Indiana's Economic Road Map for 2026: What Local Businesses and Workers Should Watch
Business leaders, educators, elected officials, and students from across the region came together January 21 in Muncie for the 30th Annual Indiana Economic Outlook. The good news? We're not in a recession. The challenge? Growth is slowing, and businesses across Indiana are navigating a climate of policy uncertainty that's making planning more complex than usual.
The annual forecast, presented by Michael J. Hicks, PhD, director of Ball State University’s Center for Business and Economic Research (CBER), was paired with manufacturing perspectives from Scott Buehrer, president of B. Walter & Co. and Vigor Therapy Equipment, and Steven M. Smith, retired CEO of Mid-West Metal Products Co. Together, they offered a layered picture of how national policy decisions are playing out on factory floors and in local labor markets across Indiana.
A Slowing Economy
Dr. Hicks’ forecast is built on a central theme: tariffs are now putting pressure on growth. According to the 2026 Indiana Economic Forecast, the United States is currently operating under the highest effective tariff rates since the Great Depression. Unlike earlier eras, today’s economy is far more globally integrated; roughly 14% of U.S. GDP now depends on international trade, magnifying the impact of trade policy changes.
One notable finding shared was just how many moving parts are involved: nearly 400 tariff adjustments occurred in 2025 alone, creating significant uncertainty for businesses trying to plan production, pricing, and hiring. While tariffs are often framed as a cost borne by foreign producers, Hicks emphasized that 95–98% of tariff costs are paid by American consumers and businesses, essentially acting as a cost increase that ripples through the economy.
That uncertainty prompted companies to stock up early in 2025, temporarily boosting GDP as firms stockpiled inputs. But by midyear, that activity faded, and hiring slowed dramatically. Nationally, job creation in 2025 averaged just 12,000 jobs per month, one of the weakest non-recessionary labor markets since World War II. Indiana saw the same pattern, with manufacturing employment already declining and forecasted to soften further in 2026.
What does this look like on the ground?
For Indiana, the most manufacturing-intensive state in the nation, these trends translate directly to factory floors.
Scott Buehrer described how tariffs on raw materials such as steel, aluminum, and copper have driven up input costs for manufacturers, even as global competitors access those same materials at significantly lower prices. In many cases, U.S. manufacturers are paying 30–50% more for the same raw inputs, putting pressure on margins and making reinvestment more challenging.
Steven Smith added historical context, noting that while tariffs are often promoted as a way to “bring manufacturing home,” the data shows otherwise. Even with years of trade restrictions, U.S. steel production remains essentially flat, while prices have climbed—benefiting producers but pressuring downstream manufacturers. When costs rise too high, companies adapt by substituting materials, automating processes, or shifting production elsewhere, often outside the United States.
The result, speakers agreed, is not a manufacturing renaissance, but a period of strategic patience—businesses are delaying expansions, hiring more carefully, and leaning into automation.
Now, here’s where things get interesting.
Perhaps the most interesting dynamic from the discussion is that labor shortages continue even as job growth stalls. Indiana manufacturers continue to report difficulty finding reliable, skilled workers, particularly for production roles. At the same time, fewer help-wanted ads and slower hiring reflect businesses pulling back amid uncertainty.
Panelists identified some long-standing challenges: an aging workforce, retirements accelerated by the pandemic, and a disconnect between education pathways and in-demand skills. On the education front, there is concern about recent changes to Indiana’s high school diploma requirements, including the elimination of a required economics credit, at a time when understanding economic policy is critical.
Immigration policy surfaced repeatedly during the Q&A as an important factor that needs attention. With population growth slowing and workforce participation constrained, speakers argued that immigration reform is essential to sustaining long-term economic growth, particularly in manufacturing-heavy states like Indiana.
So what’s ahead?
Looking ahead, the 2026 forecast projects modest GDP growth, hovering near 1%, for both the U.S. and Indiana, with employment gains limited and uneven. This isn’t a recession scenario, but growth will be modest and uneven. Inflation is expected to remain elevated in the near term, driven more by tariffs and supply constraints than by wage growth.
Dr. Hicks described what we might see as “mild stagflation”—slower growth combined with higher prices—unless policy volatility subsides. The biggest challenge, he noted, is not any single tariff or interest rate move, but the ongoing uncertainty affecting how businesses plan and invest, as well as global capital flows.
So What Does the Mean for Grant County
For communities like Grant County, where manufacturing remains a cornerstone of the local economy, here’s what matters. Slower growth and policy uncertainty underscore the value of workforce development, business retention, and long-term planning. They also highlight the need for strong local-state-federal alignment on issues ranging from education and training to infrastructure and trade.
The Indiana Economic Outlook doesn’t promise easy answers, but it provides a solid framework for understanding what’s ahead. As speakers emphasized, economies do best when communities invest in people, skills, and adaptability—fundamentals that will serve Grant County well this year.
Dig Deeper
Ball State University, Center for Business and Economic Research. (2026). Indiana Economic Outlook. Ball State University. Retrieved February 2, 2026, from https://www.bsu.edu/academics/centersandinstitutes/cber/events-affiliations/outlook
Inside Indiana Business. Hicks: Indiana’s second-half economic outlook [Video]. IBJ Media. Retrieved February 2, 2026, from https://www.insideindianabusiness.com/videos/hicks-indianas-second-half-economic-outlook