The state Labor Department threw ice cold water on the Buffalo Niagara job market Thursday.
For more than a year, the agency’s employment numbers painted a picture of a job market that was on the upswing, with local companies hiring at a pace that hadn’t been seen here since 1999.
But revised numbers released Thursday, based on more complete payroll tax and census data, indicated that hiring by local employers was just a third of what was initially reported. Instead of having the strongest job growth in 16 years during 2015, the region had its slowest job growth since 2010, although some economists doubt the accuracy of the numbers.
“Now, they’re telling us that what we thought it was – wasn’t,” said George M. Palumbo, a Canisius College economist. “Buffalo renaissance – question mark?”
The job numbers, along with the high-profile construction projects at RiverBend and the Buffalo Niagara Medical Campus, had been seemingly solid evidence that the renaissance in the Buffalo Niagara economy was real.
The revision, part of a federally mandated annual review of job statistics, paint a vastly different picture from the feel-good story that was based on the earlier data. The new data shows a Buffalo Niagara job market that is sputtering, rather than rebounding, with hiring lagging far behind the rest of the country and running at a sluggish pace even by local standards.
Some economists aren’t buying the new numbers. While they expected the revision to show slightly slower growth than first reported, especially in the construction sector, they were surprised to see what had been an unusually strong year for hiring turn into a mediocre one.
“There’s an odor about these numbers,” said Gary D. Keith, M&T Bank’s regional economist in Buffalo. “It doesn’t pass the sniff test.”
According to the revision:
• In the blink of an eye, 6,100 jobs were wiped away that the initial reports said were here.
• Instead of a job market growing at a solid 1.6 percent annual clip, the new data said that hiring rose by just 0.53 percent last year, the slowest growth in five years.
Most of the revision centered on three parts of the job market: construction, temporary jobs, and education and health services.
Instead of adding 2,500 construction jobs last year, the new data says, the region added 500. Rather than 2,300 new jobs in education and health services, the revision cut the growth to just 400. After first reporting 1,300 new jobs in a category that includes temporary help agencies, the new data said the region actually lost 500 of those jobs last year.
“I was expecting a downward revision, but not like this,” Keith said. “You would have heard something about it if it was something this big at the hospitals.”
Even John Slenker, the state Labor Department’s regional economist in Buffalo, said he thinks the revision is too severe, especially in the final three months of last year, when the new data showed a marked decline in hiring, including an outright decline in jobs during December. Through September, local job growth had been running at an annual pace of about 0.8 percent. While that’s half of the pace initially reported, it’s still above average for the region.
“I think the fourth-quarter sample is understating it,” Slenker said. “We’ve had so much construction activity going on, yet our construction numbers aren’t going up, and I just don’t understand why.”
One reason could be in the way federal labor officials count construction jobs. Instead of counting jobs in the communities where the work is done, construction jobs are credited to the community where the contractor is based. So if a Buffalo-based company has 100 workers on construction site in Syracuse, those jobs are counted as construction jobs in Buffalo. Likewise, if a Syracuse contractor is working on a project on the Medical Campus or at the SolarCity factory under construction, those jobs are considered to be Syracuse jobs, even if the employees who are doing the work live in Buffalo.
Both Keith and Slenker said other economic indicators don’t show the same type of fourth-quarter softness that the job numbers reflect, including higher sales tax receipts and a lack of major job cuts by local employers last year.
The job weakness continued into this year, with reported job growth running at a tepid 0.4 percent annual pace during January.
The revision also shows that the region’s job growth is lagging much farther behind the rest of the country than initially thought. That’s significant, because the perception that hiring was picking up was seen as a key factor in luring new workers, especially young ones, to the region and creating more career opportunities for the graduates of local colleges and universities. With local job creation running at roughly a quarter of the 1.9 percent nationwide growth, a slower pace of hiring could slow the influx of younger workers and also could reverse the stabilization of the region’s population that has occurred in the last few years.
The numbers reported Thursday aren’t set in stone. They will be revised again next March, and if Slenker’s suspicions about the fourth-quarter data being off are correct, that could make the final numbers for 2015 slightly more encouraging.
“The estimates you see in the fourth quarter don’t appear to match what you see on the street,” he said. “There’s a lot of good things happening here. Revision of these numbers doesn’t erase that.”