Improving Ohio’s Economy: First in a Series
I was recently honored to speak at the Ohio Small Business Development Centers’ statewide conference on the state of the Ohio economy. I shared both an economic status report and thoughts on ways to accelerate the state’s job growth.
As shown in the graph, Ohio job growth closely tracked the national average from January 2010, when employment growth resumed after the recession, through mid-2012. But then growth began to slow relative to the average. As a result, Ohio’s net employment growth from January 2010 through March 2015 was 7.2 percent versus the 8.9 percent national average. Year-over-year employment growth during 2014 was 1.4 percent. Nationally it was two percent.
Source: Quarterly Census of Employment and Wages, U.S. Bureau of Labor Statistics. Seasonally adjusted by Regionomics.
Unfortunately, this is nothing new. Each of the 12 recessions since 1945 has taken a worse-than-average toll on Ohio employment – a function of our manufacturing-oriented economy. But employment in the ensuing expansions used to grow at least as strongly as average, making up for the recession losses.
But Ohio’s employment growth in most of the expansions since the late 1970s has been much less than average. Before the early years of the current expansion, the last time that Ohio’s growth tracked the national average for that long was the early 1990s.
As I pointed out in my speech, though, Ohio is not a single unified economy, but rather a collection of localized economies that behave very differently from one another. Central Ohio’s economy has significantly outperformed the rest of the state. If the Columbus MSA is removed from the Ohio totals, they show that the rest of Ohio has generated job growth of only 6.4 percent since 2010, one-quarter less than the national average.
This is the first in a series of posts offering ideas to increase Ohio’s economic performance. They come both from that speech and other settings over the years.
The first idea is to take better advantage of our regional diversity.
As stated above, our regional economies are remarkably different. The folklore is that Ohio’s economy is Columbus and everywhere else. But in reality, Cleveland is different from Toledo, and Akron is different from Cleveland, even though they are only 30 miles apart, and so on.
I write a bimonthly article for Hannah News Service spotlighting different aspects of the Ohio economy. My analysis is almost always at the regional level because a state-level summary is usually not descriptive of anywhere. I divide the state into 13 regions, and even that is probably too few.
This regional diversity is due to the fact that each area has a unique set of economic and environmental characteristics that create advantages for some industries and disadvantages for others, no matter how strong the overall economy is.
As a result, the firms in some industries in a particular region are more competitive than their counterparts elsewhere, leading to higher-than-average employment concentration and growth. The disadvantaged industries are small and uncompetitive. Every region has these gaps; they arise naturally because no region can be all things to all industries.
If the Dayton economy is significantly different from the Columbus economy, it’s possible that there are gaps in the Columbus economy that can be filled by strong, competitive industries in the Dayton economy.
We should identify these strong industries and gaps across the state and do some matchmaking across regions. Identifying the strong industries, the strong players in those industries, and the gaps elsewhere in the state that those strong players could fill would take some number-crunching but it would not be especially difficult. Ohio would be stronger if governments and businesses sent more contracts to Dayton and fewer to Denver or Dallas.
Ohio’s economic development efforts are focused regionally, which is a good approach given the large differences that exist among regions. But these organizations are internally focused. This inter-regional matchmaking is not currently a priority, but it could become one.
More ideas in coming weeks. If you have thoughts, I would love to hear them.