At Last, Upstate New York Begins to Turn Itself Around

A century ago, the Erie Canal rolled through Syracuse, N.Y., bringing trade and enough prosperity to line its banks with the elegant, ornate granite buildings that still grace downtown.

When Teresa Talaca strolls by them today, on the way to one of her two jobs or a night-school class, she is at once optimistic and uncertain.

"I think the job market seems like it is doing better," she says. "But that's because people don't have just one job anymore."

That ambivalence is reflected throughout upstate New York. It's one of the few regions in the US that stumbled into depression as the rest of America - including a resurgent New York City - thrived. But now, like many struggling areas, upstate New York is showing signs of prosperity. Ironically, it's at the same time the rest of the country is beginning to get the economic jitters.

Some experts credit towns like Syracuse for overcoming the area's stultifying pessimism with aggressive economic-development plans. Others attribute upstate's nascent comeback to the lower taxes and better business climate championed by Gov. George Pataki's administration. But, perhaps most of all, the region is benefiting from a 1990s truism: In an age of labor shortages, businesses are increasingly looking for places with educated, available workers.

"It's people driven, it's labor-force driven," says David Cordeau, president of the Greater Syracuse Chamber of Commerce. "If a community can demonstrate a labor force, it can have as many jobs as it wants."

The unemployment rate in Syracuse is now only 3.6 percent, the lowest level in 10 years. Housing prices, which actually fell during the past decade, have begun to rebound. Empty downtown retail outlets are slowing filling up, and high-tech and service-sector companies are moving in.

"During 1997 we had our biggest job growth year," says Karen Knapik-Scalzo, a senior economist for the central New York Region in the State Labor Department in Syracuse.

Economic indicators are showing similar up-ticks across the state, but compared with the rest of the country, and the thriving city downstate, many economists are still very uncertain about the prospects for northern New York. "Upstate will continue to show very weak growth over the next five years, and I don't think it will be able to get the momentum it needs to turn this into a real recovery," says Celia Chen, a senior economist at Regional Financial Associates in West Chester, Pa.

Such naysayers contend the factors that brought upstate down economically in the '90s, still have a hold on the area. Traditionally, its cities have been dependent on the manufacture of durable goods - such as air conditioners, cars, and cameras. Its infrastructure is old. The tax base is fairly high; so are energy costs and state regulatory burdens.

As the economy began to pick up steam nationally in the early '90s, the lower labor and business costs in the South and overseas lured many companies away. Others simply shut down their New York operations. Downsizing became upstate's byword as most of the rest of the country boomed.

"Beginning in 1989, manufacturing literally collapsed; they were losing 25,000 jobs a year," says Stephen Kagann, Governor Pataki's chief economist.

Along with the jobs went the people. Syracuse lost 15,000 jobs between 1990 and 1995. Some 12,000 people also left in search of better economic climes. The scenario was repeated across the state, with a real-estate-market collapse added to the mix.

"There was ... an attitude that we couldn't compete with the rest of the country, so we didn't try," says Mr. Cordeau.

With the recession and slumping housing prices, the region hit its nadir.

Some would argue it had no place to go but up. And as unemployment rates around the rest of the US dropped, upstate's problems began to turn into assets.

While thousands of skilled and educated workers had left, many had stayed. Commercial real estate was plentiful and fairly inexpensive. And the housing market was a buyer's market - elegant Victorians could be picked up for a song.

Those were some of the factors that prompted the Deluxe Corp., which makes checks, to take a serious look at Syracuse in 1994. What it found prompted it to consolidate its Eastern US customer-service operations in a renovated department store downtown - bringing almost 400 new jobs.

"We looked at a variety of cities and kept coming back to Syracuse because the economic climate seemed on the cusp, just on the upswing," says Les Labriola, Deluxe sales manager. "There's a lot of intellectuals here with all the colleges as well."

That was at the beginning. And the growth since then has been slow, but steady. Cordeau says the goal is to bring more service-sector, high-tech, and government jobs to the area. Ideally, he'd like more companies like Deluxe, which has now decided to consolidate its mail operations here.

But there is still a lot of pessimism to overcome. When Cordeau started beating the drums of optimism, declaring the economic turnaround had begun in earnest last year, the local paper accused him of "indulging in denial."

Many big manufacturing companies upstate are still downsizing. Taxes are still high compared with many other parts of the country. And so are energy costs. But things are better than they were. And Cordeau's got every economic indicator pointing upward to back him up.

"Now we just have to hope a global financial meltdown doesn't put a pall over the whole national economy," he says.