McGuire on Regional Economy 2013 – Hobart and William Smith Colleges \
The HWS Update

McGuire on Regional Economy 2013

Professor of Economics Pat McGuire HON ’10 was recently quoted in parts one and three of a three-part series on the Finger Lakes economy, in the Finger Lakes Times.

“The recession, the Great Recession of 2008, didn’t hit this Finger Lakes region as hard as it did other areas,” he is quoted in the first article. “We are recovering, and we are not doing as well as everyone would like, but we’re starting from a little higher point than some other places, so that situation isn’t as bad. Our [employment] rates may not have increased, but we didn’t go down as far.”

The article goes on to note, “McGuire thinks that happened because the local economy relies largely on industries and businesses that are growing, including wine, tourism, education and health care. ‘The other issue, which not many people realize, is that the upstate New York area didn’t really get hit hard by the housing crisis,’ he said. McGuire offers a statistician’s-eye view of the local economy.”

McGuire, who recently served as interim provost and dean of the faculty, was educated at St. Peter’s College before receiving his M.A. and Ph.D. from Fordham University. With his colleague, Professor of Political Science Emeritus Joe DiGangi, McGuire co-founded the Colleges’ Public Policy program in Washington, D.C., which he has led as faculty director 10 times over the past 25 years. He co-taught the “Two Cities” bi-disciplinary course with Professor of Sociology James Spates for more than 20 years, taking HWS students to both New York City and Toronto for five days each as part of their regular coursework.

McGuire has led several off-campus programs in Ireland, England and Central Europe as well as a Semester at Sea. He was a regular participant in the annual Wall Street Experience Program which allows students to spend two days with alums and employers from global investment banks, ratings agencies and hedge funds all over Manhattan. He has held leadership roles on several faculty committees and served as chair of the department of economics. In collaboration with his students, he completed an economic impact report that tracks the Colleges’ effect on the Geneva community.

The full first article in the series follows.

Finger Lakes Times
No Boom or Bust, But Troubles Are Evident Finger Lakes Economy 2013
Part 1 of 3

Views vary on how much this region has suffered from recession
Jim Miller • March 31, 2013

Picture the Finger Lakes region as a patient lying on an examination table. Rest assured, “F.L.” is alive and kicking – this is a checkup, not a crisis – but there are a few bumps and bruises remaining from the recession, along with an economic ticker that may need some attention before it can return to a steady beat. What’s the prescription? Well, like any doctor, we have to run some tests first and measure F.L.’s well-being – in this case, economic well-being. So, five years after the Great Recession began and three years after it more or less ended, how are we doing?

“Unemployment remains stubbornly high,” said Tammy Marino, an associate economist with the state Department of Labor. “The unemployment rate [here] tends to be below the state and national averages. Right now, we’re kind of in the middle, between the state and the nation.”

If we want to assess the region’s economic health, the widely publicized and readily available unemployment rate looks like the most obvious diagnostic tool. Think of it as the pulse. However, like a person’s pulse rate, it tells only part of the story. Any diagnosis of our economic well-being also must address poverty rates, income levels, overall employment figures and a host of other numbers. Finally, anecdotal evidence comes into play. The numbers reveal a lot, but no single measure of economic health tells the whole story. The big picture emerges only when all of them are considered together and measured against the actual experience of local residents. In other words, does what’s happening to Finger Lakes residents jibe with what the numbers say should be happening? If not, why? And, in either case, where do we go from here?

An insulated region?
Conventional wisdom says the Finger Lakes region is somewhat insulated from wild economic swings, that we don’t boom and we don’t bust. The Great Recession tested that theory. If it’s true, then things here should not have gotten as bad as they did in other parts of the nation.

Patrick McGuire, an economics professor at Hobart and William Smith Colleges in Geneva, sees evidence of that, “The recession, the Great Recession of 2008, didn’t hit this Finger Lakes region as hard as it did other areas,” he confirmed. “We are recovering, and we are not doing as well as everyone would like, but we’re starting from a little higher point than some other places, so that situation isn’t as bad. Our [employment] rates may not have increased, but we didn’t go down as far.”

McGuire thinks that happened because the local economy relies largely on industries and businesses that are growing, including wine, tourism, education and health care. “The other issue, which not many people realize, is that the upstate New York area didn’t really get hit hard by the housing crisis,” he said. McGuire offers a statistician’s-eye view of the local economy.

The view from the economic emergency room could – and did – look different.

“There were just numerous examples of businesses falling off the cliff at the turn of 2008 into 2009,” said Robert Aronson, director of the Seneca County Industrial Development Agency. “The first quarter of 2009 was an eye-opener for many businesses in the region, as I recall from speaking with them, and it came out of nowhere. I know that some people had a feeling that our economy might not be as bad, or what’s happening might not be as bad. “The actuality I found was that people were just surprised …how there was just a drop-off of business in the first quarter of 2009.”

