Economic Conditions in the 2nd District

Economic Press Briefing: August 26, 2015

The views expressed here are those of the presenter and do not necessarily represent

those of the Federal Reserve Bank of New York or the Federal Reserve System.

2

The 2nd Federal Reserve District Regions in the District

FEDERAL RESERVE BANK OF NEW YORK

Upstate

Northern NJ

Downstate

Puerto Rico &

U.S. Virgin Islands

Overview of Regional Conditions

Some parts of the District are performing remarkably well,

while other places are struggling with little or no growth

New York City’s expansion is its strongest in recent history, with little

help from Wall Street.

Buffalo and Albany are seeing solid growth, with construction and

manufacturing boosting employment for the first time in decades.

Northern New Jersey is growing modestly, but is being weighed

down by weak business services and finance sectors.

Syracuse and Binghamton continue to struggle with little or no

growth, and are feeling the sting of ongoing manufacturing job cuts.

The economies of Puerto Rico and the U.S. Virgin Islands remain

depressed.

FEDERAL RESERVE BANK OF NEW YORK 3

Regional Economic Activity Index of Coincident Economic Indicators (CEI)

4

80

90

100

110

120

130

2007 2008 2009 2010 2011 2012 2013 2014 2015

New York State

New Jersey

New York City

Puerto Rico

Index (Dec2007=100)

Shading indicates NBER recession

Source: Federal Reserve Bank of New York; Government Development Bank for Puerto Rico. Note: The Puerto Rico composite index is based on a different methodology than the indexes produced by the FRBNY.

Harsh Winter

Source: Federal Reserve Bank of New York. 5

FRBNY Regional Business Surveys Indexes of Current Economic Conditions

-20

-10

0

10

20

30

Sep14 Oct14 Nov14 Dec14 Jan15 Feb15 Mar15 Apr15 May15 Jun15 Jul15 Aug15 Sep15

Business Leaders Survey

(Service Sector)

Empire State Manufacturing

Survey Aug

Diffusion Index

Source: Federal Reserve Bank of New York. 6

FRBNY Regional Business Surveys Indexes of Current Economic Conditions

-60

-40

-20

0

20

40

2007 2008 2009 2010 2011 2012 2013 2014 2015

NBER

Business Leaders Survey

(Service Sector)

Diffusion Index

Shading indicates NBER recession.

Empire State Manufacturing

Survey

Sandy

Aug

Regional Employment Trends Indexes of Total Employment, Seasonally Adjusted

7 Source: Bureau of Labor Statistics and Moody’s Economy.com.

85

90

95

100

105

110

2007 2008 2009 2010 2011 2012 2013 2014 2015

Index (Dec2007=100)

Downstate NY

United States

Upstate NY

Puerto Rico

Northern NJ

12-month % Change

Jul 15

2.0%

1.1%

0.4%

0.2%

2.1% Jul 14

Recent Job Growth Across the District May - July Average, Percent Change From a Year Earlier

8 Source: Bureau of Labor Statistics and Moody’s Economy.com.

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

United States

NYC

Lower Hudson Valley

Northern NJ

Buffalo

Rochester

Albany

Syracuse

Binghamton

Puerto Rico

Utica

Fairfield Long Island

U.S. Virgin

Islands

Downstate NY

Bu

ffalo

Rochester

Elmira Binghamton

Ithaca

Syracuse

Utica

Glens Falls

Downstate

10 Source: Bureau of Labor Statistics and Moody’s Economy.com.

88

91

94

97

100

103

106

109

112

-12 0 12 24 36 48 60 72 84

Months

Index (Start of Downturn = 100)

NYC

Long Island

Lower Hudson Valley

Fairfield

Seven Years

From Start One Year

From Start

Start of

Downturn

Note: Lower Hudson Valley includes Ulster, Dutchess, Orange, Putnam, Rockland, and Westchester counties.

Downstate Employment Trends Employment Indexed to Local Employment Peak

11 Source: Bureau of Labor Statistics and Moody’s Economy.com.

88

91

94

97

100

103

106

109

112

-12 0 12 24 36 48 60 72 84

Months

Index (Start of Downturn = 100)

Seven Years

From Start One Year

From Start

Start of

Downturn

NYC Recent

Downturn

NYC

Early 2000s Downturn

NYC Early 1990s

Downturn

NYC Employment Trends Last 3 Downturns - Indexed to Cyclical Employment Peak

NYC Employment: Wall Street & Main Street Seasonally Adjusted

12 Source: Bureau of Labor Statistics and Moody’s Economy.com.

2,500

2,750

3,000

3,250

3,500

3,750

4,000

4,250

60

90

120

150

180

210

240

270

1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014

Securities

Employment

(left axis)

Total Employment

Minus Securities

(right axis)

Dotted line indicates securities industry trough

Thousands Thousands

Sectors Driving Recent NYC Job Growth Employment Change, Sep 2009 – July 2015

13 Source: Bureau of Labor Statistics and Moody’s Economy.com.

-100

0

100

200

300

400

500 Thousands

65,000 Retail Trade

111,000 Leisure & Hospitality

124,000 Professional & Business Services

144,000 Educational & Healthcare Services

Regional Tech Employment Number of Jobs

14 Source: Bureau of Labor Statistics QCEW and Moody’s Economy.com.

0

25

50

75

100

125

150

175

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Thousands

Shading indicates NBER recessions

Long Island

Fairfield

New Jersey

New York

City

Nearly 50,000 jobs

created since

Sept. 2009

Average wage is roughly $130,000

Upstate NY

16

Sectors Driving Upstate Job Trends Year-to-Date 2014 to Year-to-Date 2015 Net Change

Source: Bureau of Labor Statistics and Moody’s Economy.com.

