Hudson Valley Review

Third Quarter 2003

Marist College

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

November 2003

This report and backup files are available on the Bureau of Economic Research homepage at

The assistance of FRED LAURICELLA and NICHOLAS LOMBARDI is acknowledged and appreciated.

Now available as a downloadable PDF file.

Table of Contents

Third Quarter 2003

Summary and Highlights
National Review
Hudson Valley Review

Third Quarter 2003 Exhibits

U.S. Nonfarm Employees

Hudson Valley Employment

Home Sales in Hudson Valley Counties

Stewart and Westchester Airports


Consumer Price Index

Transfer Payments

Special Focus - Household Composition

Summary and Highlights
Hudson Valley Review - Third Quarter 2003

  • Employment continued to expand in the region during the third quarter, in contrast to the pattern in the U.S. as a whole. The region gained 1.5% compared with the same quarter one year ago in jobs held by residents, and .55% in jobs located in the region. The regional unemployment rate was 4.1% with no county exceeding 5%. Even in the urban areas, most cities were in the range of 6%, the U.S. average, or below, with only the City of Newburgh having an unemployment rate approaching 10%.
  • Jobs located in New York City declined by 1.5%, and the unemployment rate there was 8.3%.
  • Home sales continued to rise for the region as a whole, although the pattern was mixed across the various counties.
  • Average sales price of homes sold increased by almost 20% from one year ago, faster than the state and U.S. trends. The median sales price increased for all counties.
  • Regional indicators of tourism are mixed. Tourists at the Roosevelt/Vanderbilt site declined by 10% from one year ago, while visitors at the Martin Van Buren site increased by 2.3%.
  • Sales tax collections increased by the region, accelerated by sales tax increases in Dutchess and Sullivan counties, effective June 1, 2003.
  • Business filings for bankruptcy decreased compared with one year ago, while non-business filings increased. The sales increases in the economy may benefit firms, but push consumers to debt limits, as the job growth remains sluggish.
  • The numbers of recipients and expenditures for income support programs increased for the region, including Temporary Assistance for Needy Families and Food Stamps. These increases suggest greater hardship, due to the sluggish job growth and the loss of high paying jobs in certain sectors, such as manufacturing.
  • Inflation was in the 3% range in the New York/New Jersey metropolitan area, faster than the average for all U.S. cities of 2%.


The regional economy has hardly been affected by the national recession in 2001, and is poised to continue more rapid job growth in the next year. The factors which may cloud that bright horizon include federal and state budget shortfalls, and the continuing U.S. international trade deficits. As state and federal borrowing increases, and the dollar may continue to decline, there is the prospect for interest rate increases, reducing overall growth. Such increases in the interest rate would dampen the housing and construction sectors, which to date have been responsible for some of the strongest growth in the region.

Special Focus - Households

The region has a declining share of married couples with children and family households, similar to the national trends. In the region, households consisting of married couples living with their own children has declined as a share of total households, from 32.9% in 1980 to 28% in 2000. While the region has a higher share than the U.S. average, the declining trends in families with children will affect many different areas of the economy. In the region, non-family household increased from 24.1% in 1980 to 28.9% in 2000. The regional housing stock, with growing numbers of large suburban homes, may be less suited to this new demographic mix. On the other hand, families still seeking the typical "American Dream" may find this area more attractive as a result.

National Review

According to preliminary estimates by the Bureau of Economic Analysis, the GDP grew at an annualized rate of 8.2% in the third quarter, 2003, compared with 3.3 % in the second quarter. Fueled by tax cuts and record low interest rates, consumer spending increased by 6.4%, with a 26.5% increase in spending on consumer durables, consisting of products such as cars and appliances.

Gross private fixed investment increased by 18.2%, the most rapid increase since first quarter, 2002. This pace is a dramatic increase over the 2% rate of the second quarter, and a change from the decline of 5.3% in the first quarter, 2003. Investment in equipment and software increased by 18.4%, the first return to double-digit rates of expansion since the recession of 2001. Residential investment increased at a blistering rate of 22.7% over the previous quarter.

