October 30, 1996 Federal Reserve Districts Fourth District - Cleveland

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The District's economy is still expanding and labor-market conditions are generally considered quite strong. Still, overall price and wage pressures are reported to be light. Although employment growth in the District continues to lag the national average, with most areas reporting year-to-year jobs growth at or below 1 percent, unemployment continues to inch lower in most areas. The jobless rate is very low in a broad corridor running from central Ohio to northern Kentucky. Wage growth is generally steady. Employment agencies report that the demand for temporary workers has been consistently high. Clerical and light industrial workers are still in great demand, and a few respondents say that skilled workers in accounting, healthcare, and technical support have also recently become much sought after. Agencies blame tight labor markets for difficulty in finding workers with specialized skills, such as registered nurses and laboratory technicians, and note steady pressure to increase wages. Agriculture Only minor crop damage was reported following the District's first frost in early October. Some frost damage to immature corn crops was recorded in West Virginia, and soybean crops sustained minimal damage in the Ohio Valley. As of mid-October, corn in Kentucky was fully matured, and 64 percent had been harvested. In Ohio, however, only slightly more than half of the corn crop was mature (compared to an average of 88 percent in recent years), and only 9 percent has been harvested. Ohio's soybeans are also behind schedule, but to a lesser degree. Kentucky's tobacco harvest, now nearly complete, is reported to be better than average. Apple harvests in Ohio and Kentucky are nearing completion and are in good condition. Manufacturing Manufacturing activity remains strong. Orders growth is continuing in most areas, with some pickup noted between August and September. Export orders in the past month or two are considered particularly good. Production and employment levels are rising moderately or holding steady at a high level in many sectors and regions, and inventories are declining. Still, cost and price pressures are not appreciably greater than earlier in the year. Price increases are noted in a variety of materials, including some types of steel and agricultural products. However, price declines are also reported, including those for aluminum, stainless and rolled steel, and copper. Retailers District retailers reported mixed results for September. Men's and women's sportswear are still selling well. Sales of major appliances are also robust, but some weakness is evident in sales of personal computers, toys, and certain home items. Inventories are described as normal for this time of year, and District retailers are now increasing stocks in preparation for the holiday shopping season. Retailers say they have not experienced any substantial price increases recently. In fact, they note price declines in consumer electronics goods. Some retailers anticipate difficulties in holiday-season hiring, especially in central Ohio, where the labor market is considered "very tight." Retail businesses appear to be proliferating in the region. An electronics chain plans five store openings in Ohio and one in Pittsburgh this year. A major mall, with a capacity of about 130 stores and about 3,000 jobs, opened this month in northeast Ohio. It is expected to attract between 150,000 and 200,000 customers weekly. Autos The impact of the Canadian Auto Workers' strike against General Motors has been difficult to gauge. Layoffs are minimal as stockpiles have been generally sufficient to maintain regular production. Auto dealers expressed little concern about product availability as a result of the strike. Only one contact reported stockpiling units in anticipation of strike-related shortages. The introduction of new products has been on schedule and dealers say they have sufficient inventory to meet current demand (with the exception of a slight shortage of four-wheel-drive trucks). Sales continued to show moderate strength through September and early October. The majority of dealers report sales higher than last year's, but down just a bit from their level earlier this year. Inventories were at or very slightly above desired levels. Banking and Credit Lending activity in the District is mixed, but good overall. Consumer loans generally remain fairly steady, with some banks reporting slight declines between August and September. Commercial loan demand increased moderately at most banks, but was off at a few. Delinquencies continue to rise mildly, but overall levels are not high enough to concern District bankers. Although a couple of banks have begun to tighten their credit standards, the majority report leaving them unchanged. Competition for borrowers remains a concern for District bankers. The spread between lending and deposit rates is getting narrower for most banks. Deposits are flat, and most banks are finding it difficult to retain them because customers continue to move funds into higher-yielding accounts like money-market mutual funds and small time deposits. Return to top Philadelphia Richmond