Trim Size: 25.375 x 11.0# of Pages: 2# of Colors: 4C ProcessBleed: 0.125

Diversified Economy Accounts for GrowthOur economy’s total growth of 32% in the last 15 years is surprising to many people who think the Cleveland Plus™ region is stagnant or declining. Though once known as a manufacturing-centric hub, Northeast Ohio has been successfully diversifying its economy.

Highlighting output in real dollars from 1992 – 2007 (estimated), along with percent change, the chart features the 10 largest sectors of our economy, ranked by largest dollar growth. Note that most sectors have seen strong growth over this period. Though manufacturing has grown the least, it remains very important as it represents 20% of our economic ouput. However, manufacturing often overshadows the other 80% because the makeup of the balance is so diverse, comprising finance, professional/technical services, retail/wholesale trade, healthcare and others. Collectively, these other sectors have grown 42% over the last 15 years. Businesses of many kinds are growing in the Cleveland Plus region. Our economy is becoming more diverse, which is good for the long term.

Welcome to the 3rd edition of our Quarterly Regional Economic Review for Northeast Ohio,

the publication that provides a true economic view of the 16-county Cleveland Plus™ region.

This installment takes a deeper look at industry sectors that provide consistent growth.

Real GRP Change: 1992–2007Billions (2006 Dollars)

2007 GRP 1992 GRP

$0

Real Estate/Rental & Leasing

All Other Industries

Finance & Insurance

Retail Trade

Wholesale Trade

Prof, Sci & Tech Services

Health Care & Social Asst

Information

Mgmt of Companies/Entps

Public Administration

Manufacturing

$5 $10 $15 $20

58%

22%

60%

56%

51%

74%

38%

64%

88%

16%

6%

$25 $30 $35 $40

Manufacturing Stable with Sector Diversification The overall stability of manufacturing output in Northeast Ohio is not widely recognized. Global competition has led to many changes, and, not surprisingly, the negative changes have captured the headlines. The reality is that total Northeast Ohio manufacturing real output has increased 6% compared to 15 years ago. This is due to the diversification in manufacturing sectors, as the region’s chemical (plastics, rubber, paint, specialties) and fabricated metal manufacturing are experiencing significant growth while primary metals continue to decline. The chart ranks sectors by largest dollar growth. Most sectors are up; seven had increases of 9% or more, while three showed decreases of 12% or greater. Similar to our total economy, our manufacturing sector’s stability is in large part due to our successful diversification, transforming our economy with a change in the sector mix.

Manufacturing is 20% of our economy with output slightly above

15 years ago. The other 80% of our economy has grown more than 40%.

Source: Moody’s Economy.com

Competing via Productivity and InnovationFor today’s manufacturers, productivity and quality are vital. Overall, Northeast Ohio’s manufacturers have improved their output per worker by 50% since the early 1990s.

These gains in competitiveness have helped maintain our manufacturing output, even though fewer people are employed. Manufacturing employment continues to be about 15% of the region’s total employment. In addition, many professional and technical service firms in NEO serve manufacturers, and assist in achieving these productivity gains. This chart complements the Manufacturing Sector GRP Change chart on the previous page, providing a side-by-side view of each manufacturing sector’s GRP change in relation to its productivity (output per worker) and change in employment. Notice the growing sectors (top of the chart) have shown the biggest gains in productivity, and have also shown relatively smaller employment losses. Productivity targeted at innovation and growth helps retain jobs for the long term. Many NEO manufacturing sectors are showing impressive gains.

Real GRP Change: 1992–2007Millions (2006 Dollars)

Chemical Mfg

Fabricated Metal Prod Mfg

Transportation Equip Mfg

Machinery Mfg

Miscellaneous Mfg*

Plastics & Rubber Prod Mfg

Printing & Support Activities

Elec Equip, Appl & Cmpnt Mfg

Paper Mfg

Food Mfg

Nonmetallic Mineral Prod Mfg

All Other Mfg

Primary Metal Mfg

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000

2007 GRP 1992 GRP

35%

16%

9%

19%

48%

11%

14%

1%

(-2%)

(-3%)

(-12%)

(-28%)

(-31%)

Source: Moody’s Economy.com

Ohio manufacturers have improved output

per worker by 50% since the early 1990s.

Manufacturing Productivity & Employment:% Change 1992–2007

Chemical Mfg

Fabricated Metal Prod Mfg

Transportation Equip Mfg

Machinery Mfg

Miscellaneous Mfg*

Plastics & Rubber Prod Mfg

Printing & Support Activities

Elec Equip, Appl & Cmpnt Mfg

Paper Mfg

Food Mfg

Nonmetallic Mineral Prod Mfg

All Other Mfg

Primary Metal Mfg

-60% -40% -20% 0% 20% 40% 60% 80% 100%

% Productivity Chg % Emp Chg

Source: Moody’s Economy.comSource: Moody’s Economy.com

Productivity has increased to keep business competitive.

