Last week, the U.S. Commerce Department released Personal Income (PI) estimates for the first quarter of 2020. These were much anticipated numbers. They would be the first indication of how bad the Covid19 epidemic was for the U.S. economy.
The final quarter of 2019 came in with an annualized PI growth rate of 3.64% for the nation and 3.60% for Indiana. Those are respectable numbers. They’re bankable statistics for the campaigns of incumbent politicians.
But since the Dukes of Data (the National Bureau of Economic Research — NBER) declared February was the peak of the previous expansion, we knew March would be a downer, dragging our nation and state toward recession.
Now the suspense is over. The PI data for the first quarter of 2020 came in at 2.32% growth for the U.S. and 1.19% for Indiana. Yes, they will be revised, as always, when more data are available. Yet, without doubt, these data reveal a slowing of the economy and a harbinger of still less favorable news.
Across the nation and in Indiana, the hardest hit sector was Accommodation and Food Services with earnings down in the first quarter this year by 24% and 23% (at annual rates) respectively from the previous quarter. However, this sector accounts for only 2.0% of PI for Indiana and 2.4% for the nation.
Also hard hit, as the media has told us, was Arts, entertainment and recreation. Again, the declines in earnings for the first quarter were 19% in Indiana and 22% nationally. Big drops, but small sectors in the scheme of things: 0.7% of PI for Indiana and 0.9% for the U.S.
The fact these sectors are small, does not diminish the troubles of owners and workers foregoing income.
Where were the heavy shoes falling? Look no further than our old friend Manufacturing. Indiana’s Manufacturing sector accounted for 13.9% of our total PI at the end of 2019 and had a 6.5% decline in earnings the first quarter of this year.
Nationally, however, Manufacturing accounted for only 6.4% of PI and rose by 1.7% in the first quarter of 2020.
In the Hoosier state, Manufacturing workers lost the equivalent of $193 million in first quarter earnings. That sum surpassed the entire loss in private sector earnings as we slid into recession.
Was Indiana hit harder by the virus than the nation? YES, but to find the Hoosier state lagging the nation is not news. Indiana grew less rapidly than the nation in three of the four quarters of 2019 and 70% of the time over the past 23 quarters (nearly six years)
Our leadership, in business and government, is as comfortable as the tortoise, believing we will catch the hare before the finish line. The only problem is … there is no finish line, only the perpetual race of life itself.