Report: Big Apple's Job Growth Predicted to Slow
A report by the Independent Budget Office says city's diversifying economy won't be enough to pick up a sagging Wall Street. The good news: office space bargains.
New York City is expected to continue on its path of growth, adding health care, education and tech jobs, while whittling down its 8.8% unemployment rate to 6.1 percent by 2016, according to a report released Thursday by the city's Independent Budget Office.
But the gains are likely to be slow compared to the first half of 2012. Next year, the city is expected to add 51,000 new jobs, compared to 77,500 it added through July this year.
And though the city faces a relatively minor $811 million budget gap in the fiscal year beginning July 1, the take-home message from the IBO is not all that rosy: "Don't let the gap estimates fool you into thinking things are great," warned IBO Director Ronnie Lowenstein.
With a year remaining in the Bloomberg era, the city lacks contracts with almost every major union, including the teacher's union and DC 37, the largest public employee union representing city workers. Projected budgets do not include wage and salary increases that a more labor-friendly administration may award workers.
"Those increases are a big part of city spending, and without them the city is giving a false message," Lowenstein said. "The unions are looking to the next administration to see what they can get. And the city no longer has money in reserve for retroactive wage and salary increases."
And while employment is expected to rise, wage gains are projected to be relatively flat—making projected tax revenue for the city lower than previously anticipated.
The IBO is expecting $43.4 billion generated from city taxes in the coming fiscal year, which starts July 1. That's a 4.7 percent increase over 2012 tax revenues. By comparison, the city's tax revenues grew by 10.8 percent on average between 2005 and 2007. The report attributes the slowdown to lower profits in the banking and securities industries.
Personal income growth is also expected to grow by 3.8 percent—dramatically lower than the 6.4 percent average growth in personal income New Yorkers have experienced over the past two years.
Wall Street remains the lifeblood of New York and its struggles of late have taken some of the zip out of the local economy.
"We're not expecting huge increases in tax revenue or personal income, and because of that, the economy is going to look somewhat different."
Other sectors, like education and health care are picking up some of the finance industry's slack. Those two sectors are projected to add 22,300 jobs in 2013. Other growth areas include professional and business services, which is expected to add 11,700 jobs next year; leisure and hospitality, which is projected to add 8,100 jobs.
The post-Sandy construction boomlet is projected to add 6,100 jobs in 2013.
Manhattan office rents are expected to rise, from $65.60 per square foot in 2012 to $75.70 in 2016, or about 1.6 percent per year, adjusted for inflation. That number is low compared with projections from the mayor's office.
"We don't have much strength there, because a lot of new jobs being created are not traditional office-using jobs," Lowenstein said. Mega developments at the World Trade Center site and Hudson Yards have flooded the market with office space.
The chief economist for Eastern Consolidated, Barbara Byrne Denham, said lower rents were a positive development.