Q2 2012 New York, New York Commercial Real Estate Economy

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Q2 2012 New York, New York Commercial Real Estate Economy

While much of the country is facing an employment growth slowdown, New York City is by one measure continuing to boom. According to Current Employment Survey (CES) data from the U.S. Bureau of Labor Statistics (BLS), total non-farm payroll employment—the number of wage and salary workers working in New York City—increased another 71,400 (1.9%) from May 2011 to May 2012. Private sector employment increased by 74,600 (2.3%) during the period, and the number of private sector jobs seems to be heading for an all time-high in 2012, surpassing the record set in 1969.

In the 1970s and 1980s the city had lost hundreds of thousands of industrial sector jobs, more than offsetting growth in office-based sectors, but the city’s industrial sector—though still shrinking—is not too small to affect overall employment. The Manufacturing sector, for example, once employed one million in the city, but it is down to just 74,300 as of May 2012. Thus a year-over-year loss of 1.1% caused a decrease of just 800 jobs. Once tens of thousands worked on the docks, but a 2.1% decrease in Transportation and Warehousing employment in the year to May, meant just 2,200 jobs were lost.

The office-based sectors, meanwhile, are booming. The Financial Activities sector added 7,700 jobs (1.8%) year-over-year in May, but the big gains were in the Professional and Business Services sector which added 33,400 (5.6%). Within that sector, growth was strong in the high level Professional, Scientific and Technical Services component which added 22,400 jobs (6.8%), and in the Employment Services industry. In that industry, which includes temporary workers and often foreshadows trends in permanent employment, the number of jobs increased by 16.1% (10,400). The Information sector added 3,100 jobs (1.8%) despite job losses in some of its old technology components, with Publishing (except internet) down by 1,100 (2.4%) and Radio and Television Broadcasting down by 1,300 (7.0%).

Tourism is also booming, with employment in the Leisure and Hospitality sector up by 19,600 jobs (5.7%) in the year to May according to CES data. The strongest percentage gains within that sector were not in the low-wage food service sector, but in entertainment. The number employed in the Performing Arts, Spectator Sports and Related industry increased by an incredible 23.0% (7,600) year-over-year in May. With the population on pace to rise by 56,400 (0.6%) this year according to Moody’sEconomy.com, the local consumer-driven economy is also growing. Retail Trade sector employment is up by 13,800 jobs (4.5%) year-over-year. The biggest weakness is in government spending driven jobs, and the biggest hit is in Construction and related sectors with a year-over-year job loss of 5,500 (4.9%). Government projects had dominated construction activity since the housing bubble burst, but are not winding down as fiscal pressures intensify.

Despite all the good news, attention was focused on the economic weakness of household-based data from the BLS on the employment status of New York City residents. Employment by this measure actually decreased by 15,000 (0.4%) in the year to May, and with the labor force growing by twice that much, the unemployment rate rose. By June it was over 10.0%, according to press reports. “The ongoing disconnect between job gains and rising unemployment has confounded economists,” according to Crain’s New York Business. A New York State Department of Labor economist “said the leading explanation is that the city is adding jobs in sectors dominated by commuters (from the suburbs) or newcomers (moving in). Neither would be included in the household survey that determines the unemployment rate (for city residents.” Moreover, the household survey includes the self employed, while the CES does not. Perhaps the CES-measured job gains in the Employment Services and Performing Arts, Spectator Sports and Related industries actually represent workers who were previously self-employed freelances but are now employees.