Cuomo’s Southern Tier hype

by E.J. McMahon |  | NY Torch

Screen Shot 2016-07-19 at 3.01.08 PMFor several years now, Governor Andrew Cuomo has been misusing employment statistics to back up claims that his policies have ignited an economic resurgence in upstate New York.

It happened yet again today, when the governor was in Binghamton to announce that Dick’s Sporting Goods had decided to locate a 650,000 square foot distribution center in the Broome County Corporate Park, bringing 466 jobs to the area.  Referring to Edward Stack, Dick’s chairman and CEO, Cuomo said:

… [H]e is a business man and he makes the decisions on the numbers. New York is a good investment and a good place for him to do business. He has made that decision, other companies are making that decision. You know it is true because the proof is in the numbers. Five years ago we had a 7.9 percent unemployment rate in the Southern Tier. Today, 4.6 percent. The arrows are headed in the right direction.

In fact, if there’s one economic indicator that should be taken with a grain of salt, it’s the unemployment rate—especially in upstate regions, which aren’t attracting many new working-age residents. Nationally, economists have noted how the unemployment rate’s usefulness has been undermined by changes in the labor force participation rate, which dropped sharply after the Great Recession and has only partially recovered in many parts of the country.

As measured by the state Labor Department’s household survey, the Southern Tier labor force has decreased by 28,600 people over the past five years, while employment is also down by 16,500.  The unemployment rate has dropped only because the denominator in the equation has decreased faster than the numerator—i.e., many fewer people are looking for work.  They’ve given up, died or retired, or left the area, and so are no longer counted as “unemployed.”  To put it another way, if the Southern Tier labor force was still at its May 2010 level of 326,800 people available and looking for work, the region’s May 2016 employment level would translate into an unemployment rate of 13 percent.

As counted by the same Labor Department data, after a tiny uptick in 2012, employment among Southern Tier residents has dropped every year since 2013, and is lower than it was the year before Cuomo took office.

Using a different data series — the “establishment data”  count of payroll jobs based in the region — the Southern Tier basically hasn’t been growing at all for years.  The department’s Quarterly Census of Employment and Wages counted 210,962 jobs in the region in the fourth quarter of 2015, down slightly from 211,440 in the same quarter of 2014. The same data set indicates the region had gained a net 1,013 jobs since the fourth quarter of 2010, just before Cuomo took office, a growth rate of just 0.5 percent in five years.

The arrows, in other words, are actually pointed sideways.

Keeping it in context

Consistent with the governor’s fascination with high-tech, today’s announcement was at Binghamton University’s Innovative Technologies Complex—although retail warehousing isn’t exactly an “innovative technology.”

To be sure, the Dick’s distribution center is a good “get” for the region.  The Southern Tier needs those 466 jobs. While the retail sector is very much in flux, roiled by consolidations and increasingly besieged by online retailers, Dick’s is (for now, at least) among the more solid survivors.  Nonetheless, the larger implications of this project are … limited, at best.

Geography is the prime consideration in locating regional distribution centers.  Although Cuomo contends his predecessors never invested in upstate, the confluence of major state-maintained highways and interstates around Binghamton–including the western end of I-88, whose construction in the 1970s was a capital pork priority of then-Senate Majority Leader Warren Anderson—certainly doesn’t hurt in attracting such facilities.  The second leading consideration would be cost of real estate, which is now dirt cheap in the Southern Tier. Third would be availability of workforce.  Once a retailer or wholesaler has drawn a circle around a region, it shakes the money tree of local development agencies to see who will come up with the biggest added incentives.

For Dick’s, there was another obvious factor tilting the scales towards the Southern Tier: the sporting goods store was founded in Binghamton by Edward Stack’s father in 1948—financed, the story goes, by a $300 loan from his grandmother’s cookie jar.  It’s now a 645-store national chain, ranking 365th on the Fortune 500 list of America’s most profitable corporations. Stark said Dick’s chose the Binghamton area location “for the business-friendly environment, the quality and reliability of the workforce and the opportunity to bring jobs to our hometown.”

But while landing Dick’s distribution center is unequivocally a good thing in itself, the governor (characteristically) couldn’t resist wildly exaggerating its broader economic implications.

For all the benefit provided by 466 new jobs (enticed with millions of dollars in state aid and local tax breaks), a strong case can be made that Cuomo has done more on balance to hurt the Southern Tier regional economy by (a) banning the use of high-pressure hydraulic fracturing to harvest natural gas from the Marcellus Shale formation underlying the region, and (b) killing the proposed Constitution gas pipeline, which would have linked the region’s businesses (and residents) to the gas harvested in nearby Pennsylvania.

Two of the Southern Tier’s dwindling band of manufacturing employers—Raymond Corp., which makes forklifts in Greene, and Amphenol Aerospace, in Sidney— had made it known that they’d be ready and willing to expand, if they could gain access to natural gas. The Cuomo administration itself had approved regional economic development grants to help finance feeder lines from Constitution Pipeline to those plants. The denial of a needed state water quality permit for the pipeline is being challenged in court; in the meantime, well over 1,000 jobs at Raymond Corp. and Amphenol alone, plus untold other expansion opportunities throughout the region, may be hanging in the balance.

Between the pipeline decision, the fracking ban, a sharp increase in the minimum wage and a new paid leave mandate for all employers, Cuomo has not exactly been sending positive signals about New York’s business-friendliness. And while the region will no doubt continue to attract the occasional new employer, the thrust of the state’s major policies has been to discourage existing employers from expanding or remaining upstate.

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- E.J. McMahon is the Research Director at the Empire Center for Public Policy.