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October 10, 2020 - 4:59pm
posted by Howard B. Owens in jobs, economy, news.

While the size of Genesee County's labor force shows a significant drop for August, some of this explained by normal seasonal fluctuations, says Tammy Marino, a labor analyst for the Department of Labor.

The labor force expands in the summer with students taking on jobs and for the season. This year, many college-age workers returned to campuses earlier than usual.

The August labor force for Genesee County was 29,800, down from 30,300 the month before, and down from 30,200 the year before.

Marino noted that the August number is close to the spring number. In May, the local labor force contained 29,500 workers.

There are also people who have dropped out of the labor force for various reasons, Marino said.

"There are many factors that influence people’s decision to (not) participate in the labor force," Marino said. "No child care, fear of the virus, a need to take care of a sick relative, etc. Also, long-term trends come into play here as well, a general aging of the population overall has resulted in a shrinking labor force in recent years."

There are 27,400 people with jobs living in the county, down from 29,200 a year ago. There are 2,400 people who are out of work but looking for an appropriate job, up from 1,000 a year ago.

That puts the August unemployment rate at 8.1 percent. In August of 2019, it was 3.5 percent.

Since the start of the pandemic the monthly unemployment rate has been:

  • April: 14.4 percent
  • May: 10.1 percent
  • June: 9.5 percent
  • July: 10.5 percent
  • August: 8.1 percent

The September estimate has not yet been released.

April 21, 2020 - 5:36pm
posted by Howard B. Owens in covid-19, coronavirus, news, jobs, economy.

In what may be the last snapshot of the employment picture in Genesee County before pandemic shutdowns hit local businesses, the local unemployment rate had already ticked up year-over-year for March from 4.7 percent to 5.2 percent.

The Department of Labor released statewide statistics today with a note indicating the household census of employment was taken at the beginning of March before most "nonessential" businesses were ordered to close or modify operations.

In that survey, 27,500 residents of Genesee County had jobs in a labor force of 29,000 people, with 1,500 residents seeking employment.

Through the rest of March, the Department of Labor reported a record number of jobless claims. It will be another month before we receive revised employment stats. Economists are estimating the national unemployment rate may now be as high as 32 percent.

In response to the high jobless claims, Congress passed legislation that: authorized $1,200 payments to most Americans; increased unemployment payments by $600 a week; and authorized $350 million in loans to small businesses that have suffered losses due to the pandemic primarily for payroll purposes.

The loans, if standards are met, could be converted into grants. The Senate is expected to vote today on a new stimulus package that would add nearly $500 million to the Payroll Protection Program.

March 20, 2020 - 9:13pm
posted by Howard B. Owens in unemployment, news, jobs, economy, covid-19, coronavirus, notify.

Yesterday, Mike Pettinella reported on the high volume of requests for assistance the state's unemployment offices are receiving for benefits.

Today, spokeswoman Deanna Cohen provided an update:

Yesterday we received 532,000+ site visits from New Yorkers filing UI claims.

Today we received 475,000+ calls.

Our dedicated staff is doing the best they can and are committed to serving every single person, no matter how long it takes.

January 6, 2020 - 12:53pm
posted by Howard B. Owens in economics, economy, news, notify.

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At $821, the average weekly earnings of a Genesee County resident is on the lower end of wages paid in New York and well below the national average of $1,095 and the New York State average of $1,347.

It's also lower than the other GLOW counties: Livingston, $859; Orleans, $891; Wyoming, $885.

Downstate counties and Albany are where the state's highest wage earners are, of course, with New York City workers earning $2,109 per week on average.

Erie County's average is $986. Monroe County is $1,009.

According to the Bureau of Labor Statistics (a federal agency), "Forty-two of New York’s 44 counties with employment below 75,000 had average weekly wages below the national average of $1,095. Steuben ($1,127) and Schenectady ($1,115) were the exceptions. Yates and Hamilton counties reported the lowest average weekly wages at $690 and $691, respectively."

September 26, 2019 - 5:07pm
posted by Howard B. Owens in unemployment, jobs, economy, news.

The August unemployment rate for Genesee County was 3.5 percent, according to the state's Department of Labor, up 2/10ths of a percent from the previous August.

