The pattern of employment recovery in the New York-New Jersey region is expected to remain unbroken in 1998, despite a slight slowing of job growth.Employment - New York (State) ; Employment - New Jersey ; Federal Reserve District, 2nd

James Orr

Mike DeMott

Rae D. Rosen

English

Research Papers in Economics

CURRENT SSUES I
IN ECONOMICS   AND FINANCE
FEDERAL RESERVE BANK OF NEW YORK
Second
district highlights
Second
district highlights
March 1998
In 1997, employment growth in the New York–New
Jersey region accelerated to 1.7 percent, its highest
annual rate since 1988. Relatively strong job growth in
the New York City metropolitan area and a doubling of
job growth in New Jersey helped the region to continue
its pattern of gradual but steady recovery. Nineteen
ninety-eight, however, is likely to be a year of slightly
slower growth—owing largely to the effects of a pro-
jected slowing of growth in the national economy—yet
the region’s recovery pattern should remain unbroken.
In this edition of Second District Highlights, we recap
the employment performance of the New York–New Jersey
region in 1997 and present our forecast for the region’s job
growth in 1998. We identify the key industry developments
that will shape regional employment trends and compare the
projected job growth performance of New York State, New
York City, and New Jersey. In a departure from previous
regional analyses, we also consider two international factors
that could affect employment trends: the turmoil in the
Asian markets and the recent drafting of a global agreement
liberalizing trade in financial services. We expect that any
direct negative impact from the Asian market developments
will be fairly minor, while the financial services agreement
should improve prospects for regional employment.
1997 JOB GROWTH REVIEW
Strong national economic activity, the continuing boom on
Wall Street, and an easing of downsizings in the manufac-
turing and government sectors contributed to New York and
New Jersey’s employment growth last year. With 195,000
new jobs created, the region enjoyed a 1.7 percent growth
rate (Table 1). The trade and services sectors continued to
be the mainstays of growth, accounting for more than
173,000 new jobs; the trade sector’s growth rate was double
its 1996 rate while the services sector saw robust 3.7 per-
cent growth. Also boosting employment growth were gains
in the construction sector, the FIRE (finance, insurance,
and real estate) sector, and the transportation, communica-
tions, and public utilities sector. Declines in the manufac-
turing and government sectors were smaller than in 1996.
Within the region, the steady recovery trend was evident
on most fronts. New Jersey employment rose by more than
85,000 jobs, or 2.4 percent—more than double the growth
rate for 1996. The state’s average level of employment, at
3.7 million workers, broke an eight-year record. Virtually
all of New Jersey’s job growth occurred in the private sec-
tor; public sector employment was essentially flat.
In New York State, employment growth of 1.4 percent
generated approximately 110,000 new jobs. Within the
New York–New Jersey Job Recovery Expected
to Continue in 1998
Volume 4  Number 3
Table 1
Employment in the New York–New Jersey Region:
Past and Projected Growth
Annual Percentage Change
1995 1996 1997 1998
New York and New Jersey 0.9 0.8 1.7 1.3
New York State 0.7 0.6 1.4 1.0
Private sector 1.3 1.0 1.8 1.2
Public sector -1.9 -1.0 -0.6 0.0
New York City 0.3 1.1 1.6 1.2
Private sector 1.3 1.6 2.2 1.5
Public sector -4.4 -1.4 -1.8 -0.1
New Jersey 1.4 1.1 2.4 1.8
Private sector 1.5 1.4 2.6 2.1
Public sector 0.0 -0.4 -0.2 0.0
Sources:  U.S. Department of Labor; Federal Reserve Bank of New York projections.
Note:  The 1998 figures are projections.state, New York City produced 53,000 new jobs and saw its
employment expand by 1.6 percent. Private sector job
growth in the state and the city was considerably stronger
than overall job growth because public sector downsizings
again exerted a drag on job growth.
The New York City metropolitan area continued its solid
performance from 1996.1 Jobs in the area rose by 1.6 per-
cent—outperforming employment in the rest of New York
State, which expanded by 0.9 percent. The 0.9 percent
expansion, however, marked a sizable improvement from
the rest of the state’s 1996 growth rate of 0.1 percent.
1998 JOB GROWTH PREVIEW
An anticipated slowing of growth in the U.S. economy will
help put a modest brake on the region’s job growth.2 We
project employment to rise, but by 1.3 percent, or roughly
149,000 jobs (Table 1). Nevertheless, this growth rate will
exceed the rates set in 1996 and 1995 and continue the
region’s pattern of gradual but steady recovery. The broad
contours of growth are expected to mirror those from 1997,
with trade and services—particularly business and con-
sumer services—maintaining the lead. Growth in the FIRE
