Hudson Valley Review

Fourth Quarter 2002

Marist College

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

March 2003

The assistance of Scott Bergen, Viktor Sapezhnikov, Lindsay Furtado and Luke Gallagher is acknowledged and appreciated.

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Table of Contents

Fourth Quarter 2002

Summary and Highlights
National Review
Hudson Valley Review
Special Focus

Fourth Quarter 2002 Exhibits

U.S. Nonfarm Employees


Production Workers

Home Sales


Stewart and Westchester Airports

Consumer Price Index, Bankruptcies and Sales Tax Collection

Temporary Assistance

Annual 2002 Exhibits


      Home Sales in the Hudson Valley

      Temporary Assistance

      Special Focus:



Summary and Highlights

The war in Iraq looms large in economic prospects:

Regarding the national economy, optimists see a quick war in Iraq, after which the economy will rapidly recover and oil prices decline.

Pessimists see

  • a long and costly engagement in occupying and rebuilding Iraq, if not also the war itself,  
  • already tattered international alliances and worldwide decline in U.S. prestige and moral leadership,
  • and prospects for a protracted threat from global terrorism.

The most dire formulation views the war in Iraq as a futile attempt to reinvigorate the mature oil and auto industries, while putting at risk world peace and the global environment.

Regarding the Hudson Valley economy,


Fourth quarter jobs held by residents increased by 2.57% over one year ago. The unemployment rate held steady at 3.68%. Average hourly earnings increased by the region by 2.74%, with a contribution from increases in both hourly pay rates and hours worked. That pace still lags behind the gains for New York State and the U.S. which exceeded 3%.

According to unrevised numbers, jobs located in the region grew slightly in the fourth quarter, at a pace of .34%, which was still the fastest pace of quarterly expansion of the year. According to revised numbers, the job expansion rate was .38% for total nonfarm jobs, and .15% for private sector jobs. Declines exceeding 4% occurred in manufacturing and in the information sector, which includes printing and publishing.

Stewart passenger traffic is recovering, while cargo tonnage shipped is still declining. The gains in Stewart passenger traffic of 15% exceed the pace in Westchester county, of 10%, but Stewart's traffic remains below the peak level of 1997.

The number of homes sold declined in the region by 6.4%, while prices continued to rise by various measures. Comparisons with other areas suggest that the pace of home price increase in the Hudson Valley is high by national standards.

The number of tours at the Roosevelt/Vanderbilt site declined by 9% from the same quarter one year ago, but the visitors to the grounds increased.

Sales tax collections increased in the fourth quarter in all counties, suggesting that retail sales remain robust in the region.

Bankruptcies increased for the quarter, just in line with the state average pace of 14%.

For some counties in the region, total welfare recipients and expenditures are beginning to increase, for the first time since the welfare reform of 1996. For the region as a whole, the total number of recipients and expenditures has declined for the fourth quarter, while recipients and expenditures for the state-funded safety net increased.

The rate of inflation was higher in the New York/New Jersey region than the average for all U.S. cities. The regional average exceeded 3% for the first time since late 2000.


In unrevised numbers, the jobs held by residents increased by 1.9% for the full year of 2002. This was the most rapid growth rate since 1997, and was preceded by two years of slight declines. The unemployment rate remained at 4%, the highest since 1997. Hourly earnings increased by less than 2% for the year, less than half of the rate of increase for 2001.

Employment revisions, combined with a new system of classification, have shifted the estimates of the size of the employment of residents and labor force in the region, showing an overall increase in magnitude of roughly 3.5%. According to the new classification system, the manufacturing sector is smaller, and there is now more detailed information on various components of the service sector.

Revised employment figures for jobs located in the region show a slight increase in total nonfarm jobs by .16% from one year ago, but a decrease in private sector jobs by nearly .5%. Goods producing jobs continue to decline, while the pace of growth of service producing jobs has slowed. The most rapid job growth was in tourism, now called "leisure and hospitality," and in government. Construction declined by 1% after two years of rapid growth.

According to the new classification system, employment in tourism exceeds manufacturing, and the largest employment sectors are (1) trade, transportation, and utilities, (2) government, and (3) education and health services, (4) business and professional services, consecutively. Construction and finance combined would be the fourth largest sector.

