The mission of Western New York Economic News is to provide analysis and forecasts of economic trends in the Buffalo-Niagara Falls Metropolitan Statistical Area and contrast these trends with those in New York State and the nation. The newsletter is prepared by George Palumbo, PhD, Mark Zaporowski, PhD and Julie Anna Golebiewski, PhD, of the Economics and Finance Department at Canisius University, Buffalo, NY.
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2024 WNY Economic News
Volume 27, Number 2
Despite the relatively high interest rate environment engineered by the Federal Reserve in its fight against inflation, GDP growth remained positive, and the soft landing appears to be within reach, though inflation is still above the Fed’s 2% target. The Treasury yield curve remains inverted between the 3-month and 10-year maturities. On May 10, the 3-month Treasury yield was 5.47% while the 10-year yield was 4.50%. National payroll employment has surpassed its pre-COVID peak by more than 7 million jobs while WNY employment is 3,500 below its pre-COVID peak. The U. S. “full-faith and credit” debt is currently 120% of our GDP. In 2011, when Greece sought the aid of the IMF to avoid default, its ratio was 116%.
Volume 27, Number 1
Third quarter real GDP growth showed the economy expanding by 4.9%. Inflation has continued to decelerate and the Federal Reserve’s goal of a soft landing in response to their tightened monetary policy and increased interest rate environment seems within reach. Crude oil prices have decreased by 38.7% since June 2022 and core personal consumption expenditure inflation has declined to 3.2% but remains above the Fed’s 2% inflation goal. BLS’s household survey shows that resident employment in the Buffalo MSA surpassed the pre-pandemic peak level in September 2023. The growth in the labor force has resulted in an increase in the local unemployment rate from a low of 3.3 percent from April through July 2023 to 3.9 percent in November. This is still below the average unemployment rate of 4.2 percent in 2019, a particularly low rate of unemployment by historical standards. Comparing monthly labor force measures in 2019 to 2023, the labor force in the Buffalo MSA was lower in 8 of the 11 months for which there is information. Coincidentally, over the last 10 years, the percentage of the population over 60 years of age in the Buffalo MSA increased from 22.5% to 27%.
2023 WNY Economic News
Volume 26, Number 3
The growth in real GDP has decelerated over the past four quarters. GDI has fluctuated between positive and zero growth over the same period. This mixed performance adds uncertainty to the national economic outlook. Crude oil futures prices have been increasing since late June. Higher energy prices could lead to higher inflation and more interest rate increases. Locally, the seasonally adjusted labor force remains almost 2 percent below the pre-pandemic peak. People entering the labor force are finding work quickly as the demand for labor remains high. However, in 2022, the average annual Buffalo MSA employment was 5 percent lower than the 2019 level. Average earnings per worker were 14 percent below the national average. Once again the Buffalo MSA fell deeper into recession, stayed longer and is recovering less fully. A common theme in most recessions since 1969.
Volume 26, Number 2
Since our January newsletter, the Federal Reserve has increased the federal funds rate target rate by 25 basis points in each of its last three Open Market Committee meetings. This rapid and continuous increase in interest rates has not yet resulted in an economic recession, though our data series suggest conflicting patterns. Locally, residential employment continues to recover more quickly than payroll jobs, and the wage disparity between the region and the nation persists, possibly reflecting the mix of occupations and educational attainment of the local workforce. We also find a significant positive return to education by race and gender.
Volume 26, Number 1
In an attempt to alleviate the accelerating inflation rate and return to its goal of 2% inflation, the Federal Reserve has raised its federal funds target range several times in 2022. The NBER has still not determined that the economy entered recession in 2022 even though real GDP growth was negative during 2022:Q1 (-1.6%) and 2022:Q2 (-0.6%). Inflation peaked in June 2022 at 9% for the CPI and at 7% for the PCE. Employment declined approximately 21% in Buffalo compared to 14% in the nation. While there were 24,500 fewer payroll jobs than in November 2019, there were only 9,000 fewer employed residents. In the absence of substantial gains in the local labor force or in the propensity of individuals to take multiple jobs, it is unlikely that the Buffalo MSA will recover all of the payroll jobs lost during the pandemic.
Volume 25, Number 3
There are mixed signals as to whether the national economy is in recession. The standard statement about what constitutes recession is two consecutive quarters of negative or zero real GDP growth. While GDP has contracted during the first two quarters of 2022, payroll employment continues to grow. We will have to wait until the official designator of economic turning points, the NBER, makes its call.
