As the old saying goes, if you don’t like the weather in Cleveland, wait 10 minutes. The old joke is only funny because it is true. But the weather is not the only thing that is unpredictable in Cleveland and the surrounding areas. The economy has been on a rollercoaster ride ever since the pandemic swept through the country in March 2020. Experts had predicted a recession, but the stubborn economy has been hanging on tightly. Although the Federal Reserve has been aggressive in raising interest rates to try to keep the economy on an even keel, the future of the economy in Cleveland seems to be a giant question mark at this point.
Federal Reserve News from Cleveland Office
The Federal Reserve recently announced that it has raised key interest rates by 0.25% to as much as 5.5%, which is the highest level in 22 years. This is in response to the doggedly persistent inflation in the U.S. economy. June saw consumer prices rising 3% after declining for 12 straight months, and the Fed wants the increases to land at about 2%. When the interest rates rise, both borrowing and investing become more expensive, which typically reduces the demand for labor, goods, and services.
Federal Reserve Bank of Cleveland President Loretta Mester recently spoke about the increase. “The economy has shown more underlying strength than anticipated earlier this year, and inflation has remained stubbornly high, with progress on core inflation stalling.”
The past year has been filled with aggressive rate rises, trying to right the ship against the storm of persistent inflation. In some ways, the economy is in a better position than many predicted, but there are many elements that are still off-kilter.
Mester added, “When the economy reopened, labor demand well outpaced labor supply, putting upward pressure on wages and price inflation.” She noted, “Progress is now being made in bringing demand and supply into better balance, but it is slow progress and demand is still outpacing supply.”
Inflation and the job market are still out of sync. The Fed has more increases on the horizon, as Fed Chair Jerome Powell and New York Fed leader John Williams have heavily hinted that they will take more action to bring inflation back where it belongs.
“Inflation remains stubbornly high,” said Greg McBride, Senior Vice President and Chief Financial Analyst for Bankrate. “The economy has been remarkably resilient, the labor market is still robust, but that may be contributing to the stubbornly high inflation,” he said. “So, Fed has to pump the brakes a bit more.”
One interesting paradox being experienced is that for the first time since the pandemic, inflation-adjusted wages outpaced inflation. As wages go up, the Feds get more nervous as higher wages are related to higher inflation.
The Forecast from the Terminal Tower
Cleveland has had the same disjointed journey as the rest of the country to get back on track after the effects of the pandemic, and right now there is still a deficit of workers, Joel Elvery, Policy Economist for the Federal Reserve Bank of Cleveland said. “You’re looking at a tighter labor market now than before the pandemic,” Elvery said. This creates competition when companies are looking for workers, and those with lower wages are losing out.
And as with most things, it depends on what business you are talking about, as each one plays differently in today’s economy. According to Cleveland.com, the transportation and warehousing sector in Ohio experienced a 23% increase in jobs, and Ohio has seen a 16% increase in repair and maintenance workers. The arts, entertainment, and recreation sectors are up 10%. These numbers are all good news to workers in these sectors.
On the flip side, however, there has also been a decline in several areas around Ohio. Manufacturing jobs lost 1.4%. Nursing home jobs were hit hard, with a 12.8% decline in jobs. And even with all the automobile plants in Ohio, the building of automobile parts has experienced a 14% decrease. The educational sector and realtors also were hit hard.
The road to recovery has definitely been winding and arduous, but the jobs lost during the pandemic have finally been regained. In 2020, Ohio lost 16% of its total jobs, and finally in May 2023 it has recovered them all.
And how does Cleveland fare in relation to the national average when it comes to income? For the fourth quarter of 2022, the average worker made $1,385 in the U.S. while the average local worker made only $1,268. This is a disappointment to those living in the region.
And unfortunately, the unemployment rate is a little higher in the area, as opposed to the national average. According to the Bureau of Labor and Statistics, the U.S. Unemployment rate is a very low 3.4%. The Cleveland area tops out at 3.8% while Cuyahoga County itself is worse off at 4.1%. Although lower than it could be, the unemployment rate in Cleveland and the surrounding areas does leave something to be desired as it is higher than the national average.
Economists had predicted such a bleak forecast for 2023, but like the weather in Cleveland, it seems to have changed rapidly. And instead of gloom and doom, many people in the Cleveland area and across the country are feeling more positive about the future of the economy these days. Mester also said in her report that people are reporting more optimism over the future and stated, “Most think there won’t be a recession this year, and many think that, even if demand slows down some more, a recession will be avoided or will be very mild.” Through the rollercoaster known as the economy, this is definitely good news.