The degree to which New York State and local governments trim their respective payrolls could slow recovery from the recession, Federal Reserve Bank officials said today.
William C. Dudley, president of the New York Fed, told reporters the economic recovery was dependent on hiring in health care, private education, tourism, finance and business services, such as law and accounting. He said government employment at all levels was likely to shrink, and the magnitude was cause for some concern.
“As the recovery takes shape, private services are the most likely source of job growth throughout the [Fed bank’s] region,” Dudley said, referring to New York, Puerto Rico, the U.S. Virgin Islands and parts of New Jersey and Connecticut.
Still, he said New York State had weathered the recession better than the nation, with less severe job losses. He also predicted continued economic growth in coming months, but said “unemployment remains stubbornly high and is likely to remain so for many months to come.”
Fed senior economist Jason Bram noted Wall Street remains a key driver of the regional economy, though hiring in business services, health care and tourism-related industries is fueling this recovery. In the past, he said, financial services pulled the region out of downturns in the early 2000s and 1970s.
Asked by Newsday about the employment outlook for Nassau and Suffolk, Bram said proximity to New York City was a remedy but not a cure-all. “It’s not a magic bullet for Long Island but it helps,” he said.
Local job growth has lagged the nation and New York City over the past year. Employment grew five-tenths of 1 percent to 1 percent on Long Island from February 2010 to March compared with 1.2 percent nationwide and more than 1 percent in the city.
“For Long Island, it’s a mixed picture,” Bram noted, citing hiring by hospitals and private schools. He said local governments so far hadn’t slashed their payrolls but may given that “there is a lot of fiscal stress on Long Island.”
Read more of Inside Long Island Business