The Northeast continues to see modest economic gains, according to the first-quarter 2015 economic analysis issued by Wells Fargo, with New York City and Boston bucking the “modest gains” tag and galloping at a Californian pace.
Only the San Jose and San Francisco regions rivaled Boston and New York City for receiving venture capital money.
“All nine states in the region have seen employment rise at a pace below the national average and many have not shared in the recent acceleration in growth seen nationwide,” Wells Fargo reported.
“Demographics play a large role in the region”™s sub-par growth history,” the report said. “Population gains have also been lower than average for more than a half century and in 2014, they were less than a third of the national rate. While job growth and population gains have been slower than the rest of the nation, income growth has held up relatively well. The region”™s higher costs of doing business tend to discourage lower value-added jobs.” Those jobs, in turn, result in stronger income growth.
- Photo courtesy Mike Mozart
According to Wells Fargo”™s Connecticut data:
Ӣ Growth accelerated in Connecticut toward the end of 2014. The state added jobs at a 1.6 percent year-over-year rate in February.
Ӣ Financial services employment represents 7.7 percent of overall Connecticut employment, while the industry accounts for only 5.7 percent of employment in the nation. Growth in the industry has lagged total employment in the nation, particularly in the southern parts of the state bordering New York. The stateӪs important insurance industry has fared slightly better, with employment essentially flat over the past year. Hedge funds and private equity firms remain a notable bright spot.
”¢ Home prices have been “rather weak in Connecticut” and fell 0.9 percent year over year in February. Prices remain near cycle lows. New construction activity has lagged with the exception of multifamily housing, which has largely recovered. Single-family home sales increased 2.4 percent year over year in December. Continued gains in home sales would support prices and may soon stimulate construction activity.
Ӣ Population growth turned negative in 2014 with substantial migration out of the state. The stateӪs older population and higher cost of living tend to discourage younger people from moving into the state.
In New York, Wells Fargo reported:
Ӣ The New York economy continues to post consistent modest gains. Nonfarm employment grew 1.7 percent over the past 12 months. The New York City metro has seen employment rise at a 2.1 percent year-over-year pace in February, which has significantly outpaced the rest of the state. The strength in New York City reflects a growing preference by workers and businesses for large urban areas and the many amenities that are available there.
”¢ Excluding New York City, employment in New York grew “a paltry 0.8 percent over the past year.” Government, information and manufacturing have been key areas of weakness. By contrast, hiring rose solidly in education and health services, in professional and business services and in construction.
”¢ Single-family permits were flat again in 2014 and multifamily permits leveled off, “albeit at a much higher level.” Home sales have slowed, falling 2.8 percent year over year through February 2015. “Home prices have held up rather well,” rising 8.2 percent year over year in February, and have surpassed their prerecession peak.
Ӣ Stronger U.S. growth should support New YorkӪs important financial services sector. Persistent out-migration, slow population growth and a relatively older population will weigh on growth, however, which remains below its long-term trend.
A spokesperson said by email that, of all Northeast states, “Massachusetts and New York seem to be performing best.”
“Technology firms are a major contributor to New York’s stronger growth,” the spokesperson said. “The financial services sector has been a major growth driver in both New York and Connecticut. Connecticut’s economic growth is impacted by negative population growth and the housing market.”
The report cited the presence of many national-caliber colleges and universities as an across-the-region boon for the Northeast, notably in the technology sector. But, “The region”™s large financial sector has been slow to recover but has made steady gains since the financial crisis. The industry is now even more centered in New York City and Boston, which has largely come at the expense of neighboring areas in New Jersey and Connecticut.”
