December 2009 Cleveland Plus Quarterly Economic Review


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Team NEO Report Indicates Diversifying Industries Positively Impacting Economy

CLEVELAND, January 18, 2010 — Northeast Ohio is trending closer to the U.S. in this current recession than in the 1981 recession, according to the most recent edition of Team NEO’s quarterly Cleveland Plus® Economic Review released today. Compared to the 1981 major recession in which Northeast Ohio significantly lagged behind the U.S. in employment and GRP, these indicators in the 16-county Cleveland Plus region of Northeast Ohio are trending closer to U.S. averages in this recession. The Review indicates that this change is likely due to Northeast Ohio’s change in industry mix. Nearly 30% of the region’s GRP depended on the manufacturing industry in 1981, compared with 12% today. Today, the Cleveland Plus region’s economy is more diversified with increases in Healthcare, Headquarters, Professional, Scientific and Technical Services, and other industries. Specifically, the report indicates:
• Northeast Ohio is performing Similar to the U.S. in this Recession
o In the 1981 recession, Northeast Ohio’s employment and GRP rate dropped much more sharply than the U.S.; today’s recession is trending much closer
• Shift in Industry Mix Positively Affecting GRP and Employment
o During 1981 recession, Manufacturing accounted for 28% of employment; today it represents 12%
o Diversified mix and shift to higher growth industries may be positively impacting NEO economic stability in this recession
o NEO Biomedical industry has grown by 37% in the last 5 years, outpacing U.S.
o NEO Professional, Scientific and Technical Services has grown 79% in the past 15 years with Scientific Research and Development growth doubling U.S.
o NEO Aerospace-Related Industry has grown by 59% in the last 15 years
• Cleveland Plus Workforce Transitioning
o Since 1981, individuals with some college education have increased about 120%
o Individuals with bachelor’s or an advanced degree have increased by nearly 75%
In addition, every issue of Team NEO’s quarterly Cleveland Plus® Economic Review provides updates of basic economic indicators for the 16-county economy including: current estimates of the region’s annual growth rate, as defined by Gross Regional Product (GRP), and up-to-date information regarding Northeast Ohio’s total employment rate. This quarterly report also looks at the Industrial real estate landscape. The following is a summary of the findings:
• Ongoing soft economy reflected in GRP Revisions and Projections
o GRP for the region in 2009 is estimated to show a decline of 5%
• Northeast Ohio Employment Up Slightly
o Typical growth from Q2 to Q3 was realized, while less than normal, Northeast Ohio still saw employment increase by approx. 3,000 jobs
o Total employment down 5% from Q3 2008
• NEO Unemployment Rate Declines Slightly
• Demand for industrial space remains strong
o Vacancy rate stable at 7.6% despite current economic downturn

Team NEO publishes the Cleveland Plus Economic Review quarterly to provide a holistic picture of Northeast Ohio’s economy. It is the only regular source of collective economic data for the 16-county region. The non-profit organization uses the information to attract businesses worldwide to the Cleveland Plus region.

Team NEO advances Northeast Ohio’s economy by attracting businesses worldwide to the 16-county Cleveland Plus region. The organization is a joint venture of the region's largest metro chambers of commerce. Since 2007, the organization has attracted 29 new companies, more than 3,100 new jobs and $95M in annual payroll to Northeast Ohio, leading to a total annual regional payroll benefit of $260M.

