Activity in the New York, northern New Jersey and southwestern Connecticut region’s service sector declined at its fastest pace since June, a new survey from the Federal Reserve Bank of New York shows.
The Business Leaders Survey’s headline business activity index fell 11 points to -26.9 in December. It was the second consecutive month with an 11-point drop. Some 18 percent of respondents reported that business conditions had improved this month, while 44 percent said that conditions had worsened.
Source: New York Fed
The monthly employment index fell eight points to -11.7, indicating that employment levels in the region have dropped. The wages index fell six points to 11.2, suggesting wages increased at a slower pace in December than in November.
The prices paid index was little changed at 33 this month, while the prices received index remained at zero. The capital spending index was -19.2, which suggests ongoing significant declines in capital spending.
Source: New York Fed
The service sector still is not expecting much improvement, the report suggests. The index for future business activity edged up to 4.7 and the future business climate index was zero, indicating the firms expect little to no improvement in conditions over the next six months. Employment levels are expected to edge higher only slightly, though wages are expected to increase.
The August 2020 Survey of Consumer Expectations from the Federal Reserve Bank of New York shows a continued decline in pessimism about households’ financial situation.
The report, from the New York Fed’s Center for Microeconomic Data, shows that home price growth expectations returned to levels close last year at this time, while delinquency expectations remain low. However, year-ahead spending, household income and labor market expectations all remain weak compared to the pre-COVID-19 period. Median inflation expectations increased at both the short and medium-term horizons, while uncertainty and disagreement about future inflation remain elevated.
Source: Federal Reserve Bank of New York
The report found that median inflation expectations increased 0.1 percentage point in August to 3 percent at the one-year horizon and increased 0.3 percentage point to 3 percent at the three-year horizon. The increase was driven mostly by respondents above the age of 40.
Median inflation uncertainty — or the uncertainty expressed regarding future inflation outcomes — increased for the second consecutive month at both horizons and remains elevated relative to pre-COVID-19 readings.
Median home price change expectations continued its rebound from a series low of 0 percent reached in April 2020, increasing from 2 percent in July to 2.8 percent in August, and inching closer to its 2019 average of 3 percent. The increase was similar across demographic groups and Census regions.
The median one-year ahead expected change in the price of gasoline increased from 5.4 percent to 5.6 percent in August, while median expectations for the cost of a college education and rent both increased by 0.3 and 0.1 percentage points to 5.1 percent and 5.5 percent, respectively, according to the report. However, the median expected change in the cost of medical care declined from 9.1 percent to 8.3 percent, but remained elevated, compared to its 2019 average of 7.2 percent. Expected changes in food prices remain unchanged at 5.4 percent.
Source: Federal Reserve Bank of New York
Median one-year ahead expected earnings growth remained flat at 2 percent in August, below its 2019 average level of 2.3 percent. Mean unemployment expectations — or the mean probability that the U.S. unemployment rate will be higher one year from now — decreased slightly from 39.3 percent in July to 39.1 percent in August.
The mean perceived probability of losing one’s job in the next year increased for the second consecutive month from 16 percent in July to 18 percent in August, well above its February reading of 13.8 percent. The increase was more pronounced among respondents without a college education and those with a household income below $50,000.
Finally, the average perceived probability of missing a minimum debt payment over the next three months increased slightly from last month series’ low of 9.5 percent to 9.7 percent in August. The new reading remains well below its 2019 average of 11.5 percent, according to the report.
The SCE is a nationally representative, internet-based survey of a rotating panel of approximately 1,300 household heads.
Business activity in the New York, New Jersey and southwestern Connecticut region’s service sector expanded strongly in June, according to the Federal Reserve Bank of New York’s June 2018 Business Leaders Survey.
The survey’s headline business activity index jumped seven points to 21.4, its highest level in more than a decade. The business climate index increased nine points to 21, a sign that firms regarded the business climate as better than normal.
The New York Fed reported a five-point increase in the employment index to 17.7 this month, while the wages index remained elevated. The prices paid index also moved up 10 points to 62.4, a multiyear high, suggesting ongoing, widespread input price increases. The selling price index was flat in June at 22.3.
