Hudson Valley Review

Fourth Quarter 2003

Marist College

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

March 2004

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

Fourth Quarter 2003

Summary and Highlights
National Review
Regional Review

Annual 2003

Special Focus


Fourth Quarter 2003

U.S. Nonfarm Employees

Hudson Valley Employment

Home Sales in Hudson Valley Counties

Stewart and Westchester Airports


Consumer Price Index

Annual 2003 Exhibits


Home Sales in the Hudson Valley



Sales Tax Collection

Passenger Traffic

Special Focus


Location Quotients

Summary and Highlights
Hudson Valley Review - Fourth Quarter 2003

  • Jobs continued to expand in the Hudson Valley for the fourth quarter, 2003, and for the full year. This employment growth was apparent in both measures of employment, by resident and by employer. While national job growth remains sluggish, the region has experienced nine consecutive quarters of employment growth, in terms of jobs held by residents.
  • Manufacturing employment is continuing to decline, while the region shows considerable strength in services. Gains were observed in health, education, business and professional services, as well as leisure and hospitality in the fourth quarter. For the fourth quarter and for the full year of 2003, there were declines in the information services sector.
  • Unemployment rate for the region was 4%, much below New York City, New York State, and the U.S.
  • Home sales and sales tax revenue both continued to increase.
  • Recovery at Stewart Airport is shown in both passenger traffic and cargo.
  • Tourism is declining, according to selected indicators at National Park Service locations in the region, including Roosevelt/Vanderbilt and Martin Van Buren sites. New visitor facilities are opening in the region, including new hotels and visitor centers, with expanded marketing campaigns also contributing to a favorable prospect.

Special Focus

Favorable trends in the region are underscored by migration data from the Internal Revenue Service. The region shows a net in-migration with respect to the wider New York/New Jersey Metropolitan area, as well as high tech states and the balance of New York State.

Location quotients, a standard measure of employment intensity by sector, shows that Hudson Valley counties have a larger share of employment in high tech, biotech, and finance sectors than the national average.


Even record low interest rates and three consecutive tax cuts have left the national economy with slow job growth. The job creation in the Hudson Valley stands as an exception to the national pattern. The Hudson Valley has a relative employment concentration in sectors which are showing a positive trade balance in the U.S. Balance of Payments, such as semiconductors and services. In addition, New York State is the fifth largest exporting state in the U.S. Still, outsourcing, growing trade deficits and government budget deficits, as well as stock market gyrations, will place a drag on the regional economy, along with the U.S.

Within this national context, prospects for continued job growth in the region remain very modest, at an annual rate of 1%.

National Review - Fourth Quarter 2003

The Gross Domestic Product increased by 4.1% in the fourth quarter of 2003, down from 8.2% in the third quarter. The GDP has been expanding consecutively for nine quarters, since third quarter, 2001. Personal consumption expenditures grew more slowly, at 2.7%, and production of durables goods actually declined by .1%, a sharp turnaround from the 28% expansion of consumer durables in the third quarter.

Gross private domestic investment continued to increase strongly, at a rate of 15.8%, up from 14.8% in the third quarter. This increase in investment is the strongest since second quarter, 2000, before the 2001 recession. Investment in equipment and software increased by 15.1% in the fourth quarter, down slightly from the increase of 17.6% in the third quarter. This expansion of IT investment and software in the second half of 2003 was the most rapid since the first quarter of 2000. Residential investment increased by 8.6% in the fourth quarter, down from 21.9% in the third.

Purchases of durable goods and investment in equipment and software were exceptionally strong in the third quarter, at rates that were not sustained in the fourth quarter. Nonetheless, these third quarter boosts, from low interest rates and tax cuts, pushed up GDP for the full year, 2003.

Exports grew faster than imports in the fourth quarter, continuing that pattern from the third quarter, turning around the declining exports in the first half of 2003. The improved export performance in the second half of the year may have been assisted by the lower value of the dollar recently.

The implicit price deflator for GDP grew by 1.2% in the fourth quarter, down from 1.6% in the third.

Productivity in the nonfarm business sector grew by 5.4% in the fourth quarter year over year, up from 5.3% in the third quarter. This is the most rapid gain since third quarter, 2002. Productivity in the manufacturing sector also grew at a more rapid rate of 5.8% in the fourth quarter, compared with 5.3% in the third quarter.

Full Year, 2003

The GDP grew by 3.1% in 2003, up from 2.2% in 2002 and .5% in 2001. Consumption grew by 3.1% in 2003, down slightly from 3.4% in 2002 and up from 2.5% in 2001. Reversing declines in 2001 and 2002, gross private domestic investment grew by 4.3% in 2003, and equipment and software increased by 5.5%.

For the full year, exports grew by 2.1% in 2003, reversing declines in 2001 and 2002, but still increased more slowly than imports.

For the full year of 2003, the GDP price deflator increased by 1.6%, up slightly from 1.5% in 2002, but much slower than the 2.4% gain in 2001. While the Consumer Price Index was in the range of 3% for services, the CPI for goods, excluding food and energy, was declining by nearly 3%. In the last quarter of 2003, commodity spot prices were increasing by over 10%, year-over-year.

