Batesville Herald Tribune, Batesville, Indiana

December 17, 2013

Economist details variety of topics

Debbie Blank The Herald-Tribune
The Batesville Herald-Tribune

---- — The Herald-Tribune struck gold when asking Ball State University economist Michael Hicks, Ph.D., if the unsubstantiated rumor about Walmart opening a store in Batesville turns out to be true, how will that affect small businesses here?

“I wrote a book in 2007 called ‘The Local Economic Impact of Walmart,’” he confessed to a crowd of 50 gathered Dec. 11 at Hillcrest Country Club at an event co-hosted by the Ball State University Center for Business and Economic Research, which Hicks directs, and Hillenbrand Inc.

“Walmart itself is mostly not competing with small businesses,” the researcher reported. “What you usually see” after a Walmart opens is the closure of “another big box store” within 15 miles. As Walmart has become dominant, the fortunes of J.C. Penney and Sears have fallen, he pointed out.

“If there’s a punishment of Walmart coming to a town,” it’s when the discounter adds nearby outlot stores and eateries to compete with already established businesses located farther away. The Indiana Business Journalist weekly columnist observed, “Walmart loves to bring a Goody’s to town.” Since Batesville already has one, “I think you’ll see a fairly muted effect.”

He predicted if a small town shop provides goods that compete with Walmart’s, “you’ll get clobbered” because its prices tend to be low.

“With a Walmart, a town’s retail net employment “will be a little bit higher. We see very little wage effect in retail.” Because Walmart hires mostly part-time employees, 350-450 of those would be equivalent to 150 full-time employees.

Calling Batesville “an attractive community,” the director pointed out its schools and amenities should help workers at new companies want to settle here. “If you have a manufacturing facility in your community and you don’t have those workers living in your community, guess what your benefit is?” Very little was the answer.

With the help of a senior research associate and student research assistant Morgan Lewis of Dearborn County, Hicks has compiled a 2014 economic forecast for the U.S., Indiana and southeast Indiana and is touring the state to speak about it at 11 locations, including Batesville for the second year in a row. To view the entire report online: http://projects.cberdata.org/reports/Outlook2014-Southeast.pdf.

The report noted, “Southeast Indiana is comprised of Dearborn, Decatur, Fayette, Franklin, Jefferson, Jennings, Ohio, Ripley, Rush, Switzerland, and Union counties. The regional population is just over 254,000 with a per capita income of $32,868. Employment in the region is 3.14 percent of Indiana’s total with more than 112,000 persons employed. Since the end of the Great Recession, the region has seen a population loss of 0.15 percent, or almost 370 people. However, employment has grown by 1.55 percent.

In 2014 he expected a “hard-to-notice” 122 new jobs in southeast Indiana, still better than east central Indiana, which could lose 500.

From 2010-13 in southeast Indiana, “we observed significant growth in finance and insurance” jobs (11 percent) ... Private sector educational services have also seen dramatic growth (15.3 percent) ... Other notable areas of growth include forestry, manufacturing, wholesale trade, transportation and warehousing ... real estate and rental and leasing services also grew.”

“Declines of note occurred in utilities; construction; professional, scientific and technical services; and administrative and waste management services. Also, health care declines approached 10 percent in the region, and declines in government were also significant.”

Hicks said big health care companies have announced layoffs, positioning themselves for Affordable Care Act effects. “What it means is hospitals and other providers are going to be employing fewer people and paying them less.”

Next year’s Gross Domestic Product growth for this region is projected at 2.1 percent, just below Indiana’s 2.19 percent. “That’s not very good growth,” admitted the Yorktown resident. The economy will double in 35 years at 2 percent. Most economists “are accustomed to a much brisker growth rate.”

Moving on to state forecasting, the expert who has spoken nationally on C-SPAN, MSNBC and NPR’s “All Things Considered” said “Indiana has done well” with cumulative real personal income growth. A chart detailing percents from 2007-14 showed the Hoosier state above Wisconsin, Ohio, Illinois and Michigan.

During the recession, as U.S. unemployment rose to 10 percent, the Midwest’s should have been around 14 percent, but “that never happened. We stayed under 11 percent.” Hicks called that “absolutely unthinkable” because of the high number of manufacturers, “which got clobbered in the recession.”

Looking at changes in employment from 2007-14, Michigan is still 3 percent off prerecession numbers. “That’s really, really, really tough.” On the chart, with Michigan at the bottom, there’s a gap, then Indiana, now tied with Illinois, with Ohio and Wisconsin above. But none have risen to prerecession levels.

By this summer, the U.S. will have faced only three recession recovery periods longer than the current one, he pointed out.

The national outlook isn’t much better than the Midwest’s. Job creation hasn’t returned to prerecession levels although GDP did. The economist predicted record production in 2014. “We’re doing it with a lot fewer workers, between 6 to 8 million, maybe as many as 13 million fewer than should be working.”

Hicks contended some have opted not to job hunt. He detailed studies by Casey Mulligan, a University of Chicago economics professor, who maintained the tax on working “is very high. There may be 5, 6, 8 million people who say, ‘It makes no sense in me entering the labor market” to give up jobless benefits for low-paying jobs. “We all have our price.”

The 1987-2013 economic uncertainty index “has clearly dampened the demand for workers.” The chart spiked during the two Gulf wars, Sept. 11 terrorist attacks, stimulus bill and stock market crash in fall 2008, according to Hicks. The report stated periods of uncertainty based on events slow capital investment and hiring. “A recent economic uncertainty index provides clear evidence of the sustained levels of economic uncertainty inherent in our current economy. Continuing budgetary disagreements, deep uncertainty regarding labor costs due to the Affordable Care Act and unsustainable growth in the federal debt combine to impose significant uncertainty on the U.S. economy. It will persist throughout 2014.”

Debbie Blank can be contacted at debbie.blank@batesvilleheraldtribune.com or 812-934-4343, Ext. 113.

First in a two-part series Part 2: Dr. Hicks answers attendees' questions, Dec. 20