A recent disappointing national jobs report and lower consumer confidence have rattled Wall Street and prompted some economists to suggest a double-dip recession could be in the offing if business conditions don”™t improve.
However, economists that cover the New York City metropolitan area, including Westchester and the lower Hudson Valley, say the region is in the midst of a recovery and is not in any imminent danger of suffering a significant downturn.
Johny Nelson, regional labor market analyst covering the seven-county Hudson Valley region for the state Department of Labor, told the Business Journal that while Westchester is not back to where it was prior to the start of the recession, the county continues to create jobs and lower its unemployment rate.
He said Westchester”™s unemployment rate in April was tied for third-lowest in the state at 6.3 percent, down more than two percentage points from the 8.4 percent rate posted in January 2010 and lower than the 6.9 percent rate posted in April 2010. The state”™s unemployment rate in April 2011 was 7.9 percent, down slightly from 8 percent a month earlier.
The Bureau of Labor Statistics reported on June 3 that the national unemployment rate edged up to 9.1 percent, up from 9 percent after just 54,000 jobs were added nationwide in May.
“Over the past several months we are seeing a nice turnaround in the private sector job counts,” Nelson said.
“I think that what we could hang our hat on is that more industries are joining this recovery. So, this growth is not just isolated in one area. There are many industry sectors that are reporting year-over-year job gains.”
Nelson said private sector employment in the Hudson Valley region increased 3,100 or 0.4 percent, to 717,700 for the 12-month period ended April 2011. The government sector here shed 4,900 jobs in the past year and is expected to continue with governments and school districts shedding jobs due to budget cutbacks.
“Overall, when you look at the regional economy, we are seeing a slight turnaround,” Nelson said.
While he believes the worst is behind the regional economy, “There is still much, much room for improvement,” noting that Westchester”™s jobless rate in December 1999 was just 2.9 percent. Prior to the start of the recession in 2008, the unemployment rate averaged around 5 percent.
While recognizing that the recent U.S. jobs numbers point to at least a temporary national economic slowdown, Nelson said, “Over the past several months, job seekers (in the Hudson Valley) have a reason to feel a little bit more optimistic because as far as private sector jobs are concerned, those jobs are coming back slowly but surely.”
Nelson said the jury is still out on the depth of the economic recovery for the remainder of this year. “The national numbers came out a little softer than expected but I think overall the region is showing some good recovery signs. When you look at the numbers, being that a lot more industries are participating in this recovery, it gives you the hope and the confidence that this is not an isolated recovery.”
Metro area showing strength
When asked about the prospects for New York City”™s economy for the remainder of the year, Rae Rosen, assistant vice president and senior economist at the Federal Reserve Bank of New York, said, “We think that there is nothing in the picture as of today to derail the current pace of expansion (in New York City).”
Regarding Westchester, she said the county”™s economy is expected to continue to grow, but at a slower rate than New York City.
The Federal Reserve Bank in its most recent analysis on employment trends in the Second District (New York state, New York City and Fairfield County, Conn.) reported mixed results. The agency in the May 6 report painted an improving jobs picture for the state and city. Fairfield County is on pace with the U.S. economic job growth rate, while New Jersey has experienced more modest employment gains.
“We expect employment in New York and New Jersey to continue to recover, led by growth in private services jobs, though there are downside risks to the region from state and local government fiscal restraint,” said William Dudley, president and CEO of The Federal Reserve Bank of New York.
The recovery in New York City has been fueled by job creation in the professional and business services sectors. “This is an unusual development, as New York City has normally relied on Wall Street to lead job growth following economic downturns,” the report stated. “Financial sector employment, while initially lagging behind other sectors, has gained momentum in the last year, augmenting the expansion of non-financial sector employment.”
According to the state Department of Labor, private sector employment in New York City rose by 44,400, or 1.4 percent, to 3,183,400 for the 12-month period ending April 2011. Government jobs fell by 18,000 during that period.
National economy faces tests
Bruce E. McCain, chief investment strategist for Cleveland-based Key Private Bank, said that for the first six months of the year the national economy has made some progress but described it as an ongoing “anemic recovery” by historical standards.
He said the most significant cause for the slow rate of economic growth has been consumers continuing to struggle with high debt and incomes that have not kept pace with rising health care, energy and educational costs.
While spending has increased of late, he noted that consumers “simply don”™t have the resources to spend as aggressively as we might like to drive GDP growth.”
In explaining the most recent disappointing job numbers, McCain said reports indicated that “small businesses in particular almost shut down the expansion of new jobs and they have been the primary source of new jobs over the last decade or so.”
He said small businesses have not seen the extent of the recovery in comparison to larger businesses that are engaged in exports, which are becoming a major driver of economic activity. Also, small businesses are more reliant on consumer spending and perhaps have not been able to pass along all the price increases they have incurred on production of their particular products.
“Businesses have just been incredibly cautious about expanding business activity over the course of this recovery and expansion,” he said.
Some of the areas of particular growth since the recovery began in the third quarter of 2009 include industrial production, business revenue, exports and capital expenditures for capital equipment and software. However, the recovery has been sluggish in terms of job growth, residential and non-residential construction and consumer spending.
“Keep in mind that the consumer accounts for 70 percent of the economy. If you have a weak consumer (sector) it is really hard to make up for that with strength in other parts of the economy,” McCain said.
McCain believes the U.S. economy will continue on its pace of slow, sluggish growth for the remainder of the year.
At least for now, the U.S. economy has not produced negative GDP growth of late. To officially be a double-dip recession, the economy would have to post two consecutive quarters of negative GDP growth.
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