W R I G H T I S T A T E I U N I V E R S I T Y
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Spring 2004
THE REGIONAL ECONOMY TODAY
By Thomas L. Traynor, Professor of Economics, Wright State University
Since the performance of the local economy tends
to follow that of the national economy, a quick review
of the U.S. economy is in order. Many indicators of
national economic performance have shown marked
improvement over the past year. Gross Domestic
Product (GDP) has grown at annualized rates of 8.1
percent, 4.1 percent, and 4.2 percent (preliminary) over
“Total employment for the region
continued to decline in recent
months, falling below 450,000 for
the first time since 1994.”
Figure 1
the past three quarters. Capital spending by the U.S.
business sector, the sector most responsible for the
recent economic downturn, has risen significantly since
the middle of last year. This, along with increased
federal government spending, explains most of the
increase in the GDP growth rate over the past year.
Total U.S. employment has risen for the seventh
consecutive month, and more importantly, has risen by
U.S. Investment in Billions of Real Dollars
(2000 Dollars)
1900
1850
1800
1750
Dollars
1700
1650
1600
1550
1500
Figure 3
1450
Total Nonagricultural Employment - Dayton MSA
Thousands of Employees
1400
1350
1300
Thousands of Employees
02
Q
20
1
02
Q
3
20
03
Q
1
20
03
Q
3
20
04
Q
1
1
3
01
20
Q
Q
01
20
1
Q
00
20
00
20
3
Q
1
Q
99
19
99
20
3
Q
1
Q
19
Q
98
98
19
19
3
495
Year . Quarter
Source: Bureau of Economic Analysis
Figure 2
U.S. GDP in Billions of Real Dollars
(2000 Dollars)
10500
475
465
455
445
19
98
Q
1
19
98
Q
3
19
99
Q
1
19
99
Q
3
20
00
Q
1
20
00
Q
3
20
01
Q
1
20
01
Q
3
20
02
Q
20
1
02
Q
3
20
03
Q
1
20
03
Q
3
20
04
Q
1
435
10000
9500
Year . Quarter
9000
Source: Bureau of Economic Analysis
8000
1
04
Q
1
3
03
Q
20
3
Q
20
20
03
Q
1
Q
02
02
20
1
3
Q
01
01
Q
20
20
3
1
Q
00
Q
00
20
20
3
1
Q
99
19
20
3
19
99
Q
Q
98
19
98
Q
1
1300
19
Billions of Dollars
11000
485
Year . Quarter
an average of 216,000 for the first four months of the
year. The Conference Board’s Index of Leading Economic Indicators, which is designed to project GDP
growth eight to 11 months in the future, has continued
continued on page 2
Source: Bureau of Economic Analysis
Questions or comments regarding the Report
should be directed to Professor Thomas L. Traynor,
Wright State University, Department of Economics,
3640 Colonel Glenn Hwy., Dayton, OH 45435-0001,
or via E-mail to: [email protected].
The Wright State University Regional Economic Report
is underwritten by a Strategic Initiative Grant from the
Raj Soin College of Business, Wright State University,
Berkwood Farmer, Dean.
1
continued from page 1
to rise in most recent months, indicating that economic
growth should continue through the end of the year.
The economic performance of the Dayton Metropolitan Statistical Area (MSA) continues to be disappointing. Total employment for the region continued
to decline in recent months, falling below 450,000 for
the first time since 1994. This is a 6.5 percent decline
in local payroll employment (from 478,000) since the
same quarter in 2001. A particularly disappointing
recent trend has been average hourly manufacturing
wages which fell to $18.35 in March, a $2.36 decline
from one year earlier. This reverses the gain in wages to
hourly manufacturing workers that occurred from 2002
to 2003. Moreover, average weekly hours worked in the
manufacturing industry remained relatively unchanged,
an indicator that the region will not experience significant gains in manufacturing employment in the coming
months.
“The decline in local manufacturing
employment...has been a significant
drag on the local economy.”
