Knowledge-based industries’ hiring outpaces all others

The July jobs report was another sobering reminder of the challenges facing the Rochester economy.

Relative to year-ago levels, private sector employment declined by 1,400 or 0.3 percent—reversing the 1,300 gain recorded in June.  On a year-over-year basis, the region’s private sector job count has fallen in six of the seven months of 2017.

While caution should always be used in tracking “real time” employment ups and downs, the 2017 directional pattern is disappointing.

Greater insight into the current labor market outlook can be obtained by categorizing employment into two specific clusters.

The first, broadly arranged under the so-called “Tech-Knowledge” umbrella, consists of the health care, education, professional, scientific and technical services, information and high-tech manufacturing industries—rapidly evolving sectors that rely on a significant percentage of employees with specialized skills and training.

The second group is the aggregate of all other private sector industries.

This rough sectorial sorting reveals a deeply bifurcated labor market—one with solid hiring gains in knowledge-based industries offset by relative stagnation in all other sectors.

For example, adjusted for seasonal variation, employment in Rochester area “Tech-Knowledge” industries has increased by 8,200 or 6.1 percent since the start of 2015—a pace approximating the 6.5 percent national average gain over this period (Figure 1).

Conversely, employment in sectors outside the “Tech-Knowledge” grouping has been relatively flat and actually declined by 1,200 jobs in July—in sharp contrast to the 4.1 percent national average gain (Figure 2).

The key take away from this calculus is that local labor market growth is increasingly driven by hiring at “Tech-Knowledge” organizations.  These sectors—which represent about one of every three Rochester area jobs—present significant opportunity for future expansion and hiring activity.

However, the challenge of stimulating hiring growth in other sectors remains daunting for economic policymakers.

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

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