Economic projections for Indiana's metro areas in 2025

Managing Editor, Indiana Business Research Center, Indiana University Kelley School of Business

The incoming presidential administration, pending interest rate cuts by the Federal Reserve and possible reduced consumer expenditures will play a crucial role in the future of Indiana’s metro economies.

As we usher in the new year, people are keen to see how the economy and financial markets will unfold in 2025. Back in November, the Kelley School of Business’s Futurecast tour made its way across Indiana, stopping in 11 cities to share economic forecasts for the nation, the state and its metropolitan areas. Panels of economists and featured speakers provided insight on the changing economic landscape, discussing employment, inflation and other critical factors that will influence state and local economies.

As a supplement to the Futurecast tour, the Indiana Business Research Center also publishes the annual Outlook edition of the Indiana Business Review, providing expert analysis and economic forecasts for the upcoming year. Several common themes emerged from those recent articles, including uncertainty over the new U.S. and State of Indiana administrations, pending interest rate cuts by the Federal Reserve and possible reduced consumer spending.

Below are the highlights and some excerpts taken from the 14 metro forecasts featured in the Outlook issue of the Indiana Business Review. Visit the publication website for full analyses from our authors.

Anderson

Dr. Jongdoo Lee, Anderson University
Dr. Lonnie Leeper, Anderson University

Madison County continues to show solid recovery from the woes of the pandemic era. The county’s unemployment rate has stayed low at 3.6%, maintaining the same gap with the state’s unemployment rate in back-to-back years.

Health care and social services and manufacturing continue to be the main industries of employment in Madison County. The county has also seen significant growth in annual average weekly wage (+6.4% year-over-year). With interest rates projected to be on the decline, the Madison County housing market has experienced average median sales price growth of 9.5% year-over-year.

Given the Federal Reserve’s recent interest rate cut and signal of expected future rate cuts in 2025, this could positively impact the economic growth of Madison County. The unemployment rate in 2025 for Madison County should be expected to remain steady if rate cuts continue. Wage growth should be expected to continue at a slower pace than 2024.

Bloomington

Carol O. Rogers, Indiana Business Research Center

The latest forecast from the Center for Econometric Model Research (part of the Indiana Business Research Center) provides a somber trajectory for Bloomington jobs growth (employment by place of work). The metro area’s job levels have remained relatively static since 2023, reaching 75,000 or more jobs twice since 2022. Bloomington metro jobs are forecast to experience both growth and decline within a range of 1,000 jobs through 2026.

Wages for payroll jobs in the Bloomington metro saw significant post-pandemic increases that began to bottom out early in 2024. We forecast wages to climb again late in 2024 before converging at 4% in the second half of 2025 through 2026. 

The Bloomington metro economy, as measured by real gross domestic product, is valued at $7.9 billion. Real GDP growth between 2019 and 2023 was 5% and less than half that of Indianapolis. We forecast Bloomington’s year-over-year real GDP growth for 2024 to end at 2.6% and climb to 3.1% in 2025.

Columbus

Dr. Steven H. Mohler, Indiana University Columbus

Columbus concluded 2023 with higher unemployment than 2022. During 2024, the unemployment rate was 3.4% or higher for all but one of the first nine months of the year. Current expectations are for local economic output to increase during 2024 in light of vehicle production and sales projections.

Interest rates rose from January 2022 until July 2023 at a rate not seen since 1980 and the cost of construction continues at elevated levels. These factors are reflected in residential housing sales for the first nine months of 2023 and 2024. Both year-to-date values are approximately 750 units, well below the prior low of 844 housing sales in 2019. The lack of available and affordable new and existing housing in the Columbus MSA may continue as a drag on economic growth in the near term.

Columbus may experience flat to slightly higher real GDP growth between 0.0% and 2.0% in 2025. Weakness in the automotive and durable goods sector, fueled by continuing high interest rates combined with low consumer confidence, may be key to this scenario.

Unemployment may increase slightly to between 4.0% and 4.5% in 2025 due to potential slack in the manufacturing sector and the net addition of up to 500 new entrants into the job market. In this scenario, the number of employed is expected to decrease by between 0 and 300 in 2025.

Read full Columbus article »

Evansville

Dr. Mohammed Khayum, University of Southern Indiana

The Evansville region is projected in 2025 to increase its strong manufacturing base, and continue embracing its role as a growing medical and finance hub. The region has a much stronger social network compared to the national average, which can be more effectively leveraged to spur business investment and growth.

The manufacturing sector is expected to add 274 workers (1% growth) over the next year. This sector accounts for a robust 17.8% of the workforce and regional concentration in this sector is 236% greater than the national average. The three fastest-growing sectors in the Evansville MSA are related to the region’s role as a growing finance hub. They are professional, scientific and technical services (which include legal, accounting and engineering services), finance and insurance and the management of companies and enterprises. These sectors are expected to grow by 2% over the next year, adding 187, 110 and 64 workers, respectively.

