A publication of the Indiana Business Research Center at IU's Kelley School of Business
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Midwest Turnaround

The years from 1978 to 1988 were difficult for the Midwestern states. Indiana and its four neighboring states, plus Wisconsin, added private sector jobs at an average annual rate of just 1.1% during those years, while the nation enjoyed a 2.3% annual increase. But the picture has changed. In the subsequent 10 years, 1988 to 1998, both the nation and this six-state region have seen jobs grow at a 2% average annual rate.

While every state in the region witnessed a bounce back in private sector employment growth (see Figure 1), the experience is far from uniform. Indiana, Kentucky and Wisconsin, the three smallest states of the region, have been the leaders in recovery, each topping the nation's 2% growth rate. The larger states (Illinois, Michigan and Ohio) have been lagging.

Figure 1

The details of the turnaround for Indiana are shown in Table 1. From 1988 to 1998, the Hoosier state increased its relative standing in the nation in each major sector of the private economy, compared to the 1978-88 period. Except for transportation and public utilities (where mergers and buyouts moved corporate headquarters from Indiana), Indiana's rank in the nation for employment growth rose in each sector and from 40th to 31st overall.

Click on table to see larger version.
Table 1

The same data appear even more dramatic when considered as shown in Figure 2. In most sectors, the nation's employment growth slowed. In Indiana, services was the only sector that grew less rapidly in 1988-98, compared with 1978-88. And even here, Indiana outperformed the nation, which had a greater slowing in employment growth.

Figure 2

As is often the case, manufacturing made the big difference for Indiana. After experiencing a 1.5% average annual decline in manufacturing in the 1978-88 period, the state rebounded with a 0.8% average annual growth in the next 10 years. The nation, however, saw manufacturing employment declines in both periods.

The surprise in these data, however, may be the finance, insurance and real estate sector. Despite dramatic changes in the industry, Indiana moved from the 42nd-fastest-growing state between 1978 and 1988 to 18th place in the next 10 years. This jump of 24 places was the largest the state made between these two very different periods