Air traffic for the region decline by 10% at Stewart and remained stable at Westchester.

The number of homes sold in the region increased for the year by nearly 7%, with gains in most counties. The average annual selling price increased by nearly 20%, higher than New York State and the U.S.. Construction permits increased by 2% for single family homes and 3% for all residential construction.

Regional sales tax collections increased by 9.6% for the year.

For the full year of 2002, visitation to the Roosevelt Vanderbilt site was nearly even. compared with one year ago.

Bankruptcies increased by 10% for the southern district, from one year ago, double the rate for all of New York State. This district includes New York City, and can be the result of difficult business conditions following September 11, 2001.

For the full year, the total number of recipients and expenditures decreased for the welfare program, but expenditures increased for the safety net, in 2002.

Special Focus


A special focus on regional banking shows the impact of the ongoing consolidation of financial institutions. The market share of the largest banks continues to increase, and consolidations have brought banks from other regions of the U.S. into the Hudson Valley.

Commuting Patterns

While commuting has increased overall, the Hudson Valley continues to be a relatively integrated economy. Nearly three quarters of the residents work in the region, and over 90% of the workers live in the region.

Vacancy Rate

In partnership with Prudential Serls and McGrath & Company, there are estimates of the office and industrial vacancy rates in Dutchess County.  While office and flex space have vacancy rates in the range of 20%, industrial is 40%.  Location and obsolescence are issues preventing higher occupancy of existing industrial buildings.


Overall growth of jobs located in the region remains sluggish, in both revised and unrevised numbers. Private sector jobs are declining in the region, New York City, and New York State. The largest employment sectors in the region depend on consumer spending and on government. While stable until now, the region is vulnerable to shocks to consumer confidence and to the ongoing difficult fiscal environment at the federal, state, and local levels.


Fourth Quarter Report Hudson Valley Review

National Review

The real gross domestic product increased at a rate of 1.4% in fourth quarter, 2002, down from a 4% growth rate in the third quarter. Personal consumption expenditure only grew by 1.5% in the fourth quarter, down from 4.2% in the third. Investment accelerated to a rate of 6.2% in the fourth quarter, up from 3.6% in the third. The largest gains were in residential investment, of 9.4%, the most rapid increase since 14.2% in the first quarter. Expenditures on equipment and software increased by 6.6%, down slightly from the third quarter rate of 6.7%. Expenditure on equipment and software has now increased for three consecutive quarters, after a streak of six consecutive quarters of declines.

In the fourth quarter, exports declined and imports increased, leading to continuing record levels of U.S. trade deficits. In the first half of 2002, the U.S. trade deficit reached 4.7% of GDP. For the full year, the 2002 trade deficit was $435.2 billion, up from $358 billion in 2001. Foreigners use revenue from their trade surplus with the U.S. to buy U.S. financial assets. Because foreigners have purchased more assets in the U.S. than we have abroad, the U.S. negative net international investment position equaled $3 trillion, nearly 30% of GDP, in 2002. Since its most recent peak in February, 2002, the U.S. dollar has depreciated nearly 11% on a trade-weighted basis against the major industrial countries.

Government spending increased by 4.9% for the quarter, with the largest increases in national defense, which increased by 11.4%.

The implicit price deflator for GDP increased by 1.6%.

For the full year of 2002, GDP increased by 2.4%, up from the .3% growth in the full year of 2001, in which the most recent recession occurred. Still, the growth rates of the past two years have been the lowest since 1991, the year of the previous recession. For the full year of 2002, the implicit price deflator increased by 1.1%, low enough to raise the specter of deflation.

Productivity growth in non-farm business sector continued its rapid increase. For the fourth quarter, productivity grew at a rate of 4.1%, and at a rate of 4.8% for the full year. Because productivity was growing faster than compensation, unit labor costs actually fell by 1.9% for the full year, for the first time since 1984..

In manufacturing, productivity grew by 4.4% in the fourth quarter, and 4.5% for the year, also leading to reductions in unit labor costs of .7% for the full year.

