September 2009 Cleveland Plus Quarter Economic Review

Our partners include: Greater Cleveland Partnership Greater Akron Chamber Stark Development Board Team Lorain County Youngstown-Warren Regional Chamber Medina County Economic Development Corporation Cleveland Plus ® Economic Review September 2009 Volume 3, Issue 3 Aerospace-Related Sector Piloting Northeast Ohio to New Heights

September 2009 | Volume 3, Issue 3 Diversified Aerospace-Related Sector Transitioning the Cleveland Plus Region’s Economy Since the Wright Brothers’ original flight, Ohio has been a pioneer in the aerospace-related sector. The strength in this sector continues to play an important role in diversifying Northeast Ohio’s economy. With significant regional growth in the industries that supply to the aerospace sector, the collective $8 billion cluster of these industries is helping to transition the Cleveland Plus regional economy. Aerospace-Related Sector Showing Strong Growth Between 1993 and 2008, Gross Regional Product (GRP) for this sector grew nearly 59%. In fact, as the Cleveland Plus economy has transitioned to more sophisticated products, the aerospace GRP now represents 24% of all manufacturing. Our growing base of aerospace-related companies plus our talented and highly-skilled workforce prove essential to Northeast Ohio’s advantage over other regions. Aerospace-Related GRP in Cleveland Plus ( 1993-2008) $9000 $8000 ( Millions 2008 $) $7000 $6000 $5000 $4000 $0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source : Moody’s Economy.com

Strong Base of Aerospace Suppliers in Northeast Ohio Contributing to this growth are highly-sophisticated industries such as Navigational, Measuring & Control Instruments, as well as traditional segments like Fabricated Metal Manufacturing. These industries are vital inputs to the aerospace production process. Contribution of Each Industry to Aerospace-Related GRP Fabricated Metal 21% Navigational, Measuring, & Control 20% Machine Shops & Turned Product 18% Aerospace Product & Parts 12% Coating, Engraving, & Heat Treating 8% Other Electrical Equipment & Component 5% 4% Semiconductor & Electronic Component 4% All Other 4% Computer & Peripheral Equipment 4% Communications Equipment 3% $0 $200 $400 $600 $800 $1000 $1200 $1400 $1600 $1800 $2000 (Millions 2008 $) Source : Moody’s Economy.com Higher Paying Jobs As Northeast Ohio’s manufacturing becomes more sophisticated, the skills needed are becoming more advanced. Not surprising, aerospace-related occupations are an indication of this, with average wages in Northeast Ohio for this sector 36% higher than the wages for all other industries in the region. AvERAGE WAGE All Industries = $41,200 All Other Manufacturing = $53,300 Aerospace-related Manufacturing = $56,300

Strong Cluster Drives Aerospace-Related Manufacturing Establishments in the Cleveland Plus Region Regional Growth Northeast Ohio is home to more than Cleveland 2,300 firms whose products and processes are instrumental to the aerospace sector. As indicated on the map, these firms are represented throughout the Youngstown Akron entire Cleveland Plus region. As noted below, these firms reinforce Northeast Ohio’s strong cluster of advanced Canton Mansfield manufacturing and highlight the critical resources present that continue to drive the success of our aerospace supply chain. Source : Dun & Bradstreet (2009) Legacy Fueling Aerospace Growth As early as World War I, Northeast Ohio became a major player in aircraft engine parts. Today, thousands of the region’s manufacturers and suppliers are fueling the entire industry. With proximity to industry and roots in innovation, the Cleveland Plus region has become a major hub for aerospace component design, engineering, and production. In fact, it is home to the NASA Glenn Research Center, which among other significant aerospace R&D, is responsible for the Orion crew exploration vehicle development and testing. In addition, Parker Hannifin, The Timken Company, Goodrich Landing Gear, Alcoa Aerospace, Automotive and Commercial Transportation, and other major aerospace suppliers are headquartered in Northeast Ohio. “From landing gears to major structural components to turbine blades, Northeast Ohio’s aerospace manufacturing capabilities make Ohio a leading supplier to the international aerospace industry,” says Michael L. Heil, Ph.D., P.E., President and CEO of the Cleveland-based Ohio Aerospace Institute, which works to build Ohio's aerospace economy through R&D, education/training, and collaboration. Indeed, the sector is helping to transform and diversify the region’s economy with high-tech industries. For example, helicopter gearboxes, power units for jets and special coatings are developed at the Timken Technology Center. Similarly, Parker Hannifin is creating advanced ground-breaking fuel injection technologies and other applications in the region. Their Fluid Systems Division recently developed “smart” pumps for fuel, water and coolant applications that use brushless elements to deliver flow precisely on demand, saving energy and increasing reliability. Moreover, the robust cluster allows for close collaboration in new technologies. In 2009, NASA and Goodyear partnered to develop an airless tire, The Spring Tire, to transport large, long-range vehicles across the surface of the moon; it was installed on NASA’s Lunar Electric Rover test vehicle. Further, the State of Ohio is the 2nd largest supplier to Boeing Corp, with more than 500 firms providing over $5 billion in component and services. Clearly, these innovations are helping to transform Northeast Ohio’s economy with high-tech applications and a high-skilled workforce, while they drive the global aerospace sector to new heights in performance.

