YOUNGSTOWN, Ohio – Regina Mitchell, owner and CEO of Warren Fabricating & Machining Corp., points to heavy girders, trusses, beams and columns that are being fabricated for buildings designed to handle a Sept. 11-style attack.
It’s a niche that the Hubbard plant has developed in recent years, she says. One of its current projects is building oversized nodes, columns and girders for JPMorgan Chase’s new global headquarters in New York City.
“It’s super-exciting for us to be able to see that superstructure go up and know that we’ve been an essential part of that building,” she says.
Mitchell’s company – which specializes in heavy fabricated parts – quoted $70 million in business during the first six months of 2022, including some $14.1 million in June alone.
“We have never seen business better or had the opportunity to bid so much work in a really long time,” she says.
As the nation faces the prospect of a recession and an environment that includes record inflation, rising energy costs and high demand for workers, area companies and nonprofit organizations are reporting strong results from the first half of 2022 and guarded optimism headed into the second half.
“Since the end of last year to this first and second quarter of this year has been remarkable. It’s just crazy,” Mitchell says.
She attributes part of the gains to a shift in focus to the structural industry and recent certifications that opened federal contracting opportunities.
“There’s a lot of work out there. It’s very exciting,” Bob Hernandez, director of operations, says.
JCL Energy in Sharon, Pennsylvania, which supplies transformers and other electrical equipment, came into 2022 “hot” and its backlog remains solid, founder and team leader Jim Landino says.
Sales for the first half of the year already are more than double all of 2021’s sales. “Data mining, renewals, industrial stuff – just about every front has been pretty busy for us,” he says.
Another Landino-controlled company, JCL Development, sold about half a dozen of its Sharon area properties and the sale of another is forthcoming, he says. One building, the former Goldstein’s Furniture warehouse, was sold to a company that plans to produce canned goods there.
“I went from being nervous on that property to being pretty optimistic,” Landino says. It is one of a few buildings the company sold “where we’ve done well and we’ve attracted jobs and the right next custodian for the buildings.”
BORROWING, BUYING, PLAYING
In June, 717 Credit Union in Warren posted a record $35 million in growth in loans, Gary Soukenik, president and CEO, says. “We’re exceeding all of our expectations financially. We’ve seen growth across every part of the portfolio.”
Business loans are up about 16%, Soukenik adds.
At the same time, deposit growth has doubled expectations, increasing at about 8%. Used car loans are up 12% as is growth in auto loans for used cars so far, compared to the 10% forecast for the entire year, and mortgages and home equity lines of credit are growing as well.
Consumers are borrowing now to get ahead of anticipated interest rate hikes, Soukenik says.
Based on reports he has seen, Joe Bell, director of corporate communications for the Cafaro Co., which operates the Eastwood Mall complex in Niles, says most Eastwood tenants are seeing rebounds to pre-pandemic levels.
“You’d think there would be a real hit in terms of disposable income, thanks to horrible inflation and fuel prices. But there still seems to be enough interest and enough income for people to continue to shop,” dine out and patronize entertainment venues, Bell says. He attributes that in part to built-up demand during the pandemic.
Mike Case, director of marketing and communications for Avalon Golf & Country Club and The Grand Resort in Howland Township, reports bookings are good at the hotel and business is strong at the company’s affiliated properties in the region. Although he declines to offer specific numbers, an expansion of the hotel is even being contemplated, he says.
The bulk of bookings have been for leisure and hospitality. Various news reports have highlighted the resort in “one-tank trip” segments, drawing patrons from a two-hour radius.
“It seems pretty clear that the improvements we’ve made to the hotel have helped because we’re finding out that the ‘staycation’ is real and people don’t want to get on a plane if they don’t have to,” Case says.
One company that holds events at the Avalon properties is Heroes & Tiaras in Canfield, which supplies costumed characters for birthday parties and other experiences. Clients and bookings to date are double what they were during the first six months of 2021, owner Annabelle Himes says.
Himes started the company at age 16 four years ago. It now employs 15 part-time. In addition to providing costumed characters for birthday and other parties, she partners with local businesses for themed events.“It just grew and grew to this point. I was never expecting it to be like this in my business,” Himes says.
WORKFORCE SHORTAGE REMAINS
Unemployment in the metropolitan statistical area that covers the Mahoning and Shenango valleys is 4.1%, a number that hasn’t been that low in at least 30 years, says A.J. Sumell, professor of economics at Youngstown State University.
The tight market means employers have to pay more to attract workers.
“That obviously is a good thing for workers. But employers respond by increasing prices when they have to pay more to produce whatever it is that they’re producing,” Sumell says.
At the same time, with inflation above 8% during the most recent quarter, for people in jobs where wages haven’t gone up in the past year, the decrease in standard of living is “pretty significant,” he says,
At Warren Fabricating, the top challenge is finding skilled, qualified tradesmen, Mitchell says. “We could definitely be doing double what we’re actually doing now.”
The company is looking at scholarships for students willing to get skilled-trades training and work at Warren Fabricating.
“All the employers are trying to find creative ways, things that they’ve never had to do before, to recruit people,” Mitchell says.
“The war for talent certainly was more significant than it had been in the past,” 717’s Soukenik says. The credit union typically pays “a bit above market.”