Extraordinary events over the last 12 months have caused the Fed to reverse its accommodative monetary policy, which had supported a relatively quick recovery from the Covid-19 induced recession. The inflationary consequences of aggressive monetary and fiscal policies, interacting with increased input costs related to global supply chain interruptions, resulted in an 8.3% increase in the CPI measure of the price level from August 2021 through August 2022. Over the year, the two-year treasury rate increased from .21 to 4.111%. The extent to which this move by the Fed will control inflation and derail the post-recession recovery of income and employment remains to be seen.
Regionally, the Buffalo MSA did not lead the nation into this pandemic related recession, though currently it has recovered employment at a lower rate than New York State and the rest of the nation. This is consistent with the pattern that has held over the last 40 years. While unemployment rates have fallen substantially since August 2020, the number of employed residents were 8,100 fewer than in August 2019.
Volume 25, Number 2
Last year, the national economy recovered much of the Covid-induced decline. Over the last year, a complex set of factors has led us to substantial employment growth, as well as real GDP increases, until the first quarter of 2022. Western New York has regained most of the employment lost in the historically bad second quarter of 2020. Persistent inflation has accompanied the recovery and the Federal Reserve has reacted in a predictable fashion, raising interest rates, cutting its support of U.S. Treasury and other bond prices, which began in March of 2020.
The question now is how much worse will it make the decline in real GDP, already observed in the first quarter?
Additionally, what effect will it have on the partial employment recoveries occurring in the upstate metropolitan areas that historically move down with the U.S. economy, but lag it on the upturns?
Volume 25, Number 1
The primary risk to the national economy at present is the acceleration in the rate of inflation. The University of Michigan’s consumer survey showed expectations of CPI inflation amounting to 4.9% over the coming year. Real GDP advanced at an annual rate in the 4th quarter of 6.9% and a 5.5% increase for the year. Regionally and nationally, neither employment, labor force participation nor the unemployment rate have recovered fully from their pre-recession levels. Concurrently, there have been increases in wages and the price level, both for the producer and consumer. One can only speculate if the Fed is willing to trigger another recession to slow the expected rate of inflation.
2021 WNY Economic News
Volume 24, Number 3
Extraordinarily accommodative monetary and fiscal policy supported a relatively quick recovery from the Covid-19-induced recession. The inflationary consequences of these aggressive policies, interacting with increased input costs related to global supply chain interruptions, resulted in a 4.85% increase in CPI inflation in the second quarter of 2021. Post-recession income and employment growth failed to keep up with the nearly complete recovery of GDP. Regionally, the Buffalo MSA did not lead the nation into this pandemic related recession, and currently has recovered employment ahead of the rest of New York State, an aberration in the pattern that held over the last 40 years. While unemployment rates have fallen substantially since July 2020, the labor force had 10,000 fewer individuals in July 2021.
Volume 24, Number 2
The national economy is well on its way to moving onto the growth path that it was on prior to the onset of the COVID recession in the first quarter of 2020. Real GDP was 0.84% below its 2019:Q4 peak in the first quarter of 2021. Both the fiscal and monetary policy measures that have been implemented were extremely aggressive. These policies are in part responsible for the recovery, as well as the acceleration of inflation that took place during the first quarter of 2021. The region has recovered more than half of the jobs lost during the recession, and the average wages of those working are higher in 2020 than they were in 2019. State government finances seem remarkably stable, and the feared reduction in intergovernmental transfers did not materialize.
Volume 24, Number 1
The national economy has partially recovered from COVID induced recession that began during the first quarter of 2020. Real GDP remains 3.4% below its peak in 2019:Q4, however. The Federal Reserve has aggressively lowered short term nominal interest rates to close to zero, following virtually the same monetary policy that was used during the 2008-2009 recession. Congress has been very generous with its fiscal policy response as well. Real personal income figures for the WNY region in 2019 have recently been released by the BEA. We analyze these figures along with regional employment and wages by industry, identifying the disproportionate economic impact of COVID on those with the lowest average earnings in the region.
2020 WNY Economic News
Volume 23, Number 3
The Coronavirus pandemic devastated the national economy as real GDP declined by 31.4% during the second quarter of this year. An impressive 33.1% third quarter increase brought GDP to a level that is 2.9% below pre-pandemic levels. Western New York has regained about two-thirds of the employment lost in a historically bad second quarter. The employment sectors that suffered the largest losses generally were the sectors with lowest average annual earnings per worker. State and local governments will face fiscal stress that will remind decision makers of the last recession.
Volume 23, Number 2
The coronavirus pandemic has ended the 42 quarter national economic expansion that began in 2009:Q3. Advanced estimates of GDP growth for 2020:Q1 show the economy contracting by 4.8%. The contration is likely to be much worse during the second quarter of 2020. In the coming months, the national unemployment rate will approach levels unseen since the Great Depression of the 1930s. How long this economic downturn will last depends on how quickly the economy can be re-opened and how quickly consumers return to their typical spending behavior. Even though the Buffalo MSA has changed its industrial base, once again it is leading the state and the nation into recession and seems to be falling deeper in terms of the unemployment rate.
