September 8, 1987
Summary
Economic activity in the Fourth District has slowed slightly from
the last report. The annual employment growth rate in Ohio has
tapered off, although the unemployment rate is lower due to a
reduction in the labor force estimates. The Ohio Manufacturing Index
is lower in June than a year ago, reflecting primarily a decline in
durable manufacturing employment. Retail sales are up as factory
financing incentives have stimulated automobile sales.
Retail Sales
District retailers reported slightly stronger sales in July and
August than in previous months, Sales increases occurred in a broad
range of items with increases in the sale of soft goods, such as
apparel, outpacing hard goods, such as appliances. However, both
categories of sales are reported to be weaker than sales a year ago.
Retailers expect price increases to remain modest over the near
term.
The latest factory financing incentives have helped to reduce local domestic automobile inventories in order to make room for next year's models. Import dealers have also resorted to financing incentives in order to reduce inventories.
Labor Markets
Ohio's unemployment rate dropped from 7.9 percent in May to 7.2
percent in June. Much of this reduction is attributable to a 1.1
percent decrease in labor force participation during this period.
Total employment also fell slightly, with 19,000 fewer jobholders in
June. Most of the job loss occurred in manufacturing, primarily
durables. Employment in nonmanufacturing divisions rose slightly
from May to June, with services leading the increase.
Annual employment changes continue to differ significantly among the major metropolitan areas in the Fourth District: Cincinnati. Cleveland, Columbus, and Pittsburgh. Columbus registered the largest annual percentage increase in total employment in June with a 4.2 percent increase. Pittsburgh experienced the smallest increase at 1.6 percent. Furthermore, Pittsburgh has continually lost total employment since the last business cycle peak, while Cincinnati and Columbus have increased employment by 13 percent and 18 percent, respectively. Cleveland's total employment is virtually the same as it was at the peak.
Manufacturing
The Ohio Manufacturing Index fell in June to an annual percentage
decrease of 0.2 percent. Transportation equipment and primary metals
registered the largest declines among the major 2-digit industries.
Further declines in these sectors are expected as General Motors is
scheduled to close several large assembly plants in the area. On the
other hand, electrical and nonelectrical machinery posted modest
gains over this same period. Nondurable manufacturing also exhibited
slight increases.
The steel industry has been helped recently by firm steel prices, particularly in specialty steels. LTV has recently announced plans to increase prices for hot rolled carbon bar and wire products. However, regional output and employment has remained steady over the last few months.
Housing
Contracting for new construction rose slightly in July. Increases
were reported in single-family homes and commercial and industrial
building in many areas across the district. Although mortgage rates
have inched up in recent months, they remain among the lowest in the
nation. For example, in the Cleveland area, average rates for 30-year fixed-rate mortgages stand at l0.09 percent.
Banking
District loan demand continues to be soft. Total loans outstanding
at large banks fell at an annual rate of 7 percent from the
beginning of July to mid-August. Commercial and industrial loans,
which declined at an annual pace of over 20 percent, accounted for
nearly all of the loan reduction. Real estate lending has been flat
as mortgage rates have generally drifted upwards. In contrast, home
equity lending continued to increase at a rapid pace and traditional
consumer installment lending has picked up somewhat, after being
essentially flat during June.