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December 2009 Cleveland Plus Quarterly Economic Review

  1. 1. Our partners include: Greater Cleveland Partnership Greater Akron Chamber Stark Development Board Team Lorain County Youngstown-Warren Regional Chamber Medina County Economic Development Corporation Growth Partnership of Ashtabula County Cleveland Plus ® Economic Review December 2009 Volume 3, Issue 4 Diversifying Industries Positively Impacting Cleveland Plus Economy: A Northeast Ohio View of the Global Recession
  2. 2. December 2009 | Volume 3, Issue 4 The Cleveland Plus Economy ® Through Two Recessions The U.S. has experienced two major recessions in Therefore, today it is important to know how the last 30 years: one beginning in 1981, and the we are doing in comparison – both to the 1981 current recession, which began in 2007. In the 1981 recession and to the nation. To evaluate this, recession, the Cleveland Plus region saw much the following report looks at the Cleveland greater declines in employment and Gross Regional Plus region’s performance through the first Product (GRP) than for the U.S. as a whole. seven quarters of each recession. Current NEO vs U.S. Employment 1981 vs. 2007 Recession Recession +2% + Trending 0 -2% U.S. ‘81 - % Change % Change Closer to U.S. -4% U.S.‘07 - NEO ‘07 -6% - -8% - An indicator of regional -10% NEO ‘81 -1 economic strength is the Q3 in ‘81 vs. Q4 in ’07 Q4 in ‘81 vs. Q1 in ’08 Q1 in ‘82 vs. Q2 in ’08 Q2 in ‘82 vs. Q3 in ’08 Q3 in ‘82 vs. Q4 in ’08 Q4 in ‘82 vs. Q1 in ’09 Q1 in ‘83 vs. Q2 in ’09 comparison of employment U.S. in ‘81 NEO in ‘81 U.S. in ‘07 NEO in ‘07 and GRP indexes. During the 1981 recession, Cleveland Plus > From 1981 to 2007, Source : and Ohio LMI employment and GRP rate Employment has increased dropped more sharply than the by nearly 100,000 individuals U.S. During the current recession, NEO vs U.S. Employment and GRP are only employment NEO vs U.S. GRP 1981 vs. 2007 Recession 1981 vs. 2007 Recession now approaching the decline experienced in 1981. And, the +2% change in Cleveland Plus 0 employment and GRP is U.S.‘81 -2% tracking much closer to the U.S.‘81 % Change U.S.‘07 U.S. ‘07 changes for the U.S. In this -4% NEO ‘07 recession, Northeast Ohio -6% NEO ’07 is performing more in -8% NEO ‘81 NEO ‘81 Q1 in ‘82 vs. line ‘82 vs. the ‘82 vs. average. Q1 in ‘83 vs. Q2 in with Q3 in U.S. Q4 in ‘82 vs. -10% Q3 in ‘81 vs. Q4 in ‘81 vs. Q1 in ‘82 vs. Q2 in ‘82 vs. Q3 in ‘82 vs. Q4 in ‘82 vs. Q1 in ‘83 vs. Q2 in ’08 Q3 in ’08 Q4 in ’08 Q1 in ’09 Q2 in ’09 Q4 in ’07 Q1 in ’08 Q2 in ’08 Q3 in ’08 Q4 in ’08 Q1 in ’09 Q2 in ’09 NEO in ‘81 U.S. in ‘07 NEO in ‘07 U.S. in ‘81 NEO in ‘81 U.S. in ‘07 NEO in ‘07 Source : > From 1981 to 2007, All data are for seven quarters of each respective GRP has increased by almost $65 billion recession and does not project future performance.
