SHARON, Pa. – While consumer spending continues to drive the economy and local manufacturing took a slight leap in production at the end of 2024, the regional executive of the Pittsburgh branch of the Federal Reserve Bank of Cleveland believes “the theme of 2025 is uncertainty.”
Russell Mills spoke Wednesday at the Economic Update Breakfast held by the Shenango Valley Chamber of Commerce, where he prefaced his opinions are his own and not necessarily those of the Federal Reserve Bank or the Board of Governors of the Federal Reserve System.
He delivered his speech before the U.S. Labor Department reported that the consumer price index increased 3% in January from a year ago. It was up 2.9% from December. The report would indicate that the Federal Open Market Committee is less likely to reduce interest rates in the near future, as that board strives to drive inflation down to 2%. At its January meeting, the Federal Funds Rate was unchanged and remained between 4.25% and 4.50%.
Mills pointed to a University of Michigan Haver Analytics report that shows inflation expectations have increased to 4.3% for the next year and 3.3% over the next five years.
Overall, U.S. GDP growth rate was at 2.3% in the fourth quarter, and consumer spending was at 2.8%. The Blue Chip Economics forecast real GDP will be at 2.2% in the first quarter of 2025 and fall to 1.9% each of the next three quarters.
Regarding the effects the Trump administration’s policies will have on the national economy and how an aging population will continue to affect the jobs situation locally, Mills said he and others will continue to monitor the situation in this region.
Steel production remains well below pre-pandemic levels, Mills said, down 13.3% nationally since February 2020 and down 23.9% regionally – in the Great Lakes, Midwest and Northeast.
Lower natural gas prices and technological advances also have led to fewer gas drilling rigs in operation. Since last year, Pennsylvania dropped 28.6%, and Ohio dropped 46.2% in natural gas rigs in operation.
The U.S. unemployment rate was 4% in January, and while wage gains outpaced inflation since the pandemic, the number of those leaving a job to improve their wages has slowed.
The labor force participation rate has increased since the pandemic. However, Mills said labor force participation rates for those age 16 to 24 and those age 55 and older have fallen since the pandemic. Mills pointed to statistics that show 2.24 million excess retirees are out of the workforce, compared with what was predicted before the pandemic.
Despite a rebound in labor force participation, the Mahoning and Shenango valleys are lagging.
“[In Mercer County] it’s about a 2% decline overall participation since the pandemic, so that’s one of the sources when folks, when employers said that there’s just not as many workers that they are feeling out there, that’s one of the reasons why,” Mills said.
Youngstown has improved slightly since the pandemic, with a 0.6% employment gain. Employment gain is lagging in Mercer County, 2.3% below pre-pandemic levels.
Mills tied the labor problem in the area to population loss. Between 2013 and 2023, Mercer County lost 7,272 people, including 634 from 2022 to 2023. Lawrence County lost 5,068 overall and 340 over the one-year period. In Ohio, Mahoning County lost 9,509 and 326; and Trumbull lost 7,583 and 353.
The majority of population loss in Mercer County was due to deaths compared with births, Mills said.
Throughout the Fed district, the senior population continues to be a major factor, with 18.2% of the population age 65 and older, compared with 16.7% nationally. But that situation is even more pronounced in Youngstown where those age 65 and older make up 21.8% of the population.
Mills tied the population losses and aging population in the area to the steel industry losses 50-plus years ago.
“There was an outward migration of those who worked in the steel industry, in particular in our region … who moved to other places to find employment,” said Mills, pointing to the study of a demographer from the University of Pittsburgh. “I’ve heard it said it is sort of a lost generation.”
Mills said he wants input from local businesses as he is one of the advisors for Beth Hammack, the voting member from this region on the Federal Open Market Committee, and wants to provide the best information available. Those who want to help should contact the Cleveland Fed to add to the regional analysis available.
“It’s my job to go out and connect with people to make sure that those voices are being heard,” Mills said.
In addition to the Beige Book, which provides a capsule of what the Fed is seeing, the Cleveland Fed released a new tool Wednesday – the Summary of Regional Conditions and Expectations, which provides regional information in industries such as manufacturing and transportation and in areas such as business conditions, wages, employment and planned capital expenditures.
Pictured at top: Russell Mills, regional executive of the Pittsburgh branch of the Federal Reserve Bank of Cleveland.