Trim Size: 25.375 x 11.0# of Pages: 2# of Colors: 4C ProcessBleed: 0.125

The region’s improving employment trend appears to have stalled. Each quarter we take two different looks at the job picture: one is a snapshot of the current unemployment rate without seasonal adjustment, the second is the moving average of total jobs to see the longer-term trend. These two views are showing both strengths and weaknesses.

The regional unemployment rate has been following the pattern of both the U.S. and Ohio in recent quarters. Although the trend was similar, the U.S. rate was better than that of both Ohio and the Team NEO region. This gap widened in the 2nd quarter as the U.S. rate dropped nearly a half point from 4.8% to 4.4%, while the NEO rate dropped only a tenth of a percent from 6% to 5.9%.

The unemployment rate consists of the number of people working and the number who are out of work and looking for work. Comparing the unemployment rate to a year ago, the U.S. rate is lower, while the Ohio and NEO rates are above last year. Over the last two quarters, total jobs in NEO have actually increased by more than 29,000. However, nearly 8,000 additional people are now looking for work. Thus the ratio has deteriorated.

Total Jobs Have Leveled, but Still at a Five-Year High

The economy in Northeast Ohio has grown in 14 of the last 15 years.

This report made possible through the generous support of Charter One Foundation.

737 Bolivar Road, Suite 2000Cleveland, Ohio 44115

www.teamneo.org888.NEO.1411

www.clevelandplusbusiness.com

Data SourcesTeam NEO uses a number of data sources for the Regional Economic Review. One of the primary sources is the Moody’s Economy.com (www.economy.com) regional modeling system. This firm is the leading independent provider of economic, financial and industry research and data that specializes in national and metropolitan economic growth forecasts. Moody’s Economy.com county level output, employment and payroll historical data are estimated from several publicly available sources and are summarized into the Team NEO regional footprint. It is important to understand data provided by Economy.com are estimates of economic activity.

Team NEO also uses data from federal and state sources as part of the report. As with Economy.com, the information for the Team NEO footprint is derived from data reported at either the county or metropolitan level. We rely heavily on data from the U.S. Bureau of Labor Statistics (www.bls.gov) and Ohio’s Labor Market Information (www.lmi.state.oh.us) for information on wages, unemployment and both general and industry-specific employment. In addition, Team NEO uses data from the Census (www.census.gov) to track housing-related activity including the number of single and multifamily permits, as well as their values.

Regional Unemployment Rate Now Above Last Year. Job Seekers Up

2.06

2.05

2.04

2.03

2.02

2.01

2.00Q1

2002

NEO Total Employment

Mill

ions

2003 2004 2005 2006 2007Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1

NEO Total Employment:(4-Quarter Moving Average)

Quarterly Unemployment Rate

Q1

7.5%7.0%

6.5%6.0%5.5%5.0%4.5%4.0%

NEO 16

2002

Q2 Q3 Q4 Q1

2003

Q2 Q3 Q4 Q1

2004

Q2 Q3 Q4 Q1

2005

Q2 Q3 Q4 Q1

2006 2007

Q2 Q1 Q2Q3 Q4

Ohio U.S.

NEO 16: Real GRPBillions (2006 Dollars)

180

3.6% 0.3%

5.1%

AnnualPercentChange

3.8%3.0%

4.8%2.6% 1.2% 0.3% (-1.9%)

1.2%1.8%

2.6%1.1%

1.4%1.0%

1992 1993 1994 1995 1996 1997 1992 1998 1999 2000 2001 2002 2003 2004 2005 2006

170

160

150

140

130

120

Real GRP Average Annual Growth = 2.0%

Source: Ohio Labor Market Information (LAUS Data)Source: Moody’s Economy.com

Northeast Ohio Economy Expected

to Grow for 6th Consecutive Year

The most recent estimate from Economy.com predicts our gross

regional output will grow again for the 6th consecutive year, yielding steady

growth in 14 of the last 15 years. Growth is estimated at 1% for this year. Over the last 15 years, Northeast Ohio’s

economic output is up 32% for an annual growth rate of 2% per year.

Northeast Ohio

Economic Review

September 2007

NEO economy continues on path to 6th consecutive year of growth.

We see a leveling off of the past two-year improvement when we look at the 4-quarter moving average of total jobs. Total employment is still at one of the highest levels in the last five years.

Among major industry sectors, jobs grew in Professional and Business Services (2,700) and in Education and Healthcare (2,300). Manufacturing jobs declined by 9,500 jobs between the 2nd quarter of 2006 and the same period of 2007. However, manufacturing jobs grew by 600 between the first and second quarter of 2007. Other sectors losing jobs between the 2nd quarters of 2006 and 2007 were Trade, Transportation, Utilities (-1,400) and Government (-2,600). Other industries, such as Construction, Information, Financial Activities and Leisure & Hospitality, had smaller gains and losses.

Source: Ohio Labor Market Information