While up slightly, it's still well below the recession peak of 7 percent in 2012 and below this year's highest rate of 5 percent in February.

The state reports there are 30,100 local residents in the labor force, unchanged from a year ago.

Also unchanged is the 29,100 people counted as employed year-over-year. (Working the calculation backward to find the difference between a 3.3 percent and a 3.5 percent unemployment rate would yield 1,050 people, approximately, seeking work who haven't found it. The state releases only round numbers for workforce participation).

There was also an uptick in the state's unemployment rate -- from 4.0 percent to 4.2 percent.

The nation's unemployment rate dipped from 3.9 percent to 3.8 percent.

There were 200 few jobs being filled by workers in Genesee County in August, dropping from 23,900 in August 2018 to 23,700 this year. The decrease in 200 jobs was split equally between the private sector and the government.

March 18, 2019 - 12:34pm
posted by Howard B. Owens in unemployment, jobs, economy, news, notify.

While Genesee County's unemployment rate jumped to 5.0 percent in January it was still a point-and-a-half lower than a year earlier for the same month.

The Department of Labor released the county's unemployment rate on Friday.

January's unemployment rate is traditionally one of the highest rates of any month in the year and last year it was 6.4 percent.

In December, the local rate was 4.1 percent.

There were 30,000 local residents reported in the labor force for January of this year compared to 29,500 the previous January.

Of those 30,000, 28,500 had jobs compared to 27,600 with jobs the previous year.

The number reported without work but seeking employment dropped from 1,900 to 1,500.

As for the number of private-sector jobs in the county, there were 16,300 reported in January compared to 16,200 the previous year.

January 25, 2019 - 4:36pm
posted by Howard B. Owens in jobs, economy, news, notify.

The unemployment rate in Genesee County for December was 4.1 percent, according to the New York Department of Labor, which is lower than the December 2017 rate of 5.3 percent.

The rate in November was 3.5 percent.

There are 1,000 more people in the labor force in Genesee County for December, at 30,100, compared to 29,100 a year ago.

Of those 30,100 people, 28,900 reported having jobs.

There are 1,200 people listed as unemployed. That's 300 fewer than a year ago.

There were 16,200 private sector, non-farm jobs reported in Genesee County for December, up 100 jobs from the previous December. Government jobs in the county fell from 5,800 to 5,700.

The unemployment rate for the GLOW region in December was reported at 4.2 percent, down from 5.6 percent a year ago.

The state's unemployment rate is 3.8 percent. The nation's is 3.7 percent.

December 27, 2018 - 3:23pm
posted by Howard B. Owens in jobs, economy, news, notify.

Genesee County's unemployment rate was a point and a half lower in November than it was in the previous November, dropping from 5 percent to 3.5 percent.

The state's online records for monthly unemployment rates only goes back to 1990 and in that span, the November rate has never been lower, though it was 3.8 percent in 2000.

The state reports that 29,000 people in Genesee County have jobs, compared to 27,000 a year ago. There are 30,000 people in the local labor force.

The state's unemployment rate is 3.5 percent and was 4.4 percent a year ago. The GLOW region's rate is 3.4 percent, down from 5.2 percent a year ago.

For November, 22,300 non-farm jobs are reported based in Genesee County, compared to 22,200 a year ago. Total private sector jobs has grown from 16,400 to 16,600.

November 23, 2018 - 2:45pm
posted by Howard B. Owens in jobs, employment, news, economy, notify.

There was robust private-sector job growth in Genesee County in October, according to recent statistics from the NYS Department of Labor, with 200 new jobs.

There are a reported 16,700 jobs in Genesee County compared to 16,500 a year ago.

The total number of jobs in the county, including government jobs, is 22,400, with the government sector losing 100 jobs year-over-year.

Average quarterly wages for all sectors increased from 2017 to 2018 in the second quarter from $9,921 to $10,107. Third quarter wage reports are not yet available.

The Genesee County unemployment rate is 3.3 percent for October 2018, matching the September unemployment rate but an improvement over the 4.5 percent rate of 2017.

Unemployment is a measurement of the number of county residents who are actively seeking employment divided by the total number of people considered part of the labor force (the employed and people seeking employment).

