Flexibility Crucial To Area's Future Prosperity

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Flexibility Crucial To Area's Future Prosperity

Last week, the Economic Advisory Committee to the Cincinnati USA Partnership for Economic Development, on which I serve, presented their report on the future of the economy at the national and local levels. Given how difficult it is to accurately forecast the economy, the committee has been remarkably successful. This year we agreed that the local economy would be slowed by a lethargic national economy. We disagreed about the extent. While we were aware of problems specific to the Cincinnati area, we had more optimistic about the local economy than we have had for quite a few years.

The most important determinant of the performance of the local economy is the national economy, and it has slowed over the last three years in output, productivity and employment growth. The committee expects this to continue through 2007, but to pick up a bit in 2008. We can expect the same for the local economy.

A major influence on the economy has been manufacturing employment. In the nation and locally, manufacturing employment has decreased approximately 19 percent since 1999. Because our region has a larger percentage of the workforce employed in manufacturing, the job loss has been exacerbated. Adaptation to these employment changes is critical, and our economy has some successes. Employment growth in other sectors of the economy has made up for manufacturing job losses. Yet, the local employment growth of 0.4 percent lags behind the national rate of 1.8 percent.

Another factor affecting growth is the growth in the size of the labor force. A slow growing labor force, or in some cases a declining one, has affected most developed economies. As boomers retire, the labor force will grow more slowly. The past 30-year dramatic increase in the percentage of women has brought them to about equal percentage levels of men. Most likely the percentage of women working has stabilized and the increase in the number of women entering the labor force will slow. Our region may be experiencing an additional restraint to a growing labor force. Since 2000, local population has increased by about two-thirds the rate as the national average. This is due in most part to low in-migration, especially among young people. The committee projected a growth rate in Gross Regional Product (the local version of Gross Domestic Product) of 1.9 percent for 2007 and 2.6 percent for 2008 – national growth was projected at 2.0 percent for 2007 and 2.8 percent for 2008. For local employment growth, the committee projected only .4 percent for 2007 and .8 percent for 2008. National employment was projected to grow from at 1.2 percent for 2007 and 1.0 percent for 2008.

The long term future of our economic health depends on the area’s ability to adapt to a new environment. Adaptation is what vibrant, healthy economies do best and there are signs that our economy is doing that. The number of manufacturing jobs requiring higher skills seems to be increasing --this is good news for an area still weighted toward manufacturing. Downtown has received a boost with the revitalization of the Fountain Square district, including several new restaurants and associated entertainment venues. The region also maintains its recognition as a good place to live. Most Livable Cities by Partners for Livable Communities ranked us 7th among the top 10 cities that rock! The Cincinnati area was recently rated 7th for lowest cost of operation for corporate headquarters. And recently, expansion and relocation of businesses has turned more favorable. Opportunities are developing in clusters such as aerospace, biotechnology, advanced manufacturing, plastics, and motor vehicles.

The future holds a bright promise if the region can maintain a targeted focus. Promoting the expansion of existing businesses, attracting new businesses and fostering in-migration must continue in order to bring local economic growth back on track with and beyond the national economy.

George Vredeveld, Director of the Economics Center for Education & Research and the Alpaugh Professor of Economics at the University of Cincinnati