New York Metropolitan Transportation Council Regional Transportation Plan 2010-2035

APPENDIX 3

2035 Demographic and Socioeconomic Forecasts

September 2009

NEW YORK METROPOLITAN TRANSPORTATION COUNCIL

2035 DEMOGRAPHIC AND SOCIOECONOMIC FORECASTS

BACKGROUND The 2035 demographic and socioeconomic forecasts were adopted by the Program, Finance and Administrative Committee (PFAC) on February 19, 2009. Significant changes were made pertaining to the Employment Model in the 2035 forecasts. Between the 2025 and 2030 forecast series, the federal system of industrial classification was revised from the SIC (Standard Industrial Classification) to the NAICS (North American Industrial Classification System) basis. In addition to the change in industry nomenclature, consistent historical regional data were no longer available on an annual basis from 1970, requiring quarterly data from 1990 to model historical employment and earnings. While quarterly NAICS data were sufficient at the subregional level, far less industry detail was available at the county level, a situation that persists to the present day. County forecasts were thus prepared for private sector, government, proprietors and total employment. Federal Transportation Planning Grant requirements direct metropolitan planning organizations to prepare and adopt long range economic forecasts for their regions for use in transportation and land use analysis. The level and geographic distribution of population, work site employment and earnings, resident labor force and households have a direct effect on commuting patterns and commercial transportation requirements. In particular, journey-to-work trips account for a large proportion of all travel within a region, especially peak period trips, which place the greatest demand on transportation infrastructure. A new set of forecasts was developed for the New York Metropolitan Region (31 counties) at the subregional, county and Transportation Analysis Zone (TAZ) levels, for the period 2005-2035 using the new Global Insight (GI) national level drivers. The five subregions comprise the following counties: New York City: Long Island: Mid-Hudson: New Jersey: Bronx, Kings, New York, Queens, and Richmond Nassau and Suffolk Dutchess, Orange, Putnam, Rockland, Sullivan, Ulster, and Westchester Bergen, Essex, Hudson, Hunterdon, Mercer, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, and Warren Fairfield, Litchfield, and New Haven

Connecticut:

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METHODOLOGY The four models (employment, population, labor force, households) were used with the new macroeconomic forecasts of Global Insight (GI). The employment model was built on a NAICS-based model that utilized quarterly employment data by subregion from 1990 through 2005 in conjunction with GIs macroeconomic assumptions. Subregional and county level forecasts were prepared that provide five-year interval projections of the following variables from 2005 to 2035.

Employment by NAICS Supersector (Total Employment, Payroll by Industry, Proprietors) Population (Total Population, Household Population, Group Quarters Population, Enrollment Ages) Labor Force (Total Civilian, Employed Residents) Households (Total Households, Average Household Size, Income)

The county level employment, population, labor force and household variables were applied to TAZ level socioeconomic forecast requirements for the 28-county New York Best Practice Model (NYBPM) region over the period from 2005 to 2035. These forecasts cover the following 16 variables: Employment (Total, Basic, Non Basic, Office, Retail) Population (Total, Household, Group Quarters in Institutions, Other Group Quarters) Labor Force (Employed) Households (Total, Average Household Size) Earnings per Worker Mean Household Income Enrollment (K-12, University)

Employment Model The employment model is composed of five subregional models namely New York City, Long Island, the Mid-Hudson, northern New Jersey, and southeastern Connecticut. The equations were derived using ordinary least squares regression analysis, a common statistical process used in econometric modeling. The employment model is critical to operation of the NYBPM in that it provides a basis for generating work trips in the journey-to-work forecasting process. The output of the employment model also impacts the forecasting of future population and labor force in the Region. Employment forecasts enter the labor force model and set the level of
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demand for workers in each subregion. In turn, the labor force forecasts enter the population model and determine the necessary level of net in- or out-migration, in conjunction with the expected labor force participation of the resident population. It is important to clearly understand the differences between labor force and employment. Labor force data indicate how many residents of a particular area have jobs or are unemployed, but provide no information on where the residents actually work. Employment data, by contrast, supply information on the number of persons working in an area, regardless of where the workers may actually live. Labor force forecasts tend to be driven by employment and labor force participation rates, whereas the employment forecasts are based on a range of economic variables.

