1. Richard Deitz, Officer and Senior Economist Federal Reserve Bank of New York, Buffalo Branch richard.deitz@ny.frb.org Economic Outlook for Upstate New York Can Upstate Cities Save Themselves? Manhattan Institute Policy Forum June 6, 2007

2. 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

3. 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

4. JOB GROWTH U.S. Upstate NY 1990 – 200021% 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

5. JOB GROWTH Recovery has been slow in most areas Employment Growth, 2002-2006 4% 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%

6. Unemployment rates are low Rochester Buffalo Albany Source: U.S. Department of Labor 7.0 6.0 5.0 4.0 3.0 2000 2002 2004 2006 U.S. JOB GROWTH

7. 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

8. 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 RochesterBinghamton Syracuse ElmiraGlens FallsBuffaloIthacaUtica-Rome 20051990 Source: U.S. Department of Labor U.S. Wage Level

9. Forces Shaping the Upstate Economy

10. 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

11. 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

12. 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

13. (> $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 – 2000 35 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

14. Index: 1900 = 100 Source: U.S. Bureau of the Census POPULATION Upstate 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.

15. 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

16. 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

17. 14 12 10 8 6 4 2 0 4 or more years of collegeLess than 4 years of college Out-migration In-migration Rank: 29 Rank: 51 Rank: 27 Rank: 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

18. The elderly population is growing The non-elderly population is flat 1970 1980 1990 2000 2010 2020 2030 200 150 100 50 Age 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

19. 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

20. Buffalo 8 th* 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%)

21. Albany 12 th* 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

22. 14.3% Syracuse 21 st* 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

23. 14.3% 13.3% Rochester 22 nd* 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

24. 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