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The Public Policy Institute

The Comeback Trail:1998

Section 1

The changes are for real

Sometimes it seems New York State is like the comedian Rodney Dangerfield—we just can't get any respect.

Even a cursory look at where we've been, and where we stand today, shows that things have changed. Consider the broadest, most easily understood measure of our economic health: Instead of losing more than half a million private-sector jobs, as we did from May 1990 to September 1992, the Empire State has now gained more than 332,000 such jobs since January 1995.

The relationship between government and the people is clearly different, as well. The state that became known as the Vampire State several years ago, for its blood-sucking tax system, has been declared the national leader in cutting taxes by the National Governors Association for three straight years.

Yet the world isn't convinced that we've turned a corner.

"New York entered the 20th Century as the nation's economic powerhouse—its largest state, the center of manufacturing, the home of the nation's undisputed premier city, and the concentration of the nation's business and financial elite—all supporting per capita incomes vastly exceeding those of most states," the policy newsletter State Budget & Tax News commented this March.

However, it said, New York "will leave the 20th Century without claims to these distinctions. Instead it will be in the midst of a long-term decline relative to other states." (Emphasis added.)

Well, certainly it's true that our state was the economic and political leader of the nation through the entire first half of this century—and that, starting in the 1960s and continuing into the early 1990s, we lost ground to other states year after year. The Public Policy Institute made those points in its 1994 book, The Comeback State.

The question is: Are we still "in the midst" of that decline, as State Budget & Tax News suggested, or have we reversed the trend?

Table 1
Private-Sector Job Growth, By State
% Growth Rank,
1997-98
State % Growth, 1997-98 Growth Rank, '92-94 % Growth, 1992-94 Growth Rank, '95-97 % Growth, 1995-97
1 Arizona 4.8% 3 17.9% 3 13.0%
2 South Carolina 4.7% 32 8.6% 25 4.8%
3 Nevada 4.3% 1 22.7% 1 16.8%
4 Florida 4.2% 14 12.6% 5 8.7%
5 Georgia 3.5% 8 15.5% 7 8.3%
6 Delaware 3.5% 40 6.4% 14 6.8%
7 Washington 3.5% 39 6.4% 15 6.6%
8 Texas 3.4% 21 9.9% 11 7.2%
9 Colorado 3.4% 4 17.3% 6 8.4%
10 Virginia 3.3% 30 8.7% 16 6.5%
11 California 3.2% 49 0.2% 12 7.2%
12 Massachusetts 3.1% 43 6.3% 21 5.4%
13 Utah 3.1% 2 20.3% 2 13.3%
14 Nebraska 3.0% 19 10.3% 18 6.2%
15 Minnesota 2.9% 23 9.6% 20 5.6%
16 Oklahoma 2.8% 33 8.5% 8 7.8%
17 Kansas 2.7% 38 7.3% 9 7.8%
18 New Jersey 2.5% 45 3.8% 40 3.6%
19 Oregon 2.4% 12 12.9% 4 9.8%
20 Wisconsin 2.4% 20 10.0% 26 4.5%
21 Kentucky 2.3% 25 9.3% 28 4.3%
22 Iowa 2.3% 29 8.8% 22 5.3%
23 Arkansas 2.2% 15 12.3% 30 4.3%
24 Louisiana 2.2% 26 9.2% 23 5.3%
25 Maine 2.1% 37 8.0% 48 1.9%
26 Connecticut 2.1% 48 0.3% 44 2.8%
27 Michigan 2.1% 22 9.6% 24 5.1%
28 NEW YORK 2.0% 47 1.3% 34 4.0%
29 Illinois 1.9% 41 6.4% 27 4.3%
30 Alaska 1.9% 34 8.3% 47 2.1%
31 New Mexico 1.7% 6 16.9% 35 3.8%
32 North Dakota 1.6% 13 12.7% 33 4.1%
33 North Carolina 1.6% 16 11.2% 17 6.3%
34 Vermont 1.6% 35 8.3% 31 4.3%
35 West Virginia 1.4% 31 8.7% 36 3.8%
36 Mississippi 1.3% 7 15.5% 45 2.5%
37 Pennsylvania 1.3% 46 3.4% 38 3.7%
38 Ohio 1.3% 36 8.1% 37 3.7%
39 Tennessee 1.2% 11 13.4% 39 3.7%
40 Missouri 1.0% 28 9.0% 43 3.1%
41 South Dakota 1.0% 9 14.6% 42 3.1%
42 Indiana 0.9% 18 10.8% 41 3.6%
43 Alabama 0.9% 24 9.3% 29 4.3%
44 Idaho 0.9% 5 16.9% 10 7.8%
45 Wyoming 0.7% 27 9.2% 49 0.9%
46 Montana 0.7% 10 13.5% 19 5.7%
47 Rhode Island 0.6% 42 6.3% 46 2.2%
48 Maryland 0.4% 44 4.8% 32 4.1%
49 New Hampshire 0.3% 17 11.1% 13 6.9%
50 Hawaii -1.6% 50 -3.3% 50 -2.6%
  U.S. 2.9%   7.8%   8.1%
Figures for 1997-98 are for June 1997 and June 1998; for 1992, 1994 and 1997, December of 1991, 1994 and 1997.
All figures are not seasonally adjusted. Source: U.S. Bureau of Labor Statistics; calculations by The Public Policy Institute.