Volume 23, Number 1
Real GDP grew by 2.1% during 2019, continuing the 41 quarter domestic expansion that far surpasses the 15 quarter average duration of post WWII expansions. From the end of May through mid-October 2019, the 3-month Treasury bill yield was consistently greater than the 10-year Treasury note yield. This unusual occurrence generally points to recession within 6 to 12 months of the yield curve’s inversion. Though lower than the national average, as well as the other upstate areas growth rate for total employment between 2016 and 2019, the rate of growth of average annual pay was higher in the Buffalo MSA than for the other MSAs. It’s growth rate for all industries equaled the national average over the period. Thus, though lower in earnings per worker than the rest of the nation and the other upstate MSAs, on average workers in the region are no longer falling behind.
Volume 22, Number 3
The national unemployment rate stood at 3.7% in August 2019 and the economy continues to add jobs. In spite of healthy labor markets and positive GDP growth led by consumer spending suggesting a strong economy, the FOMC lowered the federal funds target rate by 25 basis points. The Fed’s easing along with the trade war with China, the inverted yield curve and low growth or recession in the rest of the world are causes for caution concerning the national economy. Local employment continued its steady post-recession growth, though at a place slower than the rest of the nation. Average annual pay remains about 14% lower than the national average.
Volume 22, Number 2
Led by personal consumption expenditures, inventory investment and exports, US real economic growth was 3.2% in the first quarter of 2019. The FOMC kept its federal funds rate target in the 2.25% – 2.50% range, even though there is a 3.6% unemployment rate and monthly payroll employment growth has been averaging 218,000 workers. Despite the strong labor market, wage growth and inflation remain subdued. Locally, employment continued to grow, the April unemployment rate was 3.8%, and average weekly earnings increased .7% from the same month in the preceding year. However, both employment and wage growth still lagged behind the rest of the nation.
Volume 22, Number 1
Nationally, real economic growth was 3% over the period 2017:Q3 - 2018:Q3; even with nine 25 basis point increases since the Fed tightening began in 2015. Employment continues to grow at high levels averaging 206,000 per month in 2018. Unemployment rates are at, or near, 50 year lows and inflation is in the desired 2% range. Locally, the unemployment rate is below 4%, and total employment is growing, though still lagging behind the national rate. Per capita income in the region has grown faster than the national average for two successive years, and this year earnings per worker for the first half of 2018 is nearly equal to the national rate of growth, a positive trend worth watching.
2018 WNY Economic News
Volume 21, Number 3
The national unemployment rate, which hovered around the 4 percent level since the fourth quarter of 2017, stood at 3.9 percent in July 2018. Citing relatively strong GDP growth, a healthy labor market and stable inflation expectations, the FOMC stated it would maintain its 1.75%-2.00% target rate during its July/August meeting. Even at “full employment” levels, the annual growth of real average weekly wages has amounted to only .67 percent on an annual basis since the end of the recession in 2009. The Buffalo MSA has had sustained, though modest, employment growth since the end of the last recession. Although average annual pay here is lower than the national average, it has grown at the same rate as the national average since 2010 (18 percent).
Volume 21, Number 2
The U.S. unemployment rate was at 3.9% in April 2018, after having remained at 4.1% since October 2017. Monthly additions to non-farm payrolls have averaged 187,000 since January 2017. Over the same period, monthly payroll employment growth in the Buffalo-Niagara Falls MSA has averaged 4,573 jobs. While the upstate New York MSAs have experienced employment growth, it has not matched that of the rest of the United States. There has been an increase in both long term and short term Treasury yields over the past year. Along with lagging employment growth, private sector real average weekly earnings for the Buffalo, Rochester and Syracuse MSAs has been below the national average since 2012.
Volume 21, Number 1
The BEA earnings report, which has historically served as the basis for our projection of the region’s economic health, has been released for the year 2016. This issue of WNY Economic News focuses on the relationship between the regional economies of Western New York and the national economy. The trends in local employment and earnings are analyzed on the basis of both CES and QCEW measures.
2017 WNY Economic News
Volume 20, Number 3
Though the current business cycle expansion is eight years of age, three years longer than the average post-WWII expansion, revisions of average GDP and GDI growth rates over the last three quarters point to an acceleration of economic growth. Three month Treasury bill yields have continued their climb since the fall of 2016, as the Federal Reserve has continued the process of raising its federal funds target rate. While the Fed has expressed an interest in returning interest rates to more normal levels in the future, its behavior has been tempered because it does not wish rising interest rates to be responsible for slowing down economic growth or possibly returning the economy to recession.
