The State of Manufacturing
in New York State

We're doing better

New York's manufacturing economy is making a comeback.

From 1989 through 1994, the Empire State's long-powerful industrial sector bled an average of 42,820 jobs each year. In just two of those years, 1990 and 1991, we lost a staggering total of 128,000 manufacturing jobsthe equivalent of all the industrial employment in Erie and Onondaga counties, combined.

As 1997 ended and 1998 began, though, things were dramatically different. We ended the year with a slight gain in statewide manufacturing employment, for the first time in more than a decade.

Equally important, new data from the U.S. Census Bureau show that New York has set the stage for continued revitalization of this vitally important sector. The Census Bureau statistics show, for instance, that New York was among the leading states in attracting new investment capital in 1995 and 1996. Such investments make it possible for companies to add or continue the production that generates manufacturing jobs.

The resurgence of our manufacturing base is broad-based. Upstate and downstate are sharing equally in the resurgence. And on each of the major indicators of industrial strengthjobs, production, and capital investmentNew York is much closer to the national growth rate than we were just two years ago.

That recovery is not yet complete, however. We still lag the nation in creating and helping manufacturing jobs. Clearly, we need to become still more competitive.

Long decline in a key sector

Manufacturing has played a key role in New York State's economy for more than a centuryindeed, the Empire State helped usher in America's industrial age in the mid-1800s. By around 1906, more than 1 million New Yorkers worked in industry; during World War II, the number surpassed 2 million.

During the late 1960s and early 1970s, factory employment began to melt away. After a brief recovery in the late '70s, continual declines returned throughout most of the 1980s, growing especially large as the 1990s began.

The hemorrhage of manufacturing from New York in the late 1980s and early 1990s was stunning not only in absolute numbers, but in comparison to the rest of the country, as well.

As shown in Table 1 on the opposite page, more than half the states gained manufacturing jobs from 1989 to 1994, while the Empire State lost an average of 42,820 such jobs every year. Our average annual loss was 4 percent, compared to a national average loss of less than 1 percent. (The nationwide average showed a loss, even though a majority of states showed gains, because larger states such as California, New Jersey and New York were among the losers.) Our five-year decline was worse, on a percentage basis, than that for any such period in the state's history.

New York State's political establishment made a variety of excuses for the state's discouraging performance. For instance, some observers said it was a regional problem, pointing to large losses in several other Northeastern states.

But such analysis ignored the growth in industrial states such as Indiana and Michigan. It ignored another key fact: Even other states that were losing manufacturing employment did so at rates significantly less than New York (Ohio and Pennsylvania, for example). If we had kept pace with the rest of the nation during those five years, some 130,000 additional New Yorkers would have been employed in manufacturing at the end of 1994.

During this period, New York's factory employment fell below 1 million for the first time since Theodore Roosevelt was in the White House, early in this century.

"New York State is going in a different direction than manufacturing as a whole," Samuel Ehrenhalt, regional U.S. commissioner of labor statistics, warned in November 1992. "New York has clearly become a less attractive place globally for the conduct of manufacturing activities."

As of 1994, the annual loss of manufacturing jobs had slowed to about 16,000, or roughly 1.7 percent. By then, though, the industrial sector throughout the rest of the country was booming, creating more than a third of a million jobs during the year.

In 1995 and 1996, New York's losses diminished a bit further . Now, a new generation of state leadership in Albany was cutting taxes and easing the regulatory burden on businesses. Leaders of key New York manufacturers such as Corning and IBM were announcing major new capital investments.

Despite all the earlier losses, we can be thankful that manufacturing still makes up much of the bone and muscle of New York State's economy. Payroll in 1996 totaled $35.6 billion statewide. Upstate metropolitan areas such as those around Rochester, Buffalo and Syracuse depend heavily on industrial jobs, as do dozens of smaller communities from Glens Falls, to Oneida, to Jamestown.

In the bustling downstate metropolitan area, manufacturing is often the forgotten sector of the economy. Still, it's vitally importantproviding, for instance, more than a quarter-million jobs in New York City, 110,000 on Long Island, and roughly 40,000 in Westchester County.

And those jobs are typically more valuable than many others. Nationwide, manufacturing jobs paid an average $12.78 an hour in 1996, compared to $11.82 for all private-sector employment. And, unlike some sectors of the economy, industrial activity attracts wealth from outside the statein the form of sales elsewhere in this country, and abroad. In addition to the income and sales taxes their employees pay, factory sites are often the biggest property taxpayers in local communities.

In sum, a strong manufacturing sector is absolutely critical to our overall economic security.

