Ohio Industry Analysis 2018

Ohio, like the nation, is transitioning from a manufacturing based economy to a service economy. The Buckeye state remains a manufacturing leader but the number of jobs in this sector have seen a dramatic decline. Trade, transportation and utilities, education and health care, government and professional service jobs all have more jobs in Ohio than the manufacturing sector. Measuring industry concentration in a state illustrates industry strengths. This is measured by a review of the industry cluster and location quotient for the success of these clusters. An industry cluster is comprised of a geographic concentration of firms within a particular industry. Location quotient is an indicator of the economic concentration of a certain industry in a state, region, county or city compared to a base economy, such as a state or nation. A location quotient greater than 1 indicates a concentration of that industry in the area.

As illustrated in the chart above, Ohio leads states in trade, transportation and utilities, manufacturing and goods producing industries but in the high-wage information technology sector. North Carolina is a clear leader in technology with the highest location quotient in information technology, and has industry strength in manufacturing, trade, transportation and utilities.

Energy production and the access to new reliable and affordable energy is a major new economic opportunity for Ohio. In Ohio, natural gas production from the Utica shale was 12 times greater in 2015 than in 2011, rising from 1 percent of the nation’s total to 3 percent. The eastern part of Ohio contains reserves of coal, crude oil, and natural gas fields, and several interstate natural gas pipelines cross the state. Ohio is the tenth-largest coal-producing state in the nation and the sixth-largest producer of bituminous coal, and the primary fuel for electricity generation in Ohio is coal. Wind energy and solar energy projects have been popping up as well in Ohio driven by social, tax and global high-tech companies demanding energy from renewable sources. Ohio is an energy rich state that provides new opportunities to attract energy-intensive industries where the cost of energy is a major factor in the company’s site location consideration. Research indicates energy-intensive firms that produce high-wage jobs are for the most part manufacturing companies. That does not mean other industries do not consume high-rates of energy, but the question becomes: do these industries provide the high-wage jobs that fuel regional economic prosperity? Energy-intensive industries include:

  • Paper manufacturing, including paper and paperboard mills
  • Chemical manufacturing including basic chemicals, petrochemicals, alkalis and chlorine
  • Primary metals including iron, steel, ferroalloy, aluminum production and processing
  • Cement and lime production and processing
  • Food processing

Measuring past industry success or failures for Ohio is not the end of an industry analysis. Predicting the future impact of economic trends is critical as well. Two major economic trends will impact Ohio and all other regional economies- automation and growth of e-commerce. Automation has been making America’s manufacturing industry the most competitive and productive in the world but it has also played a large part in dropping the number of manufacturing jobs in the U.S to about 9% of the US workforce. Automation driven by advances in technology is transforming not only manufacturing but also retail, insurance, banking, and other white collar industries. A couple highlights include:

  • The retail industry employs roughly 16 M Americans and nearly half of these retail workers are at risk of losing their jobs to robots and other automation technology
  • The insurance market is estimated to lose 25% of their current jobs over 10 years
  • Mobile banking is booming with bank tellers and back office jobs being replaced by smart phone apps– Bank of America has seen their mobile banking customer base grow from 12 M in 2012 to 22 M in 2016
  • The health care industry has 36% of its jobs threatened by automation– Walter Reed Medical Center is using Artificial Intelligence to better predict medical complications and improve treatment of severe combat wounds, leading to better patient outcomes, faster healing, and lower costs
  • The employment of computer and information technology occupations is projected to grow 13% from 2016 to 2026, faster than the average for all occupations, and the median annual wage for computer and information technology occupations was $84,580 in May 2017, which was higher than the median annual wage for all occupations of $37,690
  • Global Autonomous Vehicle market revenue, based on the sensors, hardware, software, services, and autonomous vehicles types, is expected to grow 39.6% during 2017-2027 reaching $126.8 B by 2027
  • The growth of e-commerce, as illustrated by the table below, will close thousands of traditional retail stores and shopping malls but develop thousands of jobs in logistics, distribution and fulfillment centers– employment of transportation and material moving occupations is projected to grow 6% from 2016 to 2026, about as fast as the average for all occupations, adding 634,300 new jobs.

The Montrose Group, LLC developed the Montrose Automation Index to measure the job and wage impact of automation. The Montrose Automation Index is relatively simply- a region’s occupations are researched from U.S. Department of Labor sources to determine the number of these occupations in a region and the wages they pay. Those region’s occupations are then compared to the over 600 occupations that Professors Carl Benedikt Frey, and Michael A. Osborne of Oxford University’s outlined in their landmark study, The Future of Employment: How Susceptible are Jobs to Computerisation?, September 17, 2013. As the table below illustrates, larger cities such as Cincinnati, Cleveland and Columbus will see the largest wage loss—although they by far have the largest total wage pot. Columbus and engineer heavy Dayton will fare the best under this analysis while Youngstown will be impacted the worst with a 40% wage loss from automation.

The table above outlines the top ten occupations by wage-loss that will be impacted by automation in Dayton, Ohio. 507 occupations were reviewed in Dayton, Ohio for the impact of automation. The occupations constituted 356,040 jobs providing a total mean wage for Dayton of $27,648,610. Automation, according to the Oxford University study, in Dayton is slated to impact 194,244 jobs and create an annual wage loss of $ 9,972,253 creating a regional wage loss of 36%.