This column is the first in a series of discussions of transportation investment planning for the metropolitan region.
The cancellation of the Access to the Region’s Core (ARC) project and the second Hudson River Rail Tunnel offers the opportunity to rethink and re-plan the transportation needs of the New Jersey-New York region.
This is an essential undertaking. Many of the economic certainties at the time of the original planning and evaluation process have become today's economic uncertainties. That's particularly true when it comes to employment growth in the metropolitan area. And it's not simply the number of jobs, but the type and salary and location that must be factored into a meaningful decision. Thus, in this initial discussion it is worthwhile to take a broad view from the long sweep of the economic history of the development of the state and regional economies.
It has now been 19 months since the official start of the economic recovery (June 2009) from the Great Recession (December 2007-June 2009). The post-recession economic reality has been nothing if not sobering. Total employment one and one-half years into recovery in the United States is now at the same level as it was in late 1999. The current employment total in New Jersey is the same as in late 1998. New York's total is the same as late 1999; New York City’s, the same as at the start of 2000.
The undeniable facts are that the first decade of the twenty-first century, in its aggregate, was the lost employment decade for the United States, New Jersey, New York, and New York City. This is the first time since payroll employment statistics were originally compiled by the U.S. Bureau of Labor Statistics in 1939 that the nation ended a decade with fewer jobs than when it started. The same was true for the states of New Jersey and New York, and for New York City. This job loss was primarily due to two recessions bookending the modest 2003-2007 employment expansion. The most severe losses accrued during the extended employment downturn of 2008 and 2009. The nation lost 8.5 million private-sector jobs. New York lost 343,000; New Jersey lost 245,000; and New York City lost approximately 170,000 (not seasonally adjusted).
Recovery has just begun, and it has been at a tepid pace. As of November, the nation has regained 1.2 million of the 8.5 million lost jobs; New Jersey has regained 20,500 of the 245,000; New York has regained 85,000 of the 343,000; and New York City has regained approximately 70,000 (not seasonally adjusted) of the 170,000. (New York was uniquely bolstered during this period by the massive federal financial rescue package.)
Most economic and job forecasts based on data and trend lines extant before the Great Recession are now obsolete and must be fundamentally recalibrated -- likely in a significantly downward direction. Job growth, which optimistically was destined to take place in the region under older, pre-recession assumptions, will now occur in the post recession reality of a very large job chasm and in the new global growth markets. Pre-Great Recession employment projections, which led to forecasts of overcrowding in the Northeast Corridor by the end of the current decade, will push that potential overcrowding far into the future -- if it is projected at all.
New York City always has had a plethora of high-paying knowledge-based jobs that are accessible to New Jersey citizens. That has clearly been a great advantage of the state’s geographic location and transportation systems. Consequently, maintaining and improving such accessibility is vitally important. But today these jobs are only a portion of such jobs available to New Jerseyans. This is quite a different situation compared to several generations ago.
By 1950, when the New York and New Jersey economies had fully gained their footings following the economic disruptions of World War II and the Great Depression, New York City had more than double the total employment of the entire state of New Jersey (3.47 million jobs vs. 1.66 million). Thus, based on employment, New York City’s economy was more than twice the size of New Jersey’s, and provided double the number of economic opportunities.
Fast-forward one-half century. In those 50 years New Jersey had evolved into a powerful post-industrial, information-age economy. At the same time, New York City had also reinvented itself. But by 2000, New Jersey’s economy had grown to contain 3.99 million jobs, a 140 percent increase from the 1.66 million jobs in 1950. In contrast, the total employment base of New York City increased to just 3.72 million jobs in 2000, up from 3.47 million jobs in 1950 (a 7.2 percent increase). Thus, in the second half of the twentieth century, New Jersey added 2.33 million jobs, while New York City added just 250,000. New Jersey’s total employment base was transformed from being less than half the size of New York City’s to being seven percent larger. Capital, talent, and innovation became more broadly distributed.
A significant part of New Jersey’s transformation took place in the 1980s, when the state experienced its greatest office building boom. In 1980, New Jersey was a virtual non-player in the region’s commercial office market, although it did have potent proprietary office headquarters facilities such as the massive AT&T complex in Basking Ridge (1976).
