Manufacturing is the dominant industry in Indiana

The Indiana Manufacturers Association recently concluded a series of regional manufacturing summits around Indiana that included the participation of hundreds of individuals involved in the manufacturing sector. Statistics concerning Indiana’s manufacturing dominance were presented and discussed.

Many had a recurring comment after seeing the data. It went like this: “I knew manufacturing was important to Indiana’s economy, but I did not know it was so dominant.” When you overlay the current data, the picture becomes clear that the true engine driving Indiana’s economy is manufacturing.

Manufacturing continues to dominate the Indiana business landscape. In 2016, manufacturing accounted for $98.4 billion, or 29 percent, of Indiana’s gross domestic product (GDP). This number dwarfs all other industries in our state. Coming in at a distant second place is finance insurance and real estate, which combine at 15 percent. Other notable industries include: retail trade at 6 percent, wholesale trade at 5 percent, construction at 4 percent, transportation and warehousing at 3 percent, information at 2 percent, and total agriculture production at 1 percent.

In terms of total GDP output, Indiana’s $98.4 billion ranks sixth in the country. California leads in output with $288.9 billion, followed by Texas, $225.8 billion; Ohio, $106 billion; Illinois, $100.3 billion; and North Carolina, $99.7 billion. But the impact of manufacturing on Indiana’s economy is even greater when you look at the manufacturing output per capita. In this category, Indiana dominates—ranking number one in the country with $14,838.72 in per capita output of GDP. This outpaces all other states. Oregon is second with $12,075.34, followed by Louisiana, $10,650.27; Iowa, $10,416.65; and North Carolina, $9,833.75. The national average is $6,107.38.

Elected officials and policymakers often talk about the number of jobs created, wages paid and benefits provided in the impact on our economy. In all of these categories, manufacturing is again dominant. Not only is Indiana the most manufacturing-intensive state in the country, it is also the number-one employer, with more than 528,000 Hoosiers employed in the manufacturing sector.

Indiana manufacturing also pays some of the highest wages. As of first quarter 2015, manufacturing paid an average weekly wage of $1,277 per week. Manufacturing is also the largest supplier of benefits, particularly healthcare. When you factor in wages and benefits, the average annual compensation for manufacturing in Indiana last year was $73,765, compared to $45,592 for all nonfarm businesses in Indiana.

So what does manufacturing look like in Indiana? We can look at that in two different ways. One is by the number of establishments. With that view, we are dominated by fabricated metal products, with 1,783 separate establishments. The second-highest is machinery manufacturing, with 844 establishments. Transportation equipment is fifth, with 611 establishments.

Looking at types of manufacturers by employment gives you another view. Dominating employment in Indiana are transportation equipment manufacturers, with total employment of 130,558. Second are fabricated metal products with 59,263.

The most recent economic projections for Indiana show that the state’s job market remains solid. However, higher productivity combined with fewer available workers will translate to higher wages. Between now and 2019, it is projected that payroll employment will show modest growth; and wage income is expected to peak at 5 percent growth in 2018 and 4.9 percent in 2019. Automobile sales are expected to level off at 17.6 million units. Housing starts are expected to remain strong even as interest rates continuously rise.

One area of concern is Indiana’s population and available workforce. No matter where we go in our state, we hear that finding qualified employees remains a top challenge. Not only is there a skills shortage, there is also a people shortage. Indiana’s population growth remains stagnant, with only a 1 percent projected growth between now and 2040. This is far lower than the projected national average of 18 percent growth.

So it is a fact that manufacturing is the dominant industry in Indiana. This message needs to be sent to all who will listen. We need to tell the story to elected officials, schools, parents, kids and anyone who will listen about the opportunities that exist right here in our state. The future looks bright, but only if we work diligently to pave the way to continued success and future investment.

Click to read more from the Fall 2017 issue of Northwest Indiana Business Quarterly.