WHEN Magna International, a car-parts manufacturer, announced a month ago that it was going to wind down operations in its Syracuse factory, its 1,400 employees were not surprised. “The writing was on the wall,” observed one worker. Salaries were already markedly lower; some have fallen from $30 an hour to $13 recently. Periodic lay-offs had become the norm. The latest blow is that floor workers will not get a promised $25,000 bonus. “We no longer have even that cushion,” says Michael Needham, a father of four who has worked at the factory since 1992.

Manufacturing, once the engine of upstate New York's economy, has been in retreat since the 1980s. Old industrial cities such as Buffalo, Rochester and Syracuse have been relentlessly hit by closures. Manufacturing growth in the mid-1990s bypassed the region. Eastman Kodak in Rochester recently laid off 1,300 workers. Syracuse China, maker of plates since 1871, will soon close its doors. Syracuse China will still be made—but not in Syracuse.

Although the economy of upstate New York has been in trouble for years, the housing crisis that has tortured most of America has generally skipped the region. The downturn so far “is not devastating upstate”, says James Parrott, chief economist of the Fiscal Policy Institute. Downstate, in fact—New York and the suburbs round it—is feeling it much more.

Wall Street's recent job cuts have had a disproportionate impact on New York City's economy. Finance accounted for 9% of private-sector jobs, but for over a third of the private-sector payroll. This affects city revenues; finance pays, on average, $13,928 in taxes per worker, whereas the manufacturing industry pays only $5,745 per worker. To close the hole in his budget, Michael Bloomberg, New York's billionaire mayor, has cut $2.5 billion from city spending since last year. But the city still faces a $4 billion gap—up from $1.3 billion in November. Mr Bloomberg has proposed cutting municipal jobs as well as raising $894m in new sales taxes, which would include taxing music downloads.

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Robert Lieber, the mayor's deputy in charge of economic development, insists that “New York is in a good position now.” But, he adds, “We don't know how long or how deep [the recession] is going to go.” With the 1970s fiscal crisis in mind, when the city teetered towards bankruptcy and 1m people left, Mr Bloomberg is striving to maintain the low crime rate and keep rubbish off the streets, while finding ways to replace or redeploy finance-sector jobs. City Hall has an 11-step plan to help entrepreneurs and venture capitalists.

Last autumn the governor of New York state, David Paterson, said, “Every time you hear Wall Street's having a bad day, just know that New York [state] is having a worse day.” There have been many bad days. Some 20% of the state's revenues come from Wall Street, and a whopping 30% of its fourth-quarter revenues usually come from Wall Street bonuses. Cash bonuses paid to Wall Street firms fell by 44% in 2008 to $18.4 billion, down from $32.9 billion paid in 2007. This reduction will cost the state $1 billion in personal income tax, according to Thomas DiNapoli, the state comptroller.

Though they took a while to grasp the severity of the crisis, legislators in Albany are now on board. This year's $1.6 billion deficit gap was hard to close, though it must be closed by law. Next year's $13.8 billion gap looks a lot more ominous. Mr Paterson shaved off $1 billion but, days later, the hole widened to $14.2 billion. The president's stimulus package, which provides some aid to states, will take a little of the pressure off, but more cuts will be needed. A so-called “millionaires' tax” may be considered. The stimulus package will help extend unemployment insurance: New York pays $405 a week, a lower proportion of the average pay-cheque than in any state except Alaska, though some workers make too little to qualify for it. Strangely, welfare rolls continue to fall, but 17% more people are receiving food stamps.

There is some good news. Jobs are available, especially in health care, where Syracuse is doing well. One problem, though, is bringing upstate New York's skills into line with the high-tech needs of businesses, according to Lenore Sealy of Syracuse's CNY Works, a federally funded agency that provides career counselling and training.

Her outfit, in a former fabric factory, has seen the numbers using its services double over the past year. Its computers are especially needed, as most jobs are posted online and must be applied for electronically. Greying men and women, who operated factory machines for decades, now sit anxiously at computers, looking for jobs.