Economist Sees Slow Growth, No Recession for Central Ohio

Central Ohio’s employment will continue to grow in 2020, but the growth will remain slow, economist and Hannah News contributor Bill LaFayette said Wednesday in his annual “Blue Chip Economic Forecast” presented to the Columbus Metropolitan Club.

LaFayette, the founder of Regionomics who writes “On the Money” reports for Hannah News, also said his forecast does not predict a recession for the nation this year, and he expects tensions in Iraq and Iran to ease and not have an effect on the national economy. Either one of those factors turning out the other way would have an effect on the Central Ohio forecast, and he said if that's the case, "All bets are off."

Asked later by the audience if he sees any signs of recession in 2020, LaFayette said there are very few, and many of those could be connected to issues with finding enough skilled workers to fill open jobs.

LaFayette opened his remarks by noting the national economic expansion has reached its 121st month, continuing the longest expansion in U.S. history. The expansion has been very good in Central Ohio, which began growing employment in 2010 and has added 203,000 new jobs over the last decade, an increase of 22 percent. That is higher than the national rate of 17 percent, and statewide, where the growth rate is less than 12 percent.

He said growth in Central Ohio slowed to 1.3 percent in 2018 and failed to exceed the national rate, and in the last year, the region’s growth rate was 1.2 percent, still less than the national average and matching his 2019 forecast.

He is predicting 2020 will be Central Ohio’s 11th consecutive year of growth. It will again underperform the national average, but not as much as last year, he said, putting his prediction at a gain of nearly 1 percent, or 11,000 net new jobs.

LaFayette said the fundamental problem in Central Ohio that is slowing growth is workforce availability. He said if economic problems were causing slow job growth, there would be a slow down in job postings. Although postings are down, they have increased substantially over the past year, especially in many of the important sectors where there has been growth.

He also pointed to projections by the state that there is going to be at least another decade of slow growth among the working-age workforce, and if immigration slows down even more, that could cause additional pressures with workforce availability.

LaFayette spoke on how in the last 70 years the economy has shifted from industrial production to knowledge production. While many think artificial intelligence is going to cost jobs, he cited recent studies that argue these trends are likely to result in more job gains. That is not to say there won’t be dislocation and pain, he said, but the changes will be fundamental and require a new set of skills. He pointed to a study that predicted there will be 75 million jobs displaced worldwide by automation, but 133 million new jobs will be created. He also said that just because jobs could be automated doesn’t mean they will, and it will depend on the cost and effectiveness of machines versus the effectiveness of people.

Education continues to be crucial, and while educational institutions will remain important, he said, more of the burden to retrain the workforce will fall on businesses, something he called a matter of competitiveness and survival.

LaFayette was joined for a discussion by Columbus Dispatch reporter Mark Williams and George Mokrzan, the director of economics at Huntington National Bank.

Williams said economists are not predicting a recession any time soon, but said his “Spidey senses are on edge” because job growth in Ohio has stalled over the last year, unemployment claims are starting to rise, and the state has lost manufacturing jobs. He said consumer spending has been propping up the economy, rather than business reinvestment, something that was expected to increase with the tax cut under President Donald Trump.

Mokrzan said growth in Ohio has continued in Ohio primarily in the services sector of the economy. He said the three largest Metropolitan Statistical Areas (MSA) -- Cleveland, Cincinnati, and Columbus -- have led the way for growth in the state, something that is noteworthy because Cleveland has lagged. Cincinnati was tops in job growth, beating Columbus last year, and coming in higher than the national average.

While the services sector picked up, Mokrzan said it was a difficult year for manufacturing jobs in Ohio. He said weakness in the international economy put downward pressure on the manufacturing sector in the Midwest, as well as other issues such as those in the civilian aircraft industry. Still, he said Ohio is enjoying a nearly two-decade low in unemployment, and the job opening rate in the wider Midwest is tied with the South for most in the nation.

He said trade policy had been a factor in the economy that weighed on confidence, but new trade deals should reduce uncertainty, especially the U.S.-Mexico-Canada trade agreement, which Mokrzan said will integrate the three nations even more and be a fairly long-lasting agreement.

LaFayette pointed to several studies that suggested the U.S. was hurt a little more in the tariff war with China, primarily because of the goods China was importing, such as commodities like soybeans, versus its exports that are less easily substitutable like laptops, appliances and smart phones. He said he was worried that China would establish a new supply chain with other places in the world like South America and not go back to U.S. soybeans, but he said he is assured the quality of American soybeans “is unparalleled.”

The panel also discussed other issues that could affect Central Ohio’s economy. LaFayette said it is not just workforce development that could cause an issue, but providing wraparound services for workers such as child care and transportation, which he said is “a serious problem and is keeping people out of the economy.”

Another issue is housing, which LaFayette said could slow migration to the area as it becomes less affordable. Mokrzan said housing affordability is better in the Midwest than the rest of the nation and could be touted to lure more workforce population.

Story originally published in The Hannah Report on January 8, 2020.  Copyright 2020 Hannah News Service, Inc.