Fort Wayne

Rachel Blakeman, Purdue University Fort Wayne
Dr. Heather L.R. Tierney, Purdue University Fort Wayne

Despite resilience to inflation in 2021 and 2022, higher prices (especially for things like groceries and rent that offer little option for substitution) are wearing on Fort Wayne consumers, causing them to cut back on discretionary spending, such as restaurants or entertainment. However, Fort Wayne isn’t cruising into recession territory unless there are additional shocks to the national economy.

New population projections have Allen County growing by 54,723 residents over 30 years, marking a 14.2% increase. This growth is significantly greater than the state’s projected 5.4% growth in that same period. The projected population for Allen County is 440,805 in 2050, as compared to 386,082 in 2020.

Purdue University Fort Wayne’s model for 2025 projects unemployment in the Fort Wayne metro to be about 4%, which is consistent with what we have seen in 2024.

Indianapolis

Dr. Phil Powell, Indiana University

The real GDP growth forecast for metropolitan Indianapolis is 2.3% in 2024 and 3.1% in 2025. Real economic activity in the Indianapolis region is expected to grow slightly faster than the nation and the state.

Average hourly earnings for all private sector employees in the Indianapolis metropolitan area increased 4.1% between September 2023 and September 2024. The $31.68 earned by the average worker in metropolitan Indianapolis fell 10.7% short of the $35.46 earned by the average worker nationwide in September.

Unemployment is expected to average 4.2% nationally, 3.8% in the state and 3.5% in the Indianapolis metropolitan area during 2025. Wage growth is expected to average 3.7% nationally and 3.9% in both the state and Indianapolis region.

Johnson County

Dr. Phil Powell, Indiana University

Despite a lack of fast growth in high-innovation industries, the economic performance of Johnson County will outpace regional peers in the upcoming year. Real economic activity in Johnson County is expected to grow 3.5% in 2025. This exceeds expected real GDP growth of 2.1% in the nation, 2.9% in the state and 3.1% in the Indianapolis metropolitan area.

Unemployment during 2025 will average 4.2% nationally, 3.8% in the state, 3.5% in the Indianapolis metropolitan area and 3.1% in Johnson County. Intense competition for scarce good talent in Johnson County will continue in 2025.

While Johnson County wages are relatively low, household income is not. A large share of high-income residents work outside of Johnson County. Median household income in Johnson County was $83,036 in 2022, which was 8% higher than the state median and 3% higher than the national median.

Kokomo

Dmitriy V. Chulkov, Indiana University Kokomo

While the unemployment rate in Kokomo was higher than the state and national averages in 2024, the region saw a general convergence of employment and unemployment figures to long-term trends. The economic fortunes of the Kokomo MSA are linked to its robust manufacturing sector. The construction of two new electric vehicle (EV) battery manufacturing facilities by Stellantis and Samsung SDI, along with additional investments from suppliers in the EV battery supply chain, is poised to boost employment in the region and increase its diversification.

Current data reveal that the Kokomo MSA lags the state in both employment growth and unemployment rate. However, the unemployment situation in Kokomo is forecasted to improve over the next two years with strong employment growth. The unemployment rate in the Kokomo MSA is expected to decline to around 4% by the second quarter of 2026.

Lafayette

Dr. Timothy Zimmer, University of Indianapolis

The Lafayette MSA labor market has experienced challenges in 2024. Inflation, higher interest costs, rising labor costs and labor shortages have converged to stress the labor market. Unemployment rates increased in 2024 to between 4% and 5%, which is slightly higher than the past several years.

The labor force in 2025 should continue to build strength as the year progresses, remaining stable at the beginning of the year and eventually returning to growth. The unemployment rate should retreat from the recent high of 5% and ease down during the year closer to 4% if the Federal Reserve is successful in creating a soft landing for the economy while subduing inflation.

The economic environment of the Lafayette MSA is uneven heading into 2025. The labor market has welcomed significant wage growth, but employment and job creation remain very sluggish, leading to higher unemployment. Inflation and interest rates have remained high most of the year, with reprieve only coming in the last few months. Population growth remains resilient, likely a reflection of the desirability of the area. While there is evidence of increased building in the future, the housing market remains tight and residential real estate prices continue to rise.

Louisville

Dr. Uric Dufrene, Indiana University Southeast

We are expecting an acceleration of payroll growth for the Louisville metro over 2025 and an unemployment rate that remains about 4.5%. Slower growth was expected for 2024, with an outside chance of a recession. We have now moved past the slower growth phase and can expect higher job growth for the Louisville metro over the next year.

Education and health services is up by 5,000 jobs since last year, exceeding total jobs added for the entire metro area. Job growth in education and health services has exceeded overall job growth since 2023.

