Regional Economic Growth Report
This report contains the results of an analysis of data from the Cincinnati USA Partnership’s 2005 Capital Investment Survey. The analysis was performed by the Economics Center for Education & Research (Economics Center), a unit of the College of Business at the University of Cincinnati.
The first section describes how “Cincinnati USA Growth Businesses” are defined, presents the 2005 survey findings, and compares 2005’s economic impact results with results from 2004 report. The second section of the report presents the economic impact results of the capital investment survey by business type, state, and county. The third section of the report explains the key assumptions used in this analysis.
A. Cincinnati USA Growth Businesses
The Cincinnati USA Partnership surveyed the businesses in the Cincinnati USA1 region to determine total business investment in the region during 2005 and the new and retained jobs associated with this investment. The following analysis examines the results of businesses that added or retained jobs, added investment, or added square footage in 2005. This group of 228 businesses is referred to as Cincinnati USA’s Growth Businesses.
B. 2005 Survey Results
The Cincinnati USA Partnership identified 228 “Cincinnati USA Growth Businesses” that added or retained jobs, added investment, or added square footage in 2005.
Bio-medical investment, of which 90 percent came from hospitals, was the most significant factor in business investment during 2005 (41% of total investments), along with the manufacturing sector (23%). Among counties, Hamilton, Butler, Campbell, and Kenton all showed substantial increases in investment during 2005 compared with 2004.
The total economic impact of 2005 capital investment by Cincinnati USA Growth Businesses is $4.40 billion. Of this, $1.27 billion will enter the homes of Cincinnati USA workers in the form of wages. The economic boost created by business investment and employment will support 39,194 jobs in the Cincinnati USA region.2
In 2005, investment by Cincinnati USA’s Growth Businesses totaled $2.22 billion and directly accounted for 25,408 new and retained jobs. One job was either created or retained for every $87,240 in investment spending by the Growth Businesses.
In 2005, 41 percent of total investment occurred in the bio-medical industry (22% in 2004), 23 percent in the manufacturing industry (27% in 2004), 24 percent in the office/service industry (32% in 2004), 10 percent in the distribution industry (11% in 2004) and less than 1 percent in the hotel industry (4% in 2004). In addition, 1 percent of total investment occurred in research and development (4% in 2004).
According to the survey of Growth Businesses, a total of 10,551 new jobs resulted directly from investment and 14,857 jobs were retained. Of the total 25,408 jobs that were created or retained, 50 percent were in the office/service area, 24 percent were in manufacturing, 13 percent were in the bio-medical industry, 11 percent were in distribution, 2 percent were in research & development and less than 1 percent was in hotels. These jobs paid $1.48 billion in household earnings to Cincinnati USA workers.
Eighty-one percent of the new investment in 2005 originated from Ohio businesses, 18 percent was produced by Kentucky businesses, and 2 percent came from Indiana businesses. The five counties with at least $100 million of investment in 2005 were Hamilton County with $776 million in new investment, Butler County with $732 million, Warren County with $207 million, Campbell County with $165 million, and Kenton County with $150 million in new investment.
Of the $2.22 billion total investment, 64 percent came from expanding businesses, 10 percent from new businesses, and 10 percent from intraregional relocation, while 16 percent is speculative development.
C. Investment and Employment Trends in Cincinnati USA
The total economic impact of 2005 capital investment in Cincinnati USA was $4.40 billion. This was 40 percent greater than the $3.14 billion capital investment impact of 2004. This reflects improvements in both regional and national economic conditions. The impact on jobs increased similarly, as total jobs increased to 25,408 from 23,183 in 2004. The economic impact of employee earnings increased to $1.27 billion from $901 million in 2004.
Overall, the level of investment from Cincinnati USA Growth Businesses increased by 63 percent between 2004 and 2005, from $1.36 billion in 2004 to $2.22 billion in 2005, bringing the investment level back to the pre-recession level seen in 1998 through 2000.
Four counties showed dramatic growth in their levels of business investment. Two Kentucky counties showed the greatest percentage increases: business investment in Campbell County increased from $13 million in 2004 to $73 million in 2005, and investment in Kenton County went from $12 million to $150 million. Two Ohio counties showed the greatest dollar increases: business investment in Hamilton County increased from $522 million in 2004 to $776 million in 2005, and investment in Butler County went from $365 million to $732 million.
The bio-medical sector proved to be an important sector of the local economy, accounting for 41 percent of all investment by growth businesses in 2005.
The amount of investment spending associated with a new or retained job was $87,240 in 2005, an increase from recent years. This increase in investment is particularly notable given that it occurred in a period of rising interest rates.
In 2005, Growth Businesses created a total of 10,551 new jobs resulting directly from investment and retained 14,857 jobs. In 2004, Growth Businesses created a total of 9,186 new jobs resulting directly from investment and retained 13,997 jobs. Overall, jobs created and retained with 2005 capital investment were 10 percent above the 2004 level.
Of the total 10,551 new jobs linked with 2005 investment, 31 percent were in the bio-medical industry (16% in 2004), 27 percent were in office/service (37% in 2004), 23 percent were in manufacturing (24% in 2004), and 15 percent were in distribution (18% in 2004). Less than 1 percent of new jobs were created in R&D facilities (7% in 2004), as well as in the hotel industry (1% in 2004).
In the distribution of retained jobs linked to 2005 investment (not pictured), 66 percent were in office/service industries, 24 percent in manufacturing, 6 percent in distribution, and 4 percent in R&D.
1 Cincinnati USA, sometimes referred to as Greater Cincinnati, is the 15-county Metropolitan Statistical Area (MSA) designated by the Office of Management and Budget. (See Assumption 1 on p. 18.)
2 The total economic impact of Cincinnati USA’s Growth Businesses’ investment includes the direct impact and the multiplier effects of the investment spending, and the direct impact and multiplier effects of the employee earnings whose jobs were created or retained due to the investments.