March 2007 Cleveland Plus Quarterly Economic Review


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Overall, the economy remains stable, with a modest gain in regional gross product and generally steady employment levels. Surprising to some, our manufacturing sector is stronger than most believe. Key data and indicators included: unemployment, employment and wages, wage comparison, housing permits & value, as well as manufacturing GRP, employment & wages

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March 2007 Cleveland Plus Quarterly Economic Review

  1. 1. Northeast Ohio Economic Review Welcome to the first edition of Team NEO’s “Quarterly Regional Economic Review” for Northeast Ohio. The objective of this publication is to provide key economic data to help paint an accurate picture of the NEO economy. Our goal is to enable appropriate and timely business decisions that will assist in our region’s growth. This publication is unique because the information presented represents all of Northeast Ohio. This regional information is not readily available from other sources and, therefore, we hope you find it valuable. Our sources for this information are a combination of federal, state and private sector estimates. The private sector estimates are from Moody’s Moody’s models state and local economies. We are relying on their models to estimate data for the NEO region. Be aware that these estimates are often revised and are not always available quarterly. We are presenting data, where possible, through the end of 2006. Overall, our economy was stable in 2006, with a modest gain in regional gross product and generally steady employment levels. Most surprising, compared with popular perception, is that our manufacturing sector is stronger than most people believe. We hope you enjoy this new publication and we welcome your input for future editions as it is structured to meet your needs. Together, anything is possible. Thomas A. Waltermire, chief executive officer, Team NEO March 2007
  2. 2. NEO Total Housing Permits and Value Permits and values of permits for all 4-Quarter Moving Average types of housing (single and multi- 3 ,3 00 580 Value of Permits ($ Millions) family) have followed the general 3 ,1 00 5 60 U.S. trend of a softer housing market. Number of Permits 2 ,9 00 5 40 2 ,7 00 5 20 5 00 2 ,5 00 2 ,3 00 4 80 2 ,1 00 4 60 1 ,9 00 4 40 1 ,7 00 4 20 1 ,5 00 4 00 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2003 2004 2005 2006 Source: U.S. Census Bureau 4-Qtr Avg Total Permits (left) 4-Qtr Avg Total Value (right) Single Family Housing Permits and Mean Value The average single family permit 4-Quarter Moving Average Value of Permits ($ Thousands) value for Northeast Ohio is about 3 , 500 $200 $10,000 higher than the U.S. In Number of Permits $190 a region with slow population 3 , 000 $180 growth and few immigrants, it $170 2 , 500 $160 is likely that these homes are $150 for existing residents and that 2 , 000 $140 $130 they are replacements for their 1 , 500 $120 existing homes. It appears that as $110 1 , 000 $100 replacement homes, they are more Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 likely to be on the higher price as 2003 2004 2005 2006 individuals move up the quality Source: U.S. Censuc Bureau market to “bigger” and/or “better.” estimates the cost of living in NEO’s four Permits U.S. NEO metropolitan areas to be 10% to 16% below the U.S. average. Shelter costs are an important component within cost of living.
  3. 3. Quarterly Unemployment Rates While the region mirrored U.S. unemployment rates and behavior 7 .5 in 2003, NEO’s unemployment rate 7 .0 in 2004 was relatively flat, while the Percentage Rates U.S. showed improvement. Since 6 .5 then, NEO unemployment has been 6 .0 improving in step with the U.S. and, 5 .5 in 2006, the regional rate approached 5%. Unemployment at 4 to 5% is 5 .0 generally considered at or near 4 .5 full employment. Unemployment is 4 .0 defined as the proportion of people Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 in the workforce who are not working 2003 2004 2005 2006 but are actively looking for work or Source: Ohio Labor Market Information awaiting recall. U.S. Ohio NEO NEO Total Employment and Total Real Wages In early 2002, the region had employment of 1.87 million workers. During the 19 nationwide slowdown in manufacturing, 1. 8 9 1 8. 8 the region saw an erosion of employment 2006 Dollars (Billions) 1. 8 7 1 8. 6 Workers (Millions) through the second quarter of 2004, 1 8. 4 1. 8 5 bottoming out at total employment of 1 8. 2 1. 8 3 1.83 million workers. Since that time, the 18 1. 8 1 1 7. 8 regional economy has picked up, adding 1 7. 6 1. 7 9 approximately 8,500 net jobs. 1 7. 4 1. 7 7 During the decline in workers, the region’s 1 7. 2 1. 7 5 17 total real wages remained stable and Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 improved as employment began to expand. 2002 2003 2004 2005 2006 When the trend in wages is better than Source: U.S. Bureau of Labor Statistics the trend in employment, it suggests that worker productivity is rising. Avg Employment (4-Qtr Avg) Wages (4-Qtr Avg)
