June 17, 1998 Federal Reserve Districts Fourth District - Cleveland

Skip to content Summary Districts Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Full report

The District economy continues to expand amid relatively modest inflation. Some acceleration in wage growth has been seen, however. Temporary employment agencies report that clerical help, general laborers, and warehouse workers are in extremely high demand and an increasing number of jobs are going unfilled. Some agencies have increased their wage rates several times this year. Furthermore, a much higher share of job placements is for permanent positions. Sources in organized labor report seeing a modest acceleration in wage growth recently, from about 3% annually to a little above 3%. Contract lengths appear to be increasing, and the prevalence of cost-of-living clauses has diminished. After dampening compensation growth for the past several years, the rise in medical benefit costs is outpacing wage growth. Still, fierce competition among health care providers is said to be having a moderating effect on the rate of the acceleration. Agriculture Excessively wet weather earlier in the year has yielded to drier conditions in the past month. Crop planting appears to be back on track or ahead of schedule in most parts of the District. A mild winter has benefited the winter wheat crop, which is expected to eclipse last year's levels by 5% in Ohio and 10% in Pennsylvania. However, Kentucky's winter wheat harvest is forecast to drop 7% from last year. The continued wet weather in that state is thought to be a contributing factor to the spread of blue mold, which has threatened some of the Fourth District's tobacco crop. Compared to this time last year, the District has seen a 7% increase in the wages of field workers and a 3�% increase in the wages of livestock workers. Construction Construction activity in the District appears to be continuing the strong growth trend begun several years ago. Residential building is up throughout the District, but commercial construction seems to be mixed by region. Commercial builders in northern Ohio report a marginal decrease in activity, but from very high levels. Reports of greater speculative development are heard in the Columbus and Pittsburgh regions for commercial construction, but not residential. The costs associated with construction projects are holding steady overall. Land prices are rising at a slightly greater pace in the Cleveland and Columbus areas than they were earlier this year, but materials costs are generally flat. Although labor shortages are reported in most regions, wage growth for construction workers has been modest. Manufacturing Industrial production is expanding, but at a more moderate rate than earlier in the year. Some slackening in orders has also been reported, with a notable exception being the Class A truck market, where orders growth accelerated sharply in May. Still, activity remains strong in many areas, and order books are reasonably full, despite the influence of a soft export sector. Commodity and finished goods prices are holding steady, with the exception of some paper prices, which have been rising recently. Inventory levels are also reported to have moved up of late, but stocks generally appear to be in line with production levels. Consumer Spending May retail sales were mixed by retailer, region, and category. Discount stores tend to be at the high end of their sales plan, while department stores tend to be on or below plan. Retailers report notable strength in northern Kentucky, but other areas of the District have seen only modest gains. Furniture, housewares, and women's apparel are selling particularly well, but children's apparel sales are sluggish. Wholesale and retail prices are steady, and inventories appear to be in line with sales expectations. Sales of new vehicles have picked up in the last two months and were especially strong in May. New vehicle leases are tapering off, commensurate with higher lease rates. A rise in used car sales has also been noted. Dealers are anticipating continued strong sales through the end of the model year, and inventory stockpiling is reported. Banking and Finance Lending activity in the District is strong in both the commercial and consumer areas. Demand for commercial loans is still growing amid broad-based gains. Consumer loan demand is moderately improved at most institutions, and a few banks report a very strong consumer loan market. Mortgage refinancing remains high, but growth in this area seems to be falling off a bit. Loan delinquencies are at low levels. Competition for borrowers remains intense, and these pressures continue to squeeze the spread between borrowing and lending rates. Overall, credit standards and banks' willingness to lend remain constant, but a few institutions have repeatedly voiced concern about a persistent loosening in credit standards. Return to top Philadelphia Richmond