NEO Employment 2.10 NEO Total Employment ( Not Seasonally Adjusted ) Up Slightly in Q2 2.05 2.00 (Millions) 1.95 This chart shows total employment year over 1.90 year for comparison of seasonal patterns. 1.85 There is typically growth from Q1 to Q2, and 1.80 2007 2003 2004 2005 2006 2007 2008 2009 2003 2004 2005 2006 2008 2009 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008 while less than normal, Northeast Ohio still saw employment increase by approximately Q1 Q2 Q3 Q4 12,000 jobs in the second quarter. Employment is down approximately Source : Ohio Labor Market Information (LAUS Data) 6% from Q2 2008. NEO Unemployment 12.0% NEO Quarterly Unemployment Rate Rate Reflective 11.5% 11.0% 10.5% 10.0% of U.S. Trends 9.5% 9.0% 8.5% 8.0% 7.5% The Northeast Ohio unemployment reflects 7.0% 6.5% the trend of the overall U.S. economy. 6.0% 5.5% The rate increased to 10.6% in Q2 2009, 5.0% 4.5% with the U.S.at 9.9% and the state of Ohio 4.0% Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q3 Q3 Q3 Q3 Q3 Q3 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 is at 11.2%. 2003 2004 2005 2006 2007 2008 2009 NEO 16 counties Ohio U.S. Source : Ohio Labor Market Information (LAUS Data) NEO Real GRP Billions (2008 Dollars) GRP Estimates Continue to be $190 2.4% 0.7% (-1.5%) (-0.4%) (-1%) $180 1.8% 1.2% 0.3% 2.6% (-1.9%) 1.2% (-5.1%) $170 Adjusted for Recession 4.8% 3.8% 3.0% $160 $150 5.1% 0.3% $140 $130 The most recent estimates from economy.com $120 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 show Northeast Ohio’s GRP contracting by Real GRP Average Annual Growth = 1.1% approximately 5% in 2009. This decline reflects the ongoing recession in the U.S. economy. Source : Moody’s Economy.com Data from economy.com is continuously updated and are subject to revisions.

September 2009 | Volume 3, Issue 3 Industrial Space NEO Occupied Industrial Space & Vacancy Rate Strong Despite 405 9.5% Occupied Square Feet (Millions) 400 9.0% Economic Downturn Vacancy Rate 395 8.5% 390 8.0% 385 7.5% This graph shows the total amount of 380 7.0% industrial space occupied by quarter 375 6.5% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 between the first quarter of 2005 and 2005 2006 2007 2008 2009 the second quarter of 2009. The vacancy Occupied Square Feet Vacancy Rate rate for industrial space in Northeast Ohio rose slightly to 7.5% in Q2 2009, Source : CoStar Industrial Data while occupied space remained fairly stable. About Team NEO Due to market limits within the CoStar database, historic trend data for the Team NEO advances Northeast Ohio’s economy Team NEO region is defined as 10 of the 16 counties forming the regional footprint. These counties include Ashtabula, Cuyahoga, Geauga, Lake, by attracting businesses worldwide to the 16-county Lorain, Medina, Portage, Richland, Stark and Summit. Cleveland Plus region. The organization is a joint IMPLAN economic modeling software was used to obtain input factors for venture of the region’s largest metro chambers the aerospace related manufacturing sector; the resulting industries list of commerce. Since 2007, the organization has was then ranked in terms of inputs to determine the most relevant suppliers to the aerospace sector by NAICS code. The NAICS codes were applied attracted 25 new companies, 3,000 new jobs to Dun & Bradstreet data to create the list of supplier companies summarized in this report. and more than $95M in annual payroll to Northeast Ohio, leading to a total regional annual impact of more than $150M. For more information, visit www.clevelandplusbusiness.com. Data Sources: Team Northeast Ohio uses a number of data sources for Ashtabula the Regional Economic Review. One of the primary sources is the Moody’s Lake Cleveland Plus 16-County Region Economy.com (www.economy.com) Northeast Ohio modeling system. This firm is the leading independent provider of economic, financial and industry research and data that specializes in national and metropolitan Cleveland Geauga economic growth forecasts. Moody’s Economy.com county level output, employment and payroll historical data are estimated from several Cuyahoga publicly available sources and are summarized into the Team NEO Lorain Trumbull regional footprint. It is important to understand data provided by Economy.com are estimates of economic activity. Summit Portage Medina Akron Youngstown Team NEO also uses data from federal and state sources as part of the Mahoning report. As with Economy.com, the information for the Team NEO footprint 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 Ashland (www.bls.gov) and Ohio’s Labor Market Information (www.lmi.state.oh.us) Wayne Canton Columbiana for information on wages, unemployment and both general and industry- Richland Stark specific employment. In addition, Team NEO uses data from the Census (www.census.gov) to track housing-related activity including the Carroll number of single and multifamily permits, as well as their values. 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. 737 Bolivar Road, Suite 2000, Cleveland, Ohio 44115 888.NEO.1411 • www.clevelandplusbusiness.com

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September 2009 Cleveland Plus Quarter Economic Review

by Team NEO on Oct 11, 2009

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