Data on unemployment and economic well-being supports both McGuire and Aronson: The recession did not hurt the Finger Lakes region as badly as it hurt some other areas, but it did hurt. Parker-Hannifin closed its Lyons plant in 2009, with Matthews International in Seneca Falls following suit later that year. The Connection, a year-old call center in Penn Yan, shut its doors in 2011. So did the nearby AES Greenidge Power Plant. St. Michael School in Newark closed when it could not meet enrollment and fundraising goals. DeSales High School in Geneva followed. The roll call of casualties – and the list of newly unemployed people – continued last year when Badger Technologies in Farmington announced its closure, though at least some jobs were saved when a buyer was found. Clifton Springs Hospital and Clinic laid off workers earlier this year. School districts, facing an ongoing financial crunch, have been shedding staff for years. Regardless of whether these events directly resulted from the recession, they put people out of work and hurt the local economy. Conversely, many businesses opened during the same period. Local mainstays such as Guardian Glass in Geneva and ITT Goulds in Seneca Falls survived and thrived. BonaDent Dental Laboratories expanded, renovating the former Seneca Falls Walmart and adding jobs. Dozens of new shops added vibrancy to area downtowns.

“In our region, traditionally, over the last three years the job growth has been better than in the rest of the country,” said Karen Springmeier, director of the Geneva-based Finger Lakes Workforce Investment Board. “I think we have a strong manufacturing base. … We have the small manufacturers who are still hiring, [and] we don’t have the big Kodaks and other companies in our region that are laying off.”

However, data from as early as 2008 shows either an imbalance between jobs created and jobs lost or a disparity between the jobs available and the skills of job seekers. That summer, the unemployment rates in Ontario, Wayne, Seneca and Yates counties began a sharp rise that far exceeded the jump that usually occurs when seasonal jobs disappear for the winter. Between the summer of 2008 and March 2009, unemployment rates increased from about 4 to 6 percent to about 8 to 10 percent, depending on the county. They fell in the summer but not to their previous levels, then soared again, peaking in January and February of 2010. In Wayne County, where the rate has consistently been the highest, unemployment topped 10 percent. Since that grim winter, rates in the four-county area have risen and fallen with the seasons. With the exception of a single month in Yates County, they have never reached the heights they did in 2010, although they remain well above pre-recession levels. A comparison with state and national data shows another side of the story, one that backs the theory of a region at least partially insulated from the worst of the recession. With the exception of some winter months, the Finger Lakes region’s unemployment rate, before and since the recession, has been lower than the state average. And, even in the winter months, it has almost always been lower than the national unemployment rate, a number consistently higher than New York’s.

The (un)employment picture
Currently, the local unemployment rates range from 7.2 percent in Yates County to 8.8 percent in Wayne County. However, those rates tell only part of the local economic story.

“It’s highly variable because it has a number of components which can change that have nothing to do, necessarily, with economic activity,” McGuire said. “For example, if I as a worker decide that I’m not going to look for work this month, then technically the supply of labor [and the rate] goes down. … Now, if I decide I want to look for work, then the number of jobs may not have changed, but the very fact that I have decided to look for work means the unemployment rate goes up.”

In other words, a declining unemployment rate can actually be bad news. It can mean people moved away from the area. It can mean people have given up their job searches and, as a result, are no longer counted in the rate even though they aren’t working. On the flip side, a rising unemployment rate can actually be good news. It can mean that formerly discouraged people now feel hopeful enough to seek work again.

“Oftentimes, what would be a better indicator would be the percentage change in employment month to month to month,” McGuire explained.

A graph of the local unemployment rate looks like a roller-coaster designed by a madman. A graph showing the number of people employed has peaks and valleys, too, but they look much less dramatic. They resemble a series of gentle ocean swells, with troughs each winter and crests each summer. The trends are also less dramatic, although they match those shown by the unemployment data. The number of people working in the four-county area is smaller now than immediately prior to the recession. In December 2007, the month the national recession officially began, 127,033 people were employed in the four-county area. In June 2009, the month the recession officially ended, 125,874 people had jobs, a decrease of 1 percent.

However, the December 2007 numbers reflect the usual winter drop-off, while the June 2009 numbers reflect the usual summer surge. December offers a better apples-to-apples comparison. That month in 2009, 122,153 people were working in the region, a 3.8 percent decrease from December 2007. In December 2012, 124,057 people had jobs – better than 2009, but not yet a full recovery.

