New York State remained mired in a deeper and more protracted recession than the rest of the US over the past four years, only emerging from its beleaguered state in August 2003, according to a new study put out by the New York Federal Reserve.
A large part of New York’s economic doldrums was laid to structural change in the labor market and potentially related infrastructure disruptions following the September 2001 terrorist attacks, the economists Erica Groshen, Simon Potter, and Rebecca Sela said.
“New York State’s most recent economic downturn was more severe and persistent than the national recession in part because New York State experienced considerably greater structural change in its labor market than the nation as a whole,” the economist said. “November 2001 marked the end of economic decline and the beginning of expansion for the United States; data specific to New York State suggest that New York’s economy did not rebound until August 2003.”
Receptiveness to innovative business in New York State has likely heightened the restructuring of the job market, the economists said. The state ranks high in patented inventions per capita, and several indexes of creativity and innovation that pertain both to the state and to metropolitan areas are similarly high. New and creative start-up business have been attracted to areas, generating new jobs. However, these industries often shed jobs as the industries mature, moving them to relatively lower cost locations.
New York State has undergone relatively greater structural change in three of the four past recessions, with downturns in the 1970s, 1990s, and in this most recent recession outlasting the corresponding national downturns. The authors’ analysis of data shows this trend increased from the 1970s through the 1990s, by which time 94 percent of all jobs lost were in industries undergoing structural change.
In this most recent recession, 67 percent of all New York State jobs were in industries undergoing structural change. This decline in the effect of structural change may have been heightened by the effects of September 11, the economists said, which accounted for the greater role played by cyclical job loss in this most recent recession relative to the early 1990s. In this most recent recession, industries such as retail trade, leisure and hospitality, and other services were particularly subject to purely temporary job losses that were reversed once the recovery began; these industries were also particularly affected by September 11.
Structural change is defined as permanent reallocation of workers across industries and occupations, and has resulted in a decline in manufacturing jobs and a rise in services jobs-fundamental shifts taking place in both New York and the nation. Cyclical change results in temporary job losses, in which laid-off workers can be called back to their old firms or find comparable work elsewhere, the Fed report said.