1. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 C LOSE TO H OME I NDIANA AND ITS M ETRO A REAS Jerry Conover, Carol Rogers & Michael Thompson Indiana Business Research Center Kelley School of Business, Indiana University

2. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Indiana Outlook: A long, slow road ahead National slowdown challenges Indiana’s efforts to grow Our economy has grown more slowly than the nation’s for several years, but the gap is narrowing Overall outlook: o a tough year in 2008 o slow growth in 2009 o more robust growth in 2010

3. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Key Indiana sectors: Motor Vehicle Mfg. The nation is losing auto plant jobs at a faster rate than Indiana.

4. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Key Indiana sectors: Construction Indiana bucked the national trend last year. But residential slowdown and tight money have kicked in lately.

5. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Key Indiana sectors: Professional & Business Services Sector still growing, but much more slowly in recent months. Professional, scientific & technical services doing OK. Management of companies & enterprises not growing.

6. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Households more stressed in other states HESI = unemployment rate + inflation rate – % change in house prices 28 states have higher HESI than Indiana Indiana housing prices still rising Unemployment relatively low here

7. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Forecast for Indiana: Employment Payroll jobs shrink by 32K in 2008, then gain 8K in 2009 and 46K in 2010. Non-payroll jobs keep growing through 2010, gaining 28K this year. Several more months of weak employment before turnaround: IU Center for Econometric Model Research

8. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Indiana Forecast: Personal Income Growth IU Center for Econometric Model Research

9. Occupational Hazard – DWD Quarterly Briefing June 11, 2008 Indiana is not all the same. Many regions are adding jobs & lowering unemployment… …while others are not.

10. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Most, but not all, MSAs will add jobs IU Center for Econometric Model Research

11. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Cities will also vary in income growth IU Center for Econometric Model Research

12. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Kokomo, Muncie to Lead Sales Growth economy.com

13. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Broad slowdown in building permits economy.com

14. Occupational Hazard – DWD Quarterly Briefing June 11, 2008 New Job Commitments by International Businesses in Indiana, 2005–2007

15. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 THE OFT-POSED QUESTION: WHY IS INDIANA’S PER CAPITA PERSONAL INCOME LOWER THAN THE U.S. AND MANY STATES? I NDIANA D EPARTMENT OF W ORKFORCE D EVELOPMENT Q UARTERLY E CONOMIC B RIEFING Indiana Business Research Center Jerry N. Conover, Ph.D., Director Carol O. Rogers, Deputy Director

16. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Indiana’s Per Capita Personal Income Compared to the Midwest

17. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 What Explains Indiana’s PCPI? Hypothesis1 : Earnings comprise the largest component of personal income, ergo earnings drive income and as a result, the occupational structure of Indiana’s economy may help explain Indiana’s PCPI performance. The Question: how strong is the relationship between average annual earnings for the 22 major occupation categories and the concentration in those occupations?

18. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Correlation: Average Annual Earnings and the Concentration of Occupations

19. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Correlation: Earnings and Location Quotient

20. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Occupational Trends Help Explain Rate of Income Growth Hypothesis2: High-wage, high-growth occupations drive larger increases in personal income and faster rates of PCPI growth. Question: What is the relative concentration of occupations in higher PCPI states?

21. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Relationship between Earnings and Occupations for Illinois Positive relationship between occupation concentration and average annual earnings

22. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Relationship between Earnings and Occupations for Indiana Negative relationship between occupation concentration and average annual earnings

23. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Indiana Jobs by Occupation

24. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Growing: Indiana’s higher wage, higher growth occupations

25. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Concentration and Earnings of Management Occupations in the Midwest Indiana: Increasing

26. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Concentration and Earnings of Life, Physical and Social Science Occupations in the Midwest Indiana: Increasing

27. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Occupations Driving Indiana’s PCPI Performance Indiana currently has a higher concentration in occupations with slower earnings growth

28. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Concentration and Earnings of Production Occupations in the Midwest Indiana: Increasing (and leads the pack)

29. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Concentration and Earnings of Transportation and material handling Occupations in the Midwest Indiana Indiana: Increasing

30. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Occupations Driving Indiana’s PCPI Performance While earnings per job are increasing in these key occupations, Indiana has lost concentration in 3 of these 4

31. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Comparing the Concentration and Earnings of Healthcare practitioners and technical Occupations in the Midwest Indiana: Decreasing

32. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Comparing the Concentration and Earnings of Business and Financial Operations Occupations in the Midwest Indiana: Decreasing But earnings growth is slightly above the U.S. and most of the Midwest.

33. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Further Research This “50,000 foot” analysis shows that Indiana’s occupational mix can explain the wage & salary component of Indiana’s PCPI performance. Further questions remain: Does the occupational make-up by industry also account for overall income differences between states? What other factors can we determine directly effect PCPI (and wages)? o labor force participation rates o demographic shifts (e.g. aging and migration) o How does a lower cost of living affect wages? o policy (e.g., taxes, minimum wage)

34. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Try this at home Want to try this at home? The following slides provide the tools …

35. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 The Data Per Capita Personal Income is a measure of all forms of income, including dividends, benefits, transfer payments and BEA imputations o Divided by all state residents to create a comparable statistics Average Earnings by Occupation only considers gross salary or wages for those holding jobs at UI-covered establishments It is not “fully loaded” with benefits or supplements o It doesn’t include overtime pay The two measures are different, but are highly correlated

36. State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008 Calculating LQ The Location Quotient ( LQ ) % state employment in given occupational group % Midwest employment in given occupation group = 1. LQ score of greater than one (> 1): a higher concentration of a state’s employment relative to other Midwestern states 2. LQ score of less than one (< 1): a lower concentration of a state’s employment relative to other Midwestern states