Northeast Ohio Economy ‘Inching Forward,’ PNC Says
YOUNGSTOWN, Ohio – Spurred by healthy auto sales, the economy of northeastern Ohio, including the Mahoning Valley, “is at cruising speed,” the economics department of PNC Financial Services Group said Monday.
The economy, “inching forward,” would be stronger “had it not been for the layoffs resulting from weakness in metals production and the energy industry.”
In “Northeast Ohio Market Outlook,” PNC economist Mikael Teshome writes, “The big gains in auto-related employment seen in recent years is unlikely to continue. Also, layoffs in the steel industry will restrain employment growth in manufacturing.”
And the lull in the oil and gas industry could well last another two years although in the longer run, demand for steel pipe will return and strengthen the Youngstown-area economy, he said in a telephone interview yesterday afternoon.
Regardless, the manufacturing sector here remains healthy as does the health-care sector because of an aging population.
The increase in the number of jobs outside manufacturing bodes well for the region, Teshome writes, “boosting consumer spending and lifting retail, leisure and hospitality employment.”
Total payroll is only 1.5% below its pre-Great Recession peak and the unemployment rate remains in the neighborhood of 5%.
Cheaper energy prices – the price of a gallon of unleaded regular rose a dime to just under $2 in the Mahoning Valley over the weekend – have resulted in greater spending power for residents. Even so, the number of jobs in manufacturing will remain fewer when the energy sector recovers because of the huge gains in productivity.
Income growth “will likely lag that of the nation.” Median income is 9% lower than the national average, Teshome writes, “and the share of jobs in high-wage goods production [is] in long-term decline.” He sees that gap staying wide and growing.
In 1990, 25% of the workforce in the Mahoning Valley was employed in manufacturing. “Now it’s 13%,” the economist said.
The “silver lining,” as he put it, is an abundant supply of labor that should draw new industries and help established employers re-establish profitability
Wage increases have not kept pace with inflation in the Valley, Teshome noted, but that has started to change. He expects the raises granted this year will keep pace with a low rate of inflation and begin to surpass inflation in 2017 because of a tightening labor market.
The out-migration of population from northeastern Ohio, combined with an aging population, has resulted in “weak household formations,” the economist writes, “which undermines demand for housing.” However, that loss should soon stabilize and the rise in construction of new houses and the prices of existing houses should continue. As he writes, the demand for housing is helped by increased employment and continuing low mortgage rates.
Housing remains quite affordable in the Mahoning Valley, but new construction and sales of existing residences are unlikely to reach pre-recession levels for some time. House values have rebounded since 2009 but the number of vacant and repossessed houses has restrained that appreciation.
CLICK HERE to download PNC’s Northeast Ohio Market Outlook.
Copyright 2023 The Business Journal, Youngstown, Ohio.