sector should match its 1997 rate, which, owing to gains in
New Jersey, had reversed a weak trend from 1996 and
1995. The pace of employment decline in the manufactur-
ing sector should pick up slightly with the slowing of
growth in national activity and the continued relocation of
jobs to other regions. The government sector is projected to
remain flat, and growth in transportation, communications,
and public utilities should slow, although this sector is still
expected to generate about 5,000 new jobs.
Within the region, we forecast that New Jersey will
add 67,000 new jobs and register growth of 1.8 percent—
a decline from the 1997 rate. New Jersey’s rate, however,
will exceed the 1.0 percent growth we project for New
York State, but by less than it did last year.
Approximately 81,000 new jobs should be created in
New York. The gap between the 1997 private sector
growth rates for New York and New Jersey—which had
widened during 1996—will remain. Job levels in New
York State’s public sector should stabilize: no government
losses are anticipated overall at the state level.
Overall job growth in New York City is projected to
reach 1.2 percent, a fall from the 1997 rate. The city can
expect to gain roughly 42,000 new jobs—10,000 fewer
jobs than last year.
The Asian Markets Factor. The turmoil in the Asian
markets and the resulting sharp depreciation of several
key Asian currencies have led many economists to pre-
dict an influx of Asian manufactured goods to the
United States and a drop-off in U.S. manufactured
exports to Asia. Such developments could compound
the dampening effects of the U.S. dollar’s 1997 appreci-
ation on the demand for U.S. manufactured goods.
How will industry in New York and New Jersey—and
hence the region’s employment performance—be
affected? Fortunately, the New York and New Jersey
economies are dominated by production in the services
sector, making the states less reliant than the nation as a
whole on exports of manufactured goods. For example,
New York’s and New Jersey’s manufactured exports to
the world markets represent, respectively, just 6 percent
and 5 percent of gross production—well below the
national average of 8 percent.3In addition, if we break down
the states’exports by market, we see that just 19 percent of
New York’s, and 14 percent of New Jersey’s, manufactured
exports were destined for Asian markets last year—as
compared, for example, with roughly 55 percent of
exports from California, Washington, or Oregon (Table 2).
Consequently, the region’s sensitivity to a slowdown in
Asian demand for U.S. manufactured exports—and any
vulnerability of job growth—should be blunted by the
relatively low volume of those exports to Asian countries.
However, the Asian markets’ effect on the region’s
exports to Europe and Canada may bear watching. Europe
and Canada are the region’s main export markets—
roughly half of New York and New Jersey’s manufactured
goods are exported there (Table 2). With the depreciation
of Asian currencies, Asian firms may be able to step up
their exports to Europe and Canada, gaining market share
at the expense of U.S. exporters, including those in New
York and New Jersey.
Foreign Trade in Financial Services. Regional job
performance in 1998 and beyond could also be affected by
the opening of trade in financial services to a wider global
marketplace. Historically, trade barriers in many countries
have curtailed U.S. financial institutions’ operations in the
world markets.4 Until recently, little progress had been
made in liberalizing trade in financial services because
attention was focused almost wholly on trade in goods.
However, that attention has since shifted as the global
economy has become increasingly services-oriented—as
evidenced by the rise in demand for such service exports as
tourism, management consulting, and accounting.
Financial services, too, are expected to experience height-
ened international demand. The incentives for liberalized
trade coalesced in December 1997: the World Trade
Organization (WTO) drafted an agreement that loosens
restrictions on trade in financial services, broadening inter-
FRBNY 2
Second district highlightsSecond district highlights
national opportunities for U.S. companies and other firms
that offer these services. The seventy or so participating
countries are expected to ratify the agreement by January
1999. However, because some countries have chosen to
open their markets well ahead of agreement schedules and
ratifications, the expansion of U.S. financial services firms
abroad has already begun.
With liberalized trade in financial services under way,
the employment outlook is promising for the service
economies of New York and New Jersey. The New York City
metropolitan area in particular stands to gain: a world capi-
tal of finance, the metropolitan area is also a dominant pro-
ducer of supporting business services such as legal counsel,
accounting, consulting, and advertising—many of which
