of dealers in the nation with General Motors—many of which embarked on cost-cutting measures—ended 2010 with a profit, compared to about 60 percent of dealers in 2009. The National Automobile Dealers Association also raised its forecast for new vehicle sales in 2011 to 12.9 million units.
Rex Richards, of the Greater Valparaiso Chamber of Commerce and the Valparaiso Economic Development Corp., said many small businesses are more optimistic about their operations now than they were a year ago.
He said small businesses are making investments in their operations, such as purchasing a new truck, at a higher clip.
Horizon Bank’s Northwest Indiana Market President David Rose said if a business’ strategic plan is solid and it has a good long-term outlook, interest rates are still historically low and it’s a good time to lock in financing.
“If the financial industry is making a profit, there will be lending,” Rose said. “On the business side, most companies are starting to elongate their strategic plans.”
An uncertain future
In health care, 2010 was a worse year than 2009 even though other sectors saw significant year-over-year growth. Elevated unemployment rates are among a laundry list of problems including uncertainty about health care reform casting a pall over industry, said Gene Diamond, regional CEO for the Franciscan Alliance.
Despite expectations for improved earnings in the steel industry in 2011, positive momentum for steelmakers tapered off in the fourth quarter of 2010 for a seasonal production slowdown and softer steel market.
Capacity utilization for domestic steel mills was 74.8 percent in the week ended Feb. 12 compared to 73 percent the previous week, according to the Washington, D.C.-based American Iron and Steel Institute. The Feb. 12 figure is close to a post-recession high set in the summer when operating rates peaked about 75 percent.
The head of a Hammond steel processor and service center said his customers are expecting higher sales as a result of increased activity and orders.
But Roy Berlin, president of Berlin Metals, said activity could be improved if the federal government would more quickly address problems with trade imbalances and increase support manufacturing jobs that help provide a tax base for municipalities and incomes for people to buy things. He said one large question remains: How does the U.S. remain competitive with China and other countries in manufacturing?
“We’re spending our money on things that aren’t made in this country,” Berlin said. “I think that’s a problem.”