Employment costs are moderating, according to the Employment Cost Index from the Department of Labor. In the fourth quarter, compensation costs increased by .7%, down from .8% the previous quarter. For the full year, compensation increased by 3.4%, down from 4.1% in the previous year. Benefits costs increased by 5% for the full year, down slightly from the 5.2% in 2001, but higher than the previous four years.

Nonfarm payroll employment declined by .9% in 2002, one of only four of such decreases since 1972. Manufacturing employment declined by 60,000 in 2002, a smaller decline than the decrease of 109,000 in 2001.

While conventional mortgage interest rates have decline from over 8.5% in 2000 to less than 6% at year end of 2002, mortgage debt service burden as a share of disposable income has reached 1991 record high levels once again. Consumer debt service burden as a share of disposable income has not quite regained the previous peak level of 8.4% in 1987.

As of year-end 2002, major stock market indices have declined for three years in a row.

At the end of February, 2003, oil prices rose to $40 per barrel, a post Gulf War high.

Consumer confidence surveys by both the University of Michigan and the Conference Board showed further declines in February, 2003, to the lowest levels since 1993.

While confidence in the dollar has weakened, the price of gold reach a six-year high, at $379 a troy ounce, in February.

The Congressional Budget Office now projects a federal fiscal deficit of $287 billion in 2003 and $338 billion in 2004, a dramatic turnaround from the projected budget surplus in 2000. Cuts in federal spending then trickle down to the state and local level, leading to spending cuts and tax increases. Most states in the U.S. face such revenue shortfalls, particularly New York State, with the added impact of September 11, 2001. New York State is projecting a budget deficit of $10 billion in 2003-2004, along with $2 billion carried over from the current fiscal year.

According to revised employment figures, New York State total employment declined by 1.8% in 2002 from one year ago, and private sector employment declined by 2.4%. Among major sectors, manufacturing employment decline by 7.9%, and information declined by 8.7%, as defined by the new industry classification scheme, NAICS. Professional and business services employment declined by 4.4%, while health and education services increased by 2.2%. Government employment also increased by 1.4%, year over year.

In January, 2003, U.S. unemployment rate was 5.7%, while New York State was 6.3% and New York City was 8.6%.

New York City has lost nearly 176,000 jobs in two years, with an unemployment rate of 8.4% in December, 2002. Bonuses paid at Wall Street financial firms in 2002 were less than half the level of the boom year 2000, due to the decline in the stock market and in the pace of mergers and acquisitions. The total bonuses were $7.9 billion in 2002, down from $12.6 billion in 2001, and $19.4 billion in 2000, according to the New York State Comptroller, which affects by New York City and New York State budgets.


The national economy is at risk for several reasons:

  • Growth remains sluggish, even in the face of expansionary fiscal and monetary policy: tax rates have already been cut enough to eliminate the federal budget surplus and interest rates are at record lows;
  • Investment has recovered to some degree, but consumption is burdened by low consumer confidence and high debt levels;
  • Exports are weakened by slow global growth rates;
  • Government spending is hampered by the war effort and by existing and projected deficits; projected cuts in non-defense spending will harm domestic education and infrastructure and weaken state and local finance;
  • The war in Iraq may raise oil prices that are already at record levels, although OPEC has promised an accommodating stance;
  • The war in Iraq may intensify fundamentalist resistance to western-style modernization, and has already been a recruitment device for terrorist organizations;
  • The war in Iraq is based on the assumption that military power is more important than international political alliances; in spite of some diplomatic efforts to win support, the war in Iraq remains a U.S. initiative;
  • Post-World War II free trade and globalization requires collaboration and acknowledgement of interdependence; unilateral war risks weakening those economic ties based on trade and cooperation among nations, which have been built over a fifty-year period;
  • Waging an unprovoked war jeopardizes the international rule of law, and risks destabilizing other regions throughout the world;
  • A unilateral war risks further reducing global investment in the United States and further lowering the value of the dollar; a falling dollar would lead to domestic inflation and higher interest rates, further weakening the recovery from the 2001 recession;
  • The war in Iraq implicitly, if not explicitly, perpetuates U.S. reliance on oil, by reducing the fiscal capacity to support R&D into alternative fuels and to finance alternative transportation programs. Global auto firms are beginning to show signs of distress, including Ford, GM, and Volkswagen. Several airline firms are already near bankruptcy, from the combined threat of terrorism and high fuel costs.