Looking forward, business leaders in the service sector remained fairly upbeat about the six-month outlook, though they were less positive than they had been early this year, the New York Fed reported. The indexes for future business activity and future business climate were little changed, at 36.6 and 20.8, respectively.
Business activity statewide showed strong growth this month, according to firms responding to the Federal Reserve Bank of New York’s March Empire State Manufacturing Survey.
The general business conditions index climbed nine points to 22.3. Thirty-eight percent of respondents reported that conditions had improved over the month, while 15 percent reported worsening conditions.
The new orders index rose to 16.8, while the shipments index rose to 27, signaling strong growth in orders and shipments. Unfilled orders increased, delivery times lengthened and inventories edged higher, the New York Fed reported.
Labor market indicators showed an increase in employment and hours worked. The prices paid index moved higher, reflecting ongoing and widespread increases in input prices.
Looking ahead, manufacturing firms continued to be optimistic about the six-month outlook, though less so than in February. The index for future business conditions fell six points to 44.1. The capital expenditures index, at 29.4, suggests that firms’ capital spending plans remain strong.
Business activity continued to improve this month, the Federal Reserve Bank of New York’s Empire State Manufacturing Survey shows.
General business conditions dipped slightly to 17.7 from 19.6 in December, but remained in positive territory, suggesting a continued expansion in manufacturing activity. Some 32 percent of respondents to the survey said business conditions had improved over the month, while 15 percent said conditions had worsened.
The new orders index was down seven points to 11.9, while the shipments index declined nine points to 14.4, indicating ongoing growth in orders and shipments, but at a slower pace in the last month.
The number of employees index fell 19 points to 3.8, a level that suggests a small increase in employment levels. The prices paid index climbed seven points to 36.2, while the prices received index increased 10 points to 21.7.
Firms surveyed in January remained optimistic about the six-month outlook. The index for future business conditions improved slightly to 48.6, while the index for future inventories rose to 20.3, a record high, indicating a buildup of inventories in the coming months.
The index for future number of employees rose three points to 26.9, a four-year high.
A team of students from P-TECH Rochester earned the top spot in the 2017 Leading the Way: A Greater Rochester Workforce Development Video Campaign, sponsored by the Federal Reserve Bank of New York, the Rochester Area Community Foundation and RCTV Rochester’s Community Media Center.
The contest, which drew submissions from 74 students at three area Pathways in Technology Early College High Schools, was designed to teach students about the skills required to work in industries that are currently hiring.
“Research data has shown that there are an estimated 500 job openings in various technological fields each year in the Rochester area, and there are not enough skilled workers to fill them,” Rochester Mayor Lovely Warren said in a statement. “Closing the middle-skills gap is critical to ensuring that local industries get the workers they need to operate their businesses at full potential, and our citizens have access to stable, good-paying jobs.”
Leading the Way builds on the New York Fed and the broader Federal Reserve System’s efforts to help workers develop the skills necessary to adapt to today’s economy. Through this and other initiatives, the Fed has focused on reframing workforce development as an investment, encouraging partnerships and leveraging resources to improve economic mobility and job opportunities.
“The New York Fed is intently focused on supporting efforts to close the skills gap and help workers adapt to the ever-changing economy,” said Tony Davis, New York Fed director of community engagement. “With its first-rate educational institutions and innovative industries, the Rochester area is poised for success. Programs like Leading the Way play an important role in challenging young adults here to deeply understand the skills they need for available jobs.”
The P-TECH model is a six-year program covering grades 9-14 that focuses on career readiness and involves a partnership between at least one school district, college and employer—making up a “P-TECH school.” Students who complete the program receive a high school diploma and a college associate’s degree at no cost.
Submissions for the Leading the Way campaign were required to highlight one technical skill associated with a P-TECH career pathway, such as designing and implementing computer network systems, and two professional skills, such as personal traits or group experience, in a 30-second segment.
P-TECH Rochester was joined by Wayne Finger Lakes P-TECH and Western New York Tech Academy at an awards ceremony at Monroe Community College’s downtown campus Wednesday evening, where nine finalists, representing each of the schools, were announced. The first-place team’s video focused on cybersecurity and the prevention of hacking.
