Abstract: Paper No. 184
A Review and Forecast of the Onondaga County Economy
Shannon Felt, James R. Follain and Suzanne McCoskey
The purpose of this paper is to review the economy of Onondaga County and to offer a forecast of its future until the year 2035. This information will be used in forming a plan to improve the quality of Onondaga Lake. Understanding the past and the forecastable future is crucial to the formation of this plan and to anyone with a stake in the county's future economic growth. To create this review and forecast, we used the REMI model, a multi-equation model of a local or regional economy and is a tool that is widely used in studies of this kind.
Our report was structured around five major questions:
- Do Alternative Measures of Local Economic Performance Always Move in the Same Direction? The REMI model allows us to look at three different ways to measure economic performance: output, personal income and employment. We found that while output and personal income tend to move closely, employment sometimes does not. This makes the choice of measurement of economic performance important.
- How Has the Composition of Output and Employment Changed? We found that the make-up of the county's economy is undergoing a shift away from manufacturing as the main source of output and employment to the services industry. Manufacturing is still extremely important to the economy, comprising 35 percent of the total output of the county in 1994. However, employment in manufacturing has been dropping at an average rate of 1.9 percent a year since 1969. In contrast, employment in the service sector has grown an average of 3.5 percent a year since 1969.
- What Are the Major Sources of Imports and Exports and How Have Trade Patterns Changed? Onondaga County exports totaled $8.54 billion in 1994 with most of these going to the rest of New York State and the rest of the world. Only a very small fraction of total exports goes to the rest of the MSA and this share has actually declined over the past six years. The distribution of the source of imports is very similar with most of the imports coming from the rest of the state and the world. The trade gap (exports - imports) has declined in recent years mainly due to a slight increase in the fraction of total expenditures purchased locally, which is called the regional purchasing coefficient (RPC) in the REMI model. This increase, however, is mainly due to the general shift in the economy towards the service sector, which has a higher coefficient than the manufacturing sector. There has been little change in the percentages purchased locally by the different sectors.
- How Has the Value of Real Estate Changed? We studied two separate series, one which examines the value of all real estate subject to the property tax and one which focuses on owner-occupied housing. There has been an increase in the value of all property subject to the property tax, according to the series compiled by the New York State Board of Equalization. However, looking at the weighted repeat sales index compiled jointly by Fannie Mae and Freddie Mac, we find little change in the price of owner-occupied housing.
- What Are the Primary Factors that Drive the Onondaga County Economy? There are three primary forces that drive the economy:
- i. The external economy: employment and real disposable income in Onondaga County are highly correlated with movements in these variables for the United States economy, although Onondaga's share of the national aggregates has declined steadily since 1969. Onondaga County's share of the national population has declined more substantially and is much less correlated with movements in the United States population.
- ii The profitability of local firms relative to the national average: The profitability of local firms is close to or above the national average in most areas. Labor productivity is 30 percent higher than the national average, but fuel costs are much higher than the national average.
- iii. Migration into and out of the county. For the last two decades, more people have left the county than have moved here which has major effects on the supply of labor. The REMI model indicates that, on average, the real after tax is below what is available in the rest of the nation; furthermore, worker's in Onondaga County require an 18.3 percent higher real, after-tax wage to live in Onondaga County.
The other major portion of the paper provides a forecast of the Onondaga County economy from now until the year 2035. This forecast can be broken into two parts, a short-run forecast that runs into the early part of the 21st century and a long-run forecast that runs from the early part of the next century until the end of the forecast period. The short-run forecast for the county is somewhat more prosperous than compared to the early 1990s. Real income growth through the end of the decade is predicted to be twice the rate of growth during the early 1990s; however, long run prospects for the county are somewhat less encouraging. Growth in employment is expected to be half the growth rate experienced from 1969-1994 and a similar pattern emerges for real disposable income.
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