Exports expanded by 11% and imports increased by only 1.5%, aided by the recent decreases in the value of the dollar. Government spending increased by 1.3%, in spite of the decline in defense spending of 1.6%. The largest increase in government spending was in state and local, which recorded an expansion of 2.3%.

The GDP implicit price deflator, the broadest measure of inflation on domestic production, increased by 1.7%. This pace is faster than the annualized rate of 1.1% for the full year of 2002, indicating less of a threat of deflation.

Productivity expanded at a rapid rate in the third quarter, as output accelerated and job growth remained sluggish. The 5% increase in productivity in the business sector year over year is the fastest of 2003, continuing the strong gains of 5.3% for the full year of 2002. Year-over-year gains in manufacturing productivity were 4.4%, not matching the 6.5% gain for the full year of 2002. Unit labor costs were the same or declining in the business and manufacturing sectors, due to the pace of productivity exceeding wage increases.

In spite of recent gains in the stock market, again approaching a post-recession peak of 10,000 in early December, 2003, and the rapid acceleration of GDP growth, there are still some persistent structural issues. First, the U.S. federal budget deficit is large and growing which may lead to eventual increases in interest rates. In the short run, however, the growing federal deficit helps boost demand, in an international period of excess capacity.

Second, the U.S. international trade deficit is large and growing. The world supply of dollars increases under these conditions, as the U.S. pays dollars to other countries for imports, and is not selling exports in sufficient quantity to earn those dollars back in sales revenue. This persistent trade deficit puts pressure on the value of the dollar, and some decline in its value has already occurred. For example, there has been a 15% decline of the dollar relative to major currencies since February, 2002. Further, the euro hit a peak with respect to the dollar in early December of $1.2276, rising 17% against the dollar in 2003.

National Review 1

Source: December, 2003, report from the Federal Reserve Bank of Cleveland, Economic Trends.

One reason that the decline in the dollar has not been sharper is the use of the U.S. currency as a foreign exchange asset. For example, China and Japan have been purchasing financial assets in dollars to keep their own currencies from rising, and as a form of international financial reserves. Since these Asian economies are particularly dependent on exports to the U.S. market, they buy dollars and sell their own currencies, to keep the value of their currencies low. This keeps their products more affordable in the U.S. market. Together, Japan and China hold 50% of the foreign holdings of the U.S. treasury bonds. This strategy helps to preserve their price advantage in the U.S. market, supplementing their already low costs of production, and may inadvertently stabilize the value of the dollar on international markets. In the short run, this strategy by Asian countries postpones the ultimate adjustment to the U.S. trade deficit, which would require dramatic devaluation of the dollar, an increase in inflation, and a rise in the U.S interest rates. In the long run, postponing these adjustments leads to the persistence of the problem, and the concomitant increase in the U.S. indebtedness to the world, as the domestic and trade deficits rise and foreigners continue to hold U.S. financial debt in the form of Treasury bonds.

National Review 2

Source: the November, 2003, Economic Trends report from the Federal Reserve Bank of Cleveland.

The other major area of uncertainty is the reconstruction in Iraq, and the Middle East peace prospects. There is still the potential for terrorist activity causing disruptions in the U.S. and the global economy.

Hudson Valley Review

Employment and Earnings

Place of Residence

The jobs held by residents increased by 1.5% in the third quarter, 2003, compared with the same quarter one year ago. There were gains in all counties except Sullivan. The largest gains were in Columbia, Dutchess, and Rockland. During the same period, New York City and New York State lost jobs, and the U.S. expanded by less than one percent.

For the region as a whole, the labor force expanded by less than the number of jobs, so the regional unemployment rate declined to 4.08%. Some counties had labor force expand faster than the number of jobs, and so the unemployment rate increased in those places, including Greene, Orange, Rockland, and Ulster. In Sullivan, jobs decreased faster than the labor force, so the unemployment rate increased for that reason. Still, no county in the region had unemployment rates exceeding 5%, while the U.S. and New York State unemployment rates still exceeded 6%, and New York City had 8.3%.