Among other prizes, the winning video will be shown in four local movie theaters.
Business activity among New York’s manufacturers continued its upward mobility in September, the Federal Reserve Bank of New York’s Empire State Manufacturing Survey shows.
The general business conditions index held steady at 24.4, while the new orders index rose four points to 24.9 and the shipments index climbed four points to 16.2.
Labor market indicators pointed to a modest increase in employment and hours worked this month, while both input prices and selling prices rose at a faster pace than in August.
Looking ahead, firms continue to be optimistic about future conditions, with the index for future business conditions coming in at 39.3 and the index for future new orders edging up two points to 43.7. Manufacturers expect employment to increase modestly in the coming six months.
Separately, the U.S. Census Bureau reported a slight increase in both manufacturing and trade inventories and sales in July. The inventories to sales ratio moved down slightly from 1.4 in July 2016 to 1.38 in July this year.
An upwardly mobile inventory to sales ratio can in some cases signal a recession, as businesses accumulate goods and demand dries up. The inventory to sales ratio among manufacturers nationwide has declined since 2015, but remains much higher than pre-Great Recession numbers.
The regional economy is shifting away from the production of goods and toward higher skilled jobs, increasing wage inequality.
William C. Dudley, president, Federal Reserve Bank of New York
That was the take-away from an economic press briefing given by Federal Reserve Bank of New York president and CEO William Dudley this week. The New York Fed covers New York, the 12 northern counties of New Jersey, Fairfield County in Connecticut, Puerto Rico and the U.S. Virgin Islands.
“Since the early 1980s, wages have increased more rapidly for workers toward the top of the income distribution than for the median worker, and much more rapidly than for workers toward the bottom of the distribution,” Dudley said.
Demand has been particularly high for knowledge workers, resulting in strong wage growth in certain sectors, Dudley explained.
“All told, the forces of technological change and globalization have contributed to wage inequality by pushing up wages for those toward the top, and stifling wage growth for workers toward the middle and bottom of the wage distribution,” he added.
The good news is, when measured against metro areas nationwide, Rochester, Buffalo and Syracuse are among the most equal when it comes to wage distribution. The bad news? That lack of wage inequality likely is because job growth has been stagnant in the region for some time.
Job growth in the Fed’s second district has remained strongest in and around New York City, while there has been little growth in most of Upstate New York, said the Fed’s research officer Jaison Abel. Across New York, the health and education services sector has seen the most growth in employment, Abel noted.
Using 2013 regional employment as a base, Abel noted that nationally, total employment has increased some 2 percent annually. Downstate businesses have exceeded that pace, while upstate employment growth was roughly half the national average and this year has flattened.
Rochester, like Buffalo, has seen little or no growth in jobs over the last 12 months, Abel said.
“The least unequal places tend to have lackluster wage growth across the board, due in large part to weak demand,” Abel said, noting most metro areas in Upstate New York fall into this category.
He also pointed to that since the 1980s, skilled workers have increasingly moved to large metro areas that offer urban amenities and higher wages, changing the composition of the workforce in some areas.
“Inequality reflects impediments to people reaching their potential,” Dudley said at the briefing. “These include limits on access to education, credit, transportation and housing. Such impediments may discourage workers from investing in themselves and may lead some to drop out of the labor force.”
Dudley suggested an improvement in the quality of education for the most vulnerable citizens as a step toward wage equality.
“Children who attend better schools and attain higher levels of education have more favorable long-term outcomes, including better job prospects and higher earnings,” he said.
Workforce development is another key policy area that can improve economic mobility and reduce inequality, Dudley added.
“Because of the swift pace of economic change driven by advances in technology and globalization, we ought to step up efforts to help workers build the skills necessary to adapt to change,” Dudley said. “This means providing these types of services at the local level.”
Efforts should include innovative workforce development programs, coursework and certifications in key, in-demand skills and fostering partnerships between higher education institutions and local employers, he said.
“Here, I would point to Monroe Community College in Rochester as a model of successful collaboration with employers to create job-training programs that align with current employment opportunities,” Dudley said.
(c) 2017 Rochester Business Journal. To obtain permission to reprint this article, call 585-363-7269 or email [email protected]m.
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