We receive this release from NYC Comptroller Bill Thompson's office:
COMPTROLLER THOMPSON RELEASES ECONOMIC NOTES
-Fourth Quarter of 2008 wreaked havoc on the city's economy -
-Analysis of household income and residential trends shows NYC may be in better position to handle recession than in previous times-
According to Economic Notes, a quarterly report released today by New York City Comptroller William C. Thompson, Jr., the city's economy has suffered three successive quarters of decline, with the fourth quarter of 2008 being one of the worst economic periods for New York City in recent memory. The report also includes an analysis of household incomes and residential trends from 1990 to 2007, which indicates that New York City may be better positioned to handle this recession than it was in 1990.
To view Economic Notes visit www.comptroller.nyc.gov
"The last quarter of 2008 landed a crippling blow to the New York City economy," said Comptroller Thompson. "Our city experienced tens of thousands of jobs lost, declining revenue, rising unemployment, and a holiday season that was less than lackluster for city businesses. Unfortunately, I see the pain continuing through much of 2009."
According to Thompson's report, Real Gross City Product (GCP) fell at an estimated 5.5 percent annual rate in the fourth quarter of 2008 after a decline of 2.7 percent in the previous quarter. Real GCP increased only 0.2 percent in 2008, the smallest annual gain since 2003. Comptroller Thompson estimates the decline will continue during the first half of 2009.
Note: The Comptroller estimates that current dollar GCP totaled $578 billion in 2008.
New York City lost 65,000 payroll jobs during the last three months of the year with a broad range of employment sectors cutting workers. The construction, manufacturing, wholesale and retail trade, information, arts and entertainment, finance, and insurance sectors all experienced losses in the fourth quarter. Due to some job growth earlier in the year, the city lost a total of 53,600 jobs from December 2007 to December 2008.
In addition, New York City experienced its highest unemployment rate since the third quarter of 2004. The rate rose to 6.5 percent, up from 5.5 percent in the previous quarter. "
All indicators point to the fact that it was a terrible holiday season for New York City's businesses," said Comptroller Thompson. "Due to this lack of consumer spending, we found many businesses didn't do their usual seasonal hiring, adding to our job loss numbers."
The Comptroller's report found that city sales tax collections dropped 5.1 percent in 4Q08, after rising 6 percent the previous quarter. December sales collections were down more than 12 percent as compared to 2007, illustrating the poor holiday season experienced by city businesses.
Some other findings of Thompson's report include:
*The Manhattan office vacancy rate rose to 8.0 percent in 4Q08, the highest in two years. For the first time since 2001, the Midtown vacancy rate surpasses that of Downtown, according to Cushman and Wakefield. Of the more than 9.4 million square feet placed on the market in 2008, over 5.8 million feet were located in Midtown. \
*The average market value of one-family households in NYC fell 6.8 percent in 2008. According to the Finance Department's Tentative Assessment Roll for fiscal year 2010, Manhattan had the steepest decline in one-family home prices, falling 9.9 percent. Queens followed with a decline of 9.1 percent. Prudential Douglas Elliman reports that Manhattan apartment sales were down 9.4 percent in 4Q08 as compared with 4Q07.
*Average weekday ridership on NYC subways rose just 0.9 percent in October - November, after a 5.1 percent increase in 3Q08. Average weekday ridership on the Long Island Railroad in October-November was up 0.7 percent from the same months in 2007, while Metro North weekday ridership rose 1.9 percent from a year earlier.
In addition, Thompson's report includes an analysis of the residential location of metropolitan area families in 2007 and 1990. The analysis, titled "Trends in City and Suburban Residential Location," analyzes how the city's income distribution has changed since 1990, when the city also experienced a severe recession.
The report indicates that single-person households, higher-income households, and higher income households with children revealed a greater preference for city living in 2007 than they did in 1990. Those trends indicate that the city may be better able to withstand the current recession than it did previous downturns. However, the analysis also shows that middle-income households are falling as a percentage of all city households, and that families with children, other than those in the highest income group increasingly favor suburban residence.
"Our findings indicate that upper-middle and high-income households have increasingly chosen to reside in the city, rather than commute, suggesting that our city may be more resilient to this economic downturn than in 1990 when companies and families were fleeing New York," Thompson said. "However, the gradual decline we discovered in the middle-income households residing in the city raises the prospect of a more economically polarized city."
Thompson also noted that the reversal of the trend toward greater economic disparity between the city and its suburbs, which had occurred over many decades to the detriment of the city's social and fiscal stability, is significant. "Structural trends don't turn around very often, and when they do, it usually signals a profound change in the economic environment," Thompson said.
Some changes in household income distribution from 1990 and 2007 include:
*Upper-middle and high-income households (over $120,000 annual income) grew from 12.2% of NYC households in 1990 to 15.7% in 2007.
*Middle-income households ($40,001 to $120,000) in NYC grew in numbers but fell as a proportion of all city households.
*About 30% of NYC high-income households have at least one earner working in the financial sector.
*The trend back to city living did not extend to households with children under 18 years old. In every income group but the highest (over $200,000) families with children were more likely to commute to city jobs in 2007 than in 1990.
*Both the city and its suburbs experienced growth in the number of households falling into the lower income band.
The analysis found a notable change in the makeup of the lower income households with respect to the number of foreign-born residents. In the city, the share of lower income households with a foreign-born head rose from 34% in 1990 to 47% percent in 2007. Increasingly, in both the city and its suburbs, the lower income population is comprised of immigrant working households.
The report indicated that since 1990, New York City has made inroads in retaining and "recapturing" upper-middle income and high-income households, who in earlier decades had moved to the suburbs en masse.
"Previous recessions had a devastating impact on the city's economy because the stresses exacerbated the trend of businesses and households leaving the city," Thompson said. "The current recession strikes at a time when the tide has been turning in the city's favor. This may help to mitigate the short-term damage and offers hope that in the long-term, the city will be able to regain its economic vitality more quickly."
The study documents a gradual shift of upper middle-income and high earning households back to the city, but more research is necessary to determine why exactly this trend has occurred. Some possible reasons for the shift provided by the Comptroller include an improvement in city services and the overall environment since 1990, a more competitive tax structure and a renewed appreciation for the advantages of the urban lifestyle.
"One question we will be looking at is whether the financial crisis will undo the improvement that has occurred in the city income structure since 1990. As today's report indicates, higher unemployment and lower earnings will take a toll on households throughout the city in the near-term. Public policy has to make sure that is only a temporary setback, and that the city is positioned to resume its growth once the storm passes. We will continue to monitor the situation closely," Thompson said.
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