Mendoza School of Business

Indiana battles eroding jobs base

Published: September 11, 2009 / Author: Ted Evanoff

American imports of oil and manufactured goods surged almost 5 percent in July, a sign of a budding revival in the overall economy even though factory employment continued to fall in Indiana and the industrial Midwest, economists said Thursday.

U.S. exports rose 2.2 percent to total $127.6 billion, while imports climbed 4.7 percent to $159.6 billion, leaving a trade deficit of $32 billion in July, the U.S. Commerce Department said.

The widening deficit fanned more trade debate, with some analysts in favor of trade reform contending the import glut slows the U.S. economic recovery despite the $787 billion stimulus package passed in March by Congress.

“People are worried the stimulus package still doesn’t jump-start our economy. It helps jump-start China’s,” said Patrick Kiely, head of the Indiana Manufacturers Association, a trade group in Indianapolis. “We need to get back as a country to more production and savings.”

Indiana, still the state with the largest share of its work force in manufacturing, has lost 110,000 industrial jobs since the recession began in December 2007, and has lost a total of 237,500 industrial jobs from the historical peak of 672,500 manufacturing jobs filled in December 1999.

In July, 435,000 manufacturing positions were filled in the state, or 18 percent of all jobs.

Imports of auto parts and industrial supplies by companies such as General Motors Co. and Hyundai Motor Corp. got a boost from the Cash for Clunkers auto trade-in program and the annual retooling of plants.

The gain in auto imports to the U.S. was probably even bigger in August, when Cash for Clunkers spurred car sales to 14.1 million units on an annual basis, their highest level since May 2008.

“In the short run, any time imports go up, we lose jobs,” said trade expert Jeffrey Bergstrand, a University of Notre Dame finance professor.

Indiana Gov. Mitch Daniels flew Thursday from China to Japan on a trade mission intended to recruit industry and jobs to Indiana. China is the U.S.’ No. 2 trade partner.

Having loaned heavily to support purchases by Americans, China holds more than $750 billion in U.S. Treasury bills, putting it in position to invest the money in the United States by buying companies here or loaning it to Chinese companies for international expansions.

But analysts contend that kind of investment won’t entirely eliminate the trade deficit.

“The recession in part is being created by the overvalued currency of China” boosting exports from China, contended University of Maryland economist Paul Morici, who was chief economist at the U.S. International Trade Commission during the Clinton administration.


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