Ellie Mafi-Kreft’s doctorate in economics could qualify her to write the U.S. economy a prescription.
More corporate investment in new equipment and worker training would increase production, which would boost economic growth, the Indiana University clinical assistant professor said Friday.
But the patient might resist swallowing the medicine. Business leaders want to eliminate uncertainty before they invest, but Donald Trump’s election as the next president brings uncertainty about regulation, trade agreements, interest rates, tax laws and so much more, Mafi-Kreft said.
"The worry is that we just don’t know for sure" what’s coming, she added.
Mafi-Kreft was one of four panelists who presented the 2016 IU Economic Outlook at IPFW’s alumni center. About 60 invited guests – including local bankers, business leaders and IPFW students – attended the luncheon.
Rob Neal, a finance professor in IU’s Kelley School of Business, provided a financial markets forecast. Timothy Slaper, director of economic analysis at the Kelley School’s Indiana Business Research Center, examined state-specific issues. And Hedayeh Samavati, interim economics chairwoman of IPFW’s Doermer School of Business, offered a local outlook.
Along with lagging productivity, the aging population and income inequality are drags on economic growth, said Mafi-Kreft, who addressed national and international issues. She sees corporate investment as the easiest route to stronger growth.
Mafi-Kreft forecast 2 percent real gross domestic product growth in 2017, a continuation of the steady but weak recovery. She acknowledged, however, that her forecast was prepared before Election Day and based on the widely held belief that Democratic candidate Hillary Clinton would win the presidency and continue Barack Obama’s policies.
The professors travel to IU’s satellite campuses to share their thoughts each fall. Fort Wayne was the last stop on their tour.
"We’ll just have to wait and see" what changes Trump’s administration makes and how they affect the economy, Mafi-Kreft said.
Indiana’s GDP has outperformed those of neighboring states in recent years, but it has lagged behind the national GDP, Slaper said. But that’s about to change.
He expects the Hoosier State to hit 3 percent, outpacing U.S. economic performance next year. Indiana already is on track to reverse the trend of lagging national growth by the end of this year.
Indiana’s economic growth is being driven by the auto, pharmaceutical and medical devices industries, he said. That’s true even though auto sales declined this year when compared to last year’s numbers.
Slaper isn’t concerned by the hiccup in demand, however.
"Have you ever seen a Fast & Furious movie? They don’t drive fast and furious for the whole movie," he said. "Sometimes they have to pause and talk about driving fast later in the movie."
The auto industry contributed $11 billion to the state’s economy last year. Even with a strong auto sector, Indiana’s economy needs to diversify.
That seems to be happening. Pharmaceuticals and medical devices combined for a strong second-place showing with a $10 billion annual contribution, Slaper said.
"We’re not going to be just an auto state anymore," he added.
Slaper is also encouraged by state officials’ recent emphasis on innovation and entrepreneurship. Young firms, he said, are the real job creators.
IPFW’s Samavati reviewed local job creation and other data related to the Fort Wayne MSA’s economic performance since 2006. The local metropolitan statistical area comprises Allen, Wells and Whitley counties.
The Fort Wayne MSA has about 208,000 jobs this year, the first time the area has surpassed its prerecession employment of 205,000 jobs in 2006. That number dropped to 190,000 in 2010 during the Great Recession.
"The good news is not only have we gained employment steadily but also at an increasing rate," she said. "Right now, we are in expansion mode."
Samavati tempered that news with the fact that wages in the region remain below state and national averages. Echoing the view of many local officials, she said more local residents need to earn college degrees to help the area attract more high-tech, high-paying employers.
The region’s per capita personal income continues to increase faster than the national rate, however.
This is the sixth straight year the 11-county region has outpaced the U.S. growth rate, according to the Northeast Indiana Regional Partnership.
The region’s per capita income was $39,937 last year – or 83 percent of the national per capita income average. In 2010, the region’s per capita income was 80.4 percent of the national average.
The Regional Partnership used data reported by the U.S. Bureau of Economic Analysis to make its calculations, which were reported on Friday.
Neal presented a lukewarm financial markets forecast.
"The good news is the bad news doesn’t look too bad," he said. "And the bad news is the good news doesn’t look too good."
Neal expects the Federal Reserve will increase interest rates in December and once again next summer. Even so, he added, 1 percent is still very low.
Corporate earnings, he said, likely will increase between 5 percent and 10 percent in 2017.