The U.S. economy will continue to expand for a 12th consecutive year in 2020, but only by about 2% while struggling to remain at that level by year’s end. According to a press release, Indiana’s economic output will be more anemic, growing at a rate of about 1.25%, according to a forecast released today by the Indiana University Kelley School of Business.

Over the past year, political dysfunction and international trade friction have disrupted supply chains and eroded both consumer and business confidence. U.S. employment has grown during 2019 but will decelerate throughout 2020, well short of 150,000 jobs per month and possibly to about 100,000 by year’s end. A tight labor market will continue to be an issue for many companies.

“The total number of job openings in the economy peaked in late 2018,” said Bill Witte, associate professor emeritus of economics at IU. “Average hours worked have been flat over the past year, and auto sales have been flat for nearly two years. Given the reliance of the U.S. economy on consumer spending, these are disturbing signs. But they are vague signs, and not enough to convince us that the end of the expansion is in sight.

“We expect that growth will be weaker than in the past two years, and this outlook is likely a best-case outcome,” he added. “There is massive uncertainty in the current situation.”

Indiana’s more meager economic growth expected in 2020 can largely be attributed to the outsized presence of manufacturing and particularly tight labor markets, said Ryan Brewer, associate professor of finance at Indiana University-Purdue University Columbus and author of the panel’s Indiana forecast. Manufacturing contracts more rapidly versus other areas of the economy, and tight labor markets limit employers’ capacity to grow, he said.

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