Hudson Valley Review

First Quarter 2002

Marist College

Dr. Ann Davis, Director
Bureau of Economic Research
School of Management
Poughkeepsie, NY 12601

June 2002

The assistance of Scott Bergen, Luke Gallagher and Jeff McAulay is acknowledged and appreciated.


Table of Contents

First Quarter 2002

Summary and Highlights
National Review
Hudson Valley Review

First Quarter 2002 Exhibits

U.S. Nonfarm Employees

Employment

Production Workers

Stewart and Westchester Airports

Home Sales

Tourism

Consumer Price Index

Temporary Assistance - Fourth Quarter 2001

Temporary Assistance - Annual 2001

Special Focus - 2000 Census Population and Housing


Summary and Highlights
Hudson Valley Review - First Quarter 2002

  • Jobs held by residents in the region increased by 1%, with gains in all counties. The labor force increased faster than jobs, however, leading to the third consecutive quarterly increase in unemployment rates for the region. The rate of unemployment exceeded 4% in the first quarter, 2002, for the first time since 1st quarter, 1998. Nonetheless, the regional unemployment rate of 4.5% remains below the 6.2% rate for the U.S. and the 6.1% for New York State, and far below the 7.6% for New York City.
  • Jobs located in the region have decreased for the first time in six consecutive years. The decline in jobs located in the Hudson Valley was slight, at .14%, smaller than the decline in New York State of 1.6% and New York City of 3.6%.
  • Job growth occurred in Greene, Putnam, and Ulster, with small declines in the remainder of the counties. The manufacturing sector showed the largest declines, with a loss of 4.6% from the same quarter one year ago.
  • Reflecting the recent announced job cuts, IBM employment as a share of Dutchess County manufacturing employment has fallen from nearly 70% in 2000 to 63% in 2002. As a share of total employment, IBM represents 9.6% of total employment in Dutchess County, from 10.2% in 2000. The all-time peak was 23.4% in 1982. Still, manufacturing is a larger share of total employment in Dutchess County, at 15%, than for the region as a whole, at less than 10%, largely from IBM presence.
  • The average hourly early of production workers increased by 3.1% in nominal terms, not corrected for inflation. The largest increase was in Dutchess County at 7%, followed by a gain of 5.6% in Rockland. The average gain in nominal weekly earnings for the region of 2.2% from year-ago levels would not keep up with inflation, resulting in an overall decline in purchasing power over the year. Since 2000, the average hourly earnings of production workers in the Hudson Valley has lagged behind the U.S. average pay, as well, a reversal of the trend in the 1990s.
  • The number and prices of homes sold in the region reflected a vigorous housing market. The gains in sales were 12.3% and in average price of homes sold was 11.8%. The average selling price ranges from $103,712 in Greene to $618,075 in Westchester. The regional average was $351,993.
  • The number of construction permits ranged widely across the region for single family homes. The most rapid gains were in the northern counties of Columbia and Sullivan, as well as Ulster, while declining in the southern counties, Rockland and Westchester.
  • The number of tourists at the National Park Service sites in Dutchess County gained in the first quarter, 2002, over year-ago levels. The gains were observed in all three sites. Bankruptcies increased for the Hudson Valley region by 1.67%, although less than the U.S. gain of 3.3%. There was a decline for all of New York State of 2.25%.
  • Sales tax revenue collections increased by 12% in the first quarter, the first sizeable gain since 2000.
  • The rate of inflation was more rapid in the New York/New Jersey metropolitan area than for all U.S. cities, reversing a recent trend since 1999 of slower rates of inflation in the Metropolitan area.
  • Recipients and expenditures for Temporary Assistance for Needy Families (TANF) decreased for most categories in the fourth quarter and for the full year 2001, the most recent period for which data is available. Nonetheless, all counties showed increases in safety net expenditures in the fourth quarter, indicating some stress due to the national recession. There were increases in food stamps and supplemental security income as well, in both the fourth quarter and the full year 2001.

