The long-evolving shape of the regional economy is now clearly etched.
Mass production, whether in automobiles, chemicals or beer, has mostly disappeared from New York City and its environs. Only 1 in 16 of the 7.3 million people employed in the region still labors on a factory floor. At the same time, residents of New York, New Jersey and Connecticut earn nearly 25 percent above the national average.
The weight of the region has diminished to where it accounts for less than 8 percent of United States output. But as its position in the American economy declines, metropolitan New York is becoming the global economy's leading marketplace.
Overseas business, while hard to track, contributes much more to the region's economic life than it did a decade ago. That is because America's exports of services -- New York's stock in trade -- have soared more than 150 percent since 1985 to almost $200 billion.
New York's regional economy was once the most broad-based and diverse in the United States, generating almost one of every five dollars produced in the early post-World War II boom. As recently as the late 1980's, the region could boast of a reasonably wide manufacturing base.
Something Altogether New
Now the New York region is becoming something new under the sun. Most economic centers ship goods elsewhere and consume their services locally. By contrast, the manufacturing that remains in the New York region is heavily devoted to the local market while its cutting-edge services -- finance, law, communications, popular culture and medicine -- are increasingly in demand throughout the global economy.
"We're a major player in the global economy because of our services, not because of our manufacturing," said Richard W. Roper, director of economic and policy analysis at the Port Authority of New York and New Jersey. "This region is a magnet for foreign firms that want to get a foothold in the North American market. And almost any U.S. company that wants to compete actively in the international arena needs to have some kind of a presence here."
For the New York economy, the rapid change in telecommunications and management is both a curse and a blessing. On the one hand, such innovations undercut New York as a capital of big business by making it easier for companies to run their affairs from Atlanta or Houston or Columbus. But they also benefit the region: As the global economy becomes smaller, clusters of brain workers like Wall Street's investment bankers or Madison Avenue's world-class marketeers gain a far larger market in which to sell their wares.
"What is holding New York together, paradoxically, is what is allowing the world economy to spread further afield," said Saskia Sassen, a Columbia University professor who wrote "The Global City: New York, London, Tokyo," (Princeton University Press, 1991).
Five or six years ago, Tokyo seemed on a trajectory to surpass New York as the world's premier financial center. The air has since gone out of that balloon, however. And the share of global capital that flows through New York is once again on the rise.
To be sure, neither New York nor the United States will ever be the powers they were when big companies like R.C.A., Exxon and I.B.M. ruled the American economy from Manhattan headquarters.
The good news for the region's economy, though, is that thousands of newer, more dynamic companies are producing custom-tailored goods and services, from an Aragon stereo amplifier for audiophiles to boutique breweries such as New Amsterdam Beer to the deal that allowed General Motors to take over Saab Automobiles of Sweden.
The New Passes the Old
Consider Magda Sole, a young woman whose four-year-old company provides cross-cultural marketing for major United States corporations doing business abroad. The birth of the new economy from the ashes of the old came home to her in one crystalline moment last fall.
Ms. Sole was moving her firm, Trans Image International Communications, into a turn-of-the-century industrial building in lower Manhattan's TriBeCa district. As she arrived to inspect the newly remodeled ninth-floor offices -- now bristling with computers, fax machines and video editing equipment -- movers were wrestling the last of several heavy, ink-stained printing presses on cables down the elevator shaft of the 14-story building and off to oblivion.
"The end of an era passed right before my eyes," she recalled. "Yet it was also the start of a new one."
The stability that temples of business like I.B.M. or Union Carbide once assured has disappeared, to be replaced with frightening uncertainties.
"Even more than the nation as a whole, this region is in the midst of its own very painful transition," said Steven B. Schlossstein, a business consultant and economist in Princeton, N.J. "We are moving from the top-down, hierarchical, centralized, bureaucratic, command-and-control structure of the old industrial age to a flatter, leaner, decentralized, faster-moving, more flexible, unpredictable, chaotic information age."
Painful is right. While much of the nation emerged from recession two to three years ago, New York, New Jersey and Connecticut remained, until very recently, in a stubborn slump. Even as the U.S. economy had regained all the 1.9 million jobs lost in the downturn and added nearly two million more by the end of 1993, employment in metropolitan New York is still down 800,000 from its 1989 peak of 8.1 million.
Today, the regional economy is finally on the mend. Indeed, revised figures due this month from the United States Department of Labor should show that job losses here were not quite as bad as believed. New Jersey, whose monthly surveys still show a stagnant job market, will report that modest job increases began as early as the summer of 1992, mostly in smaller, newer firms not measured in the regular surveys.
Yet at best, economists say, the New York urban conglomeration will not regain all its lost jobs until the end of the decade. High taxes and heavy operating costs, together with congestion, crime and other urban ills, will continue to hobble the region.