are already exported. Although the effects of the WTO
agreement will become clear only over time, U.S. firms in
the metro area’s FIRE sector are very likely to improve their
business opportunities (Rosen and Murray 1997). As these
firms expand abroad through mergers, acquisitions, and the
establishment of branches, the underlying administrative
and managerial staff in the New York–New Jersey region
should expand accordingly. Demand for supporting busi-
ness services should also rise, further boosting employment
in the region.
—James Orr, Rae D. Rosen, and Mike De Mott
NOTES
1. We define the metropolitan area as New York City, Long Island,
and Rockland, Putnam, and Westchester Counties; it accounted for
60 percent of New York State employment in 1997.
2. The average projection for real GDP growth is 2.6 percent, com-
pared with 3.8 percent for 1997 (Blue Chip Consensus Forecast 1998).
3. Gross production figures are as of 1994—the last year for which
data are available.
4. For example, in some countries, U.S. brokerage firms, insurance
companies, and banks are prohibited from offering financial ser-
vices or are severely limited in the types of financial products they
can sell; U.S. mutual funds and management companies are prohib-
ited entirely from operating in some countries.
REFERENCES
Blue Chip Consensus Forecast. 1998. Vol. 23, no. 2, February 10.
Rosen, Rae D., and Reagan Murray. 1997. “Opening Doors: Access to
the Global Market for Financial Services.” In Margaret E. Crahan
and Alberto Vourvoulias-Bush, eds., The City and the World: New
York’s Global Future, 39-50. New York: Council on Foreign
Relations.
3 FRBNY
The views expressed in this article are those of the authors and do not necessarily reflect the position of
the Federal Reserve Bank of New York or the Federal Reserve System.
Second District Highlights, a supplement to Current Issues in Economics and Finance, is published by the Research and
Market Analysis Group of the Federal Reserve Bank of New York. Dorothy Meadow Sobol is the editor.
Table 2
Patterns of Merchandise Exports
Total Goods Exported Exports to Asia Percent Exported Exports to Europe and Canada Percent Exported
(Billions of Dollars) (Billions of Dollars) to Asia (Billions of Dollars) to Europe and Canada
New York 38.7 7.4 19.2 22.2 57.3
New Jersey 14.9 2.1 14.1 7.0 47.1
West Coast
California 104.5 57.4 54.9 29.8 28.5
Washington 29.4 16.1 54.9 7.5 25.5
Oregon 9.8 5.2 53.1 2.8 28.5
Source:  Authors’calculations, based on data from the Massachusetts Institute of Social and Economic Research developed under a contract with the U.S. Bureau of the Census.
Note:  Figures are for 1996—the last year for which data are available.90
95
100
105
110
115
98 97 96 95 94 93 92 91 1990
3
4
5
6
7
8
9
10
11
12
98 97 96 95 94 93 92 91 1990
70
80
90
100
110
120
98 97 96 95 94 93 92 91 1990
0
2
4
6
8
98 97 96 95 94 93 92 91 90 89 1988
0
15
30
45
60
75
98 97 96 95 94 93 92 91 1990
United States
New Jersey
New York
New York City
Index: 1990 = 100 (seasonally adjusted)
Payroll Employment
Percent (seasonally adjusted)
Unemployment Rates
New York City
New York
New Jersey
United States
Payroll Employment in Selected Sectors
New York and New Jersey Combined
Index: 1990 = 100 (seasonally adjusted)
FIREa
Services
Retail
Manufacturing
Construction
Job Growth in the Nation and Selected Metropolitan Areas
December-February 1997 to December-February 1998
United States
Upstate N.Y.b
Buffalo
Rochester
Syracuse
Albany
N.Y.C. metro area
N.Y.C.
Northern suburbsc
Fairfield Co., Conn.
Northern N.J.d
Long Island
Percentage change
Regional and National Inflation
Twelve-Month Percentage Change in Consumer Price Index
United States
New York City metro area
Housing Permits in New York and New Jersey Combined
Twelve-Month Moving Average, Annual Rate
Thousands
Multifamily
Single-family
Economic Trends in the Second District
Sources:  New York, New Jersey, and Connecticut Departments of
Labor; U.S. Department of Labor, Bureau of Labor Statistics; U.S.
Department of Commerce, Bureau of the Census; Federal Reserve
Bank of New York.
a FIRE = finance, insurance, and real estate.
b Upstate N.Y. comprises the four metropolitan areas listed as well as
Binghamton, Elmira, Glens Falls, Jamestown, and Utica-Rome.
c The northern suburbs of N.Y.C. comprise Dutchess, Orange, Putnam,
Rockland, and Westchester Counties, N.Y., and Pike County, Pa.
 dNorthern N.J. comprises Bergen, Essex, Hudson, Hunterdon, Mercer,
Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex,
Union, and Warren Counties.
Government
0 0.5 1.0 1.5 2.0 2.5 3.0
Second district highlights

Opening Doors: Access to the Global Market for Financial Services.”

New York - New Jersey job recovery expected to continue in 1998

http://www.newyorkfed.org/research/current_issues/ci4-3.pdf

New York - New Jersey job recovery expected to continue in 1998

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics