Columbus Chamber Blog: Information about economic development, economic and business trends, Columbus workforce, programs, events and the Chamber of Commerce in and around Columbus, OH

Tourism can boost economic developement

By Bill LaFayette, vice president, economic analysis

Recently, I answered a question on LinkedIn for the International Economic Development Council (IEDC)– Is tourism a legitimate economic development strategy?”

I vote yes for two reasons.

1. Tourism is a prime example of an export industry—it brings dollars into your region from elsewhere. That is the only way that household income and standard of living can rise. The direct jobs tend to be lower-wage but can provide some level of income to individuals who might otherwise not have any; the indirect jobs, on the other hand, are spread across all industries and wage levels.

2. If you make your region attractive to tourists, you make it attractive to residents as well, so it can help with workforce retention. And don't forget that if you make your region sufficiently attractive to tourists, some will become residents.

Don’t underestimate the positive impact tourism can have on economic development. I encourage you to learn more about all there is do so and see right here in Columbus at www.experiencecolumbus.com.

Manufacturing's impact on local economy: Read between the lines

By Bill LaFayette, Ph.D., vice president, economic analysis

The May 27 online edition of Columbus Business First (see Ohio, Great Lakes states big production job losers) highlighted a Business Journals study reporting that manufacturing employment has declined significantly in 49 of the 50 states since 2001. This is certainly true. Employment peaked nationally in March 2000. National employment is 33 percent lower now than it was then, while Ohio is down 40 percent and the Columbus MSA is down 38 percent.

These statistics seem to imply that manufacturing is in decline and all these jobs have gone to other countries. The fact is that the primary reason for the decline over the past decade is not offshoring, but rather efficiency gains. Consider this: between 2001 and 2007, manufacturing employment declined 25 percent but the output of U.S. manufacturers increased 20 percent. As a result, a typical manufacturing worker could produce 41 percent more output in 2007 than he or she could produce six years earlier. 

In other words, what took 100 workers to make in 2001 took only 71 workers in 2007. Many tasks that were performed by workers a decade ago are now performed by machines. While some production has certainly shifted overseas, if this were the driving force behind the employment losses, output would have stagnated or fallen rather than increasing at a faster-than-average rate.

Manufacturing employment has increased since the labor market turned in December 2009 – 2.2 percent nationally and 2.7 percent in Ohio. (Local employment, however, has been flat.) This is not surprising: the 41 percent efficiency gain is unusually large and production improvements have hit a wall. This is likely to be temporary.

In fact, the State of Ohio considers manufacturing to be one of the key industries to focus on for economic development. From the Ohio Means Business website, Ohio is "the 3rd largest manufacturing state in the U.S. ($84.1 billion) and 8th largest source for Gross Domestic Product among the 50 states and the District of Columbia ($471.3 billion in GDP) across a wide industry base." Read more about how Ohio's manufacturing knowledge will help your business adapt to changing manufacturing demands.

Over the long run, manufacturing will provide fewer jobs than it has historically – but more jobs among supplier industries. The manufacturing jobs that do exist are far more technology-dependent and higher skill than they were a decade ago.

Blue Chip Economic Forecast Video Now Online

The Columbus Chamber’s Annual Blue Chip Economic Forecast drew a packed house at the Columbus Metropolitan Club last week. According to the forecast, employment in the Columbus region will continue moderate growth during 2011 as the economy recovers from the 2007-09 recession. A net increase of 0.3 percent, or 2,500 net new jobs, is expected.

If you weren’t able to make it to the event or just want to listen and learn again, take a look at this video from the forum.

The Columbus Blue Chip Economic Forecast is published by the Columbus Chamber. The forecast is a consensus derived from the independent forecasts of four area economists – Bill LaFayette, Ph.D., vice president, economic analysis, Columbus Chamber; Joseph Mandeville; George Mokrzan, Ph.D., vice president, senior economist, Huntington Bancshares, Inc.; and James Newton, Ph.D., chief economic advisor, Commerce National Bank.

A full copy of the forecast is available for download at www.columbus.org.

Columbus MSA employment continues to outperform in August

We now have preliminary August sector employment totals, labor force, and unemployment estimates for the Columbus MSA, which I have seasonally adjusted.  The news is better than that for either the U.S. or the state.  The number of jobs in the region fell by 100 – literally a rounding error – compared to losses of 0.2 percent for the U.S. and 0.6 percent for Ohio.  There was little change in individual sectors – except education and healthcare, which increased 1,200.  As was the case for the Ohio unemployment rate, the seasonally adjusted Columbus MSA rate fell.  The local rate is now 8.7 percent – a full point below the U.S. rate – versus 9.2 percent in July.  This decline was partially driven by a decline in the labor force, as was the Ohio decline, but also by an increase in the number of employed Columbus MSA residents.  Overall, once again, we don’t have really good news but things could be worse.