The county's labor force is 29,500, down from 30,400 the previous month but up from 29,100 the prior year.

The total number of employed Genesee County residents, working anywhere in the region, is 28,600, down from 29,400 a month ago but up from 27,700 the prior year.

One thousand people are listed as unemployed, unchanged from the prior month a 300 fewer than a year ago.

The unemployment rate for GLOW is 3.3 percent, down from 3.4 the previous month and 4.7 percent a year ago.

The state's unemployment rate dropped from 3.8 to 3.6 month-over-month and from 4.4 the prior month.

The nation's unemployment rate is 4 percent.

September 26, 2018 - 10:44am
posted by Howard B. Owens in jobs, economy, news, notify.

For the first time since 2007, the August unemployment rate for Genesee County is below 4 percent, hitting 3.5 percent this August.

The rate hasn't been that low or lower since 2000 when it was 3.4 percent in August.

Genesee County's unemployment rate hasn't been as low as 3.5 percent in any month since May 2001.

The rate in August 2017 was 4.2 percent.

The total labor force for Genesee County in August was 30,400 with 1,100 people out of work and actively looking for work.

In August 2001, there were 31,900 people in Genesee County in the labor force with 1,200 looking for work.

New York State's unemployment rate is 4.1 percent, down from 4.9 percent a year ago. The national unemployment rate is 3.9 percent, down from 4.5 percent a year ago.

Nationally, the economy has added jobs for 95 straight months.

August 30, 2018 - 2:18pm
posted by Howard B. Owens in jobs, economy, news, notify.

The primary unemployment rate of 3.7 percent in Genesee County is the lowest July rate locally since 2001.

While July is traditional the among the lowest rates of any given year, at 3.7 percent, it's the lowest rate of any month since October 2006.

The rate dropped six-tenths of a percent since last July.

The primary unemployment rate -- called the U-3 rate by labor economists (there are six such levels of rates) -- counts work-age people who either have jobs or are actively seeking employment. It doesn't include people who are permanently or temporarily out of the workforce either by choice or disability.

The number of residents of Genesee County who are counted in the rate is 30,600, up from 30,500 a year ago. The highest July number over the past 28 years was 34,800 in 2008. There are 1,100 people in the county seeking work, down from 1,300 a year ago and 29,500 people with jobs, up 300 from a year ago.

The number of jobs in Genesee County grew year-over-year from 23,700 to 23,800. The number of non-farm, private-sector jobs grew from 18,600 to 18,800.

The Genesee County Job Development Bureau reports it currently knows of 879 job openings locally, down 15.6 percent from last month when there were 1,042 job openings listed.

The state unemployment rate is 4.2 percent, down from 4.9 percent a year ago. The national rate is 4.1 percent compared to 4.6 percent a year ago.

July 12, 2018 - 3:22pm
posted by Howard B. Owens in jobs, economy, news, notify.

All signs point to a tight labor market in Genesee County with more than 1,000 known job openings and only 1,100 people considered unemployed.

While local companies struggle to find workers, Genesee County's labor force size may have shrunk. 

Labor force participation has declined from May 2017 (the most recent month of data available), when it was 29,900, to 29,500 in May 2018. It was 30,400 in 2016 and 30,800 in 2015. The highest level since 1990 was 33,800 in 2009.

The decline could reflect Baby Boomers retiring, out-migration of prime-age workers, or a number of prime-age workers still sitting on the sidelines. There are not detailed enough statistics for a small county to say.

Nationally, the labor force participation rate is 62 percent, well below the pre-recession level of 66 percent. At the same time, wages have started to go up but not as fast as inflation.

Genesee County's unemployment rate -- as a measure of prime-age working people who either have a job or are looking for work -- was 3.8 percent in May, lower than a year ago, at 4.4 percent, but the same rate as May 2016.

It is the lowest unemployment rate in the GLOW region.

The lowest rate for May since 2000 was 3.5 percent in 2001 and the highest was 7.5 percent in 2012.

That reflects 1,100 people in the county who don't have adequate work but want work. The highest that number has been since 1990 was 2,700 in 1992.

