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Region Shows Resilience in Recession

September 15, 2010

The Buffalo Niagara region has been a pretty good place to ride out the Great Recession.

Two new reports on the local and regional economy note how well it has held up during the downturn, compared with the far greater pain experienced by most other metro areas and the country as a whole.

The main reasons: a stable housing market that avoided the boom-and-bust cycle that has devastated other formerly high-flying cities, along with a steady decline over the last three decades in the role of manufacturing here that has made the local economy less cyclical.

The result is a regional economy that during the Great Recession has broken from its historical pattern of leading the nation into a recession, falling harder and taking longer to recover, wrote Canisius College economists George M. Palumbo and Mark P. Zaporowski in a report on the Western New York economy issued earlier this week.

"For the first time, we're not among the worst," Palumbo said.

Those findings matched the results of a study being issued todaywed by the Brookings Institution, which found that Buffalo Niagara is one of the 20 best-performing regional economies among the nation's 100 biggest metropolitan areas.

Buffalo Niagara ranks in the top fifth of all major U.S. metro areas because its housing market has been among the nation's strongest during the downturn, while its job market suffered job losses that are much less severe than the typical big city. That also has helped keep unemployment levels, while still close to their highest levels in 20 years locally, well below the national average.

Still, Howard Wial, a Brookings researcher and co-author of the MetroMonitor report, noted that Buffalo Niagara and every other metro area have a long way to go to recover from the job losses and other economic pain inflicted by the recession, which started nationally in December 2007.

"We are nowhere near where we were prior to this recession," he said. "But you're ahead of where you were [at this point] during the previous three recessions."

Nowhere did Buffalo Niagara stand out more than in the housing market.

The 4.1 percent decline in inflation-adjusted housing prices from their peak during the first quarter of 2009 through the second quarter of this year was the smallest of any Top 100 metro area. The modest decline locally was a far cry from the 23.1 percent average plunge in the nation's biggest cities.

That strong performance has continued more recently. The region's 1.6 percent dip in inflation-adjusted housing prices over the last year was the second-best nationally and well below the 7.7 percent average drop across the United States.

During the second quarter, local home prices rose by 0.8 percent, the fourth-biggest gain in the country, making Buffalo Niagara one of only six metro areas among the Top 100 with rising home prices during the spring.

The Brookings researchers concluded that housing prices in Buffalo Niagara are fairly valued, averaging within 2 percent of where they would be expected to be, based on trends in employment, wages and interest rates.

With home prices at relatively affordable levels and home sales running within 4 percent of last year's pace, foreclosures are rare in Buffalo Niagara. Fewer than one of every 1,000 homes with a mortgage are owned by banks, well below the national rate of 3.7 homes per 1,000 and nowhere near the 18.75 per 1,000 in Cape Coral and Fort Myers, Fla.

"Housing is looking pretty good," Wial said.

The local job market, which was a major weakness for the region's economy during the expansion leading up to the recession, also has been a relative strength during the downturn.

The 3 percent job loss the region experienced during the recession was the 14th-smallest among the 100 biggest metro areas, where the losses were nearly twice as severe at an average of 5.9 percent.

"This may reflect the changing nature of the upstate economies, where goods-producing employment has been declining for the last two decades," Palumbo and Zaporowski wrote. "It may also be due to the role of the housing markets in the economic downturn."

That has kept jobless levels, which averaged 7.7 percent during the second quarter and 8 percent in July, roughly 2 percentage points below the national average of 9.6 percent. Nevertheless, the local jobless rates remain close to their highest levels since the mid-1980s.

"A 7.7 percent unemployment rate is nothing to be proud of, but it's still a lot better than a 9.6 percent national rate," Wial said.

Although the pace of job growth picked up nationally during the second quarter, it was more subdued in Buffalo Niagara, where the 0.4 percent increase in jobs ranked 62nd nationally and was less than the 0.7 percent rise across the country.

While factories were a leading source of that recent job growth nationally, manufacturing employment locally continues to decline, the Brookings study found.

The Brookings report also noted that the overall output of the Buffalo Niagara economy has taken a beating during the downturn, with the total value of all goods and services produced in the region experiencing the 69th-biggest drop among all major metro areas since the recession began.

During the second quarter, when the rest of the country was experiencing a stronger rebound in economic activity, the Buffalo Niagara economy was virtually flat, ranking 95th out of the Top 100 metro areas.

drobinson@buffnews.com