By 1990, 80 percent of all the commercial office space built in the history of the state was erected. If the 11-county north-central New Jersey office market were a single metropolitan area in 1990, it would have been the fifth-largest metropolitan office market in the country, larger than metropolitan Atlanta, metropolitan Boston, metropolitan Denver, and many others. At the same time, Manhattan’s share of the broader regional office market fell from 85 percent to 55 percent.
Starting in 1990, and accelerating until the start of the Great Recession (December 2007), the financial activities sector was one of the great economic locomotives of America, generating growing shares of the nation’s corporate profits. According to Simon Johnson in the May 2009 issue of The Atlantic (“The Quiet Coup”), in the 1980s the financial sector accounted for about 19 percent of domestic corporate profits in the nation. In the 1990s, its share reached 30 percent, and in the 2000s this share soared to 41 percent. And financial salaries and compensation increased just as dramatically, if not more so. Obviously, the most significant node of global financial activities was Manhattan. Still, even during 1990-2007, while New York City gained 180,000 total jobs (approximately 10,600 per year), New Jersey gained 444,000 (approximately 26,100 per year). Even though this is a smaller employment growth differential that the 1950-2000 trend (which was approximately ten to one in favor of New Jersey), it is still a substantial one -- about two and one-half to one in favor of New Jersey.
The composition of job growth during this period is also informative. The two largest industrial sectors encompassing high-paying knowledge-dependent jobs are financial activities and professional and business services. In 2007, New York City had the edge in the absolute number of financial activities jobs relative to New Jersey (468,000 jobs vs. 276,000 jobs). But New Jersey had the advantage in 1990-2007 growth: a gain of 42,000 jobs in New Jersey vs. a decline of 54,000 jobs in New York City. Thus, New York City had a net loss of financial jobs during the greatest financial boom in the nation’s history, although its existing jobs had soaring levels of salaries and compensation (and the incomes of those New Jersey residents holding these jobs were taxed, by the way, for state and local tax purposes by New York State and City, not New Jersey).
In professional and business services, New Jersey had the edge in both 2007 total employment (617,000 jobs vs. 593,000 jobs) and 1990-2007 growth (178,000 jobs vs. 126,000 jobs). A third large, but below-average-paying business sector, is education and health services, where New York City had a significant advantage in 2007 absolute size (705,000 jobs vs. 580,000 jobs) and a very slight advantage in 1990-2007 growth (229,000 jobs vs. 218,000 jobs).
After the lost economic decade (2000-2010), it is uncertain what broad geographic employment-growth patterns will be asserted going forward. New York City has done particularly well during 2010. However, it is unclear at this point how much of that was due to the massive, but temporary, flows of Troubled Asset Relief Program (TARP) and related federal financial rescue dollars into the city. What will happen when the new federal financial regulatory framework is effectuated? Will financial activities become less of an economic locomotive than during the credit bubble years? Can New Jersey regain its status as an employment engine, a role it performed so ably in the 1980s and 1990s? Will 24-hour cities stand as the new growth frontier and suburban office markets lag? Or will suburban markets soar as they did in 2003-2007?
What's more, bottom-heavy employment growth has characterized the economic recovery to date, both in New York and New Jersey. Below-average-paying jobs in retail trade, administrative support, health care and social assistance, accommodations and food services, and other low-level services have accounted for the bulk of employment gains to date. Gains in white-collar, knowledge-based jobs have been minimal. Is this symptomatic of protracted lean employment opportunities to come, particularly high-end opportunities?
All of the preceding questions and observations have relevance to the issue of how much job growth will take place in the future, what type of job growth, and the geographic locus of job growth. And they also have obvious relevance to future transportation needs by mode and location. Inevitable fiscal constraints dictate that choices will be needed among many future alternative transportation investments, each of which may be desirable on its own. Thus, as a first requirement for transportation planning in this post-Great Recession environment, there needs to be a new assessment of the likely scale, type, and location of future employment growth. This is critical for determining the relative value of how and where to allocate scarce public resources among alternative transportation investments.