Office Occupancy in NYC Hits a Pandemic-Era Peak, Modest Job Growth Leaves City Lagging Behind Nation
Income tax collections were up in the state, but not in New York City. We explain why.
Here is your October economic recovery update from THE CITY. We publish a new analysis of the city’s employment, job and fiscal indicators each month.
A confusing tale on income taxes
The state earlier this month reported that income tax collections for the period from April 1 to June 30 — the first six months of its fiscal year — were $2.4 billion more than it projected.
At the same time, the city this week said that for the first three months of its fiscal year, the period from July 1 to Sept 30, income tax collections were about what it expected — but estimated income tax payments declined by 30% from the prior year. Estimated tax payments come primarily from capital gains made by selling stocks and other assets; the drop could spell trouble ahead amid stock market turbulence and layoffs on Wall Street.
But why has the state wound up with a budget cushion while the city’s position is less robust?
One answer is timing. Since the state’s fiscal year begins April 1, income tax collections were strongest in the first three months before the stock market tanked. The state comptroller’s office says it too has seen weakness in estimated payments in recent months.
Another reason has to do with the strict $10,000 limit on federal tax deductions for state and local taxes. The state has allowed high-income individuals, especially those who work for partnerships, to pay a special tax through their business that is deductible from federal taxes and returned as a credit on state income taxes. That process means the state doesn’t yet know how many billions of dollars are being paid in business taxes, rather than income taxes.
The city hasn’t yet implemented a change which allows high-income earners to pay business rather than income taxes.
Tracking estimated tax payments will be a good way to monitor the effect on city and state budgets of the market downturn and Wall Street’s slump. At the moment though, the signals are confusing.
Job growth continues at modest pace
The city added 21,300 jobs in September, about the same as the 2022 monthly average. This leaves New York City 141,000 jobs shy of its pre-pandemic record: 4.72 million.
The steady increase in jobs also means the city has now regained 86% of the 972,000 jobs lost in the early days of the pandemic. The nation has recovered more quickly, regaining the total number of jobs lost and adding another 500,000.
The unemployment rate in September fell by one percentage point, dropping from 6.6 percent to 5.6 percent as the labor force shrank. This reversed an increase in the labor force and the unemployment rate in August and is caused by problems with the way the Labor Department is adjusting for seasonal issues.
Office occupancy highest in the pandemic era
Average office occupancy in New York City jumped to almost 48% last week — the highest it’s been in the city’s pandemic era — despite the Columbus Day/Indigenous Peoples’ Day city holiday on Oct. 10.
The rise in office occupancy followed some companies ending or scaling back hybrid work options after Labor Day, noted a recent economic update from Comptroller Brad Lander. The report also pointed to schools reopening as a reason parents might be returning to the office.
Occupancy data from Kastle Systems, a security company that tracks keycard swipes in large office buildings, for the week ending Oct. 19 will provide the best snapshot of office occupancy since it will cover a week without a holiday.