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Published: Saturday, 4/5/2008

Ohio and Michigan already in a recession

BY GARY T. PAKULSKI
AND LARRY P. VELLEQUETTE
BLADE BUSINESS WRITERS

Economists now generally agree that the United States has likely slipped into a recession. That would put Ohio and Michigan in a role they don't usually play: trendsetter.

Michigan has been in a dramatic recession for at least four years, according to at least one leading economist, and its southern neighbor hasn't fared much better.

"It's hard to call state recessions," said Richard DeKaser, economist with National City Bank in Cleveland. "But clearly, states in the industrial Midwest have had a far worse employment experience than has been the case for the nation as a whole."

In Ohio, employment remains below a peak reached in 2000, he said.

Ohio and Michigan have been in an economic slump for some time as a result of auto-industry restructuring and job cuts that have permanently changed the economies of the two states, said economist Dana Johnson of Comerica Bank.

"The good news is there are more and more states joining Ohio and Michigan," he said, wryly. "The real issue is how much worse does it get now that the national economy is going into recession."

He contends that Michigan has been in a recession for four years.

When the national unemployment rate for March was released yesterday, jumping dramatically to 5.1 percent from 4.8 percent the month before, some economists said the country is in a recession, probably since January.

The group charged with officially declaring one has not done so yet.

The statistics locally tell the story. Joblessness, bankruptcies, and foreclosures are all up. And home sales continue to slip.

In Lucas County, unemployment climbed to 7.1 percent of the work force in February from 6.5 percent a year earlier. In human terms, that represented 2,200 more people on jobless rolls, with the number of unemployed people climbing to 15,700 from 13,500 at the same time last year, according to the Ohio Department of Job and Family Services.

Monroe and the two other Michigan counties bordering Ohio had even higher February rates: 7.6 percent in Monroe, up from 6.4 percent in 2007. In Lenawee and Hillsdale counties, joblessness topped 9 percent.

And the 20 Ohio counties with the highest unemployment in February included four representatives from northwest Ohio. The local list was led by Ottawa County at 9.9 percent, which ranked fourth statewide. Other regional counties in the top 20 were Huron, Fulton, and Henry.

Michigan had the highest unemployment rate in the nation in February at 7.2 percent. Ohio's jobless rate, at 5.3 percent, also bested the national average of 4.8 percent in February.

The number of existing housees sold in northwest Ohio fell 27 percent in February to 408 from 559 at the same time last year, according to the Toledo Board of Realtors. Prices were down, and houses for sale were up.

Seeing no way out of their financial problems, more people sought relief from debts at the Toledo office of U.S. Bankruptcy Court. Personal bankruptcies increased by more than a quarter through March 31 to 1,520 in the 21 Ohio counties served by the office.

Across metro Toledo, 5,756 properties were in some stage of foreclosure last year, according to the private firm RealtyTrac Inc. That was more than twice as many as in the prior year and ranked the area 19th-worst in the nation.

There are signs that the two border states have seen the worst and now will more closely mirror national patterns, added Mr. Johnson, the economist. That doesn't mean Ohio and Michigan will escape the pain of the recession, just that it won't continue to be worse here than in other regions of the country.

"It's tough out there," said local restaurateur Gus Mancy, whose family operates four restaurants around metropolitan Toledo. "We're not experiencing the growth that we experienced in the 1990s or even in the early 2000s. It's very challenging."

While a number of new restaurants have opened in the Toledo market during the last two years, disposable income for many patrons has stagnated or fallen, he said. He points to the panic threshold many of his patrons crossed when gas began to regularly top $3 a gallon.

"It's just a crippling effect at the pumps," Mr. Mancy said.

There were some glimmers of light. Sales of new cars rose 8 percent in Lucas County in the first two months of this year compared to last year, a trade group said.

"We do a lot of employee-supplier business, so a lot of people [in those industries] have kind of held back, wondering about jobs," said Robb Brown, executive vice president of Brown Motor Sales Co.

"The economy is the biggest reason for it. We're seeing a lot of people trade in their bigger SUV or truck to try and get into a smaller vehicle."

Sales-tax receipts in Lucas County were up 2 percent in January through March this year compared to last year, government officials said. Some of that is likely attributable to rising prices overall for goods and services and some is from new retailers, such as Costco and the Shops at Fallen Timbers.

After a year of sagging orders, Toledo staffing executive Jackie Barnes was encouraged by a recent survey showing that 37 percent of firms in metro Toledo plan to add workers over the next three months compared to 26 percent of firms nationally.

"It's been frightful," said Ms. Barnes, vice president for business development at Renhill Staffing. "It's been very difficult to generate any new opportunities."

Lee Springer, director of business development at Toledo's Regional Growth Partnership, sees reason for optimism.

He said that from 2006 to 2008, his office has seen the number of companies soliciting proposals from the state to locate in northwest Ohio climb from zero to 12.

"That's phenomenal growth," Mr. Springer said. "Obviously, there are some companies out there that are thinking growth. I think companies are starting to realize that Ohio is a natural distribution center because of its location. Ohio's suddenly gone from not being on their list to being one of the top states on their list."

Contact Gary Pakulski at:

gpakulski@theblade.com

or 419-724-6082.



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