Regional assets, in many cases, have become liabilities. Job gains will be retarded by New York's heavy dependence on the mammoth corporations now slashing their work forces for greater productivity and competitiveness. A.T .& T., Xerox, Nynex and Pfizer are only the latest. And prosperity on Wall Street no longer automatically translates into a stronger job market.
"New York City has held up well as a world financial market," Charles R. Morris, a business consultant and analyst, wrote in City Journal, the quarterly publication of the Manhattan Institute. "But because of the increased automation of the industry, this does not portend continued high levels of employment and office-space consumption by the city's financial services sector."
"The economy in the New York region should add jobs in 1994," said Rae D. Rosen, regional economist at the Federal Reserve Bank of New York. "But the recovery here is likely to continue to lag the recovery in the nation as a whole."
Entrepreneurs Finding 'Gazelles' Of Business
There is much more to the story, however.
While the Fortune 500 leviathans are shrinking, thriving young firms like Just Toys of Manhattan and Nationwide Cellular Service on Long Island are emerging as the hidden strength of the regional economy.
New York, more than any other urban area, is the nation's leading creative hothouse of talented and driven people. To be sure, other places, such as North Carolina's Research Triangle, Boston's university complex and Silicon Valley in California, attract high concentrations of brain power. But their intellectual firepower tends to be specialized. New York has by far the greatest diversity of information workers.
"Whatever you need, you can find it here," said Mitchell L. Moss, director of New York University's Urban Research Center. "Specific, innovative, customized service -- that's what makes New York New York."
That talent is invaluable to such diverse fields here as communications, the arts, advanced health care, advertising, financial services and the law.
"Where are the brightest, most creative, most productive, and, yes, the most aggressive people?" asked Vincent Tese, New York State's Commissioner of Economic Development. "Right here."
Some formidable obstacles stand in the way, however. David Birch, president of Cognetics, a research firm in Cambridge, Mass., has found that only 4 to 5 percent of the companies in an area produce 60 to 70 percent of its new jobs.
"Where these gazelles start and where they grow, economies prosper," Mr. Birch said. "The places they avoid will have a tough time economically in the years ahead."
Unfortunately, while the fast-paced, more flexible enterprises Mr. Birch calls "gazelles" are gaining ground in the region, not enough have taken root to outpace the lumbering "elephants" still shedding weight.
Experts say that a crucial reason is that government remains focused on the past, unwilling or unable to help the new businesses shaping the future.
"We're still trapped by a nostalgia for an economy that won't come again," said William W. Ginsberg, the director of Science Park in New Haven, one of the most successful government-sponsored business incubators in the tri-state area. Mr. Ginsberg was recently named to head the economic development division of the U.S. Department of Commerce.
"Our classic corporate base is maturing and shrinking," Mr. Ginsberg added. "But we're not building a more entrepreneurial base fast enough."
Paradoxes What Is Made Is More Money
In the economy now taking shape all across the New York region, paradoxes abound.
The number of help-wanted ads in local newspapers is rising, for example, but many laid-off employees with valuable skills cannot find work.
Ravi Mehta, a 50-year-old electronics engineer, worked at Perkin Elmer Corporation in Norwalk, Conn., for 13 years, until he was laid off last February when half his division was sold. Mr. Mehta, who was a telecommunications manager earning $74,500, said he has sent out more than 2,000 resumes over the last year. He still lacks a permanent job.
"Everybody is talking about the information superhighway," he said, "but I feel like I'm on a dead end."
Meanwhile, Nationwide Cellular, a company that provides a full range of wireless communication services in seven major U.S. cities, is racing ahead on that information superhighway. It is one of the fastest growing companies in the region, employing more than 500 people, 175 at its headquarters in Valley Stream, just across the Nassau County border from Queens.
"The recession has been good for us," said Stephen Katz, president of Nationwide Cellular. "What Long Island does have is a skilled, highly educated labor force, and we've had our pick of the best."
Nationwide Cellular neither manufactures portable telephones nor provides over-the-air connections. It offers help for those too busy or too confused to sort out the best deals. "Nobody is forced to deal with us," Mr. Katz said. "But we're doing well because we offer added value and one-stop shopping with a smile."
That raises another anomaly of the New York economy. Very few workers actually make things here any more. Yet the region's residents earn among the highest incomes in the country designing, developing, packaging, financing, lawyering, advertising and selling some of the most sophisticated goods and services available.
How is this possible? By serving business as the brain serves the body. Cures for diseases are conceived and created in the array of pharmaceutical laboratories and medical centers in New Jersey and Manhattan. The pills are manufactured in Puerto Rico.
Furniture designs conceived in Manhattan offices and lofts are turned into chairs, tables and lamps in North Carolina and Michigan. Designs for apparel are laid out on Seventh Avenue. Some are put together in the back alleys of Chinatown and the burgeoning immigrant-run job shops in Queens, but millions more are cut into skirts and blouses in east Asia and the Caribbean.