Unemployment in Ohio

Last week the Ohio Labor Market Information Bureau announced that the Ohio unemployment rate fell in August from 11.2 percent to 10.8 percent – its first decline since February 2006.  This seems as if it would be good news, especially because the U.S. rate rose from 9.4 percent to 9.7 percent after treading water for two months.  But this is an illustration of the complexities in interpreting the unemployment rate that I discussed here earlier.  Changes in the unemployment rate are affected both by changes in employment and by changes in the number of people actively seeking work.  At the national level, the number of people employed fell in June, July, and August.  The U.S. unemployment rate changed only marginally in June and July because a decline in the number of active job-seekers offset the decline in the number employed.  In August, U.S. employment declined but the number of those looking for work did not decline, so the unemployment rate rose.  Here in Ohio, employment fell somewhat last month but the number of job-seekers fell a lot, producing a decline in the unemployment rate despite the decline in the number of people working.

Press Release: Columbus Chamber Reports Relatively Stable Second Quarter Employment - Columbus MSA Continues to Outpace National Average

COLUMBUS, OH, August 17, 2009 /24-7PressRelease/ -- The Columbus Chamber of Commerce is proud to announce second quarter statistics show the Columbus employment rate is stabilizing and continues to outpace the national average. The unemployment rate in Columbus is at 8.9 percent: far less than Ohio's 11.1 percent average, and still below as the national unemployment average, at 9.5 percent.

In fact, private education and healthcare have continued to experience a sharp rise, and government also reversed some of its earlier losses. Plus, education and healthcare are expected to continue enjoying large increases.

"Education and health services employment is more than 80 percent healthcare," Vice President of Economic Analysis Bill LaFayette, Ph.D. said. "This is the one sector whose growth has continued unabated during the recession - despite legitimate concerns over the ability of patients to pay for their care. Growth is expected to continue in the second half of the year."

The Columbus Chamber reports transportation and utilities also experienced growth of 44 percent between early 2001 and the beginning of the recession. The sector's decline early in the recession was worse than the national average, but the trend turned slightly positive at the beginning of the year. Assuming that growth does not deteriorate significantly, the comparison to 2008 for the full year should be much better than that for the first six months.

Professional and business services also experienced employment growth far stronger than the national average over the past seven years, and declines in the recession have been less than one-fifth the national average. Each of the three subsectors has performed much better than average since the beginning of the recession.

"This sector should be one of the first to benefit from economic recovery given its labor intensiveness and the likelihood of employers to increase their hiring of temporary employees as a response to early increases in demand," LaFayette said.

Leisure and hospitality employment declines in the Columbus Metropolitan Statistical Area (MSA), including Delaware, Fairfield, Franklin, Licking, Madison, Morrow, Pickaway, and Union Counties, have been less than average since the beginning of the recession. Statewide employment growth has been slightly positive, despite some weakening in recent months. Along with retail, local restaurants have benefited from the stronger-than-average Columbus MSA economy, while hotels in Columbus and elsewhere in Ohio, have benefited from the tendency of travelers to stay closer to home.

Other services - including various personal services, religious organizations, and professional and social associations - along with education and health services are experiencing higher employment now than at the beginning of the recession. Although the budgets of nonprofits have come under pressure, the services sector was growing much more weakly than average for several years before the recession hit.

The news is not all positive. Despite the marked economic growth reported by the Columbus Chamber, the implied Gross Domestic Product (GDP) decline would rank this recession as one of the two worst of the postwar period; its length is far greater than any of the 10 previous postwar recessions. U.S. employment is expected to decline through the year and into 2010, though at a much smaller rate. It is predicted that the national unemployment rate will reach 10 percent by December 2009 and will still be at 9.5 percent in December 2010.

More than two-thirds of the 51 economists in The Wall Street Journal's monthly survey expect the recession to end no later than the third quarter, with modest output growth in the second half of 2009.

For more information about the Columbus Chamber's economic update, visit www.columbus.org.

About the Columbus Chamber of Commerce
The Columbus Chamber of Commerce leads and supports economic growth and development in the Greater Columbus community. It supports a membership of 2,700 businesses. Learn more about Columbus at www.columbus.org.

Chamber Economist, Bill LaFayette Featured on Columbus Underground

Check out Walker's interview with Bill on the Columbus Underground:

An excerpt from the interview is included below:

We recently sat down with Dr. Bill LaFayette, Ph.D., the Vice President of Economic Analysis at the Columbus Chamber of Commerce, to discuss a variety of topics related to the Columbus economy. Bill shares with us his professional insight and research on some of the most important job sectors in the region, the growing importance of the creative class and urban renewal, and his thoughts on how Columbus is weathering the current economic recession. The full interview on the Columbus economy can be found here.