The unemployment rate in selected urban areas has improved relative to the respective counties, in the City of Poughkeepsie, for example, while it has worsened in the City of Newburgh, where the unemployment rate has remained more than double the county average.

Place of Work

For the jobs actually located in the region, total jobs grew by only .55%, while total private jobs grew by .53%, compared with one year ago. The largest gains were in services, and the largest declines were in manufacturing. These regional trends are consistent with national ones, leaving the total job count roughly constant.

The fastest rate of job growth was in Rockland, followed by Dutchess. The declines were most rapid in Sullivan and Greene, with little change in the other counties. The manufacturing sector declined in all counties, except for gains in Sullivan, and no change in Putnam.

Total job declines were registered in New York City and Albany area, as well as New York State as a whole.

Home Sales and Prices

The number of homes sold increased in the region in third quarter compared with one and two years ago. The gains were distributed unevenly across the counties, however, with Orange, Putnam, and Rockland showing the strongest increases. The average selling price increased in all counties except Sullivan, and the increase for the region was 18.7%, more than double the average gain for New York State and the U.S. The median selling price increased for all counties.

The average price for homes sold is nearly double the New York State and the U.S. averages, partly due to the larger average size of the house, measured by the number of bedrooms. For the Hudson Valley, 44.5% of all homes sold have four or more bedrooms, compared with 39.6% for the state.

The average number of building permits has declined slightly for the region as a whole, with a mixed pattern across the region. The average cost per permit is stable for single family homes, with a mixed pattern for all residential construction.


The publicly available data from the National Park Service sites in the region provide one measure of tourism. The Roosevelt/Vanderbilt sites have shown a 10% decline from the same quarter one year ago in the numbers of visitors taking tours. The total numbers of visitors to the site, including grounds, is down by 25% from the same quarter one year ago. The Martin Van Buren site has experienced a smaller decline, down only 2.36% from one year ago, but the magnitude is much smaller than the Roosevelt/Vanderbilt sites. The overall number of visitors has declined from the mid-eighties to the Roosevelt/Vanderbilt sites, while it has increased over that period to the Martin Van Buren site.

The forecast from the National Park Service for the full year to these sites is 624,160. This measure of tourist to the region is only a small fraction of the total number of visitors, indicating a powerful industry for the region. The opening of the Henry Wallace Center at the Roosevelt Home and Library will also likely increase the number of visitors for the fourth quarter.

Air Travel

Stewart Airport had an increase of nearly 20% over third quarter one year ago in passenger traffic. With the acceleration of the economic recovery nationally, and the recent announcement of new carriers, this may portend the beginning of the turnaround in Stewart passengers, following the downward trend since 1997. Air cargo also experienced a dramatic increase, a gain of 75% in outgoing cargo and an increase of over 50% in incoming freight.

Westchester County Airport experienced a decline of 4% over year-ago levels in passenger traffic, continuing the slight downward trend since 2000.

Sales Tax Revenue

Sales tax revenue, a proxy for retail sales, has increased throughout the region, with an overall increase of 8.44%. The greatest gains were in Dutchess, followed by Rockland and Sullivan. Tax rate increases were also a factor, with higher rates in Dutchess and Sullivan as of June 1, 2003.


The rates of increase of bankruptcies decreased for the third quarter, 2003, and even declined for the Southern district. The business filings decreased for the Southern district, which includes the lower Hudson Valley and New York City, suggesting gradual recovery from the September 11, 2001, disaster, and the business filings in the northern district registered no change overall. The nonbusiness filings increased for both the Southern and the Northern districts, suggesting the impact of low job growth in the region.

Transfer Payments

Temporary Assistance to Need Families, (TANF), the major income support for families with children, showed slight increases in the number of recipients for the region in third quarter, 2003, compared with one year ago. The largest increases were in the .safety net. portion of the program, which is the New York State supplement for families which no longer meet the tighter federal eligibility requirements, revised in 1996. The pattern across the counties was mixed, with increases in total numbers of recipients in Sullivan, Ulster, and Westchester, and declines in the remaining counties. The increase in expenditures was larger, at 8.5% for the region and for most individual counties. Rockland was the only county which had a decline in total expenditures year over year.

