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The local economy is strong, with more jobs available than workers to fill them. But some troubling developments in the stock market and internationally could have an adverse effect.
That's the outlook three Indiana University-South Bend economists gave the quarterly economic briefing sponsored by Lake City Bank today.
According to Dr. Fred Herschede, the national economy has grown in every quarter since the second quarter of 1991, but three issues are looming that may bring that to a halt.
"The economy, as measured by the Gross Domestic Product, has grown steadily since 1991, but there are three concerns that could have a negative effect on the trend," Herschede said. "The weak demand for U.S. exports, a decline in consumer confidence and growing inventories can all begin to pull the economy down."
Herschede said the chances of a recession are still relatively low - a one in five chance. But that's up from the one-in-10 chance that was predicted last year.
"For most of last year, consumer confidence remained steady. But it has slipped this summer over concerns about the Asian economic situation and the stock market fluctuations we've seen recently," he said. "For every percentage point change in the stock market, we see a 2 percent change in personal consumption expenditures.
"Consumers are becoming more conservative in their spending, following the decline in the stock market," he said.
The Asian and Russian economic situations have hurt U.S. exports and this will likely continue into 1999, Herschede said.
"Japan needs to really pull Asia out of the recession, and until they get going and make the needed policy changes, we won't see any progress in that area," he said. "Economically, Russian problems with the economy don't affect us that much. It's more a world perception.
"But it points to how the emerging economies are too weak to attract foreign capital, and their inability to buy our exports," he added.
The local economic outlook is good, but the lack of qualified workers could pose a problem for greater economic expansion, according to Dr. Paul Joray.
"Overall, things are going well for the local manufacturing sector, with the exception of the van conversion industry," Joray said. "The one area of concern is having enough available manufacturing employees. But this is a better problem to have than having to face a recession."
While the chance of the national economy slipping into a recession is still small, Joray said, if a downturn does occur, northern Indiana will be affected deeply and quickly.
"But the chance of a recession is still small," he said.
Local government is doing well in retaining area businesses and in keeping the cost of government down, according to Warsaw Mayor Ernie Wiggins. The city relies on property taxes for only 48 percent of its annual budget.
"And there was $641,638 in property taxes we could have collected according to our levy, but we did not," he said. "We also returned $448,250 in 1997 that we budgeted but didn't spend."
Wiggins added the city is debt free, with only an authorization for a $1.5-million bonding authorization for the Logan Street project on the city's southwest side.
The city is also focusing on expanding the commercial and industrial tax base through annexations, Wiggins said. The city annexed 50 acres of commercial/industrial property in 1998.
"We're focusing on commercial and industrial annexations, with most heading east along Corridor Drive," he said.
In order to foster more industrial development, the city is planning to build a new sewage treatment facility on the north side of the city, which will provide sufficient capacity to accommodate development in the industrial corridor along U.S. 30.