  4. 4. A strong region is m Wage Comparison Northeast Ohio’s real average per capita Annualized 4-Quarter Moving Average salary/wage continues to grow, but lags the $ 4 3 ,0 0 0 U.S. by about 7%. In 2002 and 2003, NEO wage growth slightly exceeded the U.S. In $ 4 2 ,0 0 0 the last year and a half, U.S. wages have rebounded while Northeast Ohio’s average $ 4 1 ,0 0 0 2006 Dollars wage change has been relatively flat. It is $ 4 0 ,0 0 0 important to note that after adjusting for inflation, real wages in the region have $ 3 9 ,0 0 0 been increasing. $ 3 8 ,0 0 0 $ 3 7 ,0 0 0 U.S. Ohio NEO Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2001 2002 2003 2004 2005 2006 Source: U.S. Bureau of Labor Statistics NEO Manufacturing GRP Contrary to popular opinion, manufacturing output has improved from the trough of 2002 $35.0 23.0% and 2003 and remains relatively stable. The 2006 Dollars ($Billions) proportion of NEO’s GRP that comes from $34.5 22.0% manufacturing also has remained relatively $34.0 stable. Much publicized declines in auto-related 21.0% products are being offset in other industries. $33.5 For the U.S., the share of GRP that comes from 20.0% $33.0 manufacturing is about 14%, compared with 21% in NEO. We continue to be a place where things 19.0% $32.5 are made. Manufacturing as a percent of the national economy also has been stable the last $32.0 18.0% 2002 2003 2004 2005 2006 five years. Source: Moody’s NEO Mfg GRP Mfg as % of GRP
  5. 5. ade of strong communities. NEO Manufacturing Employment and Wages Also contrary to general beliefs, Quarterly Employment & Average Weekly Hours manufacturing employment is off only by about 15,000 jobs the last four years. Workers (Thousands) Avg Weekly Hours Following the decline during 2003, manufacturing jobs have been quite steady, hovering between 270,000 and 275,000. Average weekly hours have fluctuated between 40 and 42 hours. While the last three quarters of 2006 have shown a slight decline in total industry employment, the Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 average weekly hours have been increasing. 2003 2004 2005 2006 If the trend to increase average hours Source: Ohio Labor Market Information continues, it is likely that additional workers will be hired. Mfg Employment (left axis) Avg Weekly Hrs (right axis) Quarterly Manufacturing Employment Indexx The Manufacturing Employment Index indicates the relative 100 change in employment since the Index (100=Q4 2002) 99 base period of the last quarter 98 of 2002. Since that time, 97 the decline in manufacturing 96 employment for both Ohio and 95 the region has been larger than 94 the U.S. Ohio’s concentration in 93 92 traditional automotive industries 91 is a key factor in this comparison 90 to the more diversified U.S. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 manufacturing base. 2003 2004 2005 2006 Source: Ohio Labor Market Information U.S. Ohio NEO
  6. 6. Northeast Ohio Gross Regional Product Gross Regional Product is the sum total of our economic output. While real dollar growth continues, 170 2006 Dollars (Billions) annual estimates of NEO GRP growth have been revised Annual 165 1.1% Change 0.9% downward for 2005 and 2006. Prior estimates put 3.0% 160 regional economic growth at near 2.5%, but revisions 1.9% 155 to both income and employment estimates have 150 lowered the estimated GRP. Revisions to the U.S. GDP 145 (similar to the region’s GRP), released February 28, 140 have lowered estimates of 4th quarter annualized 135 growth to 2.2%. This follows rates of 2.0 in the 3rd 130 2002 2003 2004 2005 2006 quarter for 2006, 2.6 in Q2 and 5.6 in Q1. Source: Moody’s Data Sources Team NEO uses a number of data sources for the Regional Economic Review. One of the primary sources is Moody’s regional modeling system. This firm is a leading independent provider of economic, financial, and industry research and data that specialize in national and metropolitan economic growth forecasts. Moody’s county level output, employment, and payroll historical data are estimated from several publicly available sources and are summarized into the Team NEO regional footprint. It is important to understand that data provided by are estimates of economic activity. Team NEO also uses data from federal and state sources as part of the report. As with, the information for the Team NEO footprint are 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 multi-family permits, as well as their values. 737 Bolivar Road, Suite 2000 Cleveland, Ohio 44115 This report made possible through the generous 1.888.NEO.1411 support of Charter One Foundation.