Special Focus - 2000 Census Population and Housing

  • The regional population grew by 7.3% in the 1990s, slower than the U.S. but faster than New York State. Only Putnam County had a growth rate which exceeded the national average. All counties, except Columbia, Greene, and Orange, grew faster in the 1990s than the 1980s.
  • The pattern of changes in median household income and median family income was mixed across the cities and counties of the region.
  • The rate of increase of housing stock was greater in the 1980s than the 1990s across the region. All counties in the region except Westchester exceeded the state rate of growth in housing for the last 20 years.
  • Mean travel to work increased in all counties from 1990 to 2000. The longest commutes were in Putnam and New York City, exceeding 35 minutes each way.
  • New York City has a larger and the Hudson Valley a smaller proportion of young persons, between 15 and 30, than the U.S. The Hudson Valley has a greater proportion of the youngest and oldest members, less than 10 and over 35, than the U.S.

Prospects

  • Jobs located in the region will continue a modest decline of less than 1% through the next two quarters.

National Review
First Quarter 2002

The GDP for the first quarter of 2002 increased at an annual rate of 5.6%, a substantial increase from the rise of 1.7% in the fourth quarter of 2001. The recession of 2001 was marked by a decrease of 1.3% in GDP in the third quarter. The growth rate of first quarter, 2002, was the most rapid since the pre-recession peak growth rate of 5.7% in the second quarter of 2000, fueling speculation that the recession is now over. Such a designation has not been officially made, to date.

Personal consumption spending increased by 3.2% in the first quarter, from growth rates of 6.1% in the fourth and 1% in the third. During the recession of 2001, consumption spending has not declined.

Gross private domestic investment increased by 22.8% in the first quarter, the first increase since the second quarter of 2000. The only category of investment to increase, however, was residential investment. All other categories of investment, including equipment and software, declined, with the latter decreasing for the six consecutive quarters. Equipment and software spending was increasing at double-digit rates from 1993 through 2000, to reach the first full-year decline in 2001.

Exports increased, primarily in services, while imports increased even more rapidly, so that net exports declined for the quarter. Government spending also increased in the first quarter, including both state and federal, although non-defense federal spending declined.

The price index for Gross Domestic Product increased by 1% in the first quarter, following a slight decline of .1% in the fourth quarter of 2001. The GDP price index rose by 2.2% for the full year of 2001 and by 2.3% for the full year 2000, following four consecutive years of price increases of less than 2%, from 1996 through 1999. The most recent peak of inflation, as measured by the GDP price index, was a rate of increase of 3.9% in 1990, just before the last recession.

Productivity gains for the first quarter were rapid in all major sectors. The increases in output per hour exceeded 4% for both business and manufacturing sectors from year-ago levels, strong enough to reduce unit labor costs in both sectors. For the business sector, the gains of 4.2% were the most rapid since second quarter, 2000, and a significant rise from the full year rate of 1.9% in 2001. For the manufacturing sector, the gain of 4% for the first quarter was the most rapid since the 4.9% rate in fourth quarter 2000, and a big jump from the 1.1% rate for the full year 2001.

For the three months ending in March, 2002, employment costs decreased across the board from the previous quarter, in both categories of wages and salaries and also benefit costs. For all civilian workers, the compensation costs declined to .8% for the quarter, from 1% in the previous quarter, with a similar pattern for private industry. There was a slight gain in costs for state and local government workers for the quarter. For the full year ending March, 2002, the compensation costs rose by less than 4%, in contrast to the rate exceeding 4% for the previous two years. Benefit costs rose from 4.7% to 4.9% from 2001 to 2002, but remained below the 5% rise of 2000. Benefit costs increased particularly rapidly in the state and local government sector, from 2.8% in 2001 to 5% for the full year 2002.

All major stock market indexes are from January, 2002, and from record peaks in 2000, but remained above post-September 11, 2001, lows, as of the first week of June, 2002.

The Federal Reserve Bank has maintained a low federal funds rate of 1.75% in 2002, after a series of cuts from 6.5% in early 2001. Corrected for inflation, the real federal funds rate is .5%, and even negative when corrected for inflationary expectations.

