An economy that’s still healing

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After the Great Recession began in December 2007, the number of Rochester-area jobs plummeted. Though the recession—the biggest economic downturn since the Great Depression—officially ended in summer 2009, employment in this region did not return to its previous level until February 2014, a period of more than six years.

The recovery from the economic nosedive caused by the COVID-19 pandemic hasn’t taken that long—yet.

Like the virus itself, the healing of the Rochester-area economy is still unfinished. As the pandemic begins its fifth year, COVID hospitalizations in the Finger Lakes region are coming down from a recent surge. Local employment, meanwhile, continues to grow, but the rate has slowed and lags both New York and the nation as a whole.

Still, the economy—here and nationwide—ended 2023 on a better footing than many had expected. The recession that many experts had forecast at the end of 2022 never arrived, and this year began with a surprising show of economic strength.

Another year of job growth

At the end of 2023, total nonfarm employment in the Rochester metro was 529,600, versus 527,000 a year earlier, a gain of 0.5 percent. Private-sector jobs grew 0.2 percent.

By comparison, at the end of 2022 both nonfarm and private-sector employment were up 1.2 percent compared with December 2021. (The data are not seasonally adjusted, so the best comparisons are year-to-year of the same month.)

At first in the recovery from the pandemic, the Rochester metro outpaced both the state and nation; now, that’s no longer the case. The year-end 2023 nonfarm employment growth rates were 0.8 percent in New York and 1.9 percent nationally; for private-sector jobs, the growth rates were 0.6 percent and 1.6 percent, respectively.

The U.S. replaced all of the jobs lost in the pandemic by spring 2022; many metropolitan areas nationwide have done so as well. The Rochester region, however, still has not returned to the employment level it had prior to the World Health Organization’s declaration of a global health emergency in January 2020.

Compared with December 2019, the Rochester region finished last year with 15,200 fewer jobs, a gap of 2.8 percent. There were 11,900, or 2.6 percent, fewer private-sector jobs. The civilian labor force in this region also is smaller, down 10,553 or 2 percent, compared with a 1.6 percent increase in the labor force nationwide.

It’s not surprising that the recovery has taken longer here, says Richard Deitz, economic research advisor with the Federal Reserve Bank of New York.

“It’s important to keep in mind that the pandemic hit Rochester harder than the average (nationwide),” he says. “It was a deeper hole that the region had to dig out of. That’s one reason why it has taken Rochester longer to recover. That’s true of all of upstate, of New York State.”

After the early stages of the recovery, Deitz adds, Rochester—like the rest of Upstate New York and even downstate outside of New York City—was “back to historical patterns. So, Rochester (is) growing much slower, and it has for decades.”

Lower unemployment

By one key economic metric, the Rochester region at year’s end compared favorably with four years earlier. In December, the metro unemployment rate was 4.1 percent, versus 4.4 percent in December 2019. But it was up from 3.1 percent a year earlier and higher than the 3.5 percent rate nationally (though better than New York’s 4.4 percent rate).

At least in part because of the smaller labor force, unemployment—which peaked regionally at 16.5 percent during the early months of the pandemic—has fallen dramatically, with a historic low of 2.5 percent recorded in April 2023.

Like the Rochester metro, Monroe County’s jobless rate in December was 4.1 percent, up from 3.1 percent in December 2021. Elsewhere in the region, the December 2023 rates were Livingston County, 4.3 percent; Ontario County, 3.8 percent; Orleans County, 4.6 percent; Wayne County, 4 percent; and Yates County, 3.9 percent. All were higher than a year earlier.

Among upstate metros, Rochester was in the middle of the pack. The other rates ranged from 3.6 percent in Albany-Schenectady-Troy to 4.5 percent in Buffalo-Niagara Falls; Syracuse was identical to Rochester, at 4.1 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.

Sector by sector

The pandemic did not impact all industry sectors to the same degree, and the economic recovery has been similarly uneven, a state Labor Department statistical dashboard shows.

The leisure and hospitality industry was hit hardest when COVID struck, shedding more than 50 percent of its employees regionwide. The accommodation and food services sector also saw employment drop by nearly one-half. Two other sectors—construction and retail trade—shrank by more than one-fifth. At the other end of the spectrum, government and financial activities saw only single-digit percentage declines.

In the December 2023 data, leisure and hospitality still had the biggest gap compared with four years earlier: down 9.3 percent. (Professional and business services had an 8.5 percent gap.) The accommodation and food services sector, however, had nearly regained all of the jobs lost due to COVID (down only 0.8 percent).

