Even a recession likely won't have much impact on a tight South Bend area labor market

Even with the possibility of an economic slowdown in 2023, most don’t think the region’s labor shortage is ending any time soon, even in manufacturing heavy Elkhart County.

The fact is that the area lost a considerable number of workers during the pandemic because of early retirements, deaths, ongoing health issues caused by long COVID and people who chose to quit or move on to different careers, according to observers.

Though some manufacturing-heavy areas in Indiana might be impacted by a potential slowdown next year, most don’t see too much of an effect in this region because some employers are still struggling to fill positions and new jobs will be coming on line in the coming year.

Lingering impact:No end in sight: tight labor market will likely persist for years

Even if there is an economic slowdown caused by the Federal Reserve’s attempts to tamp down red-hot inflation, Michael Hicks, an economist at Ball State University, doesn’t see the tight labor supply going away anytime soon.

After six consecutive rate hike increases so far this year ― the last four of which have been 0.75% increases ― inflation seems to be cooling and the Fed has indicated it might reduce the next rate increase at its next meeting in mid-December, Hicks said.

“The latest inflation report showed substantial slowing in the rate of growth,” Hicks said. “That’s what prompted the Federal Reserve to signal they will slow the increases.”

Investors show interest

Hicks believe there’s a very real chance the Fed will be able to avoid a recession next year and instead negotiate a soft landing. But even if there is a recession, he doesn’t believe it would be either “very deep or long lasting.”

That’s good news to local economic development officials who also haven’t seen any significant warning signs so far.

Jeff Rea, president and CEO of the South Bend Regional Chamber of Commerce, pointed out that he has never seen more interest from businesses exploring the possibility of locating in St. Joseph County during his many years involved in economic development.

“We’ve had site visits from businesses representing $10 billion in potential investment this year,” Rea said, adding that the Indiana Economic Development Corp. also has indicated that the state will see record investment this year.

One of the big fish that the county has been working to reel in is the Ultium Cells project ― the joint venture between General Motors and LG Energy Solution ― that could result in a $2.5 billion EV battery plant employing 1,600 on the west side of the county.

Now it's up to Ultium:St. Joseph County approves deal in effort to reel in $2.5B Ultium battery plant

The company has said that it could make a decision by the end of the year on the project, which would then get underway almost immediately, generating as many as 2,000 construction jobs at its peak.

While that project is still in limbo, Rea pointed out that construction of the $164.7 million Honeysuckle Solar Farm ― also on the west side of the county ― will start shortly with work scheduled for completion at the end of 2023 or early 2024. That project is expected to employ 175 to 200 construction workers.

Another project:Honeysuckle Solar Farm gets final approval; project should get underway this year

“There are a lot of incentives for reshoring (manufacturing), green energy and EVs,” Rea said. “I’m not an economist. But if the number of things we have in the hopper is any indication, I would be surprised to see a major slowdown.”

Slowing, compared to a record year

According to the latest available figures, St. Joseph County’s unemployment rate was 3.2% in October while Elkhart County was at 2.6%, both close to the statewide seasonally unadjusted rate of 2.8%.

Because Elkhart County largely builds RVs and boats, it would presumably be more vulnerable to high interest rates ― similar to the housing market ― because many buyers likely finance a portion of their purchases.

Though there has been a slowdown in the industry over the past several months, the RV Industry Association is still projecting shipments of 495,300 units by the end of the year ― the industry’s third best year ― and it’s reported that shipments could possibly decline to under 400,000 units in 2023, closer to its 10-year average.

Slowing to normal:RV industry COVID boom may be over, but insiders say they're better prepared for slowdown

In other words, the slowdown is only noticeable compared to the surge that occurred in 2021 when people were scrambling to find outdoor recreational opportunities that were deemed safer during the pandemic. In 2021, the RV industry shipped a record 600,000 units to its dealers.

Chris Stager, president and CEO of the Economic Development Corp. Of Elkhart County, said the slight slowdown in the RV industry ― again only compared to a record-breaking year ― doesn't appear to be having as much of an impact on other boat builders and other industries in the county.

To make up for the slightly slower pace, some RV manufacturers already have cut overtime, reduced workweeks, extended holiday furloughs and taken other measures to better match labor with output, and Stager expects such measures will continue if the economy continues to soften.

But on the other hand, he pointed out that Elkhart County still has lots of jobs available for those looking for work ― especially in service-related industries ― and that most RV makers and other manufacturers will be somewhat reluctant to permanently part with workers they struggled to find since the pandemic.

“Manufacturers have experienced the reality that labor is not an infinite resource,” Stager said, pointing out that newer plants are now being built with a focus on employee comfort and with more automation and even robotics compared to even five years ago.

With Amazon eventually hiring about 1,000 people for the 800,000-square-foot distribution center it's building along the Toll Road and manufacturers aiming to retain their workers, no one expects any downturn to create the double-digit unemployment that was seen during the Great Recession.

Though higher interest rates will affect new home construction and manufacturing of higher-ticket products like cars and RVs, Hicks believes the decline in those areas will be more in line with normal production levels.

“This is the tightest labor market we’ve seen in two decades,” the Ball State economist said. “No HR Office wants to lay off workers and then try to rehire them in the future.”

Email Tribune staff writer Ed Semmler at esemmler@sbtinfo.com.

This article originally appeared on South Bend Tribune: Economic slowdown shouldn't have much impact on Michiana's tight labor