The number of employed Genesee County residents in May was 28,400, down from 28,600 a year prior. It was 29,200 in May 2016 and 29,400 in May 2015. The highest its been since 1990 was 32,300 in 2006.

The Job Development Bureau has 1,036 job listings. That may not reflect all of the job openings in the county.

The sector with the highest number of listed job openings is agriculture, with 307, followed by manufacturing, 222, healthcare, 193, and retail, 65.

Every major employer in Genesee County has openings to fill, with many at hourly rates from $15 an hour to $25 an hour.

Back in 2014, when we did a story about job listings at the agency, there were only 279 listings. In April 2017, Director Scott Gage said there were 760 jobs listed.

The Job Development Bureau, 587 E. Main St., Batavia, is hosting a mini job fair from 10 a.m. to noon, Tuesday, July 24.

March 19, 2018 - 3:11pm
posted by Howard B. Owens in economy, business, news, notify.

Tariffs on steel and aluminum announced by the Trump Administration last week could put a squeeze on profits for local manufacturers, according to the executives at Graham Corp., Chapin Industries, and Liberty Pumps.

"Yes, we are adversely impacted by higher costs from imported carbon steel and stainless steel," said Jeff Glajch, chief financial officer for Graham. "We are also seeing significant increases in costs from our domestic suppliers. Making the situation more challenging is that our foreign competitors are not impacted, and if they import finished product, it is not affected by the tariffs."

While details of the tariff plan have not been released, the administration has said it plans to impose in just a few days a 25-percent tariff on steel and 10-percent tariff on aluminum. This would be a tax on all steel and aluminum imported into the United States from other countries. 

The tariff was announced under rules that allow a nation to impose a tariff for national security purposes in order to protect an industry considered vital to a nation's defense.

Even though the tariffs have not taken effect yet, manufacturers around the country are reporting that prices on steel and aluminum have been rising and are getting a bump by the anticipated tariff and are expected to rise further. Those price increases get passed on to consumers or profits must be cut.

"In steel, we use many many tons," said Jim Campell, CEO of Chapin. "Over the last 12 month, steel prices have already increased significantly. We have absorbed and offset these cost, however, we have not raised prices to our customers.

"If and when steel manufacturers raise prices again, it will impact our bottom line," Campell added. "Depending on the amount of the increase, we may be forced to raise prices, which in the end will truncate our sales and hurt our bottom line. As you know tariffs are a two-edge sword, helps some, hurts others (mostly the consumer)."

At Liberty Pumps, price increases so far have not had a big impact.

"I just had a conversation yesterday with Purchasing," said CEO Charlie Cook. "Yes, prices are going up. It has been widespread but so far just moderate percentages. When blended into the total cost of products including overheads, etc., it’s not something we’re going to react to yet. We really can’t anyway since we just imposed a price increase in January.

"Have to say," he added, "it will be good to see some U.S. furnaces cooking again."

The tariffs, however, come at a time when the steel industry in the United States is healthy. The sector is coming off of 22 consecutive profitable quarters, according to the latest report from the Department of Commerce (pdf), with net income (profits) of $869 million in the final quarter of 2017. 

In the final month of 2017, domestic steel production increased by more than 2 percent, from 6.6 million metric tons in November to 6.8 million metric tons in December while prices went up 6.7 percent. 

The tariffs are ostensibly aimed at China, which has become the world's largest steel producer, producing more steel than the United States, Mexico, Canada, the EU, and Russia combined, but China accounts for only 2 percent of the steel used in the United States. Seventeen percent of imported steel comes from Canada, 14 percent from Brazil, 10 percent from South Korea, and 9 percent from Mexico.

Even with all those imports, U.S. producers still control 70 percent of the domestic market, according to Scott Lincicome, an international trade attorney associated with the Cato Institute.

Many economists are predicting higher prices for consumers as a result of the tariffs. When President Barack Obama imposed a tariff on tire imports from China, it may have saved 1,700 U.S. jobs but at a cost to U.S. consumers of $900,000 per job saved.