  3. 3. Industry Mix Impacts GRP and Employment Because GRP represents the economic activity For example, in the current recession, U.S. of Northeast Ohio’s industries, changes in industry Manufacturing employment has declined mix will affect total GRP and employment trends. nearly 14%, while Professional, Scientific and In reviewing GRP and employment during both Technical Services is essentially unchanged. recessions, Manufacturing accounted for a signifi- Finance, Insurance and Real Estate, while suffering, cantly higher percentage of GRP and employment is down only half as much as Manufacturing. in 1981 than today. Meanwhile, higher growth Healthcare employment is actually up almost 5%. industries such as Finance, Insurance and Real The shift in the Northeast Ohio economy to these Estate (FIRE); Healthcare; and Professional, more stable industries is having a beneficial effect Scientific and Technical Services have become on this recession. larger segments of NEO’s industrial mix. This more diversified NEO industry mix may account for NEO’s closer alignment with U.S. employment and GRP rate trends during the current recession. Employment as Percent of NEO Economy by Industry 1980 vs. 2007 Recession Health Care & Social Assistance Management of Companies & Enterprises Professional, Scientific, & Technical Services Finance, Insurance and Real Estate Trade Manufacturing All Other 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% ■ 1980 ■ 2007 Source : “The growing correspondence of Northeast Ohio’s economic performance measured by both employment and GRP with that of the national economy in the recession offers a glimmer of the promise of the ongoing industrial restructuring of the region’s economy. The trend toward higher levels of education in the Northeast Ohio workforce is an encouraging reflection of the changing industrial composition and a foundation for future growth.” Dr. Larry Ledebur, Cleveland State University Economist and Professor
  4. 4. NEO Workforce with higher Education Doubles In line with the structural changes in the economy, Northeast Ohio’s workforce, ages 25 and older, has also transitioned to accommodate higher skilled industries. The percentage of individuals with some college education has increased by about 120%, while individuals with a bachelor's or an advanced degree has increased by nearly 75%. The increasing share of workforce with higher education is fueling the Cleveland Plus region’s economic transformation. NEO Composition in Educational Attainment 1980 vs. 2008 Bachelors or higher 4% Some College/Associates High School Grad Less than 12th grade 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% ■ 1980 ■ 2008 Source : US Census Bureau Industry Diversification PROFESSIONAL, SCIENTIFIC AND TEChNICAL SERVICES : Similarly, 79% growth in the Professional, Scientific and Technical Services sector from 1992-2007, with Benefits Economy Scientific Research and Development doubling U.S. growth, has further diversified the region’s economy. Cleveland Plus Economic Reviews provide an AEROSPACE-RELATED : Moreover, strength in the $8 aggregate view of long-term trends in Northeast billion Aerospace-Related sector continues to play an Ohio’s economy. In 2009, we reported growth of important role in diversifying Northeast Ohio’s economy. specific sectors - Biomedical; Professional, Scientific With 59% GRP growth in the last 15 years, more and Technical Services; and Aerospace-Related – sophisticated products are being manufactured and how they are diversifying the region’s economy. in Cleveland Plus. In this final report of 2009, we see that the diversifica- tion of industries has led to closer tracking to the hEADqUARTERS : Finally, Northeast Ohio remains in U.S. during this recession as compared to the the nation’s top 4 regions for Headquarters employ- 1981 recession. ment share, ensuring a strong management base for our region’s growing companies and industries. BIOMEDICAL : With billions of dollars in private and public investment, world-renowned healthcare With the Cleveland Plus region’s strong heritage institutions and clinical trial leadership, Northeast of invention, a strong base of significant research Ohio’s Biomedical industry has outpaced U.S. institutions and a growing entrepreneurial sector, growth. In particular, our region’s strength in Imaging, Northeast Ohio has diversified our economy, and Orthopedics and Cardiovascular, plus our transitioning employment and therefore, remains relatively strong manufacturing workforce have led to growth in the through this recession. ALL OF ThIS ADDS UP FOR BUSINESS. Medical Device manufacturing sector.