On the positive side, productivity growth remains high, and new technologies are emerging with great promise in new products and improved methods of production. Nonetheless, military spin-offs of high technology will have only a small positive effect, compared with costs and risks of unilateral war.


Hudson Valley Review

Fourth Quarter, 2002

Place of Residence

The jobs held by residents in the Hudson Valley grew by 2.6% in the fourth quarter, 2002, with increases in all counties. This regional growth exceeded New York City, New York State, and the U.S. The largest percent increase in jobs were in Greene, Sullivan, and Putnam counties.

The labor force grew by nearly the same pace as the number of jobs, so the unemployment rate for the region stayed roughly constant, at 3.7%. This is considerably below the unemployment rates for New York City, at 8% for the quarter, and New York State and the U.S., which both exceeded 5%.

The average hourly earnings of production workers increased by 1.8% for the quarter, with gains in all areas of the region except Newburgh. Dutchess and Westchester had the largest increases in hourly earnings. Weekly hours worked decreased in three of the five areas for which data is available in the region, leaving the regional average up less than 1% for the quarter. The combined effect of weekly hours and earnings left the regional weekly earnings up by 2.7% for the region, with declines in Newburgh and Rockland. Westchester and Dutchess showed gains of 6.7% and 4.1% respectively, with a smaller increase of 3.3% in Albany. New York State and the U.S. had gains in weekly earnings of over 3%, due to increases in both hourly rates and weekly hours.

Place of Work

Jobs located in the Hudson Valley grew more slowly, with an increase of only one third of one percent for the quarter, compared with one year ago. Manufacturing continued to decline, while there was almost no change in FIRE, and the most rapid growth was in the construction and service sectors. The most rapid growth rate was in Greene county, with job growth of almost 7%, and the only decline was less than one percent, in Columbia county. Every county in the region lost jobs in manufacturing, except for no change in Putnam and increases in Sullivan, where the base is very small.

New York City and New York State both had fewer jobs located in the state and the city than the same quarter one year ago. New York City and New York State also lost jobs in manufacturing, at a rate exceeding 4%.

The pattern was much the same with revised estimates and a different set of subcategories.

Air Passengers and Cargo

At Stewart International Airport, passenger traffic increased by roughly 15% from the same quarter one year ago. The prime determinant is an increase in the number of carriers. Cargo at Stewart is still down from one year ago by roughly 10%. Air passenger traffic at Westchester county airport increased by roughly 10% from fourth quarter, 2001.

Home Sales and Prices

The number of homes sold in the region decreased in the fourth quarter from one year ago, by 6.4% for the region as a whole, with a mixed pattern across the counties. The largest gains were in Greene, and the largest declines were in Ulster. The average declines in the region were larger than in New York State and the U.S., all of which occurred in the context of record low mortgage rates. The lower interest rates may have permitted refinancing of existing mortgages, and may have led to the bidding up of home prices, rather than increased sales. The average selling prices increased in the region, even more than New York State and the U.S. The rate of increase in the region was 22.9%, with declines in the average selling price only in Columbia county. The median selling price increased in three counties by more than 20% from the same quarter one year ago, and more than 10% in the rest, except for a slower increase in Columbia.

The average number of construction permits for single family homes increased by 4.5% for the region in the fourth quarter, with a mixed pattern across the region. The average number of construction permits for all residential construction increased slightly more, at a rate of nearly 7% for the quarter. The average dollar value per permit was roughly $200,000 and did not show significant increases from one year ago, with considerable variation across the region. The monthly average dollar value of construction was up in the range of 8%.

According to figures compiled by the Wall Street Journal regarding housing price trends in selected areas throughout the country, the Hudson Valley rate of price increase was among the highest in the country. This rapid pace of home price inflation has raised some concern about a housing price bubble in the region. The same phenomenon has received national attention in recent remarks by the Federal Reserve chairman.


The number of visitors taking tours at the Roosevelt/Vanderbilt sites decreased in fourth quarter from one year ago by nearly 9%. Total visitation to the grounds increased slightly, indicating a continuing attraction of the sites themselves.

Sales Tax Revenue

The average increase in sales tax revenue was12.5% in the region in the fourth quarter, with all counties showing increases.


