The Rochester-area economy, which entered 2022 with a head of steam in its recovery from the depths of the COVID-19 pandemic, exited the year at risk of stalling.
In December 2021, the Rochester area had outperformed the New York average for job growth and unemployment, and the monthly jobless rate was at a low not seen in more than three decades. Twelve months later, while joblessness remained near a historic low, employment growth here lagged both statewide and national averages.
And while Rochester in many respects compared favorably with other regions during the economic crash when COVID hit in early 2020, Rochester’s jobs recovery from the pandemic today—three years to the day since the World Health Organization said the coronavirus was a global health emergency—ranks near the bottom among the top 100 U.S. metros.
The latest numbers come amid predictions of a national recession in 2023. While some economists think a downturn can be avoided, pointing to recent GDP growth that has topped expectations, a soft landing from the Federal Reserve’s campaign of interest rate hikes could be difficult to achieve.
The Commerce Department last week reported that the nation’s GDP rose at an annual rate of 2.9 percent in the three-month period ended Dec. 31—the second positive quarter in a row after two quarters of negative growth. The inflation rate, meanwhile, has retreated from the four-decade highs of last summer; in December, it was 6.5 percent compared with a year earlier, versus 9.1 percent in June.
The Paychex | IHS Markit Small Business Employment Watch reports that hiring at U.S. small businesses—which account for nearly 95 percent of all employers—was flat in December, after declining steadily since February. “The (index) flattened in December, following nine months of moderation. Additionally, small business hourly wage growth is starting to slow as the Fed takes measures to fight inflation,” said James Diffley, chief regional economist at IHS Markit.
These numbers provide a basis for cautious optimism, but others point in the opposite direction. In recent months, the nation’s tech sector has suffered more than 200,000 layoffs, with no end in sight. In addition, consumer spending—the key driver of economic growth—declined in December for the second straight month.
A slower recovery
In the Rochester region, recovery from the pandemic continues. The jobless rate last month was 2.9 percent, near the historic low of 2.5 percent recorded in October. After a mid-summer dip, total nonfarm employment climbed to 520,000 in September and held relatively steady through December.
The recovery has slowed, however, and the pace of job growth in Rochester now lags both the state and nation. In December, the region’s year-over-year changes in nonfarm and private-sector employment each were 1.2 percent. Statewide, the growth rates were 3.1 percent and 3.4 percent, respectively; across the U.S. they were 2.9 percent and 3.2 percent. The Albany, Buffalo and Syracuse regions all added jobs at a faster clip than Rochester.
Unlike many metropolitan areas nationwide, the Rochester region’s economy still has ground to regain to reach the employment level it had before COVID was declared a global pandemic in March 2020.
In February 2020, the Rochester region had total nonfarm employment of 533,400. The pandemic lockdown took a heavy toll—in April 2020, the region reported 444,400 nonfarm jobs, nearly 17 percent.
At the end of the third quarter last year, Rochester had 520,900 nonfarm workers—roughly 18,500 fewer than in September 2019. Among the top 100 U.S. metros, Rochester had the 10th biggest job gap with pre-pandemic levels on a percentage basis. (Buffalo’s gap was third largest.) Rochester’s underperformance in job growth did not begin with the pandemic; it fits a long-term pattern. From 2000 to 2019, Rochester’s rate of job growth also ranked in the bottom 10 of the largest metros.
Unemployment remains low
The Rochester area’s jobless rate, influenced by both employers’ hiring needs and a long-term decline in the number of people in the labor force, compares more favorably to other regions.
December’s Rochester metro unemployment rate of 2.9 percent was slightly better than the 3 percent rate a year earlier and less than half the 6.1 percent rate in December 2020. Monroe County’s jobless rate in December was 2.9 percent, versus 3.1 percent in December 2021. Elsewhere in the Rochester region, the December 2022 rates were Livingston County, 2.9 percent; Ontario County, 2.7 percent; Orleans County, 3.4 percent; Wayne County, 2.8 percent; and Yates County, 2.9 percent.
The Labor Department calculates local area unemployment rates in part using the results of the Current Population Survey, which contacts approximately 3,100 households in New York each month. The data are preliminary and are not seasonally adjusted.
The remaining challenge
The economic slowdown in 2022 was engineered by the Fed. With inflation soaring, it moved to rein in the economy’s growth rate with a series of interest rate hikes—a total of seven by the end of the year. The Dec. 14 increase of half a percentage point boosted its benchmark interest rate to the highest level in 15 years, but it was smaller than the four straight three-quarter point increases that preceded it. It signaled that the rate-setting Federal Open Market Committee sees progress in the fight against inflation, but the coming months still may bring additional hikes.
A key inflation yardstick—the price at the pump—clearly has improved locally. A gallon of regular gas in the Rochester area now averages $3.53, down from nearly $5 last summer.
Rochester has a history of performing better than many other parts of the country during a recession. If a downturn occurs in 2023, that may well prove true again.
But whether this year brings an economic contraction or merely slower growth, the challenge of closing the remaining jobs gap created by the pandemic looks harder than it did a year ago.
Paul Ericson is Rochester Beacon executive editor. The Beacon welcomes comments and letters from readers who adhere to our comment policy including use of their full, real name. Submissions to the Letters page should be sent to [email protected].
An excellent article Mr. Ericson, of the current economic situation and the possibilities in the near future. However, I am more optimistic and seeing an uptic in jobs the spring. Many of us have been waiting for over a generation to see the spigot turned on to repair and build the infrastructure of today and tomorrow. Whether roads, bridges, rail, energy, and internet, and compared to other Industrial Democracies with less per capita wealth, much of the country looks like a museum from the 1940’s to 1970’s. The spigot is now open for resources for infrastructure, stablizing and expanding manufacturing such as Delphi, and much new wealth flowing to local colleges, including our largest employer, Strong/University of Rochester. This could be a boon for workers and it is infrastructure also demanded by employers to be successful. The resources have begun to flow from Federal and State Infrastructure funds and has the potential to make a large positive difference. I am more optimistic on more middle class jobs than I have been for some time.
It’s interesting to note that the “price at the pump” sort of says it all when it comes to just how well we are doing. Care to see how much the grocery bill went up last year? And there are other increases that outnumber the decreases. As I travel the highways on the East Coast I see more help wanted signs that stop signs. Every factory, warehouse, restaurant, etc. is hiring. Kinda strange to see all that advertising for help and having to listen to negative job growth, Could it be….? Nah.