As shown in the above graphs from the Cleveland Federal Reserve Board, total household debt is at an all time high, as a fraction of disposable personal income. The total debt burden, defined as total debt service relative to disposable income, has declined slightly from the most recent peak, but mortgage debt service, at over 6% of disposable income, is again at record highs.

The dollar had strengthened steadily relative to the yen since 2000, to a recent peak of nearly 135 yen per dollar, but has recently declined to levels around 124 yen to the dollar, in June, 2002. The dollar had strengthened relative to the euro as well, from 1999 through 2001, with $.85 to the euro at the dollar's peak in 2001, but weakening to the $.9398 range in June, 2002.

While the U.S. trade deficit continues to widen, both exports and imports of capital goods have declined since 2001, along with the end of the capital spending boom in 2001.

The Wall Street Journal, in a June 3, 2002, story cited in the graph above, documents the reliance of the U.S. economy on foreign capital. From a net outflow in the early 1980s, the rate of capital inflow has gone from $150 billion in 1997 to over $450 billion in 2001. If the rate of foreign capital inflow begins to taper off, there is a risk to a decline of the dollar.

National Prospects

A weaker dollar could help boost exports, but would risk contributing to a further slowdown in attracting foreign capital. The Enron effect, following on the dot.com collapse and the side-wise movement of the stock market since January, has made investment by foreigners in the U.S. less attractive. With a continuing large U.S. trade deficit, sluggish global growth, a growing U.S. government budget deficit, and with the short-term interest rates already near record lows, along with high consumer debt levels, the prospects for steady, stable expansion in the U.S. economy appear somewhat weak. The global glut in information technology, as well as the continuing decline in domestic investment in computer equipment and software, suggest further delays in the recovery of the technology sector.


Hudson Valley Review
First Quarter 2002

Employment and Earnings

The unemployment rate increased by over one third in the first quarter, 2002, from year ago levels, but remained significantly below the rate for New York State and for the U.S.

Jobs held by residents increased by 1% from the same quarter one year ago for the region. All counties in the region shared in the gain, with the largest in Greene, Putnam, and Ulster. The labor force grew more rapidly than the number of jobs, which caused the unemployment rate to increase throughout the region as well. The unemployment rate for the region of 4.5% was nearly one third above the rate for the same quarter in 2001 of 3.3%. Still the unemployment rate in the Hudson Valley remained below the 6% rates for the U.S. and New York State, and the 7.6% rate for New York City.

For selected cities and town in the region, the unemployment rate increased relative to the county average, including the City of Poughkeepsie and the City of Mount Vernon, but the ratio remained constant for Newburgh and Yonkers, still more than double the county average. The unemployment rate differentials between city and county are lower for Westchester than for Dutchess and Orange. For example, the unemployment rate in Newburgh is double the Orange county rate, while the unemployment rate in the City of Mount Vernon is only 50% higher than the Westchester county level.

For the first time since third quarter, 1995, there was a slight decline in jobs located in the region, the end of a six-year streak of job growth, from 4th quarter, 1995 to 4th quarter, 2001.

The total number of jobs located in the region decline by .14% in the first quarter, compared with one year ago. The largest declines were in manufacturing, where over 4000 jobs were lost relative to one year ago, or 4.6%. Losses in finance were smaller, with only 700 jobs lost, or 1.5%, while jobs in government expanded by 2860, or 1.7%. The overall declines in the region were smaller than the 3.6% decline in New York City and the 1.6% decline in New York State. Jobs in the U.S. declined by 1% in the first quarter compared with one year ago.

The counties with job gains were Greene, Putnam, and Ulster, while job losses were largest in Columbia, Sullivan, and Dutchess. Elsewhere the losses were slight.

Downsizing

There was a series of job actions among regional employers, in the wake of the national recession and the global glut in semiconductors. In recent job actions throughout the country, IBM has laid off 1500 employees in its semiconductor unit, and 4500 in other divisions. Before these layoffs, IBM had 150,000 workers in the U.S. and 320,000 worldwide. More layoffs may be coming, as well as repositioning of its components, such as the development of a new contract Application Specific Integrated Circuits (ASIC) design service. The company is expected to charge up to $2.5 billion in losses in the second quarter.