The employment model for each subregion includes equations for: employment by industry personal income wages and salaries other income population unemployment rate number of proprietors Employment in each industry in each subregion depends on: demand for the output of the sector wage rates relative to the U.S. average prices relative to the U.S. other relevant variables, such as the mortgage rate The nonemployment variables in the model are used primarily as measures of demand.

The historical U.S. data used to build the model, and the forecast U.S. data used as inputs to the NYMTC 2035 forecast are taken from the Global Insight, (GI) Inc. 2007 Long Term Trend Forecast which runs to 2035. They present a less robust economic forecast than that in the Summer 2003 Long Term forecast prepared by GI which was used in the previous NYMTC forecast.

Population and Labor Force Models The population model consists of five subregional cohort/survival models in Excel workbook format, with separate worksheets for each mutually-exclusive racial-ethnic group (white nonhispanic, black nonhispanic, Asian/other nonhispanic, and Hispanic). The models are calibrated on annual and decennial data from 1970 through 2005. They

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are linked to national forecasts of fertility, mortality, labor force participation, and to subregional trends in net migration and forecasts of employment. Labor force forecasts are driven by expected growth in population, rates of labor force participation, and employment levels. The Labor Force Model will utilize the US Bureau of Labor Statistics (BLS) Civilian Labor Force (CLF) concept from 2000 onward, while decennial Census Bureau data will be the basis of historical resident labor force before 2000. Normally, Census Bureau data will also inform the BLS current labor force information on a racial-ethnic basis, but the failure of 2000 Census enumerations to accurately capture the total resident labor force has resulted in the substitution of BLS data drawn from the Local Area Unemployment Survey (LAUS). All outputs of the Labor Force Model are generated by sex and age-group for the population 16 years of age and over. A separate model will be run for each subregion; within each subregional model, sub-models generate outputs for each racial/ethnic group. Each model will include a historical section, covering the years 1970 through 2005, and a forecast section, covering the years 2006 through 2035. All outputs are generated on a five-year interval basis. . 2035 FORECASTS NATIONAL ASSUMPTIONS GIs trend scenario is the principal long range forecast or baseline scenario. It is regarded as the best unbiased projection of where the U.S. economy is headed, with only a 10 percent chance that the realized path will lie outside this trajectory. Unlike the optimistic or pessimistic scenarios, which GI also forecasts, the baseline assumes that the national economy will grow smoothly along a full employment path, suffering no major mishaps between 2007 and 2037. The U.S. is officially in recession beginning in late 2007. A special Forecast Working Group Meeting was held to address concerns over the 2035 forecasts due the economic downturn. The Global Insight (GI) U.S. Long Term Forecast of Feb 2007 (used in the 2035 NYMTC Forecasts) was compared with the latest Forecast of December 2008. Comparisons were made on Employment growth, real GDP, average consumer inflation rate, average conventional mortgage rate, and unemployment rate. The indicators show a sharp downturn in 2008, 2009 and a pullback starting in 2010. Around 2015, the two forecasts started to converge. The conclusion was that the differences in the national forecast are not that significant to influence long term forecast.

Gross Domestic Product Real economic growth rate is a measure of economic growth from one period to another adjusted for inflation. Between 2005 and 2010, real economic growth is expected to

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average 3.3 percent per year, while over the remainder of the forecast period, real growth will taper off to 2.7 - 2.8 percent yearly.

Employment In keeping with expected growth in output, employment expands more rapidly in the near term, by 1.5 percent annually in 2005-2010, than in the successive five year growth periods. During the initial retirement years of the baby boom generation (2010-2020), the jobs growth rate is expected to dip to 0.6 - 0.7 percent annually, rising thereafter to a 0.9 percent annual expansion from 2020 to 2035. Manufacturing employment declines throughout the forecast period, while construction rebounds after 2025. The services sector expands moderately in the national economy, with some services experiencing losses particularly in the 2010-2020 decade. Strongest gainers are in professional and business services, and the information sector, with the former consistently expanding above 2 percent annually, while the latter tends to fluctuate between one and two percent. After a strong showing in the 2005-2010 period, job losses are expected in the 2010-2020 decade in retail trade, finance and insurance, real estate rental and leasing, and education. Although all of these industries except retail trade resume growth in the following decades, their performance is not particularly strong, falling below the total employment average. The health industry and other services, which consist primarily of personal services, grow throughout the forecast period at rates that tend to exceed the total employment average, but all below the strongest gainers. Government expansion also remains positive, with periodic federal losses offset by state and local gains, but overall, government job growth averages less than 0.5 percent annually in the national economy. Personal Income Over the next 30 years, wage rates will expand roughly 5 percent on average while inflation will advance 2 percent annually, suggesting a 3 percent real growth in earnings. Productivity growth will average 2.3 percent per year, which is higher than the 2.0 percent annual growth rate of the past 30 years. The pick-up in productivity growth, particularly over the next decade, reflects in part the expected benefits of new investment in capital goods and technology, encouraged by low interest rates. Both long term and short term interest rates will remain below their equilibrium levels by a monetary policy intended to curb inflation. The dollar continues to depreciate against foreign currencies, to slow the growth in current account deficits, while capital inflows contribute to net domestic investment over the forecast period. The growth in wage rates and productivity is also helped by the slowdown in labor force expansion.

