December 4, 1996
The District economy remains strong overall and is growing moderately in most areas. Price and wage increases are light.
Labor markets are characterized as "tight" in many parts of the District, but especially in central and southwestern Ohio and northern Kentucky. Many areas report unemployment rates under 4 percent, and in a few locations the rate has dipped below 3 percent. While several sources are expressing concern over the potential for substantially higher wage growth, there are few signs of any significant rise at present.
Employment agencies report the demand for temporary workers is strong, with low-skilled workers in short supply. In the past few months, a growing number of corporate clients have begun hiring temporary workers on a permanent basis.
Manufacturing
Production at a wide variety of
manufacturing facilities is holding steady
at a high level. Capital goods producers
generally note good production and orders
numbers, although heavy truck
manufacturing is still off substantially
from earlier in the year. Firms with
significant export markets have seen a
recent strengthening in foreign orders, and
one source indicated that orders growth in
Latin America has been especially strong.
Manufacturers continue to report pressure
to hold prices down, and few are seeing any
unusual cost pressure. A shortage of
engineers and other technical workers has
also been reported.
In mid-November, a few large District auto assembly and manufacturing plants were temporarily shut down because of parts shortages stemming from the Canadian Auto Workers? strike against GM. Some plants were closed for up to two weeks, resulting in nearly 7,000 layoffs Districtwide. Production has since returned to normal, although no makeup of lost production is currently scheduled.
Agricultural Conditions
Recent cold and wet weather caused
minor problems for the District?s farmers.
Snow fell in parts of all four District states
during the first two weeks of November,
ranging from a few inches in some areas to
as much as 70 inches in parts of northeast
Ohio. Farm activity was curtailed in many
places because of muddy fields, hindering
winter wheat seedings.
The soybean crop is reported to be plentiful and in good condition. Potato and apple harvests in Pennsylvania and Ohio are nearly complete, and reports for these crops are also favorable. However, as of mid-November, the corn harvest was still about 20 percentage points below average in Ohio. In Kentucky, blue mold has affected the weight and quality of burley tobacco.
Retailing
District retailers report mixed
sales patterns, but overall, sales seem to be
running behind last year?s pace. Sales of
furniture and consumer electronics have
been particularly slow, while major
appliances and apparel have been moving
well. Seasonal items, such as winter
apparel, are also selling well, especially in
areas of the District that received heavy
snowfall early in November.
Despite some disappointments with the overall sales picture, retailers seem cautiously optimistic about the holiday shopping season. Inventories are being expanded in line with expectations of increased store traffic. Prices are reportedly stable, except in electronics, where deep discounts are common. Many stores have already hired seasonal help, but a few report difficulty finding qualified workers for some positions. A variety of chain stores have recently expanded into the District, particularly in Ohio.
Auto Dealers
While dealers are pleased with year-
to-date sales levels, the past few months
have been disappointing, with most dealers
reporting sales at or slightly below last
year?s levels. Some of the slowdown has
been attributed to the recent heavy snows,
but in parts of the District where the
weather remained mild, sales were only
slightly better. Sales incentives have been
unusually generous and widespread for a
new model year. A few dealers are
anticipating an end-of-year surge, but the
majority note that year-end sales upticks
have been negligible in the past few years.
Inventories remain near desired levels, with shortages reported only for the most popular models and for light trucks.
Banking and Finance
Loan demand is mixed, as
community banks report strong growth in
credit while larger institutions are seeing
more moderate gains. Overall, loan
delinquency rates remain stable, although a
few large banks have noted an increase in
credit card delinquencies. Declining credit
quality--based on fierce competition for
borrowers--remains an issue at many
institutions. To date, though, the
deterioration is generally characterized as
modest.
In general, bankers are experiencing a narrower spread between borrowing and lending rates. Profits, however, are substantially improved from this time last year. Refinancing activity is picking up as mortgage rates drop.