The comeback begins

Finally, in 1997, came a breakthrough in the struggle to rebuild New York's industrial strength. Manufacturing employment grew, on a December-to-December basis, for the first time since the national boom year of 1984.

The good news on the jobs front has continued into 1998. Through April, New York gained 400 factory jobs, compared to a year earlier.

As is clear from Table 1 on the previous page, the change in the Empire State was not simply a reflection of a stronger national economy. Ranking the individual states by change in manufacturing employment, New York has

Table 2
Manufacturing Employment In Major Regions of New York
Region	Jobs (in 1,000s), April 1998	% Change, April '98 vs. '97	% Change, April '94 vs. '95
Albany-Schenectady-Troy	38.8	0.8%	-3.5%
Binghamton area	25.2	2.9%	-2.7%
Buffalo-Niagara Falls	89.6	0.7%	2.1%
Dutchess County	18.3	4.6%	1.2%
Elmira area	9.7	1.0%	0.1%
Glens Falls area	8.5	2.4%	-5.3%
Jamestown area	13.7	0.7%	0.1%
Long Island	112.2	0.4%	-3.1%
New York City	253.6	-0.2%	-2.3%
Rochester area	123.5	-2.5%	-0.5%
Steuben County	11.4	0.9%	-7.8%
Syracuse area	49.4	0.8%	1.9%
Utica-Rome area	19.3	0.0%	-2.7%
Westchester-Rockland	50.2	0.0%	-3.1%
Source: NYS Department of Labor, establishment data survey.

moved from 48th to 40th. Our performance relative to the overall, national average has improved noticeably, as well. Both measures show we still aren't doing as well as we should, but the steps toward a comeback are undeniable.

Some regions of the state are doing particularly well, as indicated by Table 2 on the page opposite. Dutchess County's 4.6 percent gain, representing 800 factory jobs, was the best showing among the state's major market areas during the year ending in April. That performance was better than the national average, as was the growth in Rockland County, Binghamton, Glens Falls and several smaller counties. Most of the major Upstate areas showed increasesa possible indicator of more broad-based economic growth yet to come in those areas. Rochester, New York City and Westchester lost manufacturing employment during the year. (But, fortunately, each of those areas has been boosted by growth in other sectors.)

Forecast: Continued improvement

Newly available statistics from the U.S. Census Bureau paint an encouraging picture of likely continued growth in our manufacturing sector.

In 1995 and 1996, new capital expenditures for manufacturing plants here totaled more than $10 billion, the Census Bureau reported in the 1996 Survey of Manufactures, released in May of 1998. That represented an increase of 33 percent from the preceeding two-year period, one of the largest percentage jumps of any state, and significantly more than the national increase.

New capital expenditures include permanent additions to manufacturing establishments, and additions to plant capacityboth of which are likely to mean new jobs. Such expenditures could also be for major alterations to establishments, or replacement machinery and equipment. Those investments do not always create new jobs, but are vitally important in maintaining existing employment.

The Census Bureau data, displayed in Table 3 on the following page, show only six other states surpassed $10 billion of new capital expenditures during 1995-96: California, Texas, Ohio, Michigan, Illinois and Pennsylvania.

These authoritative figures put the lie to the common belief that major new manufacturing activity only happens overseas or in Southern states. States such as Virginia, North Carolina and Georgia that have worked for years to take industry from New York (and, in some cases, have succeeded) failed to reach the $10 billion benchmark of success in 1995-96.

Again, though, the news is mixed. New capital investments in New York in 1996 were only 5.9 percent of the state's existing manufacturing operations (the latter measured by total manufacturing value added). Nationwide, that figure was 8.0 percent. And total shipments from New York factories barely grew from 1995 to 1996, while shipments in all 50 states rose 3.5 percent.

In other words, New York did not keep pace with other states in laying the foundation for future manufacturing activity. If we do not catch up to the national rate of new manufacturing investment and sales, we will almost certainly fall further behind in the competition for new manufacturing jobs.