2035 REGIONAL FORECASTS EMPLOYMENT Regional Share of U.S. Employment Growth

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Over the 2005-2035 forecast period, the 31 counties Region will maintain a marginally declining 7 percent share of total employment in the nation. The strong performance of the economy will be built upon increasing shares of national jobs in Finance, Real Estate & Leasing, Retail Trade, Leisure & Hospitality Services, and Other Services. Regional shares of Manufacturing and Wholesale Trade are expected to decline, while Construction, Transportation & Utilities, and Information will contract less sharply as a percent of the nations total. Despite the clarity of this trend, anomalies will exist in overall industry performance. The number of Education & Health Services jobs will grow significantly, but the sectors share in the US will decrease marginally, signaling that national employment growth will be even stronger. Similarly, employment in Professional & Business Services will increase by 81 percent from 2005-2035, but its national share will decline. Although Finance, Real Estate & Leasing is highlighted for its fast growth attributable to its increasing share in the US economy, the actual employment increase amounts to only 16 percent over the 30 year period, less than the two previously mentioned industries.

Regional Employment by Industry The Region can expect increases in all industries with the exception of manufacturing, which will continue historical levels of decline (as well as the statistically insignificant mining industry). In contrast, the service sector will experience strong increases and will account for more than all of the Regions net job growth in the near term. These trends represent a continuation of the Regions historical restructuring from a manufacturing to a service-based economy. Collectively, the blue collar sectors of Construction, Manufacturing, Transportation & Utilities will decline from 1.37 to 1.32 million jobs, while the private sector white collar/service jobs will grow from 6.89 to 9.21 million jobs over the 30 year period. Even Government, a largely white collar/service industry, will increase from 1.52 to 1.73 million jobs between 2005 and 2035.

Employment Shares and Growth Rates by Subregion New York City is expected to retain its regional share, growing by 0.9 percent annually, or as fast overall as the Region and the nation, and gaining 1.38 million new jobs between 2005 and 2035. By the end of the period, the City is expected to contain 4.5 million payroll opportunities and 1.2 million self employed opportunites. With New York City providing 36 percent of regional employment in 2035, or the same share as today, the four suburban subregions will retain a collective 64 percent share. However, their relative performance will advance some suburban subregions at the expense of others. With 32 percent of regional employment in both 2005 and 2035, New Jersey comprises the largest suburban subregion and an important component of the Regions economy that will also grow as fast as the nation as a whole. Jobs in New Jersey are expected to increase by 1.2 million with some 820,000 new payroll opportunities and some 360,000
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more self employed. Next largest in scale, Long Island represents the only subregion expected to fall behind the national rate of job growth, advancing by 0.7 percent per annum, as roughly 350,000 more jobs are created on the Island. By contrast, the MidHudson will outpace all other subregions as employment is ratcheted upward by 1 percent annually, or more than 425,000 new jobs, to reach 1.6 million total employment in 2035. Connecticut, the smallest subregion, is expected to add nearly as many new jobs as Long Island, grow at the pace of the Region and the nation to retain a 9 percent share of regional employment and top 1.4 million jobs by 2035.

