Rochester region gets good news as employment report shows growth

The June employment report provided welcome news for the Rochester area.

After experiencing a worrisome 2,700 (0.6 percent) decline in private employment over the first five months of 2017, the local job count expanded by 1,700, or 0.4 percent, last month.

While significantly trailing the 1.7 percent U.S. gain—as well as the 1.1 percent increase for Upstate New York overall—this was the strongest local hiring performance since September 2016.

Nevertheless, two key industries remain potential hot spots—continuing to record sizable headcount reductions from 2016 levels—administrative business services and retail trade.

Administrative services (“back office”) employment was 2,200 (7.4 percent) below year-ago levels in June, while retail trade employment was down by 1,400 or 2.5 percent.

The decline in administrative services payrolls reflects the late-2016 closure announcements by several large call center and customer support firms.  These company-specific events, while painful, are unlikely to be harbingers of future industrywide restructuring.

On the other hand, retail sector turbulence has been a nationwide story in 2017. Pressure to compete with lower-cost online merchants has been building for many years and is fundamentally altering the traditional brick and mortar retail landscape.

Rochester’s retail trade job cuts have significantly topped the national norm in 2017—with the 2.5 percent contraction in June providing a sharp contrast to the flat U.S. reading (Figure 1).

Retail sector downsizing pressures are unlikely to ease any time soon, presenting a continuing drag on labor market momentum.

Moreover, adjusted for population size, the Rochester area has potentially sizable exposure to future retail employment cuts.  Locally, the number of retail workers per 10,000 residents is 5 percent higher than average for large U.S. metropolitan areas (Figure 2).

With the outlook for consumer spending remaining sluggish, retail trade employment will bear close scrutiny over the remainder of 2017.

Gary Keith is vice president and regional economist at M&T Bank Corp.

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