Manhattan-based Just Toys, founded in 1989 by Allan Rigberg, a toy-industry veteran, and Rose Evangelista, a former graphic designer, is a prime example. Cited by Business Week as one of the 100 fastest-growing small companies in the nation, it has prospered mainly by producing tiny, bend able plastic figures featuring popular comic book and cartoon characters.
Based at the Toy Center on Fifth Avenue, where the designs are done and marketing shaped, its top officers shuttle in and out of Hong Kong. There they arrange contracts to churn out the toys from factories in China and elsewhere in Asia.
"Increasingly, the real value of goods we produce comes not from where they are physically manufactured, whether in New Jersey, Malaysia or Mexico, but from the substance of their content," Mr. Schlossstein said. "Without programming, TV sets are lifeless boxes. Without software, computers have no value."
Retaining the people whose ideas translate into jobs for others is a challenge for private business and public institutions alike.
Dr. Herbert Pardes is vice president for health sciences and dean of the faculty of medicine at Columbia University. Since arriving in 1989, he has helped Columbia-Presbyterian Medical Center build a stronger position as a top academic medical center.
Last year, the University of California at Los Angeles sought Dr. Pardes out to run its medical school and hospital. He was wooed by California Gov. Pete Wilson. Michael Ovitz, the powerful head of Creative Artists Agency in Hollywood, and even Dustin Hoffman, the actor, courted Dr. Pardes.
"But I decided to stay here in Washington Heights," Dr. Pardes said. "Why? Because I love New York. Because of the challenge."
Meeting those challenges has included a $300 million building program at Columbia-Presbyterian, spearheaded by Dr. Pardes, that is taking up some of the slack of New York's construction slump. And the medical center has moved up from ninth in the nation in 1989 to fifth as a recipient of federal research money today.
Jobs The Brain Train Passes Some By
But what about the people left behind in the next New York economy?
As routine jobs in production, distribution and retail dry up, so do opportunities to climb the economic ladder. Income polarization has increased, and differences between the haves and have-nots are starker in and around New York than elsewhere in the nation. Among big cities, only Detroit has a lower percentage of working-age people in jobs than New York City.
Less than 55 percent of the city's working-age population is employed, compared with a national rate of more than 66 percent.
Various explanations are offered, including generous welfare benefits, poor education in troubled urban neighborhoods and infestations of illegal drugs and crime. But a lack of promising jobs that require more strength and stamina than study is also important.
"Not everybody can be a rocket scientist or a reporter for a national newspaper," said Donald Scarry, a New Jersey economic consultant. "When manufacturing jobs go, they are gone for good. Can we ever get back the kind of job opportunities that factories once provided to the less educated?"
The trends are not particularly encouraging.
"You heard a lot of talk about how New York's post-industrial economic structure would protect us from the worst," said Samuel M. Ehrenhalt, regional director for the United States Bureau of Labor Statistics. "That was just plain wrong."
The reorganization of basic industry that helped, after painful years, to revive the Rust Belt has now shifted to pillars of the New York region, such as insurance, banking, pharmaceuticals and communications.
"Today, our industries are going through what the steel, auto and other smokestack industries went through in the 70's and 80's," Mr. Ehrenhalt said. "I'm afraid we have some of the smokestack industries of the 90's."
Growth The World Is The 6th Borough
New York's greatest promise rests on the region's increasingly close economic ties to the rest of the world.
Its leading urban competitors are no longer so much Chicago, Miami and Houston as London and Tokyo. Financial-service firms here, for instance, have long been active globally. Today, such services, along with a wide range of business and professional activities, are among the nation's fastest growing exports. New York's share of such lucrative pursuits as foreign exchange, bond trading and pension investment, for example, rose through the economic ups and downs of the past decade.
So, too, are entertainment products, from MTV to the National Basketball Association, which are headquartered here. And so are some of the high-quality, customized goods still produced locally: jet engines, high fashion, specialty chemicals, industrial electronics.
A recent study by DRI/McGraw-Hill, a Cambridge, Mass., consulting group, found that New York's regional economy would flourish again with a more vibrant global economy. More foreign and domestic investment would flow into the region, with many companies finding it advantageous to locate internationally oriented corporate staff in the New York region.
So maybe that's why back on Hudson Street in TriBeCa, TransImage's Ms. Sole is starting to feel at home.
Ms. Sole, who is 35 and speaks seven languages, co-founded the international communications and translation firm in 1990 just as the recession was in full fury. It has prospered nonetheless.
TransImage mirrors New York's diversity; its central staff of 16 come from all over the world. Most of its corporate clients, such as Time Warner and American Express, are headquartered here and looking overseas to expand.
"New York," Ms. Sole said, "is the only truly cosmopolitan city in the U.S. We couldn't have built this business anywhere else in the world."