2017 WNY Economic News
Volume 20, Number 2
The US economic recovery continues at a steady, if unspectacular, pace. Unemployment rates have fallen to the range generally proclaimed to be “maximum employment consistent with stable prices.” Inflation rates are low in relative terms and within the acceptable range. Income and earnings growth has been slow, but the growth in employment has spread the benefits of the recovery across most economic classifications. The Fed is proceeding with a slow upward adjustment of federal funds rates. Within the Western New York region employment growth continues, though at rates substantially lower than those occurring throughout the rest of the US.
2017 WNY Economic News
Volume 20, Number 1
The BEA earnings report, which has historically served as the basis for our projection of the region’s economic health, has been released for the year 2015. This issue of WNY Economic News focuses on the relationship between the regional economies of Western New York and the national economy.
2016 WNY Economic News
Volume 19, Number 3
Over the past three quarters (2015:Q4 – 2016:Q2) real GDP growth has been 0.9%, 0.8% and 1.1%, respectively. The anemic U.S. growth rate has accompanied a slowdown in world-wide economic activity. The slowdown in GDP has, however, been accompanied by a steady improvement in the U.S. labor market. An average 182,000 jobs per month have been added to non-farm payrolls so far in 2016, compared to an average of 229,000 in 2015. In 2015, Erie County employment grew at a rate of 1.1%, nearly three times the average growth rate over the period from 2010 through 2014. The metropolitan area has finally eclipsed the level of employment from before both the 2001 and the 2008 recessions. Employment is growing in most industries as are average annual earnings.
2016 WNY ECONOMIC NEWS
Volume 19, Number 2
Weakness in real GDP growth during the first quarter of 2016 was due to a decline in inventory and non-residential fixed investment, declining state and local government expenditures, and a continuing deterioration in our trade balance. Relatively low oil prices and a weak economy have kept the consumer inflation rate below the 2% Federal Reserve’s target. Without acceleration of GDP growth in 2016, it is unlikely that the FOMC will increase the federal funds rate target to above its present 25 to 50 basis point range. Locally, revised CES data, released in January 2016, suggest that the Buffalo MSA is not growing as quickly as pre-revised data made it appear. While the metropolitan area has finally eclipsed the level of employment from before the 2008 recession, it has not yet returned to 2001 levels.
2016 WNY ECONOMIC NEWS
Volume 19, Number 1
The slowdown in real GDP in the fourth quarter of 2015 was due to a decline in inventory and non-residential fixed investment and deterioration in our trade balance that is partially attributable to the appreciation of the U.S. dollar relative to our main trading partners. Oil prices have fallen dramatically (below $30 per barrel at the time this was written) leading to an economy-wide inflation rate that has been below the Federal Reserve’s target. This is likely to slow the FED’s plan of increasing the federal funds rate to more normal levels in 2016. WNY employment growth has improved in comparison to that of the nation but wage growth, while positive, has lagged that of the nation.
2015 WNY ECONOMIC NEWS
Volume 18, Number 3
Real GDI increased by 0.7% during 2015:Q2 after having increased by 0.4% during the first quarter. The national economy has added an average of 212,000 jobs through the first eight months of 2015 and the national unemployment rate stood at 5.1% in August. Inflation remains below the FED’s target of 2% and is uncomfortably close to negative territory. This is the main reason why the FOMC has kept the Federal Funds target rate unchanged. Locally, the recent increase in total non-agricultural employment combined with the reduction in the unemployment rate is good news, since the Buffalo region has rarely recovered as fully as the rest of the nation following recessions. These measures, as well as the changing composition and level of compensation for labor in the regional market will determine if the Buffalo MSA is finally going to end its sustained period of economic and demographic decline.
2015 WNY ECONOMIC NEWS
Volume 18, Number 2
The BEA earnings report, which has historically served as the basis for our projection of the region’s economic health, has been released for the year 2013. This issue of WNY Economic News focuses on the relationship between the regional economies of Western New York and the national economy.
2015 WNY ECONOMIC NEWS
Volume 18, Number 1
This strong growth of real GDP over the past two quarters can be attributed to increasing consumption, residential and non-residential investment expenditures, government expenditures and exports. This strong performance is taking place in an environment where the European economy is stagnating. The FED has ended its bond buying program while the ECB is about to embark on its own program. The actions of OPEC that have led to lower energy prices should reverse the pattern of 40 years of output and price manipulation on their part. As a result, the tremendous wealth transfers that have occurred from energy consumers to owners of energy inputs in the past will diminish as long as lower oil prices persist.