RICHMOND, Ind. – Last year, Indiana University’s annual panel of business experts predicted good economic news coming in 2020 around the world. Of course, that was before the birth of COVID-19.
“A microscopic virus has entered the picture, and instead of growing economic activity, we are experiencing a global recession on a scale not seen since World War II,” said Ellie Mafi-Kreft, associate professor at economics of business and public policy. at the Kelley School of Business at IU.
College experts were back on Thursday to give their educated guesses on what 2021 will bring. For nearly 50 years now, professors at Kelley School have presented their annual forecasts of business prospects in the state, usually joined by a local panelist.
This year, the local flavor was provided by Oi Lin Cheung, associate professor of finance and director of the Business and Economic Research Center at IU East School of Business and Economics.
And in a nod to the times we live in now, the usual in-person presentation at IU East has been ditched for a virtual gathering using Zoom.
Mafi-Kreft kicked off by taking a look at what could come from countries around the world next year.
The global economy is estimated to have shrunk 4.4% by the end of 2020, but is “cautiously optimistic” that a 5% global recovery next year will be “just enough” to offset the decline of production this year.
Of course, that comes with a pandemic-sized âbutâ attached.
âThe number predicted today might not be relevant tomorrow because the pandemic – which is our biggest obstacle to recovery – is something we have never experienced in modern times,â Mafi-Kreft said.
“As long as the virus circulates unchecked, growth is compromised. At any time, a resurgence of COVID-19 infections and the subsequent tightening of government restrictions may threaten to drag the world into an even more prolonged recession.”
Kyle Anderson, clinical assistant professor of business economics at the Kelley School of Business in Indianapolis, said Indiana tends to outperform economic trends across the country – both good and bad.
“When things are going well Indiana tends to do a little better, and when things are bad Indiana tends to do a little less well,” he said.
“The reason for this is largely related to the fact that we’re a disproportionately manufacturing state, and that really explains a lot of our economic differences between the United States as a whole and what’s going on here in Indiana.”
The lockdowns at the start of the pandemic saved the state a number of savings, but federal CARES law money helped keep things from getting worse, according to Anderson. And more federal help for consumers, small businesses, and state and local governments is needed.
He believes the state’s unemployment rate will drop to 4-5% by the end of 2021.
“The short term impact is going to be significant, but as we move into 2021 I think we will continue to grow the economy here in Indiana. We will offset a lot of the damage done in 2020,” said Anderson. .
“By the end of 2021 we will look a lot like what we were at the end of 2019, which looks like a recovery and it is, but that means we have lost two years of economic growth and job growth. “
âIt all depends on whether the pandemic improves. “
According to Cheung, Wayne County was already losing jobs before the pandemic hit here.
In the first quarter, Wayne County’s private sector lost 652 jobs from 2019. This was more than 50% of job losses in the seven-county area which also includes the counties of Fayette, Franklin, Henry, Randolph , Rush and Union. .
She expects unemployment to be around 6% next year (but here’s that warning again) “provided no further in-person business lockdowns occur.”
Those who responded to IU East’s annual survey of local businesses in September and October were mostly optimistic about what 2021 will bring.
Over 80% plan to increase or at least maintain the same level of production or business activity next year. More than half plan to continue with the same number of employees and a third expect to increase hiring.
A quarter believed economic conditions next year would be about the same as this year, while more than half expected things to improve.
But again, it all depends on the progress of the fight against the pandemic in the months to come.
âIn the face of the persistent global pandemic caused by a highly contagious COVID-19 virus, Wayne County and the region cannot be immune from the resulting negative economic impact,â Cheung said, âin particular showcase businesses with little flexibility to go online “.
Jason Truitt is the team leader and senior reporter at Palladium-Item. Contact him at 765-973-4459 or [email protected].