National Review 1

From Cleveland Federal Reserve Bank, January, 2004.

Full year productivity in the nonfarm business sector grew by 4.4%, down from 5% in 2002. Manufacturing productivity also grew more slowly for the full year 2003, down to 5.1% in 2003 from 7.2% in 2002. Unit labor costs rose by .4% in 2003, reversing the decline by 3% in 2002.

Employment costs rose by only .7% in the quarter ending in December, 2003. Wages and salaries increased only by .5%, in contrast to the benefit costs rise of 1.2%. For the full year, total compensation of civilian workers rose by 3.8%. Wages and salaries only rose by 2.9%, while benefit costs increased by 6.3%. A similar pattern held for private industry and for state and local government employees, except for the slower wage growth of the state and local government workers. The rate of increase in benefit costs is the highest since the early 1990s.

National Review 2

From the Federal Reserve Bank of Cleveland, December, 2003.

While GDP growth from the 2001 recession has been faster than the recovery from the average post-war recession, the growth of employment has been slower. Payroll employment was still shrinking in 2003, by an average monthly decrease of 4 thousand jobs for the full year. Capacity utilization remained below 75% for most of the last half of 2003, even in high tech sectors.

National Review 3

From Cleveland Federal Reserve Bank, January, 2004.

The U.S. trade deficit continued to grow in 2003. The annual deficit for the full year of 2003 reached a record $489.9 billion, 4.5% of GDP. This share of GDP has increased sharply in the last few years, from 1.9% in 1990 and 4% in 2002.

While there was a trade deficit in capital goods in 2003, the balance in semiconductors has been positive in recent years.

Semiconductors (mil. $) 2000 2001 2002
Exports 60,077 45,066 42,235
Imports 48,354 30,422 26,015
Balance 11,723 14,644 16,220

Although full year results from 2003 are not yet available, the quarterly and monthly data for semiconductor trade indicates that this trend has continued.

Semiconductors (mil $) 1st quarter 2003 2nd quarter 2003 3rd quarter 2003 December 2003 January 2004
Exports 10,705 11,318 11,720 4,287 4,024
Imports 6,122 6,152 6,202 2,116 2,155
Balance 4,583 5,166 5,518 2,171 1,869

Perhaps for this reason, New York State is the fifth largest exporting state in the U.S., with Texas and California in first and second place, as of January, 2004.

National Review 4

From Cleveland Federal Reserve Bank, January, 2004.

Because of these persistent trade deficits, the U.S. is now more likely to run a deficit on income on investments overseas, as opposed to payments to foreigners for their returns on investments in the U.S.

Income (mil $) 2000 2001 2002 2003 1st quarter 2003 2nd quarter 2003 3rd quarter
Receipts 346,861 277,362 255,542 62,901 64,310 67,344
Payments 327,256 266,673 259,512 62,710 62,580 64,749
Balance 19,605 10,689 -3,970 191 1,730 2,595

Based on data for three quarters in 2003, the deficit on income for the full year of 2002 is not likely to be repeated in 2003.

Regional Review - Fourth Quarter 2003

Employment and Earnings

Place of Residence

Jobs held by residents increased by 1.7% in the fourth quarter, 2003, from one year ago. There were gains in all counties except Greene, while the fastest increase was in Rockland, Orange, Dutchess, and Putnam counties. Employment in New York City and New York State continued to decline.

For the region as a whole, labor force grew faster than the number of jobs, so the unemployment rate increased slightly to 4%. In two counties, Dutchess and Westchester, jobs grew faster than labor force, so the unemployment rate declined, remaining below 4% in both counties. In New York City, the unemployment rate declined for the opposite reason, the labor force declined faster than the number of jobs. The unemployment rate in New York City was nearly 8% and in New York State still over 6%.

The region has had nine quarters of employment expansion, although the pace has slowed throughout 2003. Because the job growth for the nation has been much slower, the unemployment rate in the region remains far below the U.S. average.

Place of Work

Jobs located in the region also increased by 1.5% from one year ago. While manufacturing declined by over 3%, services gained by nearly 2%, particularly in health and education services, and hospitality. There were mixed results elsewhere in the services sector. The information sector decreased by almost 6%, but the financial services sector gained by nearly 2%. The strongest total gains were in Putnam, Orange, and Rockland counties, while there was no change in Columbia, and small declines in Greene and Ulster. The only county with gains in manufacturing was Dutchess, where there was a gain of 100 jobs.

Home Sales

Home sales expanded strongly in the region in the fourth quarter, stoked by continuing low interest rates and northward migration. Sales expanded by 26.6% for the region as a whole, with mixed pattern by county.

There was a mixed pattern of building permits, an indicator of future construction. There were large increases in Columbia, Greene, and Dutchess, and large declines in Ulster and Westchester, with an overall slight decline of 1.3% for the region in single family homes. There was a large gain for the region in all residential construction, with a gain of 27% over one year ago.