Food stamp recipients and expenditures also increased significantly, with an increase in 8.8% in the number of recipients and 16.6% in expenditures for the region as a whole. For supplemental security income, the pattern of the numbers of recipients was mixed, but expenditures for that program also increased by 18.3%, a sizable gain.

These increases in transfer payments suggest that the slow pace of job growth, along with the loss of jobs in high paying sectors like manufacturing, does increase the stress for disadvantaged families.


Inflation, as measured by the New York/New Jersey Metropolitan area consumer price index, accelerated in the third quarter. The rate of increase breached 3% in the third quarter, higher than the range for all U.S. cities, which remained less than 2.5%.

Special Focus: Household Composition

Demographic trends for the U.S. as a whole can be significant for the region also. For example, married couples with children represented just one quarter of the households in the nation in 2000, and that proportion is projected to drop further to 20% by 2010. Married couple households, with or without children, have declined from nearly 80% of total households in 1950 to just over 50% in 2000. The median age of first marriage continues to increase for both men and women, and the numbers cohabiting without formal marriage continues to grow.

Similar trends can be found in the region as well. Although consistently higher then the U.S., the region has experienced the same trend of a declining share of total households which consist of a married couple with children. For example, while the U.S. share of married couples with children declined from 30.9% in 1980 to 24.1% in 2000, the regional share declined from 32.9% to 27.5% over the same period. The share of non-family households grew from 24.1% in the region in 1980 to 28.9% in 2000.

Household Composition

In earlier decades, the troubling demographic trend was the rise in female-headed households with children. The concern was proper care for children with just one parent, and the lower average income of females. The latest trends include a rise in male-headed households with children, as well as non-family households. During this period the share of female-headed households has increased, but much more slowly. In 1980, the share of female headed households with children was 5.5%, rising to 6.2% two decades later.

The implications of these trends for the region include

  • Labor force composition
  • Location of residential development, in urban vs. suburban areas
  • Size of residence
  • Health insurance
  • Child Custody
  • Inheritance
  • and "Social Capital," including community volunteers and philanthropy.

For example, recently nearly half of the homes sold in the region have four or more bedrooms. With the declining marriage rates, as well as concomitant decline in average family size, these homes may be less suited to the demographic trends in the next several decades. In addition, the trend towards suburban locations, with reliance on automobile transport and in-home recreation, may be less suitable for the non-family household. Proximity to cultural amenities, shopping, and public entertainment, may be preferable for this demographic group.

On the other hand, with an increasing share of non-family households, there may be more reliance on out-of-home services, which would benefit the leisure and hospitality industry, as well as personal care services.

Median Household Income

The level of median household income in the Hudson River Valley region is both higher and lower than the median household income for the U.S. as a whole. Several counties, including Columbia, Greene, Sullivan, and Ulster, have median household income lower than the U.S., while Dutchess, Orange, Putnam, Rockland, and Westchester are higher.

Real income trends for the region are somewhat divergent from national trends. For example, the median household income declined in the Hudson Valley between 1989 . 2000, for all counties except for a slight gain for Columbia. The U.S. trend was for increases for each decade since 1969, although the rate of increase slowed in the 1990s. Part of the reason for the decline in the 1990s in the region is the significant impacts of the 1991 recession and the 1993 corporate consolidation. Other mature high tech regions in the country had similar patterns, including Boston Rt. 128 and northern New Jersey. Nonetheless, Silicon Valley counties in California recorded gains in median family income through the last several decades, along with Research Triangle counties in North Carolina, and most of the Texas counties near Austin.

Sources: New York Times, Wall Street Journal, Business Week, Federal Reserve Bank of Cleveland, U.S. Department of Commerce, U.S. Department of Labor, New York State Department of Labor, New York State Department of Taxation and Finance, National Park Service, Bankruptcy Courty, Stewart Airport, Westchester County Airport, New York State Office of Temporary and Disability Assistance; Robert Putnam, Bowling Alone.