93,200 in 1998, to 86,300 in 2001, and to 67,800 this
year (27 percent overall) has been a significant drag
on the local economy. This has an impact on local
industries such as retail, and construction, as well as
local government. This decline, after accelerating during
2001 and 2002, has been slowing in recent months.
Aside from manufacturing, the region’s weakest
performing industries over the past three years in
terms of employment continues to be construction
(down 10 percent), wholesale trade (down 18 percent),
retail trade (down 12 percent), and transportationwarehousing-utilities (down 18 percent). As has been
mentioned in previous editions of this newsletter,
although an economic turnaround will slow the rate
of employment decline in the manufacturing industry,
Figure 4
Total Manufacturing Employment - Dayton MSA
Thousands of Payroll Employees
Figure 5
Total Health Services Employment - Dayton MSA
Thousands of Payroll Employees
90
61
85
Thousands of Employees
80
75
70
65
04
Q
1
58
57
56
55
54
53
20
04
Q
1
3
1
Q
03
20
3
Q
03
20
1
Q
02
20
02
20
20
01
Q
Q
3
1
3
Q
01
20
1
Q
20
00
Q
3
00
20
1
Q
19
99
Q
3
99
98
19
Source: Bureau of Labor Statistics
19
Year . Quarter
98
Q
1
20
52
19
3
1
Q
03
20
3
Q
03
20
1
Q
02
20
02
20
20
01
Q
Q
3
1
3
Q
01
20
1
20
00
Q
3
Q
00
20
1
19
99
Q
3
19
99
Q
Q
98
19
19
98
Q
1
60
60
59
Q
Thousands of Employees
95
Year . Quarter
Although data regarding recent wages and hours for
non-manufacturing industries is not available yet, the
local manufacturing industry is an important indicator
of the region’s economic health. Local manufacturing
firms provide a larger flow of income from outside the
Dayton area than any other industry. Hourly manufacturing jobs in the region pay an average of $2.34 above
the national manufacturing average, and $5.83 above
the region’s service sector average. In addition, hourly
manufacturing jobs often provide better benefits packages than hourly non-manufacturing jobs. The income
generated by manufacturing employment is then spent
locally, helping the industries that dependent on local
customers.
When all is said and done, manufacturing jobs
typically have a more significant impact on the local
economy than jobs in other industries. Thus, the decline
in local manufacturing employment from a peak of
Source: Bureau of Labor Statistics
and may even bring about an increase in employment,
continued technological improvements (which reduce
the labor needed to produce goods), and increased
competition from the global marketplace will continue
to have a negative impact on employment in these
industries in the long-run.
On the positive side, the finance and insurance
industry has experienced 15 percent job growth in the
past three years, and the health serves industry continued to be a steady source of employment growth (up six
percent). Overall, a simple statistical model that I have
developed indicates that the performance of the national
economy tends, on average, to influence the Dayton area
labor market with a six month lag. The region has now
gone nine months without a turnaround in employment
totals. Hopefully, they will be forthcoming over the
spring and summer this year.
2
INDUSTRY EMPLOYMENT FORECASTS
66
496
The forecasts presented in this
HEALTH CARE SERVICES
488
issue are the result of individual term
TOTAL EMPLOYMENT
EMPLOYMENT
63
(in
thousands)
(in thousands)
projects conducted by students in the
480
462.7
M.S. in Social and Applied Economics
472
program at Wright State University.
60
452.9
460.1
61.0
464
The students in the course were each
455.3
59.9
59.1
59.8
60.1
assigned and industry for which they
456
57
447.0
developed an econometric model that
448
would produce a proficient forecast.
54
440
Eight of these were chosen based on
there relative importance to the local
89
46
economy, either as major employment
MANUFACTURING INDUSTRY
HOTEL, RESTAURANT &
85
sectors or as key components to the
EMPLOYMENT
LEISURES SERVICES EMPLOYMENT
44
81
(in thousands)
region’s economic base.
