Hudson Valley Review

Third Quarter 2004

Marist College

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

December 2004

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

The assistance of FRED LAURICELLA and CHARU VERMA is acknowledged and appreciated.

Now available as a downloadable PDF file.

Table of Contents

Third Quarter 2004

Special Focus:


Third Quarter 2004

U.S. Nonfarm Employees

Hudson Valley Employment

Home Sales in Hudson Valley Counties

Stewart and Westchester Airports


Consumer Price Index

Transfer Payments

Special Focus

Hudson Valley Journey to Work

Employment Location Quotients

Manufacturing Supersector Location Quotients

Information Supersector Location Quotients

Financial Activities Supersector Location Quotients

Professional & Business Services Supersector Location Quotients

Hudson Valley Review

Summary and Highlights

  • The Hudson Valley economy continued its modest growth and low unemployment in the third quarter, 2004.
  • Jobs held by residents increased by less than one percent, but the regional unemployment rate was only 4.3%. The unemployment rates increased only in Dutchess and Ulster counties, where labor force increased faster than jobs.
  • Job growth by Hudson Valley residents was faster in New York City, New York State, and the U.S. during the third quarter.
  • The regional picture was more favorable using the measure of jobs located in the region, which grew by 1.6%. All sectors expanded except for manufacturing. Total employment expanded in all counties except Greene.
  • Home sales increased by 3.1% in the third quarter, compared with one year ago and average selling price increased by nearly 13%.
  • Tax revenue collections increased except in Rockland County.
  • The number of recipients on New York State Safety Net transfer program increased, but the total number of recipients, including both state and federal, declined.

Special Focus

The sectors in which New York City remain strong, including finance, business services, and information, are the areas in which Hudson Valley commuters in related occupations commute the longest. For example, lawyers, finance, and media professionals have the highest share of occupational incumbents who commute more than 60 minutes.


The ongoing decline of the dollar may impact the region in several ways:

  • Increasing interest and mortgage rates, which will hamper consumer spending and home purchases.
  • The weaker national currency may impair the leading role of New York City in global finance.
  • Export markets may expand for regional manufacturers, while costs of materials and products imported will increase;
  • International tourism may increase, as foreign currencies have more purchasing power in the U.S..


Further, the growing federal government deficit may reduce funds available for needed regional infrastructure, including education, water and sewer, and roads.

National Review

The Gross Domestic Product increased by 3.9% in the third quarter, up from 3.3% in the second quarter. This third quarter pace was slower than the previous four quarters, from second quarter, 2003, to first quarter, 2004, and suggests an uneven pace of recovery from the 2001 recession. Consumer spending increased by 5.1%, the most rapid pace since fourth quarter, 2001. Gross private domestic investment slowed considerably, to 2.8%, slower than the substantial jump of 19% in the second quarter. The expenditures for equipment and software, one component of investment, increased, by 17.2%, with a pattern of five of the last six quarters expanding at a double digit pace. Government expenditures increased by 1.2%, slower than the previous three quarters, with a jump in defense spending of 9.8%.

The GDP price deflator increased by 1.3% in the third quarter, the slowest pace since third quarter, 2003. The price deflator for Gross Domestic Purchases, which includes imports, increased by 1.8%, but still slower than the full year pace of 2% for 2003.

Corporate profits decreased from the previous quarter by 2.4%, with large declines in the financial industry of 46.7% from the previous quarter. Profits from nonfinancial corporations and the rest of the world increased from the previous quarter, by 10.2% and 8.8% respectively. Corporate profits increased by 8.4% compared, with the same quarter one year ago.

Productivity increased by 3.1% from year ago levels for the nonfarm business sector, the slowest pace since first quarter, 2003. Since compensation increased faster than productivity, unit labor costs rose for the first time since first quarter, 2003. Manufacturing productivity rose by 4.6%, the slowest pace since second quarter, 2003. Since compensation costs increased more slowly, unit labor costs in manufacturing continued the third consecutive quarterly decrease.

On an annual basis ending in September, 2004, compensation costs for civilian workers increased by 3.8%, down slightly from the previous year. The wage and salary component rose by 2.4%, the lowest in two decades, while benefit costs increased by 6.8%, the highest since the early 1990s.

The Federal Reserve Bank increased the federal funds rate to 2%, in a stepwise progression over the last six months, from the record low of 1% in mid-2004.