POPULATION Regional Share of U.S. Population Growth The Regions population is expected to grow from 22.1 million residents in the year 2005 to 26.3 million by 2035, a gain of 4.2 million persons over the 30-year period. Growing at 0.6 percent annually, the regional expansion lags the 0.8 percent rate of national population growth to 2035. The Regions population grows by natural increase, or births less deaths, and net migration, the sum of gross in-migration and out-migration from domestic and foreign sources. Over the 30-year forecast period, natural increase will account for six in every seven new residents (86.3%) with 9.41 million anticipated births less 5.77 million deaths in the Region. Net migration will amount to 578,000 persons in a total population change of 4.21 million persons. Obviously, the cross flows of gross in-migration and gross outmigration will be considerably greater, encompassing the Regions on-going influx of foreign immigrants from largely Asian and Hispanic heritage and outflow of largely White and Black non-Hispanic residents to locations elsewhere in the U.S. Regional Population by Subregion New York City will continue to dominate the Regions settlement pattern, adding 1.37 million new residents by 2035 over 30-year period, expanding population from 8.21 million in 2005 to 9.59 million in 2035. Despite this increase, which will account for 33 percent of the Regions gain, New York will grow more slowly than most suburban subregions. Fastest population growth is expected in the Mid-Hudson, which will expand resident population by 0.8 percent annually from 2.27 million in 2005 to 2.86 million by 2035. Connecticut and New Jersey will follow in rate of growth, each increasing at rates equal to or above the regional average. In Connecticut, the smallest area, some 433,000 new residents will be added, expanding population from 1.94 million to 2.37 million residents. New Jersey, the second most populated subregion, will add nearly as many new inhabitants as New York City, or 1.36 million by 2035. From 6.87 million residents in 2005, the 14 counties of northern New Jersey will grow to 8.23 million. Lastly, Long
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Island, the slowest growing subregion at 0.5 percent annually, can be expected to attract slightly more residents than the three southwestern counties of Connecticut or 460,000, topping 3.26 million in 2035.

LABOR FORCE Regional Share of U.S. Labor Force Growth New York City and New Jersey will account for the largest increases in civilian labor force or, respectively 920,500 and 568,600 new participants over the next 30 years. Long Island and Connecticut will each add 231,200 and 233,500 potential workers respectively, while Mid-Hudson can be expected to generate the third largest increase, or 331,700 more workers or those seeking employment. Relationship Between Regional Employment and Labor Force The civilian labor force of the 31-county Region is expected to encompass 13.1 million residents by 2035, an increase of 2.29 million persons over year 2005 levels. The labor force expansion is consistent with growth in payroll employment, which is expected to add 2.48 million jobs over the 2005-2035 period. Resident Employed Labor Force Growth by Subregion Resident employed persons do not necessarily work in the subregion of residence. As the forecast shows, given the Regions expected population growth, the resident employment population will rise from 10.3 million in 2005, when they comprised 46.7 percent of population, to 12.5 million persons by 2035, at which point they will represent 47.6 percent of total. The forecasted increase of 2.2 million resident employed will mean that more than one in every two new persons (52.6%) in the Region will be workers, contributing positively to the Regions economy. New York City will generate the largest increase in new resident employed, adding some 887,900 more persons seeking employment. The suburbs, by contrast, will grow slower with the exception of the Mid Hudson where the resident employed will expand by 0.9 percent per annum. The second largest increase in resident employed will occur in New Jersey with the expansion of some 554,600 more persons. Suburban growth in resident employed exceeds suburban employment growth, while New York Citys increase in resident employed are not sufficiently large to match the expected rise in employment. Commutation within the Region will climb. HOUSEHOLDS Resident Households by Subregion

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The growth in households reflects the expected rise in population and trends in the average size of household formation. Between 2005 and 2035, 1.63 million new households will be formed in the Region from the 4.10 million increase in household population. Owing in part to the immigrant influx and their more youthful age structure, average household size levels off slowly over the 30-year period, declining from 2.72 in 2005 to 2.69 in 2035. By 2035, 9.56 million households will reside in the Region, with each decade requiring on an average the construction of more than 50,000 new housing units per year to accommodate this growth. New York City has historically represented the largest concentration of resident households in the Region and will continue to do so throughout the forecast period. Nonetheless, the largest increment in resident households will occur in New Jersey, where 612,700 more households will be formed over the next 30 years. In New York City, the equivalent period will generate a growth of 534,900 new households. Long Island is expected to add 117,100 new households, while household formation in the Mid-Hudson will expand by 217,400. Growth in the Connecticut suburbs will fall midway, at 149,700 more households between 2005 and 2035.

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