richard deitz, officer and senior economist federal reserve bank of new york, buffalo branch...

Richard Deitz, Officer and Senior EconomistFederal Reserve Bank of New York, Buffalo Branchrichard.deitz@ny.frb.org

Economic Outlook for Upstate New YorkCan Upstate Cities Save Themselves?Manhattan Institute Policy Forum

June 6, 2007

• Economic conditions in the region

• Forces shaping the economic outlook–Restructuring: continuing to move to a service economy

–Workforce upgrading: becoming higher skilled

• Long-term issues–Population loss

–An aging population

OUTLINE

130

120

110

100

90

Job growth upstate has been sluggish

JOB GROWTH

Source: U.S. Department of Labor

1990 1992 1994 1996 1998 2000 2002 2004 2006

Upstate NY

U.S.Index (1990 = 100) Total Employment Levels

Albany

JOB GROWTH

U.S. Upstate NY

1990 – 2000 21% 5%

2000 – 2003 -2% -3%

2003 – 2006 5% 1%

Expansion was slow and recession was not severe, but recovery has been weak

Source: U.S. Department of Labor

JOB GROWTH Recovery has been slow in most areas

Employment Growth, 2002-20064%

3%

2%

1%

0%

-1%

-2%

-3%

Binghamton Buffalo Rochester Utica Syracuse Albany U.S.

Source: U.S. Department of Labor

4.5%

1.7%

0.5%0.4%

-0.4%

0.1%

-1.6%

Unemployment rates are low

Rochester

Buffalo

Albany

Source: U.S. Department of Labor

7.0

6.0

5.0

4.0

3.02000 2002 2004 2006

U.S.

JOB GROWTH

JOB GROWTH Despite little net growth, some sectors growing

Source: U.S. Department of Labor

6%

3%

8%

3%

2%

-3%

-2%

1%

-4%

-16%

-19%

Financial Activities

Professional and Business Services

Educational and Health Services

Leisure and Hospitality

Government

Wholesale Trade

Retail Trade

Other Services

Manufacturing

Transportation and Utilities

Information

Employment Change in Upstate, 2001 - 2006

Average Wage per Worker as a Percent of the U.S.

WAGES Losing ground relative to the nation

120%

100%

80%

60%

40%

20%

0%

Albany

Roches

ter

Bingha

mton

Syracu

seElm

ira

Glens

Falls

Buffal

oIth

aca

Utica-

Rome

20051990

Source: U.S. Department of Labor

U.S. Wage Level

Forces Shapingthe Upstate Economy

RESTRUCTURING

Source: U.S. Department of Labor

25.3%

-26.0%

5.7%

0.0%

18.9%Producer Services

Consumer Services

Goods Production and Distribution

Locally Consumed Goods and Services

Government

Traded Goods and Services

Percent Change in Employment, 1990 – 2005

48.7%

Upstate

Growth in services offsetting a large manufacturing decline

RESTRUCTURING

Source: U.S. Department of Labor

Percent Change in Employment, 1990 – 2005

39.4%

48.7%

-8.4%

21.6%

18.4%

U.S.Upstate

Growth in services offsetting a large manufacturing decline

25.3%

-26.0%

5.7%

0.0%

18.9%Producer Services

Consumer Services

Goods Production and Distribution

Locally Consumed Goods and Services

Government

Traded Goods and Services

• Declining demand for lower-skilled labor, particularly in manufacturing

• Increasing demand for higher-skilled labor

• More workers needed in jobs that service an aging population- Healthcare, travel & tourism

• More workers needed to supply consumer services through personal contact

WORKFORCE CHANGES

(> $50,000)High-Wage

($40-50,000)Mid-High

($30-40,000)Mid-Wage

($20 -30,000)Mid-Low

(< $20,000)Low-Wage

There is a shift toward high-skill jobs

Percent Change in Employment by Occupational Wage Class, 1990 – 200035

30

25

20

15

10

5

0

-5

-10

-15

U.S.Albany

WORKFORCE CHANGES

Source: U.S. Department of Labor, Buffalo Branch, Federal Reserve Bank of New York

Index: 1900 = 100

Source: U.S. Bureau of the Census

POPULATIONUpstate population growth stopped in the 1970s

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

400

300

200

100

Upstate NY

U.S.

Eastern New York growing the most

Population Change: 1980 – 2005(U.S. = +30.5%)

17.1%

9.9%

6.8%

1.4%

-5.8%

-7.6%

-7.0%

Syracuse

Albany

Glens Falls

Rochester

Binghamton

Utica

Buffalo

POPULATION

Source: U.S. Bureau of the Census

Migration of the Population Aged 30-64, 1995 - 2000

Notes: Rank is of 51, if upstate New York were a separate state from downstate New York; Age group examined tends to eliminate college students who may have moved to the region only to attend school.

Out-migration 255,851 8.7% 27

In-migration 193,090 6.6% 50

Net -62,761 -2.2% 48

Number Percent Rank

OUT-MIGRATION A net outflow of the working-age population

Source: U.S. Bureau of the Census

Out-migration

Net

In-migration

14

12

10

8

6

4

2

04 or more years of college Less than 4 years of college

Out-migration In-migration

Rank: 29

Rank: 51

Rank: 27Rank: 48

13.4%

9.3%

7.0%

5.6%

Migration Rate of Population Between 1995 and 2000

Aged 30 – 64 in Upstate NY

Source: U.S. Bureau of the Census

OUT-MIGRATION Out-migration is typical, but little in-migration

The elderly population is growingThe non-elderly population is flat

1970 1980 1990 2000 2010 2020 2030

200

150

100

50Age Index (1970 = 100)

65+

<65

Source: U.S. Bureau of the Census and NY Statistical Information System, Cornell University

Note: Post 2000 data are projected

Upstate New York

AN AGING POPULATION

The elderly share of the population is rising

1970 1980 1990 2000 2010 2020 2030

20%

15%

10%

5%

Share of Population 65+

Upstate NY

U.S.1 in 10

1 in 7

1 in 5

Note: Post 2000 data are projected

Source: U.S. Bureau of the Census and Economy.com

AN AGING POPULATION

AN AGING POPULATION

Buffalo8th*

15.8%

*Ranked out of 81 metro areas with 500,000+ population Source: U.S. Bureau of the Census

Share of Population 65+, 2000

Upstate metro areas among oldest in nation(U.S. large metro median is 11.6%)

Albany12th*

14.3%

Upstate metro areas among oldest in nation(U.S. large metro median is 11.6%)

AN AGING POPULATION

15.8%

*Ranked out of 81 metro areas with 500,000+ population Source: U.S. Bureau of the Census

Share of Population 65+, 2000

14.3%

Syracuse21st*

13.3%

Upstate metro areas among oldest in nation(U.S. large metro median is 11.6%)

AN AGING POPULATION

15.8%

*Ranked out of 81 metro areas with 500,000+ population Source: U.S. Bureau of the Census

Share of Population 65+, 2000

14.3%13.3%

Rochester22nd*

12.9%

Upstate metro areas among oldest in nation(U.S. large metro median is 11.6%)

AN AGING POPULATION

15.8%

*Ranked out of 81 metro areas with 500,000+ population Source: U.S. Bureau of the Census

Share of Population 65+, 2000

• Growth has been sluggish across upstate NY, but Albany & Glens Falls are bright spots

• Manufacturing continues to shed workers, while finance, health care, and education are key growth industries

• Boomer retirements are likely to create many new jobs to fill

• Finding and retaining workers is likely to become increasingly important

CONCLUSIONS