Preliminary estimates show strong growth in both the labor force and employment across the metro region. As the labor force has increased over the past year, the number of unemployed has also drifted upward, thus producing a higher unemployment rate. An expanding labor force will also contribute to payroll growth, in line with the overall positive outlook for the Louisville metro.

Muncie

Dr. Dagney Faulk, Ball State University
Owen Holzbach, Ball State University

While the Muncie metro experienced employment and wage growth over the past year, the rate of growth has slowed. However, this was expected given the Federal Reserve’s policy actions to slow the economy. The number of food stamp recipients and payments were relatively stable over the year. New housing permits increased for both single-family and multi-family units. Home sales slowed a bit from the recent peak, but the single-family housing market is still tight.

The most recent forecast from Indiana University’s Center for Econometric Model Research shows employment growth of 1.89% over the next two years (2023 Q4 to 2025 Q4). Personal income is expected to increase 3.4% through 2027. The population projection shows a slight decrease of -0.23% by 2027. 

Northwest Indiana

Dr. Micah Pollak, Indiana University Northwest

While the manufacturing sector has the highest relative employment concentration of any sector in Northwest Indiana, the largest sector by employment level since 2009 has been health care and social assistance. This sector employs 42,267 workers and provides 19% of jobs. With an average annual wage of $60,561, the health care sector contributes 18% of all wages in Northwest Indiana. The health care and social assistance sector has also been one of the most robust sources of employment growth for the region over the last few decades, nearly doubling sector employment with the addition of more than 20,000 jobs since 1990.

Between 2019 and 2024, professional, scientific and technical services was the sector in Northwest Indiana with the highest competitive advantage. Employment growth in this sector outperformed expectations by over 300%. In addition, the industries responsible for much of this job growth within the sector are relatively higher paying. For example, 1,719 of these new jobs were in the management, scientific and technical consulting services industry, with an average pay of $62,041.

Northwest Indiana now finds itself in a position new to us. Instead of grappling for a way to stem economic decline, we find ourselves already well down a path of growth toward greater economic prosperity. Population is growing, real incomes are rising and we are building a foundation for even stronger growth in the future.

Read full Northwest Indiana article »

Richmond

Dr. Oi Lin Cheung, Indiana University East

Manufacturing continues to be the Richmond region’s lead industry sector by employment, providing 12,894 jobs in 2024 Q1. Manufacturing is followed by health care and social services (8,262 jobs), retail trade (7,895 jobs) and accommodation and food services (4,635 jobs). The region added 712 new jobs to the private sector in 2024 Q1, as compared with the year before. This resulted in large part from the remarkable creation of 331 jobs in retail trade (+218) and wholesale trade (+113).

The region saw an average 3.3% increase in the private sector’s weekly wages at the beginning of 2024. Only agriculture, forestry, fishing and hunting (-7.8%), management of companies and enterprises (-17.1%) and educational services (-11.5%) suffered declines in weekly wages. All the other industries recorded a rise ranging from 0.7% (retail trade) to 12.9% (mining).

Robust consumer spending, a solid labor market and inflation converging to the target of 2% (implying possible further interest rate cuts) should give rise to a more favorable economic environment for doing business in the U.S. and the Richmond region next year. We project the Richmond region’s 2025 unemployment rate to hang around 4%, with significant variations across counties and industry sectors.

South Bend and Elkhart

Dr. Hong Zhuang, Indiana University South Bend

The labor markets in the South Bend-Mishawaka and Elkhart-Goshen MSAs saw substantial declines in the labor force while unemployment rates moved higher in 2024, under the influence of contractionary monetary policy. While total employment increased in the South Bend-Mishawaka MSA, it declined in the Elkhart-Goshen MSA. Housing market supply increased in St. Joseph County and housing price inflation eased.

The unemployment rate in the South Bend-Mishawaka MSA is expected to be between 4.5% and 5.0% in 2025. The MSA started 2024 with an unemployment rate of 4.3% in January before falling to 4.0% in April and then rising to 5.2% in August. Although the monetary easing cycle began in September 2024, policy effects typically take time, so unemployment reduction may be gradual. Hourly wage growth in South Bend-Mishawaka will likely slow, though aggregate income may increase depending on work hours.

The Elkhart-Goshen MSA’s unemployment rate is also expected to range from 4.5% to 5.0%. Similar to South Bend-Mishawaka, unemployment in Elkhart-Goshen rose from 4.1% at the start of 2024 to 5.4% in July and 4.7% in August. This trend reflects a decline in manufacturing jobs closely tied to the RV industry.

Read full South Bend-Mishawaka and Elkhart-Goshen article »

Learn more

Visit www.ibrc.indiana.edu/ibr to read the in-depth metro analyses, as well as projections for the nation, state, financial markets and more.