Regional Airports

Both passenger and cargo traffic increased at Stewart Airport from year-ago levels, while Westchester declined by 10%.


The number of visitors taking tours at the Roosevelt-Vanderbilt sites in Dutchess county decreased slightly from year-ago figures, by 3.23%. The number of visitors to the grounds also declined, possibly due to the unusually harsh winter weather. Total visitation also declined to the Van Buren site.

Consumer Price Index

In the fourth quarter, 2003, there was a significant divergence between regional and national inflation rates. The New York/New Jersey Metropolitan area had 3% consumer price inflation, compared with 2% or less for all U.S. cities. This difference is unusual in the context of high unemployment rates in New York City, and may reflect higher costs of operations. There was a similar pattern in 2002, but New York area had lower rates of inflation in 2000 and 2001.

Retail Sales

For the fourth quarter, sales tax revenue increased by nearly 12%. This boost in year-over-year earnings was partly due to the increase in New York State sales tax by .25% in June, 2003.


Bankruptcy filings for the Southern District increased by 6.3% from one year ago, faster than for other regions and for all of New York State. The Southern District, which includes much of the Hudson Valley as well as New York City, had declines in business filings but increases in non-business filings, which are the largest share of the total. The Northern District, which includes Columbia, Greene, and Ulster, had a very slight increase from one year ago, and had large declines in non-business filings.

Annual, 2003


Place of Residence

Jobs held by residents expanded by 1.9% for the full year 2003, faster than New York State and the U.S., but slower than 2002. Jobs expanded in all counties except Sullivan. The fastest growth was in Columbia, Dutchess, and Putnam. For the region, jobs grew faster than the labor force, so the unemployment rate declined.

Place of Work

Total jobs located in the region expanded more slowly, with a mere .6% growth over one year ago, while manufacturing continued to decline. All service sector jobs increased except for information, with professional and business services growing by more than 2%. Jobs expanded in all counties except for Sullivan. All counties have greater employment levels in 2003 than during the 1990s except for Dutchess.

Home Sales

There was a decrease of 1.9% in the number of homes sold in the region in 2003 from year ago levels, offsetting somewhat the increase of 16.6% from 2001 to 2002. There was a mixed pattern across the counties.

The number of building permits also decreased for single family homes for the region by 12% from year ago levels, in spite of large increases in Columbia, Dutchess, and Greene. The regional average for all residential new construction for the region increased by 18%.


Visitors taking tours to the Roosevelt-Vanderbilt sites decreased for the full year of 2003 by 13%. For the Martin Van Buren site the decrease was smaller, 9%.


Bankruptcies increased for the Northern and Southern Districts by over 6% in 2003, more than the average for New York State. Non-business filings are the largest share of the total in both southern and northern districts. Non-business filings increased in the southern district, but decreased in the northern district, from year-ago levels.

Sales Tax

Sales tax revenue collections increased by over 7% for the region, with increases in all counties. During the year of 2003, there were rate increases in New York State, and in some counties, as well.

Regional Airports

Passengers embarking from Stewart Airport increased by 4% for the year. The number enplaned in 2003, 188,791, was still less than half of the peak year of 418,828 in 1997.

Special Focus


Data available from the Internal Revenue Service provide an annual measure of migration.

For the period 1996 to 2002, the number of tax returns for filers who moved to the Hudson Valley from the New York/New Jersey metropolitan region exceeded the number of filers who moved from the region to the metropolitan area. For the entire period, 119,842 filers moved into the region, while only 721 moved out of the region to the larger metropolitan area. The southern most portion of the region, particularly Westchester, Orange, and Rockland, experienced larger numbers of in-migrants.

There was considerable migration within the region, as well. A total of 76,091 filers moved within the region during the period 1996-2002, with a general trend of increasing migration over the period.

From high tech states there was a net in-migration into the Hudson Valley, including California, Massachusetts, Texas, and North Carolina. There was also a net in-migration from the rest of New York State into the Hudson Valley counties.

Location Quotients

A technique for measuring the concentration of types of employment in a region is to compare the relative intensity of that sector as a share of total employment, to the share of that same sector of total employment in a comparison region.

Using these measures, the relative intensity of high tech employment in the Hudson Valley compares favorably with the U.S. as a whole for computer manufacturing, as well as internet service providers, wired telecommunications carriers, and chemical engineering. In some cases, the Hudson Valley compared favorably with other high tech regions as well.

The location quotient for biotechnology also shows the Hudson Valley has a higher share of employment in that sector than the U.S. average, using the measure by counties. Using comparison metropolitan areas, only Albany and Bergen county, New Jersey, have higher than average shares of biotech employment.

Similarly, by county, the Hudson Valley has a higher share of finance sector employment than average for the U.S. By MSA, only Albany has a higher share than average.

Sources: New York Times, Wall Street Journal, Federal Reserve Bank of Cleveland, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics, New York State Association of Realtors, New York State Department of Taxation and Finance, Stewart Airport, Westchester County Airport, U.S. Department of Labor, New York State Department of Labor, Internal Revenue Service, National Park Service.