Many economists have predicted that the new tariffs will unleash a trade war, but since the tariffs are being implemented under national security rules, the United States can make exceptions for countries considered allies. These include its foremost trading partners, allowing trade negotiators to zero in on China, leading Harvard economist Martin Feldstein to speculate that the real target of the tariffs is China's continued insistence on obtaining U.S. technology from companies trying to do business there. The tariffs, Feldstein speculates, could be used as leverage in trade negotiations over the issue.

The situation for aluminum is very different than steel for the United States, which imports 90 percent of its aluminum used in everything from beer cans to jet fighters, and imports are rising, according to The Washington Post. That said, higher prices for aluminum will mean higher prices for beer and soda pop.

None of the Genesee County companies anticipating higher prices on steel and lower profits anticipate layoffs as a result of the changing financial picture, even though some economists have predicted from 140,000 to 170,000 jobs lost across the country as a result of the tariffs.

Campell at Chapin said there will be no local layoffs. 

"We have not had a production layoff in the last decade," Campbell said. "We go to great lengths to keep our workforce intact. It may, however, slow some of our growth."

Glajch, at Graham, said even with the increased production costs, the business is growing.

"We are not anticipating layoffs," Glajch said. "On the contrary, we are hiring. Our core markets have shown early signs of some improvement and our Navy business is doing quite well. We are hiring for direct labor and certain engineering and sales roles."

December 27, 2017 - 3:03pm
posted by Howard B. Owens in jobs, economy, news, notify.

More people in Genesee County now have jobs or want jobs than the same period a year ago, and this has actually meant the county's unemployment rate grew from November 2016 to November 2017, according to the latest statistics from the Department of Labor.

The November labor force is an estimated 29,600, up from 29,000 a year ago and while the number of people with jobs grew, the number did not grow as much as total labor force participation.

Labor force participation is the measure of how many people either have jobs or who report they are under-employed and looking for full-time work or are unemployed and looking for work.

The county's labor force participation rate has been at or below the previous year's number for more than a year.

While the pool of eligible workers grew, so did the total number of employed people. In all, 400 more people in the county are reported to have a job in November than the previous year. The total grew from 27,700 to 28,100.

Even with that growth, the bigger jump in total participation meant that county's unemployment rate grew from 4.5 percent to 5.1 percent year-over-year.

The GLOW-area unemployment rate rose at the same pace, hitting 5.3 percent, up from 4.7 percent a year ago. Buffalo's rate rose from 4.9 percent to 5.3 percent and Rochester, from 4.5 percent to 5.1 percent.

The state's rate was 4.5 percent.

Earlier this month, the Department of Labor reported 22,600 non-farm jobs in Genesee County, down from 22,500 a year earlier. There were 16,700 private sector jobs in Genesee County for November 2017, the same as 2016.

October 19, 2017 - 4:20pm
posted by Howard B. Owens in jobs, economy, news, business.

Genesee County has lost 100 jobs over the past 12 months, according to data released today by the Department of Labor.

For September 2017, there were 23,600 jobs in the county. The previous September, there were 23,500.

The total number of private sector jobs held steady at 17,800 year-over-year, which is also the same total as September 2015. The lowest number of private sector jobs locally over the past two decades was 16,800 in 2012. There haven't been as many as 18,000 private sector jobs in September since 2004 (18,100).

Labor is reporting 89,100 new jobs in the state since last year, but Western New York's two metropolitan areas reported job losses year-over-year. The Buffalo region has dropped from 564,900 to 561,400 and Rochester has dropped from 532,300 to 529,000.

There are 5,700 government jobs in the county, compared to 5,800 a year ago.

August 22, 2017 - 4:38pm
posted by Howard B. Owens in jobs, economy, news, business.

Genesee County's unemployment rate ticked up a percentage point, even though the number of people reported as unemployed in the county remained steady at 1,300.

The rate rose year-over-year from 4.1 percent for July to 4.2.

There are 29,000 people in the county with jobs.

The total labor force -- the number of people working or looking for work -- is 30,300, down from 30,600.

Nationally, the unemployment rate is 4.6 percent. That's what's known as the U-3 number. The number that accounts for people who have stopped looking for jobs out of discouragement and part-time workers who would like full-time employment for the nation is 10.4 percent. That rate has been falling steadily since 2009 from a high of nearly 18 percent. (source, The Wall Street Journal)

That kind of detail is not available for job markets as small as Genesee County.