  5. 5. NEO Employment NEO Total Employment ( Not Seasonally Adjusted ) Up Slightly in q3 2.10 2.05 2.00 This chart shows total employment year over (Millions) 1.95 year for comparison of seasonal patterns. 1.90 There is typically incremental job growth 1.85 between Q2 and Q3, and Northeast Ohio 1.80 2007 2003 2004 2005 2006 2007 2008 2009 2003 2004 2005 2006 2008 2009 2003 2004 2005 2006 2007 2008 2009 2003 2004 2005 2006 2007 2008 saw employment increase by approximately Q1 Q2 Q3 Q4 3,000 jobs in the third quarter. Employment is down approximately 5% from Q3 2008. Source : Ohio Labor Market Information (LAUS Data) NEO Unemployment NEO Quarterly Unemployment Rate Rate Declines Slightly 12.0% 11.5% 11.0% 10.5% 10.0% The Northeast Ohio unadjusted 9.5% 9.0% unemployment rate declined slightly 8.5% 8.0% in the 3rd quarter, following the trend of 7.5% 7.0% the overall U.S. economy. The rate dipped 6.5% 6.0% to 10.3% in Q3 2009, with the U.S. at 5.5% 5.0% 9.6% and the state of Ohio is at 10.5%. 4.5% 4.0% This decline is a result of both an increase Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 2003 2004 2005 2006 2007 2008 2009 in total employment, as well as a drop in NEO 16 counties Ohio U.S. the overall size of the workforce. Source : Ohio Labor Market Information (LAUS Data) NEO Real GRP Billions (2008 Dollars) GRP Estimates Continue to be Adjusted for Recession $190 2.4% 0.7% (-1.5%) (-.4%) (-1%) $180 1.8% 1.2% 0.3% 2.6% (-1.9)% 1.2% (-5.1%) $170 4.8% The most recent estimates from 3.8% 3.0% $160 $150 5.1% $140 0.3% show Northeast Ohio’s GRP contracting by $130 approximately 5% in 2009. This decline reflects $120 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 the ongoing recession in the U.S. economy. Real GRP Average Annual Growth = 1.4% Data from is continuously updated and are subject to revisions. Source : Moody’s
  6. 6. December 2009 | Volume 3, Issue 4 Industrial Space Strong NEO Occupied Industrial Space & Vacancy Rate Despite Economic 405 9.5% Occupied Square Feet (Millions) Downturn 400 9.0% Vacancy Rate 395 8.5% 390 8.0% This graph shows the total amount of 385 7.5% industrial space occupied by quarter 380 7.0% between the first quarter of 2005 and the 375 6.5% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 third quarter of 2009. The vacancy rate for 2005 2006 2007 2008 2009 industrial space in Northeast Ohio rose Occupied Square Feet Vacancy Rate slightly to 7.6% in Q3 2009, while occupied space continues to remain fairly stable. Source : CoStar Industrial Data About Team NEO Industrial real estate data for this edition was derived from the CoStar Group. The CoStar Group is a leading provider of commercial real estate data throughout the United States, covering more than 58 billion square feet of property throughout the country. Team NEO advances Northeast Ohio’s economy by attracting businesses worldwide Due to market limits within the CoStar database, historic trend data for the Team NEO region is defined as 10 of the 16 counties forming the regional to the 16-county Cleveland Plus region. footprint. These counties include Ashtabula, Cuyahoga, Geauga, Lake, The organization is a joint venture of the Lorain, Medina, Portage, Richland, Stark and Summit. region’s largest metro chambers of commerce. Since 2007, the organization has attracted 29 new companies, 3,100 new jobs and more than $95M in annual payroll to Northeast Ohio, Cleveland Plus 16-County Region leading to a total regional annual payroll impact Ashtabula Lake of more than $260M. For more information, visit Cleveland Geauga Data Sources: Team Northeast Ohio uses a number of data sources for Cuyahoga the Regional Economic Review. One of the primary sources is the Moody’s Lorain Trumbull ( Northeast Ohio modeling system. This firm is the leading independent provider of economic, financial and Summit Portage industry research and data that specializes in national and metropolitan Youngstown economic growth forecasts. Moody’s county level output, Medina Akron employment and payroll historical data are estimated from several Mahoning publicly available sources and are summarized into the Team NEO regional footprint. It is important to understand data provided by Ashland are estimates of economic activity. Wayne Canton Columbiana Richland Stark Team NEO also uses data from federal and state sources as part of the report. As with, the information for the Team NEO footprint Carroll is derived from data reported at either the county or metropolitan level. We rely heavily on data from the U.S. Bureau of Labor Statistics ( and Ohio’s Labor Market Information ( for information on wages, unemployment and both general and industry- specific employment. In addition, Team NEO uses data from the Census ( to track housing-related activity including the number of single and multifamily permits, as well as their values. 737 Bolivar Road, Suite 2000, Cleveland, Ohio 44115 888.NEO.1411 •