The document provides an economic overview of Northeast Ohio. It summarizes that the regional economy was stable in 2006, with modest growth in gross product and steady employment levels. Contrary to perceptions, the manufacturing sector remains stronger than believed, accounting for around 21% of the regional economy. Unemployment has declined to around 5%, which is considered near full employment.
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Northeast Ohio Economic Review Provides Key Data on Regional Economy
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
Economy.com. 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. 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.”
Economy.com 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. 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. 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 Economy.com
NEO Mfg GRP Mfg as % of GRP
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. 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 Economy.com
Data Sources
Team NEO uses a number of data sources for the Regional Economic Review. One of the primary sources is Moody’s Economy.com
www.economy.com) 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 Economy.com 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 Economy.com are estimates of economic activity.
Team NEO also uses data from federal and state sources as part of the report. As with Economy.com, 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 (www.bls.gov) and Ohio’s Labor Market Information (lmi.state.oh.us) for information on
wages, unemployment and both general and industry-specific employment. In addition, Team NEO uses data from the Census
(www.census.gov) to track housing-related activity including the number of single and multi-family permits, as well as their values.
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Cleveland, Ohio 44115
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This report made possible through the generous
1.888.NEO.1411
support of Charter One Foundation.