The total number of bankruptcies increase by 14% in the region, compared with one year ago. This pace is slightly below the rate for the whole of New York State, and substantially above the 8% rate for the U.S. as a whole. The Southern region includes New York City as well as the Hudson Valley.

Transfer Payments

The numbers of recipients for New York State safety net programs have increased for the region in the third quarter, 2002, the last period for which data is available. The safety net is comprised of those individuals who no longer qualify for the federal program, due to the exhaustion of time limits based on the welfare reform of 1996. Total numbers of recipients have declined, however, for the Temporary Assistance for Needy Families (TANF), the federal program that replaced Aid to Families with Dependent Children (AFDC) in 1996, with the two year time limits. For most counties the decline in TANF offset the increase in the safety net. There were several exceptions to this pattern, however, in Dutchess, Putnam, Sullivan, and Ulster, where total numbers of recipients increased. For the region as a whole, the total number of recipients declined by 13% while the safety net recipients increased by 67%. New York City and New York State showed the same pattern of decline in the total number of recipients and increase in the number of safety net recipients. Temporary Assistance expenditures showed the same pattern, with declines in total amounts but a rise in the safety net expenditures. Again the exceptions were in Dutchess, Sullivan, and Ulster, where total expenditures increased by over 10%. These exceptions suggest the beginning of a pattern of increases in welfare recipients and expenditures, in spite of the effects of welfare reform of 1996. The increases in this case are in the New York State safety net program, which will also impact local areas.

Two other income support programs are available, including Supplemental Security Income (SSI) and Food Stamps. The total numbers of recipients of SSI declined slightly for the region, and for all counties in the region, while expenditures increased by almost 3% over the same quarter one year ago. The same pattern was observed in New York City and New York State, suggesting that the reduced numbers of recipients have greater average cash needs. The number of food stamp recipients increased by over 4.5% in the third quarter, while food stamp expenditures increased by almost 10%, with increases in both recipients and expenditures observed in all counties.

Consumer Price Index

The rate of inflation, as measured by the Consumer Price Index for New York/New Jersey Metropolitan Area, increased by 3% in the fourth quarter, 2002, higher than the 2.2% rate for all U.S. cities. The rate of inflation for the full year was 2.55% in the metro area, higher than the 1.6% average for all U.S. cities. Annual Report

Place of Residence

For the full year, jobs held by residents rebounded in the Hudson Valley in 2002, expanding at a rate of 1.9%, up from a decline of .7% in 2001. The gains were observed in all counties, based on unrevised numbers. The regional employment has not yet regained its 1990 pre-recession peak, however, along with several counties including Dutchess, Sullivan, Ulster, and Westchester. The labor force grew by 2.6% for the region, up from a decrease of .4% from the previous year, with gains in all counties. The average annual unemployment rate for the region for full year 2002 was 4.06%, lower than New York State and the U.S. The highest unemployment rate in the region was in Sullivan county, at 5.05%. The lowest was in Columbia at 3.25%.

Hourly earnings have increased for the region by1.9% in 2002, down from a 4.15% gain in 2001. The strongest gains were in Poughkeepsie, with an increase of nearly 5% over one year ago, while the only decrease was in Orange. The largest increase in the decade from 1991 was in Rockland county, with an increase of 66%, compared with the regional increase of 30.7%. Average hourly earnings in the region have not kept pace with New York State or the U.S. over the decade of the 1990s.

Place of Work

Before revisions, the fourth quarter employment increased by .34% , the largest quarterly rate of gain for the year. Although still sluggish, these growth rates exceed the first quarter 2002 decline of .13%, due to the effect of the national recession.

For the full year, with unrevised numbers, regional employment grew by .18%, the slowest growth rate since 1993. The regional employment total has surpassed the previous peak employment to reach a new high of 934,920 jobs located in the region in 2002.

Employment Revisions

The system of categorizing place of work employment data has changed to a new system called NAICS. In the new system, there is more detail in service sectors, and a restricted definition of manufacturing. What was once included under manufacturing employment was such functions as corporate headquarters and R&D. Now these are listed separately under service categories. At the same time, place of residence employment data has also been benchmarked, to be more consistent with the place of work series. As a result the order of magnitude estimates of residential employment have been increased by roughly 3.5% overall for the region. Because the increase in the labor force was slightly larger than the increase in the employment, the unemployment rates are slightly higher than the unrevised numbers. The overall employment trends of the last decade seem more or less consistent with the new estimates, nonetheless.