-2,500

0

2,500

5,000

7,500

10,000

Trade

Transport & Utilities

Manufacturing

Government Information

Professional & Business

Construction Leisure & Hospitality

Financial Activities

Education & Health

Job Change

Upstate Construction Employment Annual Percent Change

17 Source: Bureau of Labor Statistics and Moody’s Economy.com.

3.7%

0.3%

3.3%

- 0.9%

1.8%

- 2.4% - 0.6%

3.8%

10.0%

2.7% 2.4% 2.3%

- 1.4%

- 3.8%

-6%

-3%

0%

3%

6%

9%

12%

2012-2014

2014-2015 (YTD)

United States

Buffalo

Utica

Albany

Binghamton

Rochester

Syracuse

Upstate Manufacturing Employment Year-to-Date 2010 to Year-to-Date 2015 Percent Change

18 Source: Bureau of Labor Statistics and Moody’s Economy.com.

22.7%

6.4%

- 2.0% - 4.1%

- 9.0%

- 21.3%

-30%

-20%

-10%

0%

10%

20%

30%

Binghamton Syracuse Rochester Utica

Buffalo Albany

Northern NJ

Bu

ffalo

Rochester

Elmira Binghamton

Ithaca

Utica

Albany

Glens Falls

92

94

96

98

100

102

104

2007 2008 2009 2010 2011 2012 2013 2014 2015

Total Employment Seasonally Adjusted Index

20 Source: Bureau of Labor Statistics and Moody’s Economy.com.

Index (Dec2007=100)

Shading indicates NBER recession

Note: Northern NJ is here defined as Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Pike, Sussex, Somerset, and Union counties.

United States

Northern NJ

Jul

21 Source: Bureau of Labor Statistics and Moody’s Economy.com.

NNJ Sectors Underperforming the Nation May - July Average, Percent Change From a Year Earlier

3.5%

3.0%

1.9% 2.1%

- 0.8%

2.1%

- 1.9%

- 1.9%

-2%

-1%

0%

1%

2%

3%

4%

5%

Professional & Business

Services

Leisure & Hospitality

Financial Activities

Retail Trade

United States

Northern NJ

- 0.2%

NNJ Sectors Matching or Exceeding the U.S. May - July Average, Percent Change From a Year Earlier

22 Source: Bureau of Labor Statistics and Moody’s Economy.com.

0.3%

1.5%

2.7% 2.8%

0.3%

1.8%

2.7%

4.2%

-2%

-1%

0%

1%

2%

3%

4%

5%

State & Local Government

Construction

Educational & Health Services

Wholesale Trade

Northern NJ

United States

Puerto Rico

24 Source: Bureau of Labor Statistics and Moody’s Economy.com.

Puerto Rico Employment Trends Thousands

220

240

260

280

300

320

340

640

660

680

700

720

740

760

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Government Employment Private-Sector Employment

Government (right axis)

Private-Sector (left axis)

Jul

25

Sectors Driving Puerto Rico Job Trends Year-to-Date 2014 to Year-to-Date 2015 Change

Source: Bureau of Labor Statistics and Moody’s Economy.com.

-5,000

-2,500

0

2,500

5,000 Job Change

Trade

Government

Information Professional & Business

Construction

Leisure & Hospitality

Financial Activities

Education & Health

Transport & Utilities

Manufacturing

Summary

New York City’s job growth has been particularly strong, outpacing

the nation, without much help from Wall Street. Growth has been

more modest in the rest of downstate.

Economic conditions are mixed across upstate New York, with Buffalo

leading in job growth and Binghamton still seeing significant declines.

Northern New Jersey’s economy is growing modestly, with varied

performance across sectors.

The economies of Puerto Rico and the U.S. Virgin Islands remain

depressed, with no sign of recovery.

FEDERAL RESERVE BANK OF NEW YORK 26

Economic Conditions in the 2nd District

Economic Press Briefing: August 26, 2015

The views expressed here are those of the presenter and do not necessarily represent

those of the Federal Reserve Bank of New York or the Federal Reserve System.

How We Define the Tech Sector

NAICS 334 Computer Manufacturing

NAICS 454111 Electronic Shopping

NAICS 5112 Software Publishing

NAICS 518 Data Processing, Hosting & Related Services

NAICS 51913 Internet Publishing & Broadcasting and Web Search Portals

NAICS 5415 Computer Systems Design & Related

NAICS 5417 Scientific R&D Services

28 FEDERAL RESERVE BANK OF NEW YORK