Moody's proclaims Toledo recession; most of Ohio, Michigan shed jobs

8/13/2008

It is no shocker, but a respected Wall Street ratings service claims that Toledo, most of Ohio, and all but one metro area in Michigan are in a recession, and have been for a while.

The analysis by Moody's Economy.com is based on statewide industrial production and local employment reporting. It found that Columbus, Akron, and Steubenville, Ohio, and Benton Harbor, Mich., are the only places in the two former industrial powerhouse states that aren't shedding jobs right now.

The study found that the broad U.S. economy appears to have escaped recession, but 170 metropolitan areas are in it. Nationally, though, the business cycle is framed by the downturns in the housing, banking, and finance sectors.

Some economists have said the Midwest, in general, has been in a recession for a while, but the study takes the step of nailing down specific metropolitan areas.

The automotive industry problems with big cars and trucks not selling because of high gas prices have hurt the Midwest, and home foreclosures have made it worse, Economy.com said.

Dana Johnson, an economist with Comerica Bank who watches Michigan and Ohio's economies closely, said recently that Michigan, Ohio, and Indiana had the three worst performing economies over the last three years.

"Some of the common characteristics that are retarding growth in all three states are a significant overweight in auto production, a vulnerability to international competition from offshore manufacturers, and sluggish population growth," Mr. Johnson said in a report.

"Toledo's been having employment declines for quite a while," explained Megan Ellis, an assistant analyst with Economy.com. "The employment in Toledo peaked in the late 1990s and it's been declining pretty consistently since then. Manufacturing has been very hard hit."

Metro Toledo had 347,000 jobs in the first quarter of 2000 and 324,000 jobs two months ago, the study said. Of the 23,000 jobs lost locally during those eight years, 20,000 came from the manufacturing sector, Ms. Ellis said. Joblessness in Lucas County was 7.8 percent in June.

Statewide, both Michigan and Ohio were in recession since at least the last quarter of 2007, and perhaps longer, Ms. Ellis said. June unemployment rates were 6.6 percent in Ohio and 8.5 percent in Michigan.

"I think the worst of the downturn is over, although a lot of risks remain in the national economy, especially in the financial sector," she said.

Three area municipalities fared better than Toledo over the last eight years, according to Moody's. But Monroe, Lima, Ohio, and Sandusky all continue to shed jobs and shrink their economies.

Monroe has lost an estimated 4,000 jobs since 2000, dropping from 75,000 to 71,000 jobs, Ms. Ellis said. Michigan's worst-in-the-nation unemployment rate of 8.5 percent and the area's heavy reliance on the automotive industry for employment were the main factors cited for the city's economic slide.

Lima has dropped 2,400 jobs in just the last three years, Ms. Ellis said, from 58,000 in 2005 to 55,600 in 2008. The Allen County area, with 7.3 percent joblessness in June, has had "a very persistent long-term [job] decline that's been adding up for awhile," she said.

While the Sandusky metro area shed 1,000 jobs during 2007 to technically put it into recession, Ms. Ellis said, employment in the north coast city "has been a lot more steady" over the years than in other places across Ohio. Its county's June unemployment rate was 5.9 percent.

Nationally, Moody's found 116 metro areas are at risk of economic contraction, which include Columbus and Akron. Steubenville is considered in "expansion."

Richard DeKaser, chief economist at National City Bank, said the Moody's study's limited factors were short-handed but likely accurate for Ohio and Michigan.

"Recognizing all the data limitations and the inability to be precise, I'd agree that Toledo is in decline and in a recessionary period," he said.

Short-term prospects for the Toledo area don't forecast a turnaround for at least another two years, Moody's Ms. Ellis said.

"In the near term nationally, we have manufacturing employment growing slightly in 2009 and 2010. But in Toledo, because most of the manufacturing is in auto-related industries, our near-term forecast is showing slight losses, but not as fast as we've seen in the last year."

Elsewhere in the country, the Moody's study found that Florida, Nevada, and Arizona are experiencing the biggest collapse in home prices after the biggest run-up in prices during the boom of 2001 to 2005. Their turnarounds will depend largely on when the housing free fall bottoms out.

The nation's most populous state, California, is a mixed bag. It has four metro areas in expansion, the two big agriculture centers of Bakersfield and Hanford and tech-heavy San Francisco and San Jose.

Contact Larry P. Vellequette at:

lvellequette@theblade.com

or 419-724-6091.