For the place of work series, the total number of jobs is nearly the same after revisions, at total of 931,900 total nonfarm jobs located in the region. The magnitude of manufacturing, according to the new NAICS system, now counts only 70,200 jobs, with a decline of nearly 10% in the last two years. While total nonfarm jobs grew slightly, by .16% in 2002 over one year ago, the total private sector jobs declined by .47%. The only sectors with sizeable gains over the year were Leisure and Hospitality and Government. Total service producing jobs, the job machine of the region, grew only .73% over the last year.

Air Traffic

The decline in passengers in Stewart Airport for the full year 2002 was nearly 10%, falling less dramatically than the 23% decline of 2001. Westchester county airport traffic was nearly stable in 2002.

Home Sales and Prices

For the full year of 2002, the number of homes sold in the region increased by 6.9%, with gains in all counties except Rockland. This rate outpaced New York City and New York State. The largest rates of increase were in Greene and Sullivan.

The average price of homes sold increased by nearly 18% for the region as a whole, with more rapid gains in Greene, Ulster, Orange, and Putnam. The rate of price increase was similar for New York State, roughly double the U.S. average price increase for homes sold.

The total number of building permits for single family homes increased by nearly 2% for the full year 2002, with a varied pattern across the region. The increase for all residential construction was 3.3%. The average dollar value per permit also increased by 4.5% for single family homes and 12.3% for all residential construction.

Sales Tax Collections increased for the region by 9.6%, with gains in all counties.

Special Focus

Financial Institutions

The market share of the top five banks exceeds 50% in all counties in the region. This may mean relatively fewer choices for consumers and a more competitive climate for smaller banks.

The Bank of New York and Chase Manhattan, which had the largest market shares in the region in 1994 and 1998, have been surpassed by Wachovia in 2002, which only has a significant presence in Westchester and Putnam counties. Wachovia, with headquarters in Charlotte, North Carolina, also recently merged with First Union bank, which had the leading regional market share in 1998.

The regional share of the top ten banks has increased from 60% in 1994 to 72% in 2002, although there has been considerable turnover and mergers among the top ten banks over that period.

Commuting Patterns

Location of Employment for Residents

The percent of residents who are able to work where they live is highest in New York City, at 91.55%, followed by Albany, at 83%. For the Hudson Valley as a whole, nearly three quarters, or 74.7%, are able to work in the region in which they live. Within the region, the leader in this respect is Dutchess County, where 69.3% of the residents are able to work in the same county. The largest area of employment outside of Dutchess for its residents is Westchester county. The lowest is Putnam, where only 28.5% of the Putnam residents are employed in that same county. For Westchester county, 62.9% work in the county of residence, while 27.7% of Westchester residents work in New York City.

Location of Residence for Workers

Nearly all of the workers in the Hudson Valley are able to find a home in the region, a share over 90%. The largest other area of residence for Hudson Valley workers is New York City, most of whom work in Westchester. The counties in the region where the highest share of workers in the county also live in the county includes Sullivan, Ulster, and Orange. Of those who work in New York City, 86.5% live in New York City, and 5% live in the Hudson Valley, mostly in Westchester.

While opportunities for commuting provide more specialized and diverse employment opportunities, travel time and expense detracts from consumer expenditures and leisure, quality time at home and in the community.

Vacancy Rates

In the interest of providing relevant information for decision-makers, a new feature in this report is the estimate of vacancy rates and available space in Dutchess County.  Provided by Prudential Serls and McGrath & Company,  the estimates show the available space by type and by market area within Dutchess County. 

While available office space has more than doubled since 1993, the vacancy rates have remained roughly constant.  In contrast, the square footage of available industrial space has declined over that same period, with increasing vacancy rates, due to location and obsolescence.


Sources: Wall Street Journal, New York Times, Business Week, 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, National Association of Realtors, New York Association of Realtors, Federal Deposit Insurance Corporation, U.S. Bankruptcy Court.