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RBJ 75: Predicting fastest-growing sectors is difficult

With the long-term decline of manufacturing, health care and education have grabbed the spotlight for job creation here. But other industries could be positioned to emerge from the shadows.

Those who study the local economy predict that over the next five to 10 years other sectors—leisure and hospitality, food processing, and professional and business services—also will be producing growth in the Rochester region.

In addition, the adoption of integrated systems in nearly every industry is predicted to fuel growth for the region.

In 2013, leisure and hospitality accounted for 44,100 employees and professional and business services accounted for 66,100 in the region. By comparison, education and health services accounted for 116,000 of the 435,500 private-sector employees in the metropolitan area.

“(Growth is) going to be (in) professional and business services,” said Delores Conway, faculty associate dean for master’s programs at the University of Rochester. “There’s a new field emerging, which is the field of big data, and (we are) really poised for growth in that area.”

Kent Gardner, chief economist and chief researcher for the Center for Governmental Research Inc., points to food processing, saying it is “a real strength of our region.”

“Anytime you’re in an industry that’s growing like food processing,” he added, “(there are) ancillary business opportunities that hover around that.”

Consistent growth in these sectors is expected in the next few years, after a steady four years of growth in each sector, experts say.

“What we’ve seen over the past couple of years is modest but very consistent job growth,” said Tammy Marino, labor market analyst for the Finger Lakes region with the state Department of Labor. “During the recession, employment took a hit, but certainly not as severe as many other areas in the nation. In the initial stages of the recovery, the local economy rebounded much quicker than the rest of the nation. Now the rate of job growth has slowed somewhat, but it’s still very consistent.”

Predicting which industry sectors will grow most rapidly is difficult because of the rate of economic change, officials say.

“It’s always a really hard question. It’s a good one to ask, but it’s not a particularly simple one to answer,” Gardner said. “It always seems to be the case it’s the thing that surprises you that ends up being the big driver.”

Leisure and hospitality is one of the region’s assets, Gardner says, but the most important impact on jobs might be indirect.

“From an economic perspective I tend to think that the difficulty is that tourism and hospitality doesn’t tend to have a lot of high-paying jobs, but it’s enormously important to quality of life,” he said. “If you have an economy that’s becoming more and more footloose every day—more and more companies and jobs (are) able to locate someplace else—then having the Eastman School of Music can be a tremendous incentive” for companies to stay here.

The components of a fast-growing sector are numerous and can include “a focus on knowledge goods and services, synergistic activities between the trinity of higher education, the private sector and enlightened government, both locally and in Albany, and an ability to retain talented professionals,” said Amitrajeet Batabyal, the Arthur J. Gosnell professor of economics at Rochester Institute of Technology.

Some reasons given for changing tides in employment are New York’s tax structure, the interaction between traditional manufacturing and newer knowledge-based industries, and Rochester’s ability to position itself competitively in the world economy, Batabyal said.

An emerging factor that could play a significant role in future job creation is adoption of integrated systems. Harnessing the “Internet of things” will create new markets, experts say.

“This Internet of things stuff—I know that’s a real buzzword—we don’t really know what it means exactly,” Gardner said. “I don’t really care whether my toaster is connected to the Internet. A lot of these innovations start small, but the fact that we still have a fairly deep bench in Rochester around telecommunications and around software matters a lot.”

“I think a lot of (these) integrated systems, you couldn’t have talked about 10 years ago as a potential industry,” said Nabil Nasr, associate provost and director of the Golisano Institute for Sustainability at RIT. “We’re going to see a lot of home automation, a lot of things that deal with communication, to home automation to smart buildings, and I think this is more of a down-the-road opportunity for businesses to evolve. I see it as an opportunity for our region to create jobs for the next 10 years or so.”

Data, more than ever, will dictate much of employment’s future, experts say.

“You look at the general trend of everything becoming more connected—a lot of data, data mining and big data—everything is connected, everything is tracked, and that’s all being networked,” said Todd Oldham, vice president of the Economic Development and Innovative Workforce Services Office at Monroe Community College. “It’s clearly going to continue to create opportunities and probably eliminate some opportunities. It’s that continued drive forward with technology heavily based on the connectivity, the convergent factor.”

Rochester’s well-educated community should help it in the long-term, experts say.

“In addition to higher education and the health care sector, the sector that will drive employment growth the most in the future is the knowledge sector, broadly construed,” Batabyal said. “This is because after the (decline) of the Big Three (Eastman Kodak Co., Xerox Corp. and Bausch & Lomb Inc.), the Rochester area has been left with a large pool of highly skilled professionals who have generally decided to stay in the Rochester area and to use their skills to start businesses of their own.”

Conway agrees.

“I think one of the greatest strengths of this region is a highly educated populace,” she said. “We also have this (expansion of) high-tech jobs that are growing largely through small, entrepreneurial companies. I think with a highly educated population (Rochester) becomes more of a center of creativity. We are poised to tap into that with our workforce.”

The lines between companies and the job skills they require are becoming blurred, making the next five months nearly as hazy as the next five years, Gardner said.

“Increasingly we’re seeing convergence in a lot of sectors,” he said. “Because so much of what happens in any company is IT-driven, you’ll end up seeing the same kind of skills being required for some very dissimilar companies. So that also makes the task of prediction difficult.”

7/25/14 RBJ 75 (c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email [email protected]

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