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Location Notebook: Diversification Bolstering Economic Growth in Ohio

While building on its existing strengths — including its logistical advantages, low tax burden, and productive workforce — Ohio is seeking to diversify the state’s economy.

Q2 2019
Honda Motor Corporation is the state’s largest manufacturing employer.
Honda Motor Corporation is the state’s largest manufacturing employer.
Economic development leaders In Ohio — the country’s seventh-largest state economy in terms of GDP — are aiming to diversify the state’s array of industries to enable continued growth and to bolster resilience to market cycles, positioning Ohio well for both the heady days of growth and the more somber periods of a global downturn.

To that end, Dana Saucier, vice president and head of Economic Development for JobsOhio, a private nonprofit organization dedicated to state economic development, says his organization is targeting nine industries to strengthen and play a vital, enduring role in Ohio’s economy. Each of these identified industries — including manufacturing, financial services, health care, information technology, and energy, among others — is growing at a faster pace in Ohio than in the rest of the Midwest.

Saucier says the state’s Moody’s ranking for industrial diversity improved from 10th in 2007 to eighth in 2017. “We see more opportunities for growth in sectors that are more resilient and less cyclical to increase the state’s share of industries that maintain GDP growth through all business cycles,” Saucier explains.

Among many promising signs, Ohio’s venture capital funding broke the $1 billion mark for the first time in 2018, representing a 150 percent increase over the previous year. Saucier says the funding is leading to more early-stage company growth, primarily in technology and health care. “Wages and GDP are consistently rising in Ohio, and we remain one of the most cost-effective states [in which] to do business,” Saucier notes.

The state aims to look beyond large corporations when working with companies considering an Ohio home. In fact, 80 percent of JobsOhio projects are with small and medium-sized organizations. Ohio led the country with 442 capital project announcements in 2017, according to the Ernst & Young Investment Monitor, which ranked Ohio fourth overall for mobile capital investment that year with a total investment of $7.3 billion.

Key Industries
A crucial piece of Ohio’s economy remains the manufacturing sector, which employs more than 700,000 people, according to the Ohio Development Services Agency. Ohio is fourth in the country in manufacturing GDP, and according to the agency, the state leads the country in the production of plastics and rubber, fabricated metals, and electrical equipment and appliances, while also ranking highly in the production of steel, autos, and trucks — the state’s leading exports are motor vehicles and machinery. Honda Motor is the state’s largest manufacturing employer, followed by GE, Berkshire Hathaway, and Procter & Gamble.

We have the opportunity to help students discover quality career paths and gain skills that are needed right now in the workforce by emphasizing career and technical education. Governor Lee, Ohio In addition, Saucier says Ohio is seeing a surge in the natural gas industry, pointing to the region’s Marcellus and Utica shale formations as key to the growing interest. “Because of this energy growth, 11 natural gas-fired power plants are under construction or in development in Ohio, helping boost Ohio’s competitiveness across many industries,” Saucier says. “In fact, according to a new IHS Markit study, the Ohio Valley region will supply nearly half of the nation’s natural gas and nearly a fifth of natural gas liquids by 2040.”

Saucier also sees growing opportunities in in the technology sector, noting that innovative companies such as BrightEdge, Facebook, Quotient, Upstart, Veeva Systems, Amazon Web Services, and others have recently chosen to invest in Ohio for the first time.

Saucier says the state is boosting its R&D capabilities. “The R&D Center Grant Program is bringing more R&D centers to Ohio, making the state more favorable for investment, high-tech jobs, and talent,” he notes. Saucier believes Ohio can emerge as a world leader in emerging technologies, particularly pointing to autonomous mobility as an area filled with promise.

“The largest, most advanced independent automotive proving ground in North America is here,” Saucier says. “We are pioneering a ground-based detect-and-avoid radar system that will allow, for the first time, unmanned aircraft to routinely fly beyond operators’ visual line of sight.”

Logistical and Other Strengths
According to the Ohio Development Services Agency, 59 percent of the U.S. and Canadian populations are located within 600 miles of the state, and Ohio’s central location and ready access to a host of major metro areas appeals to a wide range of industries for logistics purposes. Walmart, for instance, has five distribution centers in the state, and the company’s 50,000-plus workers make it the largest private employer in Ohio.

“Our integrated transportation infrastructure connected by highways, intermodal facilities and airports, with access to water and low-cost energy enables companies to obtain raw materials, produce goods, and reach customers more efficiently and cost-effectively,” Saucier explains.

Among additional strengths, Saucier points to a workforce of 5.7 million people (total employment is expected to grow 5.3 percent from 2014 to 2024, a projected growth of 300,000 jobs, according to the Ohio Development Services Agency); a research and innovation network consisting of collaborative public and private organizations; accessible academic and clinical resources; and strong support from the business community. Ohio also is growing its inventory of development-ready sites, where infrastructure and due diligence are already in place, smoothing the way for new facilities. And, the Anderson Economic Group ranked Ohio as having the 11th-lowest tax burden for businesses in the country.

The Labor Challenge
Although the state’s strong business climate provides stability and predictability for companies, as in the rest of the country, the availability of skilled workers is a primary challenge for Ohio’s continued economic development. The state’s labor force participation has dropped from 67 percent before the recession to 62 percent, according to a 2018 Dayton Daily News article.

In addition, Ohio’s large manufacturing presence also makes it vulnerable to a nationwide downward employment trend in that sector. According to a 2018 article in the Tribune Chronicle, manufacturing employment in the state dropped by a third from 2000 to 2017. Despite Ohio’s continued central role in steel and auto manufacturing, overall employment in those industries has been on the decline.

Nevertheless, Saucier says talent is at the top of the wish lists of companies, and JobsOhio has a talent acquisition team dedicated to the issue, developing customized talent development programs related to specific projects. “Ohio’s people are one of the state’s biggest assets,” Saucier says. “Ohio has a skilled workforce…known for their productivity and strong, midwestern work ethic.”

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