What's happened since 1996? There is no complete answer, but there are some encouraging signals. For example, IBM is developing a $700 million

Table 3
New Capital Expenditures for Manufacturing, 1995-96 Ranked by Total for 1995-96
Rank	State	New Capital Expenditures for Manufacturing (millions of $)	Change in New Capital Expenditures 1993-94 to 1995-96
1	California	27,000.9	32.0%
2	Texas	24,801.9	32.1%
3	Ohio	15,591.5	23.7%
4	Michigan	15,563.2	32.7%
5	Illinois	13,547.8	13.4%
6	Pennsylvania	10,592.4	11.8%
7	New York	10,063.7	33.3%
8	North Carolina	9,929.0	5.0%
9	Indiana	9,484.8	14.1%
10	Wisconsin	7,492.9	23.2%
11	Georgia	7,488.8	22.0%
12	Tennessee	6,339.7	12.9%
13	Louisiana	6,274.8	17.1%
14	Alabama	6,104.6	46.2%
15	Massachusetts	5,616.3	25.2%
16	Minnesota	5,612.3	27.8%
17	South Carolina	5,608.2	29.7%
18	Kentucky	5,565.2	12.3%
19	Virginia	5,533.2	17.1%
20	Missouri	5,454.0	22.2%
21	Oregon	5,414.3	97.1%
22	New Jersey	5,208.8	1.5%
23	Arizona	5,163.9	120.8%
24	Florida	4,989.8	30.9%
25	Washington	4,315.8	-2.4%
26	Iowa	3,826.6	21.9%
27	Connecticut	3,282.0	1.7%
28	Mississippi	3,044.2	40.8%
29	Colorado	3,029.6	-17.6%
30	Idaho	2,967.6	103.4%
31	Kansas	2,841.5	30.7%
32	Arkansas	2,647.5	26.3%
33	Maryland	2,177.9	46.0%
34	Utah	1,842.7	-9.1%
35	Oklahoma	1,747.1	1.3%
36	West Virginia	1,512.2	25.7%
37	Vermont	1,501.6	98.3%
38	Nebraska	1,496.3	39.4%
39	Maine	1,392.7	38.5%
40	Delaware	1,126.4	40.0%
41	New Hampshire	970.7	31.2%
42	New Mexico	715.9	-7.5%
43	Rhode Island	685.8	30.7%
44	Nevada	466.7	22.6%
45	South Dakota	432.7	8.2%
46	North Dakota	312.4	27.3%
47	Montana	271.6	-9.4%
48	Alaska	200.1	-18.3%
49	Hawaii	191.8	-49.2%
50	Wyoming	126.8	-63.5%
	U.S. total	267,680.2	24.0%
Source: U.S. Census Bureau, 1996 Survey of Manufactures

computer chip production plant in the Hudson Valley, the largest manufacturing investment in the state's history and one of the most important industrial site location announcements in the nation last year. Corning Incorporated opened a major new optical components plant in the Southern Tier, creating hundreds of jobs. Near Syracuse, the Solvay Paperboard plant announced a $150 million expansion.

We're experts in exports

Another reason for optimism is New York's strength as an exporter. While our overall industrial employment declined by more than 100,000 from 1992 to 1996, export-related jobs in manufacturing grew by 14,500, according to a recent University of Indiana study.

Our net gain in factory jobs over the past year was driven largely by increases in export-intensive industries such as electrical and electronic equipment, industrial equipment and computers, fabricated metal, and chemicals and allied products.

Here again, though, the news is not all encouraging. Merchandise exports from the Empire State rose by 28.6 percent from 1994 to 1996. That rate was slightly below the national average, and well behind major competitor states such as Texas, Illinois and California.

Exports play an increasingly important role in the entire U.S. economy. New York's continuing strength in this area will be a key to the health of our overall manufacturing sector.

Manufacturing in New York: A snapshot

While "manufacturing" is commonly regarded as one sector, in fact it represents a broad cross-section of our economyfrom foods to fiber optic equipment, paper to plastics, computers to chemicals.

The Empire State's manufacturing sector tends to be more highly skilled than those in most other states. Value added per New York production worker averaged $163,448 in 1996, 14 percent higher than the national average, as shown in Table 5 on Page 10.

In 1996, some 42 percent of manufacturing jobs here were non-production in nature, compared to a national average of 35 percent. That's partly due to the Empire State's status as home to dozens of corporate headquarters. Thousands of other non-production jobs are in research and development; world-class innovators such as IBM, General Electric, Corning and Eastman Kodak Co. maintain large R&D facilities in the state.

New York has a reputation for high labor costs. For instance, a recent analysis by Standard & Poor's DRI reported: "New Yorkers' wage and salary income per employee is the second highest among the 50 states, 27 percent higher than the national average." But much of that difference is due to the state's heavy concentration of high-value-added industries, including the securities sector and corporate headquarters. Overall, manufacturing payroll per employee is about 9 percent higher in New York than nationwide.

