Can an unprecedented promise of $1 billion in state aid help the Buffalo Niagara region turn its back on decades of decline and stagnation?
That’s the billion-dollar question that no one can really answer today, but local officials are hopeful that it will turn into a powerful catalyst for growth in the coming years.
“This is truly an amazing time for Western New York,” said Satish Tripathi, the University at Buffalo president who serves as co-chairman of the Western New York Economic Development Council. “Because of this historic state support, we are turning a definite corner in Buffalo and Western New York.”
But it will take years for the initiatives envisioned through Gov. Andrew M. Cuomo’s promised “Buffalo Billion” to yield tangible results. That’s because most of the initiatives are geared toward laying the groundwork for future growth by bolstering worker skills, promoting a stronger entrepreneurial climate and improving the region’s tourism programs.
Most of those initiatives will be targeted at advanced manufacturing, life sciences and tourism – sectors of the local economy where local officials believe the region can have a competitive advantage over other cities – and countries.
The stakes are high because the local economy, after showing surprising zest coming out of the recession, has steadily lost steam over the past year, cooling to the point where its growth rate now is very slow and even bordering on stagnant.
The region shifted from slow job growth during the spring and summer to outright job losses during the fall, although local economists say they believe the reported data may be overstating the depth of the decline. Several economists predict that revised data, due out in March from the state Labor Department, will show that job growth locally slowed last year, but did not turn slightly negative or stagnate, as the current figures suggest.
Regardless, the local job market remains weak, with unemployment, which stood at a seasonally unadjusted 7.9 percent in November, just below its highest level since the 1980s and four-tenths of a full percentage point higher than it was a year earlier. The pace of local job growth, which averaged a little more than 0.8 percent in 2011, cooled to a near-stagnant 0.2 percent last year.
But Gary Keith, M&T Bank’s chief economist, thinks those preliminary job figures make the local economy seem worse than it really is, although the Buffalo Niagara economy still has had a fairly slow go since the recession hit more than five years ago.
The region’s total economic output has grown by almost 6 percent since 2007, which works out to an annual growth rate of a little more than 1 percent a year. The number of jobs locally still is almost 1 percent lower than it was before the downturn began, although that decline is about a third of the drop nationwide, Keith said.
The sluggish recovery is partly due to the modest decline during the worst of the recession. “Because we didn’t fall as far, the rebound has not been as positive as in other parts of the country, or even upstate New York,” he said. “Because we didn’t fall as far, the bounce hasn’t been as strong on the other side.”
The region emerged from the recession in better shape than much of the country because local housing continued to slowly appreciate, rather than going bust as it did in many high-flying markets.
“Because we didn’t fall into such a deep hole, we’re in a much better position today,” Keith said.
“There’s some nice things that are occurring that we hope to be able to leverage into better growth,” he said. “Locally, we’re making progress.”
Housing bright spot
Housing remains a bright spot. U.S. home prices have plunged by about 24 percent since their peak in March 2006, while upstate prices have increased by about 4 percent, said Jaison Abel, a regional economist with the Federal Reserve Bank of New York in Buffalo. “Home prices in upstate New York were basically flat and stable,” he said. “Home price appreciation is fairly stable, consistent with historical patterns.”
Within the Buffalo Niagara region, median sale prices of existing homes strengthened by 4.3 percent last year, buoyed by nearly 9 percent rise in sales, according to statistics from the Buffalo Niagara Association of Realtors. While low mortgage rates have been making homeownership more affordable for borrowers, prices have been buoyed by a shift in the local housing market that has brought it more in balance, after tilting in favor of buyers during 2011, when the supply of homes for sale swelled.
But that inventory of available homes steadily declined last year, falling by 17 percent overall, leaving the market in a much better balance. By November, there was a 6.2 month supply of homes for sale locally, a marked improvement a nine-month supply during the fall of 2011, the Realtors group said.
Another measure of home prices, which includes data from home sales, appraisals and refinancings, found that local home prices rose by 1.3 percent over the past year, compared with a 3.3 percent increase nationally, according to third-quarter data from the Federal Housing Finance Agency. The Buffalo Niagara region ranked 57th out of 304 metropolitan areas nationally.
On the home building side, the Buffalo Niagara market bottomed out in September 2011 and has grown modestly since, with building permits up 1.5 percent since then, according to the National Association of Home Builders.
Local consumers also are feeling a little better about their financial situations and are starting to think more about buying cars, computers, furniture and other more costly items that they put off buying during the downturn, said Donald Lonnstrom, the founding director of the Siena Research Institute, which conducts a quarterly survey of consumer confidence in upstate metro areas, including Buffalo.
In fact, confidence levels in the Buffalo Niagara region have rebounded to their strongest point since 2007, although the urge to buy remains relatively subdued.
“Consumers are closer to being back in a position where they can make decisions about big-ticket purchases,” Keith said.
The strong Canadian dollar, which hovered around parity with the U.S. dollar for most of the past year, has turned into a powerful magnet for Canadian shoppers, Keith said.
Same-day car trips from Canada to the United States at the four local bridges rose by 8 percent through November of last year and are about 60 percent higher than it was seven years ago, according to data from Statistics Canada.
“Getting new money into the region is the key,” Keith said. “This is a destination for Canadian shoppers, and they are making the case that this is where they want to shop.”
Making it here
Another bright spot has been the rebound by local manufacturers, who have added about 1,700 jobs since hitting their recession low three years ago. While factory employment still is down 44 percent locally since 1990, the modest rebound has been a welcome relief from decades of decline.
“Manufacturing is still relevant in Western New York,” said Chris Sansone, the president of the Buffalo Niagara Manufacturing Alliance.
Sansone bemoaned what he described as a growing skills gap within the region, where local manufacturers have open jobs for qualified workers but can’t find people with the necessary skills to fill the job. That’s forcing some employers to launch costly apprenticeship programs to train workers on their own, or to turn work away because they don’t have enough qualified people to do it.
And he predicts that the problem, if unaddressed, will only get worse over the next five to 10 years, as aging baby boomer factory workers retire.
“Too many manufacturing jobs, from welders to engineers, have gone unfilled because of a lack of available talent at a time of high unemployment,” said Andrew Rudnick, president of the Buffalo Niagara Partnership.
Part of the problem, local experts said, is that young workers have been discouraged from seeking careers in manufacturing because factory jobs have been steadily vanishing for more than a generation. As a result, manufacturing has come to be seen as a dead-end career.
But Sansone said that’s not the case for workers who have the right skills. To address the gap, the Western New York Economic Development Council is proposing new initiatives to train local workers under programs that are developed in close cooperation between local schools and employers.
“You can’t grow your economy unless you can match the skills of your workforce with the jobs that are available,” said Howard Zemsky, the co-chairman of the development council.