Regional manufacturing sector  Background The manufacturing sector is important to our region because it provides a substantial number of high-wage jobs and, in some parts of the region, is a key driver of business cycles and longer-term trends. To understand manufacturing in our region, it is important to note that different parts of the region specialize in different products. For example, New York City’s largest manufacturing industry is apparel; motor-vehicle parts is a large industry in western New York, as are computers and electronics in Syracuse, Binghamton and the Hudson Valley. The pharmaceuticals industry is dominant in Northern New Jersey and Puerto Rico. Over the past several decades, manufacturing wages have risen, while the number of workers it employs has fallen, These long-term trends stem from fundamental structural changes in trade, technology and consumption patterns. Some manufacturing has moved to other parts of the United States or overseas. The advent of information technology and computerization has also profoundly altered many manufacturing processes. And, the mix of products demanded by consumers has evolved over time. All of these factors have combined to reduce the number of factory jobs across the nation, with the New York/New Jersey region hit particularly hard. What is less well known is that despite this employment decline, manufacturing output has actually continued to grow moderately in much of the New York/New Jersey region. This means that the sector has experienced substantial gains in productivity.
These productivity gains – the result of innovation and adaptation – have been accompanied by rising average wages in manufacturing. Like the rest of the country, our job losses have been heavily concentrated in lower-skill positions, resulting in a leaner and more skilled manufacturing industry. The manufacturing sector and its structural job-wage dynamics are particularly important in upstate New York. Upstate (especially in its rural areas) manufacturing workers tend to earn higher wages than the average in their region, and the sector employs a larger share of the workforce there than it does nationally. 2  BIS Review 100/2010  Outlook How will the current recovery in manufacturing employment play out? Nationally, the growth in manufacturing output over the past year has occurred in a variety of industries, including autos, machinery, and computers and other electronic equipment. This growth reflects a combination of the restocking of inventories, domestic demand growth (particularly in investment goods), and higher exports. The concentration of these industries in parts of our region meant that those areas were poised to take advantage of this growth. The region has seen some increase in factory jobs in recent months, which undoubtedly reflects the expansion of production that has occurred nationally in these industries. A number of indicators suggest that the inventory cycle may be largely complete – that is, the recent restocking has brought inventories into a better balance with sales. If so, we will lose restocking as an impetus for growth.