Following months when economists kept tearing up their job-loss forecasts and revising them upward to keep pace with deteriorating economic news, the Independent Budget Office has gone in reverse.
On Wednesday, May 20, the public agency lowered its employment-loss estimate by more than 5 percent from where it stood in March, predicting the city will shed 254,500 jobs from a peak in the third quarter of 2008 through the middle of 2010.
A better-than-expected first quarter—when the city lost 25,600 jobs, including 7,800 in financial activities, and financial institutions posted surprisingly positive earnings—prompted IBO to revisit its prediction.
“We were expecting bigger losses in the financial sector than have occurred so far,” said IBO director Ronnie Lowenstein.
IBO’s revisions in financial activities were particularly steep.
The agency lowered its estimate for sector losses by 27 percent to 56,800. Losses in the all-important securities subsector are now pegged at 32,400, more than one-third lower than the figure forecast in March.
Economists have noticed the slowing pace of job decline, but they’ve had trouble explaining the good news.
“That’s the mystery,” said Marissa Di Nitale, senior economist at Moody’s Economy.com, who has revised downward by 20 percent her estimate of financial activities losses.
She says a buffer provided by federal stimulus dollars, banks taking a “wait and see” approach to layoffs, and fired workers who are still receiving severance payments (and therefore aren’t officially counted as unemployed) may be partly responsible for the good news.
Yet total losses will still be widespread.
Professional and business services, which derive much of their revenue from financial activities, will lose 67,100 jobs, or 11 percent of their employment, according to the new IBO projections. Some 28,000 construction jobs will likely disappear. And 27,500 retail jobs could go.
Three-quarters of the 254,500 jobs projected to be lost are expected to be shed by the end of September, IBO calculates. But the bottom line is the total employment decline will be greater than that of the 2001-2003 recession, when the city lost about 230,000 jobs.
Plus, even though data on the employment front is more positive, numbers on the government-budget side of the ledger remain disastrous. IBO estimates the city will face an enormous $5.6 billion budget gap in 2011—$1 billion more than Mayor Michael Bloomberg currently estimates. By 2011, the city will no longer have substantial federal stimulus dollars or an accumulated surplus to cushion the blow.
“The budget issues,” Lowenstein said, “remain daunting.”