The debt to income ratio for households increased to 1.2 relative to disposable income, a record high. The debt to asset ratio was 18%, the highest over the decade of the 1990s. The debt service ratio, relative to disposable income, is 13%, higher than the pre-recession peak in 1990. Delinquency rates of residential, consumer, and credit card loans are continuing to decrease since 2001, nonetheless.

Chart - Household Saving and Debt

Chart - Debt-to-Asset Ratio

Chart - Household Obligations

Chart - Delinquency Rates

The four quarter percent change in the house price index increased by over 9% in 2004, a record high since the peak of 8% in 2001.

Chart - House Price Index

Since 2001, China has made a larger contribution to world growth than the U.S.

U.S. manufacturing employment has declined by 20% since 1977, at a more rapid pace since 1997. Korea, Canada, and Taiwan manufacturing employment has increased over the same period, while U.K has declined by 50%. Korea, Taiwan, Japan, and U.K. have higher rates of manufacturing productivity growth than the U.S. since 1977, with Korea and Taiwan increasing most rapidly over that period. Capacity utilization in the manufacturing sector recently reached a post-recession high of 77.8, still low by this relative stage of the business cycle.

Chart - Manufacturing Employment

Chart - Manufacturing Output Per Hour

The decline in manufacturing over the 2001 recession was 8.9%, the steepest loss since 1983. By September, 2004, the sector had begun to increase.

Chart - Year-Over-Year Employment Changes

The trade deficit of the U.S. has continued to increase, reaching an all-time record 5.7% of GDP in 2004. The value of the dollar has continued to fall, down 9% against major currencies since August. Asian central banks hold $1.8 trillion in U.S. government bonds, purchased to maintain their currency pegs against the dollar. Should these central banks decide to sell those bonds, the dollar will tend to fall further and the U.S. long term interest rates may be as much as 1.5% higher, according to Stephen Roach of Morgan Stanley.

The falling dollar will tend to help expand U.S. exports and to correct the U.S. trade deficit, except for the trend towards declining manufacturing in the U.S. mainland, as opposed to manufacturing by the affiliates of U.S. corporations located abroad. The falling dollar may also affect the strategic role of the global financial center in New York City, if the key currency position moves to the euro or to an Asian currency. Alternatively, an accord among major industrial nations may be reached to stabilize the dollar at a new lower level, to prevent overshooting in the adjustment process.

Place of Residence

The growth of jobs held by residents expanded by less than one percent in the third quarter, 2004, from one year ago, slower than the U.S. and New York State. The most rapid rate of expansion was in Putnam and Sullivan, and the only decline was in Greene County. The labor force expanded more slowly, bringing the unemployment rate down for the region as a whole. There were slight increases in Dutchess and Ulster, nonetheless, where labor force expanded more than the number of jobs. The unemployment rate for the region remains at 4.3%, less than New York City, New York State, and the U.S.

Place of Work

The growth of jobs located in the region was 1.6%. There were continuing declines in manufacturing employment, but growth in other sectors. Growing sectors included trade, business services, and tourism.

There was employment expansion in all counties except Greene. Job growth in the Hudson Valley region outpaced New York City and New York State.

Home Sales and Prices

For the region there was an increase in the number of homes sold by over 3% (without data available from Sullivan county), compared with one year ago. There were increases in all counties except Putnam and Rockland. The increase in the average price of homes sold is nearly 13%, with increases in all counties. The mean and median sales price for New York State continued to rise, but the median price declined by 7.8% for the U.S. as a whole. The rise in home prices for the region may be driven in part by larger homes being built. The share of homes with four or more bedrooms is larger for the region than New York State, with a smaller share of homes with three or fewer bedrooms.

The number of building permits increased by 8.1% for single family homes, with a mixed pattern across the region. The cost per permit increased by nearly 16% for the region, with declines only in Rockland.

Air Travel

Passenger traffic at Westchester County airport increased by over 15% for the third quarter, compared with one year ago.

Sales Tax Collections

One proxy for retail sales, sales tax collections, increased by 12% for the region. The largest increase was in Orange county, with the only decline in Rockland.


The number of visitors taking tours at the Roosevelt/Vanderbilt sites declined in the third quarter from one year ago by 15%, according to the National Park Service. The total numbers of visitors to the tours and grounds increased by nearly 20%, nonetheless. There was also a slight decline at the Van Buren home.


