Local Business Activity Subsides in Second Quarter
by Douglas Crowe, Asst to the Dean, Foster College of Business Administration &
Dr. Bernard Goitein, Director, Center for Business and Economic Research
The Summary Peoria Metropolitan Statistical Area (MSA) Index fell 0.6% in the second quarter 2004, erasing the 0.5% gain of the first quarter, leaving no net change in the first half of 2004. For the last three years the Summary Index has fluctuated around 106, and the second quarter 2004 Index gave back gains made earlier in the year, returning the Index to 106.0.
New Unemployment Claims Index was up 8.1% from the previous quarter, indicating new job losses during the second quarter. Increases in the local New Job Openings Index in the last three quarters put new job openings up 6.2% from its level last year. These available jobs meant that despite layoffs and facility closings, the number of employed area residents was virtually unchanged from the previous quarter at 172,684 working residents, and the area unemployment rate of 4.9% slightly changed from the first quarter.
The growth of the local manufacturing sector is reflected in rising employment at area manufacturing firms that experienced a second consecutive quarterly increase, rising to 25,842 in the second quarter. The second quarter's 0.7% second quarter fell 11% from the previous quarter, which second quarter growth in manufacturing employment helped reverse 2003 declines, resulting in 0.5% higher manufacturing employment in the second quarter than one year earlier.
Non-Government Services and Retail Trade
Employment in Hospitality/Entertainment services was up 0.7% to 16,693, employment in Professional/Business Service was little changed at 16,917, and employment in Transportation and Utilities of 7,150 fell 0.5% from the previous quarter.
The local medical sector second quarter employment of 27,352 jobs had little change from the first quarter and the weak 1.2% second quarter revenue growth of area hospitals did not exceed the inflation over the same period.
The CBER preliminary estimate of $1.146 billion in tri-county second quarter retail sales shows a small increase of 0.6% that did not exceed inflation in the quarter. Sales of new cars and trucks in the second quarter showed a 1.6% decrease in the number sold. Despite these sales weaknesses, seasonally adjusted employment in retail trade of 24,682 tose 1.1% from the previous quarter, restoring retail employment to last year's levels.
Real Estate and Construction
The number of area homes sold was up 6.5% from the previous quarter and up 3.2% from the year before. While demand for homes was up, the supply of homes available for sale fell 6.5% in the first quarter and again in the second (1.9%), so that the CBER index of Available Homes for Sale in the second quarter was 9.3% below its previous year's level. With heightened demand confronting reduced supply, the average price of homes sold during the second quarter of $117,596 is up 6.1% from the previous quarter.
Interest in new home construction by area builders in the second quarter fell 11% from the previous quarter, which follows a 3% decline in the first quarter. Due to extremely high levels of construction in late 2003, second quarter building permits remained 13.7% above the year before. Declining levels of Single Family Building Permits translated into reduced construction, down 1.0% from the second quarter and down 0.7% from year-earlier levels.
At the national level, GDP growth slowed in the second quarter, and the Composite Index of Leading Indicators fell in July, for its second consecutive monthly decline. Local signals are mixed: despite uncertainties regarding UAW-Caterpillar labor negotiations, local employer confidence showed a slight increase (up 3.5%). At the same time, the decline in area new building permits suggests that contractors wish to avoid the risk of over-building, and that further mortgage interest rate increases may dampen future demand for new housing.
Other future demand indicators are also mixed: while the U.S. Leading Indicator Index is off 0.7%, the local factory work week is little changed, and local producer Caterpillar Inc. non-financial revenues were up 4.2% from the previous year.
Taken together, the indicators do not yet signal that local performance will rise out of the performance level to which the local economy sank by the first quarter of 2001, and where it has remained with only minor changes for the last three years.