Team NEO ‘Cautiously Optimistic’ about Regional Economic Recovery
YOUNGSTOWN, Ohio – The northeastern Ohio economy appears poised to perform better than earlier projected, according to a Team NEO report released Monday.
The report, based on data from Moody’s Analytics, projects that gross domestic product for the 18-county region is expected to fully recover to 2019 levels following last year’s declines caused by the coronavirus pandemic. However, the report says, employment recovery will lag.
“There is reason for cautious optimism on how the economy could perform in 2021,” said Jacob Duritsky, Team NEO vice president, research and strategy. “The takeaway from this is not that we’re out of the water from the pandemic nor that it didn’t hugely impact us like everyone else in the world, but that some early signs are indicating that you might actually do a little better coming out of this than we would have originally anticipated.”
According to projections back in November, the region was expected to show a 5% decline in GDP, with an expectation to regain about half that in 2021, “still well below where we were going into the pandemic,” Duritsky said.
Instead, March figures showed just a 3% decline in regional GDP last year, with a 4% growth rate expected in 2021.
“We’ll actually net new GDP from where we were in 2019 in 2021 if these projections hold as they are today,” he said.
Employment is also expected to do better than earlier projections showed, although those gains won’t be as pronounced as was the case in regional GDP.
The region lost about 175,000 jobs at the peak of impact in 2020, and November’s projections showed flat job growth in 2021. The updated projections show job growth of about 1.7% this year.
“We will not recover from the jobs we lost in the pandemic. So unlike GDP, it’s not going to be that type of recovery,” Duritsky said. The 1.7% projected growth equates to between 25,000 and 30,000 jobs added.
According to the report, nearly all sectors of the regional economy are projected to see growth in GDP and employment, with the exception of some portions of government, leisure and hospitality, and real estate, particularly commercial.
Mining and gas extraction are projected to lead in both GDP and employment growth, with GDP increasing about 13% and job growth up around 9%. Other sectors projected to show strong GDP growth are information (10%) and headquarters (8%), while top performers in employment administrative and support (just over 6%) and construction and education (each around 3.5%).
Among the assumptions built into the updated Moody’s projections are the anticipated speed of reopening for sectors of the economy such as arts and entertainment. Unlike during 2020, there is some capacity for that taking place this year, Duritsky said.
The projections also take into account the effect of federal stimulus funds – both those distributed to consumers who will spend money throughout the economy and to support for state and local governments – and expectations interest rates will remain low.
Additionally, Duritsky pointed to the impact of the reopening of supply chains that were disrupted because of the shift to producing personal protective equipment, shut down because they weren’t in essential industries or people weren’t making huge purchases such as automobiles.
“Some of those issues are starting to loosen and I think we’re starting to see supply chains function a little more normally,” Duritsky said. “It’s showing up from an output perspective and a jobs perspective in manufacturing, but also in sort of the manufacturing adjacent sectors, too.”
What could throw those projections off would be the inability of sectors to recover as believed, because of people still dealing with the consequences of the virus or setbacks
“It really is the question about how quickly do we open back up, how quickly do things get back to ‘normal,’” Duritsky said. Maintaining the current restrictions or placing new ones on the numbers of people that venues can accommodate or re-imposition of curfews would have “a profound impact on the data,” he noted.
“So I use the phrase, ‘cautiously optimistic,’ emphasis on ‘cautious,’ because the next three to six months are going to be critically important for whether we start to realize some of that upside potential.”
Copyright 2022 The Business Journal, Youngstown, Ohio.