Modest Growth in Area Business Activity
by Douglas Crowe, Asst to the Dean, Foster College of Business Administration &
Dr. Bernard Goitein, Director, Center for Business and Economic Research
The fourth quarter 2003 business indicator data show some growth in local fourth quarter business activity, but few gains in area employment. The recent growth allowed the Summary Index for the Peoria Metropolitan Statistical Area (MSA) to rise above 106 in the fourth quarter, and put the Index at its highest level since the 107 recorded during the fourth quarter of 2001.
Employment in the manufacturing sector dipped in the fourth quarter, and stands 21% below its cyclical peak of 34,318, found in the 2nd quarter of 2000. Declines have also been reported nationally, with domestic manufacturing jobs recently showing their 43rd consecutive monthly decline from a July 2000 cyclical peak.
The local factory work week was off slightly (down 0.9%) from the third quarter, although still above its year earlier level.
The fourth quarter's $6.01 billion equipment sales of major local manufacturer Caterpillar Inc represented a third consecutive seasonally adjusted quarterly increase for these sales.
The local medical sector continued to show strength in the fourth quarter, with revenues of area hospitals up 5.4%, for their third consecutive quarterly gain. The medical sector strength is also reflected in local heath care employment, with over 25,000 jobs in the sector, up 1.1% from the previous quarter.
The lingering effects of dampened consumer confidence combined with diminished fourth quarter auto manufacturers' incentives for new automobile purchases lead to a reduction in the number of new cars and trucks sold locally by 9.1% in the quarter. The area's retail sales of $1.115 billion for the fourth quarter, however, was up (seasonally adjusted) 2.1% from the third quarter. Seasonally adjusted employment in retail trade, however, was down 1.2% from the previous quarter.
Real Estate and Construction
Area homes sold at a record pace (up 1.1 % for the quarter and up 6.3% from the same time one year earlier). With heightened demand reinforced by low mortgage interest rates, the average price of the homes sold rose 3.1% in the fourth quarter.
The level of home sales appears to have attracted more homes to the market, with a 5.0% increase in the CBER's Index of Available Homes for Sale, as well as encouraging interest in new home construction. Investment in new home construction was supported by the low local prime interest rate, driving the area's Single Family Building Permits Index up 60.1% from the previous quarter, reaching a new high for the Index.
The Single Family Building Permits Index is unlikely to be sustained at its current record level, as modest economic growth locally has prompted only limited increases in the number of area families.
Layoffs rose during the fourth quarter, with the New Unemployment Claims Index up 13% from the third quarter, returning the Index to its year earlier level. Those laid off faced fewer job openings than past job seekers, with a 2.7% decline in job opportunities from the previous quarter, as measured by the New Job Openings Index. The impact of the fourth quarter's layoffs and diminished job opportunities are not yet reflected in fourth quarter employment data, with little change in the area's unemployment rate since the third quarter.
Nationally, recent growth in GDP and productivity of about 3% has been recorded, yet the nation lost over two million jobs (principally in manufacturing) since the recession began. A fourth quarter 2.5% increase in the National Composite Index of Leading Indicators points to future national economic expansion.
National trends in the manufacturing sector, however, combined with local weakness of such leading indicators as the local factory work week and the local Employer Confidence Index do not signal substantial employment growth in the coming months.