With a 3.8 percent increase compared with December 2019, construction had the second-strongest growth (health care and social assistance, up 4.6 percent, was No. 1). Retail trade still had a 3.3 percent gap.

Strikingly, the pandemic did not reshape the regional economy. The distribution of jobs across sectors remained essentially as before, with only health care and social assistance (up to 17 percent from 16 percent) and professional and business services (down to 12 percent from 13 percent) recording slight changes.

The outlook now

The U.S. economy finished 2023 on an unexpectedly strong note. Nonfarm employment increased more than expected, and fourth-quarter gross domestic product easily topped predictions, growing at a 3.3 percent annual rate. For the full year, seasonally adjusted GDP rose 3.1 percent—faster than the average for the half-decade preceding the pandemic.

Analysts had expected an economic slowdown in 2023 after the Federal Reserve moved aggressively to rein in soaring inflation. A series of interest rate hikes brought the 12-month inflation rate—which had reached 9.1 percent in June 2022—down as low as 3 percent last year.

That reversal is evident in gas prices, an often-cited inflation yardstick. A gallon of regular gas in the Rochester area now averages $3.26, down from $3.47 a year ago and nearly $5 in summer 2022.

A Fed-induced slowdown was nowhere to be seen in January’s employment figures, either. Total nonfarm payroll employment nationally rose by 353,000 last month, and the jobless rate was unchanged at 3.7 percent, even though big tech firms continued with notable layoffs. (Both figures are seasonally adjusted.)

The Paychex | IHS Markit Small Business Employment Watch paints a similar picture. It recently reported that January marked the 34th consecutive month of rising employment for U.S. small businesses. At 100.69, the national index indicates slower but continued job growth.

“Federal policymakers have managed to bring down inflation and secure a ‘soft landing’ without major repercussions for workers or the economy,” said John Gibson, Paychex president and CEO.

Concerns remain, however. On Tuesday, the U.S. Bureau of Labor Statistics reported that the Consumer Price Index in January rose 3.1 percent on an annual basis, down from 3.4 percent in December but higher than economists had forecast. The news renewed worries that the Fed might postpone interest rate cuts, which could brake growth in the months ahead.

Barring a recession, though, the Rochester region is on track to replace all of the jobs lost after COVID struck. The bigger challenge: catching up with many other metros around the country. A scorecard maintained by the Research & Statistics Group of the New York Fed shows the region is still navigating the transition from a traditional manufacturing economy to one with educational institutions and health care at the forefront. As a result, the region has struggled to keep up in terms of employment and population.

Reflecting the pandemic disruption, the Rochester metro’s five-year rate of job growth as of 2021 was negative 5.5 percent; that compares with negative 4.1 percent statewide and 1.2 percent growth nationally. The 10-year change in population as of 2020 was 1 percent, compared with 4.2 percent for New York and 7.4 percent for the U.S. And while a skilled workforce is often cited as a regional asset, the share of the 25+ population here with a BA or higher degree is 34.2 percent, which trails both New York (39.4 percent) and the nation (35.1 percent).

On comparing Rochester and upstate to the U.S. as a whole, Deitz offers a cautionary note.

“It’s useful to do that to a certain extent, to gauge where we’re at. But I don’t think it’s a good yardstick anymore,” he says. “We’re in a slow-growth region; this whole part of the country is a slow-growth region. And that means a lot of this stuff is very entrenched, not likely to be reversed. … It’s not likely we’re going to grow as fast as the U.S.”

The Rochester region has notable economic assets—in particular, its higher education institutions and health care systems—to work with. Deitz also points to the recent federal Tech Hub designation earned by the Buffalo-Rochester-Syracuse region and Micron’s plans for a huge semiconductor manufacturing facility near Syracuse as possible upstate growth drivers. But he warns against unrealistic expectations.

“A lot of these ideas and changes that you could make,” he says, “everybody wants to shoot for the stars, but it usually doesn’t work that way.”

Paul Ericson is Rochester Beacon executive editor. Data visualizations by Jacob Schermerhorn.

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One thought on “An economy that’s still healing

  1. Informative and thorough information for total population data, both locally and statewide.
    Though wages are not the subject of this article, I would like to note that we have now had years of annual Minimum Wage increases which have put us closer to a living wage, and more than double the federal minimum wage of $7.25 an hour. Some of these increases happened during a pandemic and a hard economic time. And yet, we do not have double digit unemployment and double-digit inflation. Someone tell the Chamber of Commerce.

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