Indicators Show Reasons to Hope

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Can Cincinnati make progress in job growth?

Let's take a moment for optimism; the economy seems to have turned the corner. Signs are positive as most economic indicators are improving on a consistent basis. Production and business profitability are up and even employment indicators are pointing in the right direction. Now is a good time to look back at our region's recent employment experience and capture information that provides us with a better understanding of how we can move forward.

The economic changes that we experienced since early in this century give us insights about our regional strengths and weaknesses. During this period, from 2000 to 2010, the nation encountered two economic downturns, one occurring toward the beginning and the other late in that period. During this time, the nation as a whole lost about 1 percent of its jobs. This may seem insignificant, but it is enough to weaken the economy and affect the lives of millions of people. The Cincinnati region lost 75,000 jobs, which is about 4 percent of its total employment.

Here's what we learn when we review the situation. The big loser at the local level was the manufacturing sector, which lost 37,000 of its jobs. The education and health services sector was the big winner, producing 35,000 net new jobs. Of the 75,000 Cincinnati jobs lost, we can readily find an explanation for 25 percent. About 15 percent can be explained by the condition of the national economy. Another 10 percent is due to our industrial mix of employers. This industrial mix is such that sectors in which we had a high concentration of jobs were the same sectors that fared poorly at both the local and national levels. For example, at the national level, the manufacturing sector lost 32 percent of its jobs and that is a sector in which the Cincinnati region has a high concentration of workers.

It might appear that the manufacturing sector is the weak link in our economy, yet there is another way to look at this. While the nation lost 32 percent of its manufacturing jobs, it was less severe in the Cincinnati region, where the loss equaled 25 percent. Economists view this ability to outperform the nation as a possible sign of strength that may aid in future growth. Such was the case during 2010, when employment in the manufacturing sector actually increased, easily topping the nation's growth rate.

If we shift our attention to the education and health services sector, we see that it produced 35,000 net new jobs and grew by 30 percent. Yet this sector underperformed the nation's education and health care sector, which had a growth rate of 34 percent.

The question to which we should be seeking answers is: If only 25 percent of job losses can be explained by the national economy and our industrial mix, what explains the remaining 75 percent? Economists seem to agree that a touchstone for strong job and economic growth is the "general business environment." This is determined by regulations, financing alternatives, taxes and labor policies. The size and quality of the labor force also strongly affect growth. The goal before us then is to examine and improve the extent to which we have a business environment that is conducive to development and job growth. Furthermore, since our region falls behind a bit in both population growth and the percentage of our population with a college degree, we should look for ways to induce our college graduates to stay and work in this region. It will make for a brighter and more vibrant future.

George Vredeveld is the Alpaugh Professor of Economics at the University of Cincinnati's College of Business and director of UC's Economics Center.