March 16, 1987
Summary
The regional economy continues a slow and somewhat unsteady
expansion. New orders, production, and inventories of manufacturers
are up slightly. Ohio employment continues to expand at a rate equal
to the nation, but with a number of manufacturing sectors showing
continued employment decline. Retail sales are higher than a year
ago, and automobile purchases have picked up. Residential
construction has also rebounded, accompanied a sizable price
increases in several local markets.
Retail Sales
Retailers reported that sales in January and February were 7 to 10
percent higher than a year ago. Clothing and other soft goods are
among the best selling items at present, while sales of hard goods
such as furniture and home appliances are spotty throughout Ohio.
Retailers expect prices to increase from 2 to 3 percent in 1987,
resulting primarily from higher import prices due to a weak dollar.
Although many buyers have switched to suppliers from countries with
relatively weaker currencies, comparable substitutes are not always
available.
February automobile sales began significantly below last year's levels due to the end-of-year buying spree. However, by mid-month sales picked up and now appear to be on par with last year's sales. Domestic dealers reported that the weaker dollar is helping them compete with Japanese imports. Japanese import dealers reported slightly higher inventories. In addition, prices increased slightly in March in order to maintain an acceptable profit margin.
Labor Markets
The number of jobless Ohioans increased 39,000 from November to
December, raising the seasonally adjusted unemployment rate from 7.2
to 7.9 percent. During this period, the U.S. rate declined from 6.9
percent to 6.7 percent. Within the state of Ohio, unemployment rates
ranged from a high of 21.9 percent for the coal-producing areas to a
low of 5.4 percent for the Columbus area. Seasonally adjusted
manufacturing employment rose 4,000 from November to December. The
increase occurred in durable-goods industries while non-durables
remained unchanged. Workers in nearly all manufacturing industries
had higher earnings in December, up $11.32 from the previous month.
Workers averaged a 43.2 workweek in December, up .6 hours from
November.
Manufacturing
Manufacturing activity in the region is mixed. A survey of
purchasing agents in Northeast Ohio shoved very little change in
manufacturing from last month. Production, new orders, and inventory
levels were fairly stable, prices were higher, and employment was
lower. A similar survey for Central Ohio showed signs of continued
improvement. New orders, inventories, and prices were significantly
higher than December's figures. On the other hand, more respondents
reported a decrease in employment in January than those who reported
en increase in employment.
Raw steel production for the Lake Erie and Pittsburgh regions continually increased throughout February. Employment in the basic steel industries also increased, reflecting to some extent the resolution of the USX work stoppage.
The region continues to be marked by large scale plant closings and layoffs. General Motors recently announced plans to close plants in the Greater Cincinnati area that will affect over 8,000 workers. Firestone and Goodyear have also announced layoffs. At the same time, the region continues to be a target for foreign investment, especially automobile assembly and parts facilities. For example, Mitsubishi Electric Corporation, recently announced plans to build a $25 million plant to produce car audio equipment, car electronics and electrical parts for the U.S. auto industry.
Housing
Residential construction in Ohio has picked up considerably from
last year. Value of future residential construction in Ohio rose 16
percent from last year. The number of housing permits issued in Ohio
during December 1986 increased 7 percent from a year ago. House
values have also increased. In Akron, for example, sale prices in
January were 20 percent above what they were a year ago. While the
single-family market appears very strong, multifamily housing is
sluggish, which is partly due to the less favorable depreciation
rules under the new tax code. Despite heavy advertising for
adjustable rate mortgages, many mortgage borrowers are choosing
fixed-rate mortgages with a shorter maturity.
Banking
District loan demand has softened considerably from the strong pace
registered during December. Loans outstanding at large district
banks fell significantly during the first six weeks of this year,
The slower rate of bank lending was broadbased. Both commercial and
industrial loans and consumer installment loans fell at an annual
pace of over 20 percent. Although real estate loans have expanded at
an annual rate of 25 percent since the beginning of the year, this
pace is slower than the growth registered in December. Moreover,
some of the recent real estate loan volume is attributed to the rise
in home equity loans.