In the southern district, which includes Dutchess, Orange, Putnam, Rockland, Sullivan, and Westchester, there was a substantial increase in Ch 11 business filings in the full year ending on June 30, 2004, by 173%. The bulk of the filings were personal filings, which also increased by 9%. In the Northern district, which includes Columbia, Greene, and Ulster, the filings declined for businesses but increased at a slower rate for personal filings.


The inflation, as measured by the consumer price index, increased by over three percent for the New York/New Jersey Metropolitan Area in third quarter, 2004. The rate of price increase in the metropolitan area continued to exceed the average for all U.S. cities, continuing the pattern from 2002.

Transfer Payments

The number of recipients of payments to needy families decreased overall in the third quarter, while safety net recipients increased. The New York State safety net program is more generous than the federal program since the welfare reform act of 1996. There was a mixed pattern across the region, however, with increases in Columbia, Sullivan, Dutchess, and Greene, with declines in the other counties. There was a similar pattern for expenditures. New York City and New York State had increases in both recipients and expenditures for both types of program, federal and state.

The number of recipients for supplemental security income increased moderately for the region, with a mixed pattern across the counties. The expenditures for supplemental security income increased for the region by nearly 20%, with increases in every county.

The number of recipients and the level of expenditures increased for food stamps in all counties and the region as a whole. Still, the increases in the region were smaller than New York City and New York State.

Special Focus

The influence of New York City on the Hudson Valley region is important to explore, in terms of impacts on home prices, commuters, migration, and employment trends. The Hudson Valley is part of the New York/New Jersey Metropolitan area, which serves as both a magnet and a competitor for industries located in the region. There is a geographic complementarity, as in industry clusters, as well as competition for firms and workers.

The indicator used in this analysis is .location quotients.. The relative intensity of a given sector in a metropolitan area is compared with the national average. Any number greater than one indicates employment intensity higher than the national average. Similarly, any number less than one indicates a relatively low share of employment in that sector.

The role of New York City as a manufacturing center is lower than other metropolitan areas, where the leadership is greater in Detroit, Los Angeles, Chicago, and Dallas. New York's role in this sector has declined further over the decade of the 1990s.

The information sector consists of internet service providers, publishers, broadcasting studios, music, motion pictures, telecommunications, wireless, and cable producers. New York City has a concentration higher than the national average, but Washington, D.C., Los Angeles, and Dallas rank even higher. New York has declined relative to other metropolitan areas over the decade of the 1990s.

New York City is the strongest of the largest metropolitan areas in the finance sector, by a large margin, although there has been a relative decline since 2000.

New York is also strong in professional and business services, which includes computer programming, management consulting, advertising, accounting, legal, research and development, and engineering, but is exceeded by Washington, D.C., Detroit, Miami, and Chicago.

The implications are that the Hudson Valley may be better able to attract companies and people in occupations that are strongly related to finance, business and professional services, and information.

One particular cluster in the Hudson Valley, the research and development cluster, including information technology and biotechnology, may have positive growth prospects, given the strengths in the metropolitan area. For example, IBM continues to invest in its R&D facilities in the Hudson Valley, and in its global services, in spite of selling its PC unit.

Commuting professions and Income Levels

The professions with the longest average commutes in the Hudson Valley tend to be in employment sectors in which New York City is strong. The higher pay and critical mass of employment opportunities in key sectors tend to draw labor force from a wider commuting area.

Finance, legal, and media occupations in the Hudson Valley tend to have longer commutes, with a higher percent of the population commuting more than 60 minutes. That suggests that commuting relationships in the Hudson Valley are related to industry clusters in New York City.

There is also a strong relationship between commuting time and income. Those with incomes greater than $200,000 are more likely to commute more than 60 minutes, for example, than those with incomes less than $50,000.


The recent and continuing decline in the dollar may affect the region in several respects:


The role of finance in New York City may continue its recent declines, given global competition from other currencies and other global finance centers.

Housing and interest rates

Especially if Asian central banks begin to sell their large holdings of the dollar, long-term interest rates will rise, with a negative impact on home mortgage rates and the housing market.

Manufacturing and Business Services

While manufacturing employment continues to decline in the region, New York City, and nationally, the professional and business services sector continues to have good growth prospects.

New York Times, Wall Street Journal, Business Week, U.S. Department of Labor, U.S. Bureau of Economic Analysis, U.S. Census Bureau, New York State Department of Labor, New York State Department of Taxation and Finance, New York State Association of Realtors, Stewart Airport, Westchester Airport, U.S. Bankruptcy Court, Cleveland Federal Reserve Bank.