Why Buffalo Niagara’s economic recovery has lagged

That’s what happened with Buffalo Niagara’s job market after it plunged headfirst during the early days of the Covid-19 pandemic.

The Buffalo Niagara region lost more than 21% of its jobs in the first two months of the pandemic — a drop 50% steeper than the 13% job loss nationally.

“If you think about where we are today, it’s important to remember where we were four years ago,” said Jaison Abel, an economist at the Federal Reserve Bank of New York in Buffalo.

So from the start, Buffalo Niagara’s economy was in bad shape. And this is one of the main reasons why the region has still not recovered all the jobs lost during the pandemic, even though the country did so almost two years ago and recorded additional growth of 4% since then.

Abel and three other Fed economists looked for reasons why places like Buffalo — and many others — struggled to recover from pandemic-related job losses while others recovered and continued to grow.

It turns out, Fed economists found, that how hard a region was hit in the early weeks of the pandemic largely explains how quickly it recovered. That could explain as much as 80 to 90 percent of the gap between regions that are slow to recover and regions that have fully recovered and growing, Abel said.

The hardest-hit places, like Buffalo, had the greatest number of jobs to recover, and it was the metropolitan areas that, overall, took the longest to rebound. About a quarter of the nation’s 400 largest metro areas have failed to return to their February 2020 employment levels.

The places that took the biggest hit had a head start on recovery, and those were generally the ones that fully recovered and continued to grow.

This is important because the post-pandemic recovery is almost complete. Most Covid restrictions have been lifted and life has mostly returned to normal.

“We are out of the recovery phase of the cycle,” Abel said.

But there are other factors at play that help explain why some countries have more than fully recovered, while many others have not, Fed researchers have found.

Places where workers were hard to find tended to struggle during the recovery.

Metropolitan areas that were growing rapidly before the pandemic tend to return to those same robust growth rates. Slower growing places, like the Buffalo Niagara region, tend to revert to their slow growth mode.

And finally, places that were hot spots for Covid outbreaks – particularly in states like New York, California and Michigan – have also tended to rebound more slowly, largely because the surge in cases has fueled even greater job losses.

“Parts of upstate New York were hit with a triple whammy: slow growth that led to the pandemic recovery, a deeper chasm when the pandemic hit, and a hand of work in decline,” Fed economists said in a published report. this week.

So what does this mean for the Buffalo Niagara region? Four years after the start of the Covid epidemic, the country still has 0.6% fewer jobs than before the start of the pandemic. The nation has 3.8% more.

This gap is significant. If the Buffalo Niagara region had kept up with the nation’s job growth since February 2020, it would have about 20,000 more jobs than it currently has.

Of course, this is not a realistic expectation, given our stagnant population and general shortage of workers. The region has only about 25,000 unemployed people, and this available labor pool is not large enough to support hiring on this scale.

Still, Abel said the good news is the Buffalo Niagara region is close to regaining lost jobs. And he wouldn’t be surprised if last year’s steady job growth — running at an annualized rate of about 2 percent — continues.

“If you look at Buffalo over the last year, the city has seen pretty strong growth,” he said. “That actually outpaced the national level,” which saw annual growth of about 1.8 percent.

The problem, Abel said, is that the Buffalo Niagara region is starting from a much deeper hole and its shrinking pool of workers poses a significant constraint to growth.

“Steady, solid growth is what we can expect across much of the region,” he said.

The region’s labor force, which is about 1% lower than it was before the pandemic, is one of the main drags on the local job market. This leaves fewer options for employers looking to hire. Some companies, especially early in the recovery, wanted to hire more workers than they could find — a common constraint in metropolitan areas that have not regained all their lost jobs.

“A lot of these places just don’t have the workers they need,” said Joelle Scally, another Fed economist who co-wrote the report. “It’s difficult for businesses to replace their workers or find all the workers they need. »

It also doesn’t help that lagging metropolitan areas in upstate New York have mostly stagnant populations, which places a natural limit on the workforce relative to other other areas of the country that are adding population.

Immigration, a major potential source of population growth that is problematic in border areas, is a modest factor in the upstate, which already faces an aging workforce and a constant flow of people that are moving away, said Richard Deitz, an economist at the Fed in Buffalo. who is also a co-author of the report.

“Immigration is an important way to compensate for these demographic deficits,” he said.

Remote working is also not a solution. With most remote work now done on hybrid schedules that require employees to come into the office two or three days a week, most people still have to live close to where they work. The idea that New York City office workers could abandon their expensive apartments and move to cheaper, quieter places upstate hasn’t happened — and won’t.

There is, however, another silver lining: The pandemic has also fueled a rise in wages, particularly among workers at the lower end of the pay scale.

So even though the region continues to lose about 4,000 jobs since the pandemic began, total earnings for local workers recovered quickly and grew nearly 7% during the first three quarters of last year. That fueled consumer spending that kept the economy on solid footing, here and across the country.

“The fact that we have a pretty strong recovery from an income perspective is likely to give a little boost to communities like Buffalo,” Abel said.