Wage growth nationally remains stagnant. 

The state's unemployment rate is 4.9 percent.

The GLOW unemployment rate is 4.9 percent, a tick higher than a year ago. The region's labor force has dropped from 98,300 to 96,900.

August 17, 2017 - 1:07pm
posted by Howard B. Owens in jobs, economy, news.

Genesee County added 100 more jobs in July, in a year-over-year comparison, according to data released today by the NYS Department of Labor.

In July 2017, there were 23,700 jobs in the county, compared with 23,600 a year ago.

Over the past decade, the highest job count for July was in 2014, with 23,800 jobs. 

The state added 18,800 jobs in July, according to the report.

July 25, 2017 - 4:26pm
posted by Howard B. Owens in jobs, economy, news.

While Genesee County's unemployment rate remains lower than state and national averages, it still was slightly higher in this past June than it was 12 months before.

The June rate was 4.2 percent, up from 3.9 percent a year ago.

The rate for the state and nation is 4.5 percent, which in both cases is an improvement over a year ago when the rates were 4.7 and 5.1.

Genesee County also didn't add any new jobs year over year, with 24,000 jobs reported in the county for June 2016 and June 2017.

The Rochester-area unemployment rate is 4.8 and in the Buffalo area it is 5.1.

There are 29,000 people with jobs in Genesee County. A year ago, there was 29,500. There are 1,300 people without jobs who are considered part of the labor force. Last year, that number was 1,200.

March 31, 2017 - 8:00am
posted by Howard B. Owens in economy, jobs, trade policy, news.

Local Economic Development

This is part eight of an eight-part series on trade and how changes in policy might affect the local economy.

renderingwnystamp.jpg

There's been a lot of talk about trade from President Donald J. Trump, but so far, no real action -- no new trade deals, no concrete action on tariffs or border adjustments. But just the idea that there might be some future advantage to manufacturing in the United States is already having an impact locally, said Steve Hyde, CEO of the Genesee County Economic Development Center.

"At least in the short term, this push, this effort to try and balance the trade profiles and make sure the U.S. is on an equal footing with the rest of the world, honestly, we're seeing an uptick in interest in manufacturers looking for U.S. sites, including direct foreign investment," Hyde said.

It's almost like all the work of GCEDC since Hyde became the CEO 14 years ago aligns with this potential new direction for the country. During those 14 years, GCEDC has been aggressive about creating build-ready industrial parks, from Gateway II, Apple Tree Acres, Buffalo East Tech Park, the Genesee Valley Agri-Business Park and WNY STAMP.

"I think there is still a wave of optimism going on about whatever relative changes may be coming," Hyde said. "The president is very focused on trying to beef up manufacturing in America and that's certainly helped our focus here on Genesee County to bring back manufacturing in both food and ag and in advanced manufacturing." 

The president's potential policies just enhance GCEDC's efforts, Hyde said.

"There's a bit of a bubble and ramp up of interest in manufacturing products of late and siting new facilities and trying to bring back growth and manufacturing to the state."

Hyde said he's recently had specific inquiries from foreign investors in sites at Gateway II and STAMP, with a lot of activity around STAMP.

The plan is still to break ground on STAMP this spring, though there seems to be an air of uncertainty about the company expected to be STAMP's first tenant -- 1366 Technologies.

While 1366 has raised tens of millions of dollars in venture capital backing, has already signed contracts with foreign firms to buy its solar wafers, there is still a potential issue with the company receiving funding assistance from the Department of Energy.

The Trump Administration has taken steps that alarm some environmentalists concerned with climate science, but that has been mostly directed at the Environmental Protection Agency. Rick Perry, Trump's selection to head the Department of Energy, testified during his Senate confirmation hearing that he's had a change of heart on climate science and has come to accept climate change as a real concern.

"I believe the climate is changing. I believe some of it is naturally occurring, but some of it is also caused by man-made activity," Perry said. "The question is, how do we address it in a thoughtful way that doesn't compromise economic growth, the affordability of energy, or American jobs."