That one question can be broken down further:

Yes, things really are better now

The big increase in employment over the past 42 months is one clear indicator that we're making progress. There is just plain no disputing the good news that we've gained a third of a million private-sector jobs since the start of 1995. Compared to our huge losses of the early 1990s, and small gains from 1993 to 1994, that's obviously a major change for the better.

And it's clearly not true, as some argue, that those new jobs are simply the reflection of a national economic boom. As Table 1 shows, New York has improved relative to the rest of the country and our key competitor states. We still lag the national average, but the progress is real.

From the end of 1991 through 1994, private-sector employment nationwide boomed by 7.8 percent as the rest of the country emerged strongly from the 1990-91 recession. New York entered the recession before most other states, suffered worse during it, and stayed in a downturn long after the nation as a whole began growing again. Our growth over the three-year period ending in December 1994 was 1.3 percent, a rate only about 17 percent of the nation's growth.

For the three-year period ending in December 1997, by contrast, New York's performance relative to the nation looks noticeably brighter. U.S. employment grew at a slightly faster pace than it had in the previous three years, 8.1 percent. Job growth in the Empire State quickened, to a total of 4 percent over the three years. So instead of growing at barely one-sixth the U.S. rate, we were up to about half the national average.

That improvement didn't happen immediately. Our growth rate in 1995 was 38 percent of the nationwide rate, barely higher than our relative performance in 1994. In 1996, we improved sharply, growing at 59 percent of the rate of increase across the country. In 1997, we slipped back to 52 percent. And for the 12 months ending this June, we were on the upswing again, posting our best showing relative to the nation in years—nearly 70 percent of the nationwide growth rate. Some year-to-year fluctuation is to be expected. But the trend is unmistakably a favorable one.

Back from recession, and on the way up

In fact, almost unnoticed, we passed a key milestone earlier this year. The July employment figures collected by the state Labor Department show New York has finally regained the equivalent of the more than half-million private-sector jobs we lost from May 1990 through early 1993. If the positive trend keeps going, we will surpass our previous all-time high for private-sector jobs sometime during 1998—and set a record for total employment (with government jobs included in the overall total) in mid- to late 1999.

There are favorable indicators other than the job numbers. For instance, the number of business failures declined 37 percent in New York from 1992 to 1996, compared to a nationwide drop of 26 percent. That better-than-average performance was a complete turnaround from the preceding five years. During that earlier period, the number of such failures jumped in the Empire State more than three-fold, while the national figure rose only 60 percent.


Some basic truths about New York's economic health

In the coming election season, various arguments will be offered about New York's recent economic progress. To keep the debate in perspective, it's worth repeating the three basic truths, mentioned above, that emerge from a look at the authoritative statistics.

The facts show that:

Those three basic truths point to another, perhaps the most critically important for our state's leaders and candidates to keep in mind:

Our economy is better—New Yorkers are better off—because state government is making our business climate more attractive to employers. And the further we improve our business climate, the better off we'll all be.

         

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