1. 1 Briefing on the Regional Economy Presented to the New York State Network for Economic Research Rockefeller Institute for the Study of the States Albany, New York Rae D. Rosen Assistant Vice President Federal Reserve Bank of New York March 30, 2005

2. 2 Key Points: Our coincident economic indicators show that a moderate economic recovery continues underway in New York State and New York City. The pace of the recovery is on par with prior recovery periods in terms of output. Employment continues to recover more slowly than output in New York State and New York City and the rebenchmark revisions lowered the already low rates of job growth in New York City. Our forecast calls for a continuation of this trend: a moderate pace of recovery in output this year and next coupled with a slowly improving job market. This economic pattern suggests that the distribution of wage gains, income growth and migration will become increasingly important to the economic health of NYS and NYC.

3. 3 INDEXES OF COINCIDENT ECONOMIC INDICATORS Index July 1992=100 Note: Shading denotes state or local recession. Source: FRBNY. Peak in December 2000 Index July 1992=100 Peak in January 2001 New York City New Jersey New York Peak in November 2000

4. 4 Index Expansion Patterns Increase from CEI Trough to Peak for the First 24 months Source: FRBNY. New York StateNew York City Aug. 2003 – Jan. 2005 Nov.1965- Oct. 1969 Nov. 1971- Feb. 1973 Aug. 1992- Jan. 2001 Nov. 1976 - Apr. 1989 Dec. 1982- Apr. 1989 Jul. 1980-Aug. 1981 Nov. 1965- Oct. 1969 Oct. 1992-Dec. 2000 July 2003- Jan.2005 Oct 1976- Feb.1980 Oct. 1971- Jun. 1973 Index

5. 5 New York State Real Per Capita Personal Income 1978 – 2004 Source: U.S. Bureau of Economic Analysis, FRBNY Calculations. Percent Yr/Yr Percent Yr/yr NYS Real GSP NYS Real per Capita Personal Income

6. 6 Recent Trends in Regional Employment Percent change from 12 months earlier Percent Source: Bureau of Labor Statistics, FRBNY calculations. NYC NYS US Mar. ‘05 = 1.6% NYC Feb. ’05 = 0.9% NYS Feb. ’05 = 1.0% US

7. 7 Source: Bureau of Labor Statistics, FRBNY calculations. Private-Sector Job Growth: U.S. and Region Percent change from 12 months earlier NYC US Percent US Mar. ‘05 = 1.8% NYC Feb. ’05 = 1.2% NYS Feb. ’05 = 1.2% NYS

8. 8 New York State Employment Percent change from 4 quarters earlier Percent Source: Bureau of Labor Statistics, FRBNY calculations. Covered Employment Non-farm Employment

9. 9 New York City Employment Percent change from 4 quarters earlier Percent Source: Bureau of Labor Statistics, FRBNY calculations. Covered Employment Non-farm Employment

10. 10 New York City Information Employment Percent change from 4 quarters earlier Percent Source: Bureau of Labor Statistics, FRBNY calculations. Covered Employment Non-farm Employment

11. 11 New York City Financial Activities Employment Percent change from 4 quarters earlier Percent Source: Bureau of Labor Statistics, FRBNY calculations. Covered Employment Non-farm Employment

12. 12 New York City Professional & Business Services Employment Percent change from 4 quarters earlier Percent Source: Bureau of Labor Statistics, FRBNY calculations. Covered Employment Non-farm Employment

13. 13 Growth in Service Jobs % change January 2005/ January 2004 Source: Bureau of Labor Statistics, FRBNY calculations. Note: U.S. data are for February 2005.

14. 14 Second District Employment Forecast Percent change from 12 months earlier Note: F denotes forecast, Source: Bureau of Labor Statistics; Federal Reserve Bank of New York forecast.

15. 15 Second District Unemployment Rates Note: U.S. data are for March 2005 Source: Bureau of Labor Statistics.

16. 16 Percent United States NYS Percent Wages and Salaries Percent change from 4 quarters earlier Source: Bureau of Labor Statistics, FRBNY calculations. NJ

17. 17 Personal Income Percent change from 4 quarters earlier Percent United States Percent Source: Bureau of Labor Statistics, FRBNY calculations. NJ NYS

18. 18 Home Prices Percent change from 4 quarters earlier Percent Source: Office of Federal Housing Enterprise Oversight. United States NYS NJ

19. 19 Consumer Price Index Percent change from 12 months earlier Percent Source: Bureau of Labor Statistics, FRBNY calculations. United States New York-Northern NJ

20. 20 Top 5 Metropolitan Areas by Venture Capital Investments Q4 2004 Source: PricewaterhouseCoopers MoneyTree Survey, Q4 2004.

21. 21 Top 5 Investment Industries For Venture Capital Firms in Q4 2004 Source: PricewaterhouseCoopers MoneyTree Survey, Q4 2004. Software Semiconductors Networking and Equipment Medical Devices and Equipment Biotechnology Networking and Equipment Software Telecommunications Biotechnology Medical Devices and Equipment Silicon Valley Area New York Metro Area

22. 22 Top Five States for R&D Funding Source: National Science Foundation, FRBNY Calculations, 2002. *Federal expenditures not available and Federal obligations may not equal expenditures so the columns are not additive.

23. 23 Household Median Adjusted Gross Income Source: Internal Revenue Service, Statistics of Income.

24. 24 Migrant Taxpayers Aggregate Adjusted Gross Income $ Billions Source: Internal Revenue Service, Statistics of Income.

25. 25 Points of Concern Longer Term: NYS has the fastest rate of out-migration of seniors. The rate has increased 2 ½ % from 1985-90 to 1995-2000 as the population has aged. NYS has a very rapid rate of foreign immigration of younger working age people and this contributes to a reasonably strong trend in births in NYC. NYS and NYC have a high rate of out-migration of young prime working age people. However, there is evidence that this is a cyclically sensitive phenomena. The out-migration of seniors and foreign immigration, coupled with a strong rise in births, have slowed the rate of aging in NYS and NYC compared to the nation. On balance we are accelerating the export of our wealthier population and importing a less wealthy, less educated population. We are failing to obtain our fair share of federal R&D spending. We have yet to capitalize on the potential in changing freight patterns.

26. 26 Appendix

27. 27 2002 Sales Tax Revenue Collections Year to Date Mil $ 2003 2002 2003 New York CityNew York State 2004 Source: New York City Department of Finance, Office of the New York State Comptroller. Feb. 2005 YTD 6.4% Feb. 2005 YTD 7.8% 2005

28. 28 2002 Personal Income Tax Revenue Collections Year to Date Mil $ Source: New York City Department of Finance, Office of the New York State Comptroller. 2003 2002 2003 Mil $ New York CityNew York State 2004 Feb. 2005 YTD 14.2% Feb. 2005 YTD 11.4% 2005

29. 29 Percent of Residential Mortgage Loans with Installments 90 Days Past Due Percent Source: Mortgage Bankers Association. United States NJ NYS

30. 30 Percent of Residential Mortgage Loans in Foreclosure Started During the Quarter Percent Source: Mortgage Bankers Association. United States NJ NYS