The city’s already slower-than-expected economic recovery from the pandemic downturn has stalled and threatens a see-saw double-dip recession, at least for the early months of the year.
New York City lost 7,500 jobs in December, state labor data released Thursday shows, primarily because of the shutdown of indoor dining. It marked the first decline in jobs since a low in April.
Meanwhile, a special tax credit for restaurants proposed by Gov. Andrew Cuomo this week drew weak praise from the city’s devastated sector. The de Blasio administration deflected a plea for property tax relief for equally slammed hotels. And Cuomo failed to follow states like California and Maryland in proposing direct aid to the hardest hit families.
Only a revision of the earned income tax credit approved in the December federal aid bill offers substantial help for New Yorkers without work as COVID-19 cases grow and the vaccination rollout threatens to slow.
“Today’s data clearly show we’re now in the midst of the second-wave economic slowdown,” said James Parrott, an economist at The New School who tracks the local economy closely. “We saw the first seasonally adjusted job decline since April, more of those working are only getting part-time hours and most of those unemployed have been jobless for more than six to eight months.
City Hall insists the solution has to come from the federal government.
“It’s tragic, but not surprising, that local businesses are feeling the impacts of Washington’s inaction,” said Mitch Schwartz, a de Blasio spokesperson. “We know President [Joe] Biden understands the impact COVID-19 has had on our economy. We know he’s committed to offering businesses real relief in the weeks to come, and we know he’ll tackle the root cause of this crisis by helping New York City fight back this virus.”
Only ‘Modest Relief’
The city’s unemployment rate declined slightly to 11.4% from 12.1% in November, but remains far higher than the national jobless rate of 6.7%, state Department of Labor figures show. The New York figure would be even bigger if 240,000 people had not dropped out of the workforce by not looking for jobs.
The pandemic recession cost New York 570,000 jobs in 2020, more than the city lost in the three most recent downturns.
The plunge in tourism and restrictions on restaurants have eliminated half of the 460,000 leisure and hospitality jobs that existed a year ago.
Also worrisome is the 88,000-job decline in professional and business services, primarily in relatively low-paying administrative support positions. Retail lost a similar number, followed by the combined education and health category, with the biggest hits taken by higher education.
Recognizing the plight of restaurants, Cuomo this week proposed a tax credit of $5,000 per employee, up to a maximum of $50,000, for anyone hired by the end of 2021.
But eateries would have to prove a loss of at least 40% of revenue to qualify. And the credit would be enacted only if the federal government provided substantial aid on the order of the $15 billion the governor demanded.
“We of course welcome any support, but the restaurant tax credit proposal only provides modest relief to a very limited number of restaurants,” said Andrew Rigie, executive director of the New York Hospitality Alliance.
He called on Cuomo to push Biden to approve the federal Restaurants Act, which would spread $120 billion in aid nationwide. The Cuomo tax credit would provide $50 million.
The governor also proposed a similar amount for small businesses generally, and $25 million for the city’s musical and theater producers.
The Hotel Association of New York City this week launched a radio, TV and digital ad campaign pleading for help that centers on waiving interest on unpaid property taxes.
“The hotel industry has been utterly devastated by the pandemic,” said Vijay Dandapani, the association’s CEO. “Hotels need critical, immediate help from City Hall to stay open and to protect the livelihoods of tens-of-thousands of New Yorkers and their families.”
When asked about the request, City Hall reiterated the need for federal aid.
‘Expedite the Vaccination Rollout’
Elsewhere in the country, governors are proposing direct aid to families in the most need. No such proposal was included in the budget Cuomo unveiled this week.
Democratic Gov. Gavin Newsom’s budget in California would give $600 to anyone who receives the earned income tax credit, which targets low- to moderate-income workers and families.
Maryland Republican Gov. Larry Hogan wants to provide more money to people getting the credit: $450 for individuals and $750 for families, followed by a second round of payments of up to $150 for individuals and $250 for families.
New Mexico, Colorado and the District of Columbia have already provided similar aid using the federal CARES Act money from the spring.
When asked if the Cuomo administration was considering a similar step, a spokesperson responded with a list of moves the governor has made to help residents.
At least claiming the earned income tax credit will be easier for New Yorkers who lost their jobs or saw their income cut substantially during 2020, thanks to a little-noticed provision of the aid bill passed in Washington last month.
The credit is based on the amount of money earned in wages, meaning many New Yorkers would have no longer have been eligible or received reduced payments if they were not working or received unemployment benefits.
Now taxpayers can use either 2019 or 2020 income in figuring the credit. The bump from the federal government can reach $6,728 for a family with three or more children, with the state and city increasing that amount by 35% to $8,852, according to city Comptroller Scott Stringer.
That represents “a significant amount of supplemental income for low-income families,” said Stringer, who is running for mayor.
The 950,000 New York families qualifying for the earned income tax credit collected $2.8 billion in 2018, the last year for which figures are available, with an average gain of $3,000. However, no one knows how many people will fit the parameters of those who will be helped by the change.
In any case, the outlook for the economy is clearly worse than just a few months ago.
“All hands are needed on deck to get the virus under control and expedite the vaccination rollout,” Parrot said. “The economy won’t get better until that happens, and even then, there will be no snap back to where we were before.”