Challenged to revisit my dismal review of Rochester’s recent economic performance, I looked again at the influence of Eastman Kodak.
We often chart economic trends from the previous peak or trough of the business cycle. The so-called Great Recession began in 2008—so, 2007 is a good place to start. Rochester metro employment was 4 percent higher in 2018 than in 2007, about half the growth rate nationwide and well under the state’s 10 percent rate.
Moreover, the metro unemployment rate is roughly equal to that of the state and nation. (Note: The “U6” unemployment rate in the chart below is the share of the labor force that is unemployed plus discouraged workers and individuals marginally attached to the labor force, e.g. those working part time who would prefer full-time work.)
The Kodak impact is apparent in two statistics: First, as noted in that previous post, Rochester’s employment gains are feeble when compared to the nation’s 100 largest metros, placing fourth from the bottom.
Second, Rochester’s growth in real GDP from 2007 to 2018 was effectively zero. The nation’s growth rate topped 16 percent and New York’s was trending higher (the 2018 figure has yet to be released). My friend and fellow dismal scientist, Gary Keith of M&T Bank, attempted to account for the Kodak effect by looking at the chemical manufacturing sector, which includes the bulk of Kodak employment and payroll (although not all). He estimates that real GDP in this sector fell 74 percent from 2007 to 2018. When this sector is removed from the aggregate, real GDP is shown to increase by more than 6 percent.
Kodak’s employment impact is also substantial. Roughly 11,000 of the 12,500 local jobs Kodak had at the start of 2007 have gone away. As these jobs paid well above the average for the economy, they had a disproportionate impact on GDP and a ripple effect on jobs in other sectors.
Kodak left a proud legacy and continues to be going concern. But at 1,500 jobs (as reported to the Rochester Business Journal), the days of its outsized economic significance are over.
That is interesting. I talked to Jeff Clark’s office a little while ago. I was wanting to leave a proposal for him. The employee said that I had better send it to him as he is only in his State Street office one day per quarter.
Look at the newer largest area employers. My alma mater, the University of Rochester, is the 16th largest employer in the state, when taking in all the medical aspects. My employer of five years, Wegmans is the largest employer in Monroe County. I would not have forecast that in the 1980’s. However, much of Wegmans employment base in its almost 100 stores is not in Upstate New York, but in states to the south and Massachusetts. Rochester would do well to sell food and products made in the area to Wegmans for distribution out of the area. Would that be the revived Jolt Cola, Zweigles, even Sahlen’s hot dogs, and the bountiful farm products of the Genesee Valley and the area? Buy copy paper made by Xerox or Kodak photo paper. Buy and spend local.
Once again this points out how Rochester is a “devastated ecosystem,” which as I wrote in a different post means (in ecological terms) an ecosystem where there’s been some catastrophe that’s produced a giant discontinuity in the way things are, with the result you’d be a (enumerate) fool to assume a continuous trend line, which is what historical estimations (obviously) do.
To put it more simply, if you looked at growth in Constantinople up until the mid-1400s you’d probably get a trendline of continued growth — yeah Constantinople. But then after 1453 that line would plummet — yeah well nothing like the sack of city to disrupt growth. Rochester isn’t exactly like this (we’re colder for one) but you get the point.
This also points out how careful we ought be about aggregated results. The job market here isn’t good overall — that’s a bad thing. But set aside how lovely it once was when Kodak employed 60K workers here, and focus on the sectors that are growing.
Remember, at one time Silicon valley was fields, and a bunch of Dutch farmers lived in New York City.