A total of 11,900 workers are employed at two IBM facilities in Dutchess County as of year-end 2001, from a peak of 24,700 in 1983. Approximately 714 layoffs have been announced since January 1, 2002, or 6% of IBM employment in the county. While not matching the major sizing of the early 1990s, these job losses are significant for the county and regional economy. Given a rough estimate of $35.7 million in payroll, a modest estimate of the total impact may be a loss of $71.4 million to the county economy. As a consequence of the two major IBM facilities in the county, Dutchess County still has 15% of its total employment in manufacturing, from 34% in the late 1970s. By contrast, the region as a whole has less than 10% of its employment in the manufacturing sector, from 23% in the late 1970s.

Hours and Earnings

The average hourly earnings of production workers continued to rise in the region, with a gain of 3.1% from year-ago levels. This regional average is weighted to reflect the relative size of each area for which data is available, as well as the wage level. The largest gains were in Dutchess and Rockland, with a slight decline in Westchester. Weekly hours fell in most counties for which data is available, with some counties now showing average weekly hours less than 40, such as Dutchess and Newburgh. The average for the region still exceeds 40 hours a week, nonetheless. Average weekly earnings increased by 2.2% for the quarter, compared with one year ago. The largest weekly gains were in Rockland and Albany, with increases in both hourly pay and number of hours. Westchester had declines in both hourly pay and the number of hours, leading to a decline in weekly earnings. In Dutchess, gains in hourly earnings more than offset a decline in hours, to result in a net increase in weekly earnings.

Home Sales and Prices

The number of homes sold in the region increased by 12.3% from year-ago levels, a more rapid increase than New York State or the U.S. All counties in the region had double- digit growth rates, except for a smaller gain in Rockland and declines in Sullivan and Ulster.

Both the median and the average price of homes sold increased throughout the region, with an average increase in the region of 11.8% from year-ago levels. The average price is higher than the median in all counties, suggesting that the average is pulled up by a smaller number of higher priced homes.

The pattern of construction permits for single family homes was mixed across the region, with declines in Rockland and Westchester, and gains elsewhere. The largest growth rate was in Ulster, Columbia, and Sullivan. The average value per permit increased in all counties except Sullivan for single family homes.

Tourism

The number of visitors to the Hudson Valley historic sites increased in the first quarter, 2002, compared with one year ago, according to records of the National Park Service. Visitation to the Roosevelt-Vanderbilt site grew by 27% over one year ago, with gains at all three sites.

Bankruptcies

Bankruptcies in the Hudson Valley increased compared with the first quarter of 2001, by 1.7%. The number for New York State declined, while the increase for all of the U.S. was larger, a gain of 3.3% for first quarter, 2002.

Sales Tax Collections

According to one indicator, sales tax collections, retail sales grew 12% in the region in the first quarter, compared with one year ago. Gains were recorded in all counties, with the largest in Sullivan, followed by Putnam, Greene, Orange, Rockland, and Ulster, all with double-digit increases.

Inflation

According to the Consumer Price Index for the New York/New Jersey Metropolitan area, the rate of inflation increased at a rate of 2.3% for the first quarter, 2002. Although the regional pace of inflation in 2002 was lower than the same quarter one year ago, the New York/New Jersey rate of 2.3% significantly exceeded the average for all U.S. cities of 1.25%, a reversal of recent patterns. For most of 2001, the rate of inflation in the New York/New Jersey metropolitan area was below that for all U.S. cities.

Transfer Payments

Fourth Quarter 2001

The number of recipients for Temporary Assistance for Needy Families (TANF) decreased for the region as a whole for the fourth quarter, 2001, the most recent period for which data is available. The only exception was Greene County, for total numbers of recipients, and Orange and Putnam for the "safety net," those recipients who no longer meet normal eligibility requirements. For expenditures, the region as a whole showed increases in the "safety net" program, both federal and state. In addition, there were increases in total expenditures in several counties, including Columbia, Dutchess, Greene, Orange, Putnam, Sullivan, and Ulster. These increases, the first since welfare reform was implemented, indicate some hardship due to the national recession. Westchester and Rockland showed increases only in "safety net" expenditures.

