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March 1, 2006

Economists agree: New York will continue to lag the nation in creating jobs

New York State will continue to lag far behind the rest of the nation in creating jobs this year and in 2007, the state's fiscal experts and independent economists agreed.

Leaders of Governor Pataki's Budget Division and the Legislature's fiscal committees heard from outside economic experts Wednesday, in the state's annual Economic and Revenue Consensus Forecasting Conference, after the legislative analysts issued their own forecasts.

Two economists who analyzed New York's employment picture during the conference agreed the state's job growth will fail to keep pace with that in most other states.

Hugh Johnson of Johnson Illington Advisers predicted New York will add employment at half the national pace in both 2006 and 2007. James Diffley of Global Insight was more optimistic, projecting New York's job growth at 1 percent compared to 1.5 percent nationally both years.

Their predictions of continuing sub-par performance for New York's economy matched those released earlier by the Governor's Budget Division and the four legislative fiscal offices representing Democratic and Republican members of the Senate and Assembly.

The Assembly Majority, for instance, projects that employment will rise 1.5 percent nationally, but only by 0.9 percent in New York, this year. Its report says actual employment growth since mid-2003, and projected growth through early 2008, will total 4.1 percent in New York and 6.8 percent nationwide.

"If New York State were to gain jobs at the same rate as the U.S. during the period of employment expansion, the state would gain 225,400 additional jobs," the Assembly Majority's economic report says. It notes that health-care employment across the state has risen significantly, while manufacturing jobs have continued to decline, and predicts that both trends will continue.

Rae D. Rosen, senior economist at the Federal Reserve Bank of New York, offered the conference's only observation on reasons for the state's lagging job growth.

"In an era of slow job growth, attention to the state's competitiveness could help improve retention, encourage attraction and leverage the growth of the economic base," she said.

Frank A. Fernandez, chief economist for the Securities Industry Association, warned state officials that New York cannot depend on continued large increases in personal-income tax and corporate-tax revenues from the industry's activity in the state. He recommended the Legislature use this year's expected surplus to build up reserve funds, rather than increase spending or enact additional tax cuts.