For more insights on the Columbus MSA economy, read Bill's series of posts here.

Foreclosures and house prices

The Columbus Dispatch reported Thursday that Ohio foreclosures have declined for three consecutive months while they continue to rise nationally.  The experts are not sure whether this is a real turn in the trend or just a temporary break in a downward trend.  While foreclosures are likely to continue to be a serious problem for Ohio communities and neighborhoods, there are reasons to think that the situation in other states will be worse.

The foreclosure crisis in Ohio has been driven by different factors than is true elsewhere.  Nationwide there was a large run-up in house prices followed by a crash.  Between the first quarter of 2002 and the second quarter of 2007 (when the market peaked), national house prices rose 47 percent, compared to  14 percent in Ohio and 15.5 percent in the Columbus MSA, according to the federal government’s FHFA House Price Index.  Since then, national prices have fallen 3.8 percent, while Ohio prices are off 0.1 percent and those in the Columbus MSA have recovered and are up 0.7 percent.  (Only 10 of the 50 largest metros have done better.)  California, Florida, Arizona and Nevada account for 56 percent of foreclosure filings.  The 2002-2007 house price gain in these four states was more than 90 percent, and their subsequent loss has been between 18 and 27 percent.  Many of those buying in these states near the top of the market now owe far more than the house is worth.  If the payment on the mortgage increases to an unaffordable level, they cannot refinance and have no alternative but to default.

Homeowners in these four states share the chief problem facing Ohio’s homeowners: payment problems due to job loss.  Ohio employment has declined 5.9 percent since the beginning of the recession – equal to California’s loss, but less than the 7.2 percent in Florida, the 7.8 percent in Nevada, and the 9 percent in Arizona.  The rate of job declines is expected to decrease in coming months, but the recovery in the housing market in boom states is likely to be much longer in coming.

Another small gain in Columbus regional employment

The Bureau of Labor Statistics released preliminary June employment statistics for the Columbus MSA this morning. On a seasonally-adjusted basis, total employment increased in the Columbus Region for the second consecutive month. This is especially surprising because the June decline in U.S. employment was worse than that in May. Our net gain was 1,700 jobs (0.2 percent), close to the 2,000-job gain in May. (May employment was adjusted downward by 300 jobs.) The nation lost 459,000 jobs (0.35 percent), compared to 330,000 jobs (0.25 percent) in May. State employment fell 33,000 (0.6 percent). Since the recession began in December 2007, the region has lost 17,600 jobs, or 2.0 percent, compared to losses of 4.7 percent nationally and 5.9 percent in Ohio. The largest employment gains in June were 2,500 in private education and healthcare and 1,200 in the beleaguered government sector. Construction lost 1,400 and leisure and hospitality lost 1,200. Changes in everything else were close to zero.

For more information on the Columbus economy, visit www.columbusregion.com.

The Pickaway County economy

I was honored to be guest speaker Wednesday at a Pickaway County Chamber event.  Part of my talk included some analysis of the Pickaway County economy.  I always enjoy these deeper dives into local economies because of the significant economic differences among the eight counties of our region.  Pickaway County’s economy is driven by manufacturing.  The 2,450 manufacturing jobs in 2007 represented almost 17 percent of the county’s total employment – a concentration 63 percent greater than the U.S. and twice that of the Columbus region as a whole.  As is true of other manufacturing-oriented areas, efficiency increases and consolidation among producers caused employment declines for Pickaway County earlier in the decade.  Manufacturing lost more than 2,000 jobs (46.5 percent) between 2001 and 2006, which led to a total loss of nearly 1,900 jobs (11.6 percent) over that period.  Unlike most other manufacturing-based economies, though, Pickaway County has enjoyed strong growth more recently.  The county gained 100 manufacturing jobs (4.2 percent) between 2006 and 2007, and about 40 more in the first three quarters of 2008.  As a result, Pickaway County’s total employment increased 2.7 percent in 2007 – twice the rate of the Columbus region and the U.S. – and declined only marginally in the first three quarters of 2008 relative to the same period of 2007.  The earlier employment declines and current recession, however, have led to a May 2009 seasonally-adjusted unemployment rate of 11.3 percent.

State government is also important, contributing more than 10 percent of employment.  There are two sectors that, while still below average in terms of employment share, are growing nicely and becoming far more important: professional and business services and private education and healthcare.  Transportation and logistics has declined since 2001, but has a bright future thanks to the recent opening of the Norfolk Southern Intermodal on the county’s northern border, and the completion of the Heartland Corridor rail project next year.