Turnover, normally in the single digits, is a little higher today but far below the 35% for most credit unions, he says.
Likewise Eastwood Mall tenants report a lack of staffing remains their biggest issue. “It’s still been difficult to get enough people to work,” Bell says.
SUPPLY CHAINS AND STICKER SHOCK
Price increases are “a big thing,” says Paul Johnson, president of Adolph Johnson & Son Co. in Mineral Ridge. Some customers have experienced ‘”sticker shock” and prices continue to rise. More suppliers are adding fuel surcharges.
“It’s hard to get stuff still,” Johnson says. “So, we deal with that as best we can.” That means finding substitute materials or working to expedite the process of finding needed materials.
Transformer prices have doubled as commodities prices have risen, says JCL’s Landino.
And at the Eastwood Complex, restaurants are hanging signs apologizing to customers for raising prices, Bell says.
Consumers are starting to respond, YSU’s Sumell says.
Even though demand for gas is “highly inelastic,” there are signs that the amount of gas consumed is decreasing compared to last year, he says.
“It takes time for consumers to respond to those high gas prices” by changing their driving habits, deciding whether to go on a road trip or even purchasing a more fuel-efficient vehicle, Sumell says.
“But those changes are starting to take place.”
To cool demand, the Federal Reserve is increasing interest rates.
As of July 1, new factory orders are down, production and backlogs are growing and manufacturers are facing record-long lead times for capital expenditures and production materials, according to the Institute for Supply Management.
NONPROFITS FEEL THE PINCH
Inflation is beginning to have “a big impact on operating costs,” says Brigid Kennedy, CEO of Beatitude House in Youngstown, which offers various programs to assist women, children, immigrants and college students.
The organization is reorganizing to use resources more efficiently and improve service delivery, which she hopes will help it weather economic conditions, Kennedy says. “We always have been cautious with spending, so just more so now.”
Likewise, Smarts Community Art School in Youngstown is more diligent with its spending as the agency copes with inflation and supply chain issues, says its president, Becky Keck. The school shops “smarter” and doesn’t purchase unneeded materials. Nor has it raised prices, she says. It still offers free programming but has focused on revenue-generating work and raising funds.
“Instead of using the pandemic and current economic conditions to make excuses about operations and/or our success, we’ve used them both as opportunities to make our operations work better,” Keck says. “Life is all about change and how you manage it. Business is the same.”
Youngstown Blue Coats, which distributes coats, boots, hats and other warming items to homeless individuals, has seen that the prices of those items doubled in some cases, according to volunteer Cynthia Hirtzel.
“The [increase in the] number of homeless we serve well exceeds the numbers of donations we collect,” she says.
Meanwhile, the number of homeless people increases annually and the pandemic only worsened that trend. “We have increased our grant writing, fundraising and other development activities to increase revenue,” Hirtzel says.
LOOKING AHEAD
Sumell doesn’t expect the regional economy to shift significantly during the second half of the year. Employers are offering significant bonuses for jobs that many potential workers could fill. Unemployment could rise modestly as discouraged workers decide to reenter the workforce, he says.
The YSU economist points to significant economic drivers such as the Ultium Cells plant, which has yet to do most of its hiring.
Still, inflation will continue to be a problem, probably remaining higher than 5%, and gas prices will remain historically high, although not as high as they are now, he says.
717’s Soukenik anticipates low demand for the second half of the year, as pent-up demand begins to wane. And he expects loan delinquencies to begin to increase.
“There are a lot of signs that indicate there’s going to be a recession,” he says.
Warren Fabricating’s Mitchell expects customer demand for the second half of 2022 to be much the same as the first half.
“If they know that they are going to have a project third quarter, they want to secure those man-hours now,” she says.
“We have every reason to be optimistic for the second half of the year, that things will continue to follow this course,” Avalon’s Case says. He expects there be the same number of weddings and golf groups coming through as the first half of 2022.
Heroes & Tiaras’ Hines is preparing for a busy second half, with bookings already doubled what she has done in past years. Summer is her busy season but several events already are planned for the remainder of 2022. She is adding a second Grinch for holiday parties.
“Last year I booked every weekend with the Grinch,” she says.
The expectation of Eastwood Mall tenants is that they will continue to do better, Bell says.
“A lot of retailers and other businesses have high hopes that the rest of the year will continue on an upward trajectory, despite the challenges they’re facing in terms of getting inventory, in terms of getting workers and whatnot,” Bell says. Some acknowledge they are going to have to “bite the bullet” and pay more to get the staff they need for the holiday season.
Not everyone is optimistic.
Johnson foresees the economy slowing down during the second half of the year. He says requests for commercial construction proposals are down slightly from last year.
“There’s not one segment that’s particularly strong from what we’re seeing,” he says
“There’s a negative perception out there, along with the continued inflation and shortages. None of those things are encouraging for people to do projects and expand.”
JCL’s Landino says he sees signs of a slowdown, because customers can’t get the supplies they need to finish their projects or suffer from “outrageous sticker shock” from the prices.
“There’s no question we’re starting to see a decrease in activity,” he says. “Inflation has thrown cold water on a very hot market.”
Pictured at top: Regina Mitchell, CEO of Warren Fabricating & Machining Corp., says business has never been better.