Times are tough for many aspects of the local economy, but as things ramp up, Kokomo and Howard County could experience a strong economic recovery and could even bounce back better than it was, according to local experts.
As the COVID-19 pandemic plays out, many aspects of the economy effectively shut down. Locally, FCA US ceased operations, putting thousands of workers on unemployment. On the other end of the spectrum, local service industries and retailers took a hit as travel restrictions and social distancing guidelines idled such economic drivers. According to a slew of local experts, the area’s economy took a substantial hit in the short term due to the effects of the virus shutdown, but they remain hopeful for a strong recovery.
“This is a little different than 2008 and 2009,” said Craig Dunn, a financial advisor with Liberty Financial Group in Kokomo. “The auto industry was largely affected by an absolutely ridiculously stupid lending policy on mortgages. No fault of the auto workers there. Essentially we had a collapse in the credit markets that were caused by that, an institutional threat to the financing of American business. We had some major changes there. Here we had the government step in and really working wonderfully. Now turn the spigot off; crank it off. I have a confidence that says when the spigot is turned back on things will move in a real positive direction pretty darn quickly, and I think we’ll see positive effects of that. And truly we may not have as much a lingering effect.”
Alexandra Daniels Durham, a partner at Freedom Financial in Kokomo, said the immediate impact has been a big hit on local restaurants. She said she knew of two that were teetering on the edge of closing their doors forever. Economic injections via federal or local programs have helped, she said, but those may have only delayed such decisions.
“My biggest worry is for our small businesses and restaurants and the service industry,” said Daniels Durham. “I think the problem they have is several of these restaurants have told me they are down 50, 75 percent. Some have told me they were down over 90 percent on their revenue. And that was for a solid eight or nine weeks. I think, going forward, the issue is going to be not only are they going to lose their revenue but that their business isn’t going to come back 100 percent right away.
“We’ve been seeing that. They’ve been open for a couple days, but people aren’t returning to their normal. They’re not going out to eat like they did, and some aren’t wanting to leave their houses.”
Of course, the primary economic driver in Kokomo and Howard County is the automobile industry. According to Alan Krabbenhoft, the dean of the School of business at IU Kokomo, once FCA US begins to pick back up, the local economy should see a corresponding improvement. In the past, such dependence upon the automobile industry has proved problematic for the area, but the dean said he didn’t see that as big of an issue during the pandemic.
“The lack of diversity, I don’t think will have as big a negative as one would think with a traditional recession,” said Krabbenhoft. “I think it will take some time for the automobile industry to pick back up because other parts of the country need to get back in line. But, from what I’ve read, General Motors and Ford are getting back up, as well as Fiat Chrysler … I really think that those will be things that will start to drive our economy.
“Once those larger groups of individuals that are a larger part of our employment base start to make their income levels, I think yes, there will be more and more activities that take place on the social, retail, and other levels of our economy. I don’t see a huge challenge for most restaurants and retailers to ramp back up. Hopefully, they can gain back most of the employees they had to furlough.”
One bright spot during the pandemic for Kokomo, economically, has been the local GM plant’s pivot to manufacturing Ventec Life Systems ventilators.
Prior to those two companies striking a deal, the local GM facility’s workforce had dwindled significantly over the years, from thousands to about 180. But, ventilator production and the revamping of the Kokomo plant meant bringing in about 1,000 workers as a mix of returning local workers, some from Marion, and others who were completely new hires.
In last year’s contract negotiations, the Kokomo plant missed out on a boost in new work, to the disappointment of the local workforce. But, the ventilator production could provide a boon beyond the scope of the contract that was struck in March.
One possibility, according to Krabbenhoft, was that ventilator production has shown how capable the local workforce is, which could strengthen GM’s desire to utilize the local plant.
“I think what it does is it re-exposes the availability of a skilled workforce,” said Krabbenhoft. “Now, some of these people that were brought back were simply relocated GM workers that were brought back to a GM facility that was reopened to make these ventilators. One question would be, does this company that is licensed to GM to make its ventilators, do they continue to see this as a viable alternative and GM sees it as a good way to diversify its manufacturing?”
Dunn said he remained doubtful that GM would want to focus on Kokomo in the long term, but ventilator manufacturing could garner the interest of other companies.
“I think they’ve essentially seen that a business is turnkey ready and ready to run with,” said Dunn. “I think that is the positive thing there. We could see a business we hadn’t anticipated there. Particularly if President Trump is successful with encouraging a lot of the manufacturing that has been done in China to come back to the United States. Then I do think there’s a possibility of that there. But whether it’s General Motors or not, I don’t have any idea. But I do think it could be some other items, and that’s a very positive thing.”
Of course, a question remains as to what will happen should a second surge in COVID-19 occur. But, Dunn remained hopeful about a full recovery for Kokomo and Howard County’s economy.
“I think it should be a V-shaped recovery, but when we look at the hospitality industry like hotels and air travel, our hotels should be back fairly quickly. We weren’t a major tourism area … Locally, when the government turns the spigot back on and we’re back to normal, to me there should be no reason we can get going again, “said Dunn.