Ohio’s economy will expand in 2013 at the fastest rate in more than 16 years, but growth will still remain slow and unemployment will not decline as sharply as it did in previous years, according to an economic forecast by a major financial institution.
The resurgence of the automotive and manufacturing industries and energy production in eastern Ohio should help sustain and accelerate the economic growth the state experienced last year, some economists said.
Economic momentum should build as a result of improvements in the housing market, higher consumer spending and increased exports to the Eurozone as the area emerges from its debt crisis, the forecast said.
But other economists said these projections may be overly optimistic. They predict Ohio’s lukewarm recovery may slow at a time when the state desperately needs it to gain steam.
Ohio’s real gross domestic product is expected to increase to $443 billion in 2013, up 3 percent from $430 billion in 2012, according to economic projections featured in the most recent quarterly report from JPMorgan Chase & Co.’s commercial banking.
The forecasted increase in real GDP would be the largest since at least 1997, and the last time Ohio’s real GDP exceeded $443 billion was in 2005, according to U.S. Department of Labor data. Real GDP, which is adjusted for inflation, is the output of all goods and services produced by workers and property in the state.
Ohio will add almost 97,000 jobs between November 2012 and December 2013, bringing total nonfarm payroll employment to 5.29 million, said Jim Glassman, managing director and senior economist with commercial banking at JPMorgan Chase, citing seasonally adjusted estimates.
The job growth will help push Ohio’s unemployment rate to about 6.8 percent this year and 6.7 percent in 2014, Glassman said. Unemployment was about 7.2 percent in 2012, 8.6 percent in 2011 and 10 percent in 2010.
“People may not be overwhelming impressed by what happens in 2013, but I think it will be better than what happened in 2012,” Glassman said.
Rebounding auto industry
Ohio’s real GDP has grown for four consecutive years and the growth will be faster this year and the next in large part to the rebound of the U.S. automotive market, he said. Other contributing factors include the large amount of oil and gas exploration and extraction taking place in the eastern part of the state and the return of manufacturing.
Automakers sold as many as 14.5 million vehicles in 2012, making it the industry’s best year since 2007. Manufacturing employment in Ohio has experienced 31 months of year-over-year growth, according to labor department data that was not seasonally adjusted. Ohio’s Utica Shale supported almost 38,830 jobs in the state in 2012, and that will increase in coming years, according to a report released last month by IHS Inc.
Labor and production costs in developing nations are on the rise, reducing the incentive to ship manufacturing operations overseas to places like China, Glassman said. Some companies are moving their operations back stateside. The weak dollar is also good for U.S. exports, because it makes U.S. goods cheaper to purchase in foreign markets.
The future of the U.S. economy is clouded by uncertainty, but JPMorgan Chase’s predictions are sound considering current conditions, said Robert Premus, an economics professor with Wright State University.
“I think it’s as good as you can get right now,” he said. “It shows some growth, at a pretty slow pace … Our economy will not come roaring back.”
But George Zeller, an economic research analyst in Cleveland, said the JPMorgan Chase forecast may be need downgraded because Ohio employers continue to lay off workers at an alarming pace.
“Ohio has a current streak of 19 consecutive weeks when the statewide total of weekly new claims for unemployment were at ‘job destruction’ levels exceeding 1999,” he said. “We need a more rapid recovery, and the high levels of ongoing layoffs slow the recovery down to a slow recovery instead of a rapid recovery.”
He also said tax concerns over the fiscal cliff were resolved by Congress, but the issues of federal spending and the debt limit have not been addressed. Uncertainty about the fiscal plans of lawmakers and the monetary policies of the Federal Reserve make it difficult to have a reliable economic projection for 2013, he said. Also, if unemployment continues to fall and inflation increases, the Federal Reserve would raise interest rates, and that would impede economic growth, he added.
“Nobody, including (chairman of the Federal Reserve) Ben Bernancke, can tell us with certainty what the interest-rate policy will be at the Fed for the upcoming 2013 year,” Zeller said.
Another economic forecast from PNC bank is less rosy than JPMorgan Chase’s.
Payroll growth across the nation and southwest Ohio will be about 1.4 percent in 2013, and unemployment only inch downward this year, according to the forecast by PNC Financial Services Group.
Employment growth in southwest Ohio will slow because manufacturing growth will slide this year, said Mekael Teshome, an economist with PNC Financial Services Group. Southwest Ohio includes the Cincinnati and Dayton metropolitan areas.
Southwest Ohio’s economy outpaced the national economy in 2012, but that will change this year, Teshome said. Tighter federal spending could hurt the local economy because of its reliance on the Wright-Patterson Air Force Base. Sluggish population growth will be another obstacle. A slowdown in manufacturing would especially hurt this region because the industry is such a large employer. Still, the forecast predicts slow and steady growth.
“In our view, the wrongs that got us into the recession are being corrected, and that’s why we believe there will be slow and steady progress,” Teshome said. “We are expecting, essentially, the same job growth and GDP growth (nationwide) in 2013 as we did in 2012.”