(in thousands)
39.5
42
77
66.5
39.3
The Dayton Metropolitan
39.3
66.8
38.8
73
67.6
40
Statistical Area (Clark, Greene,
68.5
37.6
67.8
69
Miami, and Montgomery Counties)
38
65
will continue to feel the effects of the
36
61
sluggish U.S. economy. The economet34
ric model used to develop the forecasts
57
for the Report predicts only a modest
31
increase in total employment for the
60
TRANSPORTATION
29
region, much of which is not expected
RETAIL TRADE
EQUIPMENT MANUFACTURING
27
57
EMPLOYMENT
until late in the year.
EMPLOYMENT
(in thousands)
25
(in thousands)
Total Employment—Total
54
23
19.5
19.1
employment in the Dayton MSA is
19.2
54.0
21 19.0
18.6
53.5
51
expected to rise for the second and third 19
51.4
quarters of 2004, then accelerate during
51.3
17
48
49.2
the fourth quarter of 2004, in part due
15
to improved economic conditions and in
45
13
part due to seasonal factors.
100
Manufacturing Industry—The
22
TRADE, TRANSPORTATION
manufacturing industry forecast projects 95
& UTILITIES
20.4
21
89.9
a continued slow decline in the region’s
EMPLOYMENT
21.1
82.4
20
19.2
manufacturing employment throughout 90
(in thousands)
18.5
82.4
the remainder of 2004.
18.2
19
85
79.3
Transportation Equipment
86.5
18
FINANCIAL
SERVICES
80
Manufacturing—Employment in the
EMPLOYMENT
17
transportation equipment manufactur(in thousands)
75
ing industry is expected to experience a
16
moderate rebound this year. The point
2nd Qtr.
4th Qtr.
4th Qtr.
3rd Qtr.
1st Qtr.
2nd Qtr.
4th Qtr.
4th Qtr.
3rd Qtr.
1st Qtr.
2004
2003
2004
2004
2004
2004
2003
2004
2004
2004
forecast projects an increase of 1,000
jobs by the end of the year.
Trade, Transportation, and Utilities—Employment in the trade, transportation and utilities industry is expected to rise by roughly 3,000
employees in the second quarter of 2004 and remain unchanged through the third quarter of 2004. Due to expected improvements in the
economy and seasonal (temporary) demand, fourth quarter employment is expected to rise significantly, by over 6,000 jobs.
Health Care Services – Dayton-area health care services employment is expected to continue rising steadily throughout the remainder of
the year.
Hotel, Restaurant, and Leisure Services—Employment in the hotel, restaurant, and leisure services industry is projected to remain relatively
unchanged in the second and third quarters of 2004, before a seasonal decline in the fourth quarter of 2004.
Retail Trade—Local retail trade employment is expected to rise in the second quarter of 2004 and remain unchanged through the third
quarter of 2004, before experiencing the usual seasonal boost at the end of the year.
Financial Services—Dayton area financial services employment is forecasted to decline steadily through 2004, by more than 2000 jobs, after
rising significantly over the three previous years.
The students involved in the production of these forecasts are: Adam Bellin, Gayatri Deshpande, Paul Johnson, Jon Kneer, Amanda Kyle,
Michael Kubiak, Lin Liu, Jiamin Qi, Nick Ruszkowski, and Chandima Wingesinghe.
R E G I O N A L
The cone shaped portion of the graphs represent the
90 percent margins of error for the forecasts. This
means that the true future values of each industry’s
employment level should be within these ranges nine
out of 10 times. Also the shading from dark to light
represents that fact that the margins of error follow
the bell curve, in that employment levels near point
forecasts (the black line) are more likely to occur than
employment levels near the outer limits of the
confidence intervals (the white lines).
R E P O R T
The Report is published biannually and provides
articles and forecasts pertinent to the Dayton
Metropolitan Area’s economy. The Report is sent to
friends of Wright State University and is available at no
cost to any interested parties. To be added to the mailing
list, please call (937) 775-3070.
201050/0921-04/MY04
3
Raj Soin College of Business
3640 Colonel Glenn Hwy.
Dayton, OH 45435-0001
NONPROFIT
ORGANIZATION
U.S. POSTAGE PAID
DAYTON, OH 45401
PERMIT NO. 551
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