Indiana’s 2025 growth forecast indicates population declines

Researchers at Indiana University expect Indiana’s workforce to reach a record 3.4 million people by the end of next year, but the state still faces the challenge of increasing the number of college-educated workers .

The Indiana Business Research Centerled by Indiana University’s Kelley School of Business, shared Wednesday his annual predictions about the state’s economy for 2025.

Indiana’s employment rates and incomes are expected to grow slightly in 2025 and be below the U.S. average. While Indiana’s unemployment rate will rise slightly next year from around 4.3% currently, the rate is expected to remain below 5%, researchers say.

Nationally, researchers forecast that core inflation, which best reflects the long-term trend in price levels, will fall further to almost 2.3% in 2025. This metric hit a three-year low of 3.2% in September.

Here are three key takeaways from the Central Indiana data:

The Indy metro area is leading the way in growth

Like this year, the 11-county Indianapolis metro area is expected to outpace the state’s percentage growth in real domestic product — the value of goods and services produced in Indiana — in 2025.

The state’s real GDP growth is expected to be around 2.1% in 2024 and rise to 2.9% in 2025, closely tracking the statewide average. In the Indy metro area, the increase is expected to reach 2.3% this year and rise to 3.1% in 2025.

Phil Powell, executive director of the IBRC, said a Fall in interest rates this year has led to higher consumer spending on durable goods such as vehicles, appliances and furniture. Indianapolis’ manufacturing-intensive economy is benefiting from this higher-than-expected spending after years of high inflation, Powell said.

But it’s not just consumer goods that have had an impact. 2024 was a record year for conventions and large events in downtown Indianapolis, Powell said.

IBRC data shows the city will end the year with more than 550 “signature events” that brought in hundreds of millions in local spending. For example, the three Taylor Swift concerts this weekend will bring about $100 million to the local economy, the IBRC estimates.

Low-wage jobs are increasing as the number of scientists and engineers declines

While Indianapolis’ overall economic output grew, Powell outlined troubling long-term trends in the types of jobs employers are creating and losing in the region.

An analysis of employment data from 2019 to 2023 found that there are 12% fewer scientists and 7% fewer engineers in the Indy region than before the pandemic, Powell said.

During the same period, the region reported a 17% increase in the number of transportation and logistics workers. While Powell praised the city’s status as “At the Crossroads of America,” he noted that those jobs tend to pay less.

In general, Powell said, Indiana is struggling to increase the number of college-educated households, which earn on average twice as much as households in which no one has a degree.

To play a major role in the country’s future economic growth, Powell said state and city leaders must become “obsessed” with attracting engineers and scientists to large metropolitan areas.

“Competition is fierce and we don’t compete,” Powell said. “We’ve been kind of negligent as a region.”

The separation of IU Indianapolis and Purdue University in Indianapolis this summer has already resulted in major capital investments by both universities. Local business and government leaders say they see Boston as a model for how large research universities can spur dense residential and commercial growth.

“When you bring smart people together,” Powell said, “that attracts more smart people.”

Slowly growing state population means trouble

While the 11-county Indianapolis metro area is expected to add 405,000 residents by 2050, a 19.3% increase, most Indiana counties will do so It is likely that residents will be lost Over the next three decades, researchers discovered.

The IBRC predicts the state will add 383,000 residents by 2060, a 5.6% increase in population to 7.17 million. About 60% of Indiana’s modest population growth will occur by 2030, according to IBRC. National forecasts show this USA grows by around 10% from now until 2080.

But by 2060, 67 of Indiana’s 92 counties are expected to lose people.

In the 2040s, Indiana will see more deaths than births, according to IBRC, as baby boomers reach old age and the birth rate remains low. There were 12% fewer births in Indiana in 2023 than in 2007.

These trends suggest that immigration is Indiana’s only source of growth. Kyle Anderson, an assistant professor of business administration at IU, said that U.S. states should not compete with each other for young, highly skilled workers, but rather that the country should improve the processes through which foreigners can move here.

“Smart, educated people from all over the world would like to come (to the U.S.),” Anderson said, “and we make it damn hard for them.”

Email Jordan Smith, IndyStar Housing, Growth and Development Reporter [email protected]. Follow him on X: @jordantsmith09