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The trade equation

Since the end of the recession, Greater Rochester has performed admirably. From 2009 to 2011, the Brookings Institution’s Metro Monitor program repeatedly ranked this region among the nation’s top 20 metropolitan areas in performance during the economic recovery.
 
The latest Metro Monitor report suggests, however, that the local economy faces a challenge in trying to maintain this level of performance. The report shows Rochester ranked 43rd overall among the top 100 metro areas in the second quarter, down from 40th in the first three months of the year.
 
Rochester continues to do well, relative to its low point during the recession, in some of the main indicators: economic output (10th), house prices (28th) and employment (33rd). But this area’s unemployment ranking is near the bottom, 93rd.
 
A closer look at the data reveals another characteristic of the recovery here that could signal a longer-term challenge for the local economy. Employment growth shows a concentration in what economists refer to as non-tradable industries. These include real estate and construction, retail, government and many services.
 
Non-tradable activities are those confined to the local market. By contrast, tradable activities operate in the global arena.
 
Jobs in non-tradable industries tend to pay less than those in tradable sectors such as manufacturing. What’s more, they do not bring new wealth into the community.
 
And here’s another reason why the tradable sector is important: It enables local companies to take advantage of rapidly growing markets abroad.
 
Indeed, as Brookings senior fellow Amy Liu noted in a recent speech, companies focused on international sales have driven the recovery in economic output. "Exports were responsible for 46 percent of U.S. GDP growth between 2010 and 2011-which is remarkable since exports make up only 13 percent of the GDP of the U.S.," she noted.
 
This region traditionally has been a per-capita export leader; Brookings ranks Rochester 18th in exports as a share of metro GDP. But the growth rate of exports locally during the recovery ranked only 73rd.
 
Rochester’s future economic performance is likely to depend on the ability of local businesses to compete in the global marketplace.

7/20/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.

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