Table 4
Manufacturing by Sector in New York State Data for 1996 and 1995, sectors ranked by number of jobs 1996
Sector	Shipments	Jobs (in 1,000s)	Payrolls (millions of $)	Capital Expenditures (millions of $)
Printing, publishing	28,773	139.5	5447	502
Apparel and other textile prod.	9,630	91.2	1800	66.6
Industrial machinery/equip.	14,088	84.2	3230	456
Electronic, other elec. equip.	13,966	82.9	2812	354
Instruments, related prod.	20,550	81.4	3576	910
Fabricated metal prod.	7,903	64.3	1962	258
Food and kindred prod.	14,912	50.7	1447	344.8
Chemicals, allied prod.	12,364	41.9	1677	614
Rubber, misc. plastics prod.	4,804	35.3	969	257
Paper, allied prod.	6,018	31.7	1019	766
Transportation equip.	9,709	27.4	1295	214
Stone, clay & glass prod.	3,329	21.6	697	146.6
Primary metal industries	6,353	20.8	771	153
Textile mill prod.	2,055	19.3	449	59.4
Furniture and fixtures	1,677	17.9	446	52.6
Lumber, wood prod.	1,631	14.7	326	53.1
Leather, leather prod.	440	2.8	100	n/a
1995
Sector	Shipments	Jobs (in 1,000s)	Payrolls (millions of $)	Capital Expenditures (millions of $)
Printing, publishing	28206	141.4	5425	514.8
Apparel and other textile prod.	10379	101.3	1892.3	87.7
Industrial machinery/equip.	13754	83.1	3093	475
Electronic, other elec. equip.	13767	83.7	2784	458.4
Instruments, related prod.	20939	84.7	3602	560.8
Fabricated metal prod.	7871	64.1	1931	298.7
Food and kindred prod.	13998	51.7	1450.8	348
Chemicals, allied prod.	12034	43.2	1656	631.8
Rubber, misc. plastics prod.	4608	35.7	949	167
Paper, allied prod.	6915	33.2	1077	379
Transportation equip.	9760	28.7	1306	261.4
Stone, clay & glass prod.	2953	20.8	660.6	131
Primary metal industries	6679	20.1	684	158
Textile mill prod.	2129	20	426	50.6
Furniture and fixtures	1610	17.2	405.5	40.3
Lumber, wood prod.	1489	15	317.8	37.1
Leather, leather prod.	475	2.6	95.4	n/a
Source: U.S. Census Bureau, 1996 Annual Survey of Manufactures, Geographic Area Statistics. n/a=not available.

Focusing the comparison on production workers, though, shows a different story. The average hourly wage for such workers nationwide was $12.98 in 1996, while in this state the figure was 2 percent lower, at $12.72. We're fortunate to have high-paid manufacturing jobs in research, management and other non-production areas. At the same time, it's important to recognize—and advertise—the competitive level of production wages in the Empire State. Too many out-of-state business people still think New York is always a high-wage, high-cost location; they need to hear that this image is no longer accurate.

As Table 4 shows, the largest sub-sectors of our manufacturing base (ranked by total shipments in 1996) are:

• Printing and publishing, including commercial printing (37,700 jobs in 1996), periodicals (33,800), newspapers (24,600) and books (23,400).

• Instruments and related products, including medical instruments and supplies (14,700 jobs), measuring and controlling devices (14,300), and search and navigation equipment (13,700).

• Food and kindred products, including bakery products (13,400), beverages (9,000) and preserved fruits and vegetables (7,200).

• Industrial machinery and equipment, including general industrial machinery (14,900), metalworking machinery (14,700), refrigeration and service machinery, and computer and office equipment (7,500).

• Electronic and other electric equipment, including electronic components and accessories (38,700), communications equipment (12,100), and electric lighting and wiring equipment (10,700).

• Chemicals and allied products, including drugs (16,200), soaps, cleaners and toilet goods (10,800), and industrial organic chemicals (4,200).

• Transportation equipment, including motor vehicles and equipment (20,300) and aircraft and parts (6,800).

Three sectors—fabricated metal products; stone, clay and glass products; and furniture and fixtures—added jobs from 1995 to 1996.

In the past year, each of those sectors has grown further. Other industries adding jobs in the past year are industrial machinery and equipment, electronic and electric equipment, and transportation equipment, including motor vehicles and equipment.

All of these industries fall into the durablegoods area of manufacturing, which represents the bestpaying industrial jobs. Durablegoods workers in New York averaged weekly earnings of $596.70 in January, compared to $504.86 for manufacturing employees in the nondurablegoods sector. Growth in these areas is an especially encouraging sign for the health—both today and tomorrow—of our overall economy.