Looking at the data on the county level shows a similar trend. In Ontario County, for example, 54,631 people were working in July 2008, when employment peaked. In July 2009, that number was 53,368. In July 2012, it was 53,077 – not a recovery, but better than the January 2012 nadir of 51,517 jobs. The differences between pre- and post-recession employment levels amount to a few thousand people, at most, in each county. In Seneca and Yates counties, where the populations are smaller, it adds up to only a few hundred. And, in some counties, the number of people working now is actually higher than it was in the early 2000s. Nonetheless, the decrease is unmistakable. Some of the people who held the missing jobs may have moved away or found work outside the four-county area. Some are surely counted in the unemployment rate. The remaining people, however many there are, may be among those hardest hit by the recession, the people so disheartened by the economy that they have essentially given up on finding work.

Poverty & underemployment
Yates County’s unemployment rate has consistently been the lowest in the four county-area and among the lowest in the state – which, on its face, suggests a healthy economy. However, Yates County also had the lowest per capita income in the four-county area, and the seventh-lowest in the state, as of 2010. Per capita incomes in the other local counties also were below state and national averages as of 2010. Those statistics reveal something about the area’s health that the unemployment numbers do not. Economic well-being is not just a question of whether people are working. It’s a question of what kind of jobs they have and how much money they make.

“There’s an underemployment issue in the region,” Springmeier said. “Underemployment is having a higher skill set but working at a lesser wage, or the entry-level workers that are making minimum wage, or $8 an hour. With a family, they are still eligible for social services, food stamps. There’s a national outreach for people to recognize that food stamps … are necessary for working families.”

A person can be employed and still be poor or need help. The unemployment rate does not measure that. Nor does it measure whether people who have found new jobs have had to take pay cuts, change careers or string multiple jobs together to make ends meet. Springmeier said people who use Workforce Investment Board services after becoming unemployed typically find new jobs that pay $35,000 to $40,000 a year. “Those higher-paid professionals realize after they are unemployed for a while that they may have to take something less than what they were making before,” she said.

Other people have trouble finding even lower-paying jobs. Local poverty rates range from 9 to 14 percent. Anecdotal reports of growing need at local food banks have piled up for years, and high numbers of local students rely on free- and reduced-cost lunch programs. The situation in Yates County, which has the highest local poverty rate, illustrates the plight of some area residents. At the end of 2012, the Yates County Department of Social Services reported that 25 percent of county residents younger than 18 were receiving HEAP, Medicaid, Food Stamps or other temporary assistance. The department had 15 homeless families living in temporary residences, and 80 families were receiving help with their monthly rent, up from 53 in 2011.

Even Ontario County, which has the lowest local poverty rate, has seen increases in the number of people relying on public assistance in recent years. According to the quarterly Economic Development Dashboard prepared by the Ontario County Industrial Development

Agency, 10,081 of the county’s 108,000 residents relied on food stamps during the fourth quarter of 2012. That marked a 1.3 percent increase from the same period in 2011. The number of people relying on Medicaid rose 7.6 percent, to 13,908. Only the number of people receiving cash assistance fell, from 1,486 to 1,421, a 4.4 percent drop. A look at historical trends offers some needed context for those numbers, however. Ontario, Wayne, Seneca and Yates counties all have lower poverty rates now than in 2007. Ontario County’s poverty rate fell between 2008 and ’09, rose in 2010, then leveled off a few points below its 2008 peak. In Seneca County, it fell gradually until 2009, rose in 2010, then leveled off, again below 2007 levels. Wayne County’s poverty rate has bounced back and forth, but it was above 12 percent in 2007, and it’s at 10.8 percent now. Yates County, meanwhile, saw a steady increase in its poverty rate through 2010, when it peaked just below 17 percent. Since then, it has fallen and leveled off. More context comes from state and national poverty data. Other than Yates County, the percentage of people living in poverty here is no higher than the state and national averages. Taken in context, the numbers reveal a region whose economic health was on the upswing prior to the recession. It suffered a setback from which it is now convalescing. To the people living below the poverty line, that likely comes as small comfort. However, as a description of the region’s overall economic health, it matches the picture painted by the jobs data.

What the numbers say
Talking to people about the economy often brings to mind an old saying, attributed to everyone from Franklin Roosevelt to Ronald Reagan. It goes something like this: A recession happens when your neighbor loses his job; a depression happens when you lose yours. For people who have found success, or at least continued employment, the economic picture probably looks rosy. For people still struggling, not so much. When looking at the big picture, the people who study the numbers and the trends see reason for optimism.

“I think we’re on our way [back],” Springmeier said. “I don’t think we’re all the way there yet, but I think we’re on our way. … We’ve got a strong economic development base, those folks trying to attract and retain the businesses in the region.”

Steve Griffin, director of the Finger Lakes Regional Economic Development Center, also sees good signs. Several businesses that have been recruited to Yates County in the past year or two have returned to Griffin’s office with plans for expansion. “Activity breeds activity,” Griffin said.