For Supplemental Security Income and Food Stamps, there were increases in both the number of recipients and expenditures fore the region, in the fourth quarter, over one year ago.

Annual 2001

For the full year 2001, all counties in the region had declines in the total number of recipients by 13% overall, and only Columbia, Greene, Orange, and Rockland had increases in the total number of safety net recipients. There was a similar pattern of declines in the total for expenditures of 7% for the full year, except for an increase in Putnam. All counties except Putnam, Sullivan, and Westchester showed increases in safety net expenditures for the year, with a slight decline for overall average in the safety net for the region.

The number of recipients and expenditures for food stamps and Supplemental Security Income increased, except for a slight decline for the number of food stamps recipients.

 

Special Focus - Census 2000

The population growth rate for the decade of the 1990s was 7.3% for the Hudson Valley region, up from a growth rate of 5% in the 1980s. This regional population growth rate was slower than New York City and the U.S., but faster than New York State. The fastest growing counties were Putnam and Orange, both with double-digit increases. Although the region as a whole grew faster in the 1990s than in the 1980s, some counties showed the reverse pattern, with a larger growth rate in the 1980s, including Columbia, Greene, and Orange.

For most counties in the region, median household and median family income grew during the decade of the 1990s, corrected for inflation. The most rapid real income gain was in Columbia County, followed by Putnam. There were exceptions to this pattern, however. Median household income, corrected for inflation, actually declined in Dutchess, Rockland, and Ulster, as well as New York City. The highest level of median household income was in Putnam County, at $72,279, and the lowest was in Greene at $36, 493. A similar pattern holds for median family income, where members of the household are related. Median family incomes tend to be higher than median household income, because the latter can include non-related individuals. The highest level of median family income was in Putnam, at $82, 197, and the lowest was in Sullivan at $43,458. The largest gains in median family income were in Columbia, Putnam, Orange, Westchester, and Greene, with declines in Dutchess, Sullivan, and Ulster.

The county with the largest share of minority population was Westchester, with a minority population that is 28.7% of the county total. The next highest were Rockland, at 23.1%, followed by Dutchess and Orange, at 16.3% respectively. The cities in the region with the highest minority population in 2000 were the City of Mount Vernon, the City of Newburgh, and the City of Poughkeepsie, at 71.4%, 57.7%, and 47.2%, respectively. New York City has a minority population of 55.3% and New York State has 32.1% minority population, as of 2000.

For New York State as a whole, roughly 15% of its total housing stock was constructed in the last 20 years. For three counties in the region, Greene, Orange, and Sullivan, more than 25% was built in the last 2 decades. Five more counties, Columbia, Dutchess, Putnam, Rockland, and Ulster, had more than 20% of their housing stock constructed in the last 20 years. Only Westchester County had less than 15% of its housing build since 1980, indicating that for Westchester, the greatest growth occurred in earlier periods. New York City and New York State also had less than 15% of its housing stock constructed in the last 20 years.

Housing affordability varies throughout the region, with the least affordable in Westchester, and the most affordable in Greene and Sullivan.

Mean travel to work increased in all counties from 1990 to 2000. The longest commutes were in Putnam and New York City, exceeding 35 minutes each way.

New York City has a larger and the Hudson Valley a smaller proportion of young persons, between 15 and 30, than the U.S. The Hudson Valley has a greater proportion of the youngest and oldest members, less than 10 and over 35, than the U.S.

 

Regional Prospects

With the possibility of further slowdown in the high tech sector, due to lack of domestic investment and coupled with global excess capacity, the regional manufacturing base may experience further declines. The fiscal drain on the New York State budget from September 11, 2001, may also weaken support for the otherwise strong education and health sectors. The finance sector remains sluggish due to the absence of any clear movements in the stock market indexes.

Moderate job losses are expected in the near term, of less than 1% for the second half of the year.


Sources: New York Times, Wall Street Journal, Poughkeepsie Journal, U.S. Commerce Department, New York State Department of Labor, New York State Department of Finance, U.S. National Park Service, Business Week, New York State Association of Realtors, Cleveland Federal Reserve Board, CSFirst Boston.

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