On the manufacturing front, as 1366 officials point out, if the Trump Administration goal is to increase U.S. manufacturing and U.S. exports, 1366 will be exactly that kind of company. At least initially, 1366 expects to export all of its solar wafers.

We asked Laureen Sanderson, a spokesperson for 1366, about the status of the project in light of the new administration and when we can expect 1366 to break ground on its local factory. Here's her response:

Yes, we’re factoring in the change in administration into our business plans. We expect the new administration will support U.S. manufacturing jobs and we’re looking forward to working with the team to do just that. At this time, I don’t have any additional details or timing to share but I will be sure to let you know as soon as we do.

Your trade questions are all excellent but we don’t want to speculate. We obviously support policies that support the global industry and its growth. We do not need clarity to move forward. One of the great things about the Direct Wafer technology is just how competitive it is, the cost reductions we allow for are unmatched and that positions us really well.  

One of the possible trade policy changes is the Border Adjustment Tax. That would put a 20-percent tax on imports but make revenue derived from exports completely tax free.

"That would be a huge benefit for 1366," Hyde said.

One of the criticisms economists have leveled at a potentially more protectionistic regime from the Trump Administration is that the United States simply doesn't have the supply chain any longer to support increased domestic manufacturing.

Trump's trade policy advisor, Peter Navarro, doesn't think that will be a problem.

“We need to manufacture those components in a robust domestic supply chain that will spur job and wage growth," Navarro said.

Hyde said with Genesee County sitting half way between Rochester and Buffalo -- the second and third largest population centers in the state and the second and largest export areas in New York -- along with all of the build-ready sites, the county is well positioned for any repatriating of a manufacturing supply chain.

"A lot of manufacturers want supply chain partners within an hour of their manufacturing site," Hyde said. "Some of the things going on at the Federal level has us well positioned to attract some of that supply chain, depending on how things unfold."

Like a good entrepreneur, Hyde is always optimistic. He never lets go of the big vision he has for creating jobs in Genesee County and he's excited by the activity he is seeing around not just STAMP but Gateway II and the other sites GCEDC has ready for new factories.

"About 5.6 percent of New York's private sector jobs come from employment at foreign-owned companies," Hyde said. "Foreign direct investment is a prominent part of New York's economy. With a focused policy at the federal level, advanced manufacturing is something we could see go up and that means good-paying jobs. Advanced manufacturing is the best way to build wealth in a community."

GRAPHIC: A rendering of what WNY STAMP might look like some day.

March 29, 2017 - 8:00am
posted by Howard B. Owens in economy, jobs, trade policy, news.

The GOP Plan: Border Adjustment Tax

This is part six of an eight-part series on trade and how changes in policy might affect the local economy.

eatcakesmalltariff.jpg
Editorial cartoon from 1912 illustrating the dilemma of tariffs: protect profits for producers, harm consumers.

President Donald J. Trump, as he did as candidate Trump, talks trade deals and the need for creating a series of bilateral agreements. He also threatens tariffs against countries he thinks are taking advantage of the United States such as Mexico and China.

But congressional Republicans have their own plan, though it's not one it's at all clear Trump supports.

The proposal, called a Border Adjustment Tax (BAT), is part of a broader push by the GOP to reform the tax code and lower corporate taxes.

The BAT changes how companies pay taxes on their profits. Effectively, imports would be taxed and any profits from exports would be tax free.

The goal is to encourage more U.S. manufacturing and protect domestic companies from lower-priced imports.

Rep. Chris Collins supports the Border Adjustment Tax, which is part of a bill pending in the House now.  The bill is a massive overall of the tax code that would eliminate almost all itemized deductions for corporations and individuals, except the home mortgage interest deduction and charitable contributions.

The corporate tax rate would fall from 35 percent to 20 percent.

The BAT has many critics and raises many concerns for U.S. businesses, particularly retailers, who are dependent on imports. And though Trump made comments during his campaign that indicated he might look favorably on it, he's made comments since taking office that express concern about the proposal.

“Under the border adjustment concept, if somebody is making a motorcycle or a plane in our country, they’re getting a credit for the plane they make before they send it over to wherever it’s going,” he said. “And you don’t need that plus lower taxes and everything else.

"And it's too complicated. They get credit on some parts and not other parts. Where was the part made? I don’t want that. I just want it nice and simple.”

