Federal Reserve Bank of Cleveland

Summary of Economic Activity

On balance, business activity in the Fourth District increased slightly in recent weeks, and contacts generally expected it to increase modestly in the months ahead. Demand for manufactured goods edged up, but some contacts noted that seasonal patterns and customer demand were less predictable than before the pandemic. Residential construction contacts said that demand increased after mortgage rates fell, while nonresidential construction contacts reported that activity was boosted by demand for manufacturing projects. Retailers reported softer spending in discretionary categories. Overall, firms held staffing levels flat, and some noted increased labor availability, reduced turnover, and easing wage pressures. Nonlabor cost and price pressures remained stable in recent weeks, but they were down from those a year earlier.

Labor Markets

Overall, contact reports suggested that employment was flat during the recent reporting period, with the majority of firms indicating that their overall staffing levels had not changed. Several contacts noted that reduced turnover and increased worker availability had allowed them to hire more selectively or replace underperforming workers. For instance, some bankers reported that turnover of frontline staff declined, and they were hiring only for strategic positions. In contrast, several commercial construction firms reported increasing staffing levels to ramp up for new capital projects, and a business services contact noted that their client was "hiring at a fast pace given the growing interest and demand in AI/data solutions." Contacts generally expected slight growth in employment in the coming months.

Wage pressures were largely unchanged in recent weeks and have been relatively stable over the past year. Many firms reported that wage pressures had normalized. Notably, many manufacturing and business services firms returned to offering standard annual cost-of-living adjustments, with several noting that increases were lower than in previous years. Similarly, firms across industries reported holding wages steady as labor availability increased and retention improved. One hospitality contact stated, "we seem to be retaining our workforce with our current pay level." Still, a few firms seeking to attract and retain workers with specialized training continue to report offering larger wage increases than before or adjusting wages more frequently.


Nonlabor input cost pressures changed little over the past several reporting periods. Many contacts across sectors continued to report that their costs had stabilized and, in some cases, had softened. Some manufacturers noted that an increased availability of alternate suppliers helped contain costs. One contact said that after two years of suppliers' not accepting new customers, the contact was able to find alternate vendors with more favorable costs relative to the contact's existing suppliers. Yet firms across industries continued to report cost increases, albeit at a slower pace, and some restauranteurs noted a recent uptick in the cost of chicken, beef, and produce.

Price pressures were generally unchanged from those of the prior period, though pressures varied by industry. On the one hand, retailers reported being selective about raising prices, and two restauranteurs said they were holding menu prices steady and absorbing any cost increases. On the other hand, many business services firms reported raising their rates based on the market conditions, with one contact stating, "we've come to understand we can increase fees and remain competitive." Some manufacturing and construction contacts raised prices to cover increased materials costs, while others noted decreasing prices when costs fell.

Consumer Spending

Consumer spending moderated following a slight increase during the holiday shopping season. Contacts across retail segments reported softer spending in discretionary categories, and one retailer of consumer products noted a "marked decline in consumer spending." Auto dealers continued to report slow sales because of high interest rates and high vehicle prices, though one contact indicated that the supply of new vehicles had improved compared to recent reporting periods. While some contacts hoped that the arrival of spring would boost sales, the balance of retailers expected demand to change little in the coming months.


Demand for manufactured goods increased slightly in recent weeks. However, some contacts noted that recent demand and orders had not returned to normal levels after expected end-of-year slowdowns. Some contacts indicated that seasonal patterns and customer demand were less predictable than those prior to the pandemic, and one manufacturer explained that "erratic [customer] demand" was "part of the post-Covid landscape." In general, manufacturers expected customer demand to improve slightly in the near term.

Real Estate and Construction

Residential construction contacts reported that demand increased as mortgage rates declined. However, real estate agents indicated existing homes sales changed little because inventory remained low. Looking ahead, home builders and real estate contacts anticipated that demand would increase should mortgage rates fall, encouraging some "customers [who had been] waiting on the sideline" to move forward with home purchases.

Nonresidential construction activity continued its recent rebound, bolstered in part by strong demand for manufacturing space. Still, one builder expected that "many large capital projects" that remained sidelined would move forward if interest rates were to come down. On balance, contacts expected nonresidential construction and real estate activity to be flat in the months ahead.

Financial Services

Reports suggested that loan demand stabilized after declining notably throughout 2023. Bankers attributed improved conditions in both commercial and consumer lending to a more stable interest rate environment and strong economic conditions. Two commercial bankers noted that the uptick in activity was a function of increased demand for their clients' goods and services. Looking ahead, bankers expected loan demand to increase because they anticipate interest rate reductions. Indeed, one commercial banker reported that clients' expectations for rate cuts in 2024 led their clients to move forward with capital spending plans. Core deposits remained flat, and two bankers indicated that they were no longer willing to compete with banks on overly aggressive deposit pricing. Bankers reported that delinquency rates were flat for both commercial and consumer loans.

Nonfinancial Services

Professional and business services contacts reported that demand increased. An engineer reported that demand for services increased as funds from federal infrastructure programs became available. Looking ahead, contacts anticipated that demand would continue to grow as clients are encouraged by "continued positive economic data." Overall, freight and transportation activity increased slightly since the last reporting period, and haulers expected activity to increase in the coming months.

Community Conditions

Several workforce development contacts reported increased demand for their services over the past few months, with some noting that their client composition included more immigrants and non-English speakers. Most individuals sought training for occupations in health care or to obtain commercial driver's licenses. However, one contact noted that younger workers were gravitating to gig work or other self-employment, even after completing training for other jobs. Contacts noted that federal infrastructure initiatives in Ohio increased employers' demand for training geared toward broadband infrastructure, robotics, cybersecurity, and skilled trades. Several contacts said that access to transportation and quality childcare continued to be barriers for job seekers in obtaining and retaining employment.

For more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis.

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Last Update: March 06, 2024