McMahon:National recovery leaves NY behind
January's stronger-than-expected employment numbers, released by the U.S. Labor Department last week, are fueling hopes that the economic recovery may finally be picking up steam. But even if the national jobs data keep improving, New York State has a rougher road ahead.
While our recession was less severe than the national average, our recovery prospects look weaker. There are two reasons for this.
First, much of New York never had a boom to begin with. Unemployment was relatively low even in stagnant upstate regions, if only because few people were hanging around to look for jobs when they were so plentiful elsewhere.
Second, Wall Street defied all expectations and bounced back quickly from the near panic of September 2008, thanks largely to federal bailouts and ultralow interest rates. But those effects began to wear off last year. The securities industry lost money in the second half of 2011 and has begun shedding thousands of jobs. Bonuses for the survivors are expected to fall for a second straight year.
A cover story in the latest issue of New York magazine portrays investment bankers as "emasculated" and describes the situation as "the end of Wall Street as they knew it." If that's true, it's also the death of a goose that laid golden eggs for more than a quarter century.
From the early 1980s to 2008, Albany flat-out feasted on finance. State income tax receipts rose by a record-breaking $14 billion, or 61 percent, during the five years preceding the big bust.
Since the recession hit four years ago, middle-class households certainly have come under tremendous strain. But in absolute terms, the biggest dollar losses have been concentrated among the widely excoriated "1 percent" of highest income earners in New York.
From 2007 through 2009, their taxable incomes dropped by a whopping 40 percent. The state has compensated by raising taxes on million-dollar earners. This may make some people feel good, but it's the fiscal equivalent of crawling further out on a narrow limb in a windstorm.
The rest of New York's economy isn't likely to pick up the slack. A new report from the state comptroller points out the state began losing jobs even while the nation was adding them in the second half of 2011.
The weak spots in New York's highly uneven recovery have included its wealthiest regions -- the lower Hudson Valley, which has regained just 13 percent of the jobs it lost between mid-2008 and the end of 2009, and Long Island, which has regained a net zero.
New York's manufacturers dropped another 9,500 jobs in the past two years, counter to the national trend in that sector, while business services employment in the state basically has matched the national average. Tourism, another New York rebounder, could be hurt by the eurozone slump. Manhattan's trendsetting tech and social media cluster is creating new jobs, but they probably won't pay like the ones Wall Street is losing.
Meanwhile, Gov. Andrew M. Cuomo's proposed budget forecasts that New York State will gain jobs at barely half the national rate from 2012 through 2015.
These trends underscore the importance of Cuomo's battle to hold down spending and reform public pensions. They also highlight the need for the jobs and tax revenue that would be fired up by permitting natural gas exploration upstate. For all the progress made in Cuomo's first year, New York is not out of the woods. Indeed, we are still in danger of getting lost in them.
E.J. McMahon is senior fellow at the Manhattan Institute's Empire Center for New York State Policy.