As you might expect, import-dependent businesses, such as large retailers, are fearful of the BAT. They argue they make nothing themselves to export to offset the expense of the tax on the goods they import to sell to their customers. JCPenney CEO Marvin Ellison said the BAT would make profitability nearly impossible for his company, at least in the near term.

"It takes our tax structure, as an example, from roughly a 34-percent corporate tax to over 170 percent," Ellison said.

Consumer prices, he said, would go up 20 percent.

"That's simple math."

Some economists think it's not that simple.

It's possible, some say, that the rise in the value of the dollar will balance the cost adjustment on imports and exports, or wages and prices rise together and consumers don't feel the pinch.

That's what Collins said he believes.

Pete Zeliff, owner of p.w. minor, when talking more generally about tariffs, said he believes things will work out in America's favor because of the strength of our economy.

"Tariffs may drive up prices, they may not drive up prices," Zeliff said. "What they will do is get more people to work where labor rates will go up and more people will be able to afford to buy everything. We will start manufacturing more and more here and prices will go down because our efficiency will be higher. Instead of 80 percent of our products made overseas, 80 percent will be made in America, so you will see prices go down."

Where a BAT makes sense -- if your goal is to tax all imports and exempt all exports, the BAT makes that easier to do. There's no car on the road today that was all made in Japan or in Mexico or the United States. Parts and supplies come from all over the world. A car assembled in Mexico contains many parts, up to 40 percent in some cases, that were manufactured in the United States. A BAT makes it easier to track which pieces get taxed and which don't instead of trying to figure out what portion of a finished product counts as imported and which should be considered American made.

A potential problem with the BAT is that would make things more expensive that simply can't be produced in the United States. You will pay more for chocolate and coffee, and since U.S. waters don't produce all the seafood Americans consume, we rely on imports, therefore seafood prices will rise.

Tequila comes from Mexico and while some avocados are grown in California, not enough to meet customer demand. Without margaritas and guacamole, a lot of Super Bowl parties could be ruined.

Collins said he understands Constellation Brands, based in Victor, is concerned about importing Corona from Mexico if the BAT goes through.

"They say you can't make a Mexican beer in the U.S., therefore it should be exempt," Collins said. "Should there be an exemption? If you put in one exemption, somebody else is saying, 'what about me? what about me?' and then it all falls apart. You don't have a 20-percent tax rate. You have a 34-percent tax rate. Don't count on any exemptions."

The big thing about the BAT is it's a big unknown. It's never been tried before. It's not clear that it will mean higher prices for consumers or if a stronger dollar will offset the adjustment. It's not clear it will raise as much revenue as Republicans hope year-after-year or if it will create more jobs in the United States or if it will even lower the trade deficit. What it is is a giant experiment with the U.S. economy and that excites some economists. They get to see in real time, in a real-world setting, how economic theory works.

Meanwhile, we don't know yet whether the BAT will even become law. The White House has not endorsed the plan and support is far from solid in the Senate. The administration does seem to think it can strong-arm trading partners into buying more U.S. goods, even if the prices are higher than what might be available from other suppliers.

All of this puts a lot of uncertainty around key parts of the U.S. economy, and business managers tend to prefer certainty when planning how they will run their businesses But the local business leaders we spoke to weren't particularly unsettled by the current transition.

 

"At this point, that uncertainty doesn't affect us," said Jeff Glajch, vice president and CFO for Graham Manufacturing in Batavia. "If one of those things were to suddenly result in a 35-percent tariff, that could cause some angst in the short term, but we tend to think that anything like a trade war would be short lived. Both sides would realize how harmful it is to both sides and they will come to the table."

Collins, himself a businessman, said he understands the need for certainty and that there may be some turmoil that goes with changes, but in the long run, local businesses will be better off.

"We're trying to move this fast, this tax reform piece," Collins said. "We want to get it done in 200 days, not three years. I acknowledge that there is some uncertainty and that is unsettling because people don't like uncertainty. In the meantime, you've got your customers and you make your product and you go home and worry a little bit. But it's all good news on the horizon, so maybe you go to bed and dream in multicolor."

Previously:

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