Table 5
Manufacturing Value Added Per Production Worker, 1996
Rank	State	Value added per production worker	Production workers, 1996 (in 1,000s)	Total manufacturing workers, 1996 (in 1,000s)
1	New Mexico	$427,087	27.5	43.4
2	Delaware	$212,890	27.2	60.2
3	Louisiana	$203,606	123.4	175.3
4	Arizona	$189,782	120.4	208.1
5	New Jersey	$179,257	278.9	540.3
6	Texas	$175,464	664.7	1,055.0
7	Massachusetts	$166,655	264.3	474.8
8	West Virginia	$163,885	54.7	76.2
9	New York	$163,448	554.7	949.6
10	Colorado	$162,704	118.1	195.8
11	Kentucky	$162,524	215.6	296.2
12	California	$162,427	1,162.4	1,937.8
13	Connecticut	$161,484	153.4	298.7
14	Hawaii	$159,257	10.1	17.1
15	Maryland	$155,706	112.1	191.9
16	Washington	$154,169	207.1	341.8
17	Iowa	$153,092	176.5	250.4
18	New Hampshire	$152,969	70.7	107.4
19	Missouri	$152,650	263.4	414.9
20	Idaho	$149,944	53.2	74.1
21	Virginia	$149,926	283.6	398.9
22	Illinois	$147,171	625.2	996.3
23	Ohio	$146,462	720.3	1,073.5
24	Utah	$141,731	79.3	118.7
25	Wyoming	$140,746	7.1	9.7
26	Pennsylvania	$140,594	589.8	917.6
27	Oregon	$138,917	157.2	232.4
28	Michigan	$136,186	629.2	966.5
29	Minnesota	$135,399	256.4	432.2
30	Oklahoma	$133,856	118.6	167.0
31	Florida	$130,170	296.7	486.1
32	Kansas	$129,970	144.8	209.2
33	Indiana	$129,678	477.3	660.0
34	Wisconsin	$128,984	415.7	601.0
35	Georgia	$125,797	411.4	584.5
36	South Dakota	$125,753	31.6	45.6
37	Alaska	$124,568	11.8	15.8
38	Vermont	$122,652	32.5	47.9
39	North Carolina	$121,814	627.8	855.5
40	Nevada	$120,408	27.2	40.8
41	North Dakota	$117,390	15.4	22.1
42	Nebraska	$115,229	80.0	110.1
43	South Carolina	$113,162	271.9	366.1
44	Montana	$111,582	15.3	22.1
45	Tennessee	$106,411	397.4	533.1
46	Maine	$100,988	66.1	88.6
47	Arkansas	$98,414	188.1	238.8
48	Rhode Island	$97,779	55.3	83.1
49	Alabama	$96,422	284.7	382.5
50	Mississippi	$91,024	190.0	238.9
	Total U.S.	$143,847	12,169.1	18,666.7
Source: U.S. Census Bureau, 1996 Survey of Manufactures, Geographic Area Statistics

We're more competitive nowbut we
need to keep improving

What will happen to our key manufacturing sector in the years ahead? Naturally, much of the answer will depend on the national economy. There are some signs that manufacturing nationwide is starting to slow down. For instance, federal government data show factory production grew only 2 percent in the first quarter of 1998, compared to quarterly increases in the range of 4 to 8 percent last year.

But that doesn't mean New Yorkers don't control our own fate. We've proven, just in the last few years, that we can grab a larger piece of the national manufacturing pie.

We've done that by becoming more competitive. Taxes are significantly lower; workers' compensation premiums are down; our historically hostile regulatory climate is much better.

Further improvements to our business climate are coming. New York's corporate tax rate will fall from 9 percent, among the highest in the nation, to 7.5 percent, the national median, by the year 2002. This year's reduction in the state's alternative minimum tax will make New York's investment tax credit significantly more valuable for manufacturers. And electrical rates will decline, especially for large industrial users, over the next few years.

There's more to be done. For example, manufacturers point to these hurdles in the race to be more competitive:

• A complicated and often useless job-training system. Manufacturers need effective training that is specifically geared to individual company requirements, if we are to maintain our edge in worker skills and productivity.

• A liability system that drives up costs and stifles innovation. Comprehensive reform of product and other liability laws is needed to keep pace with competitor states such as Ohio, Illinois and New Jersey.

• Overall costs of doing business that are still too high. We need more progress in cutting energy bills; workers' compensation and other employee costs; and taxes, including those at the local level.

We can make it in New York

The industrial muscle that built New York's economy into an international powerhouse remains strong. Our task now is to build on the steps we've taken in the past few years. By becoming more competitive, we can be assured that the 21st Century, like the past one, will be "Made in New York."

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