Here is your June economic recovery update from THE CITY. We publish a new analysis of the city’s employment, job and fiscal indicators each month.
Office Occupancy Breaks Through a Key Barrier
Office occupancy in the New York area exceeded 50% for the week beginning June 1. The increase in New York mirrored gains in the rest of the country.
The jump, which was about three percentage points in most large cities, came after data which included Memorial Day saw a predictable decline in office occupancy due to the holiday. It isn’t clear whether this is a one-week blip of the start of a new trend in which employers are requiring more days in the office. Some financial services companies, such as J.P. Morgan Chase, have imposed more in-person requirements, especially for high-ranking executives.
New York City broke through the 50% figure in January, according to a separate survey of large employers from the Partnership for New York City, although that data has not been updated recently.
No Doom Loop for NYC, Insists Comptroller
It’s called the Doom Loop scenario. Attributed to Columbia University business school professor Stijn Van Nieuwerburgh, the theory says that remote work will lead to a drastic decline in the value of office properties — estimated down by 40% from pre-pandemic levels — which means property tax revenues will plunge. Cities like New York, the hypothesis goes, will then see a repeat of the fiscal crisis of the 1970s when the city had to slash services, causing more people to flee, which means lower tax revenues and more service cuts.
Not so fast, said city Comptroller Brad Lander in a report issued earlier this week. In fact, the overall value of office buildings in the city has increased in the last year. How do we know? Because buildings’ income, which is the basis for tax valuations, rebounded from the 2020 pandemic shutdown, and currently stands at 97% of pre-pandemic levels. The Adams administration’s official forecast does project a modest decline in office values in coming years on the order of 14%, said Budget Director Jacques Jiha at a recent Citizens Budget Commission breakfast.
Lander noted that even a 40% decline in the value of office buildings — the most pessimistic prediction — will result in a loss of no more than $1.1 billion in property tax revenues, and that won’t occur before 2027. While $1.1 billion seems like a lot, he said, it represents only 3% of property tax collections, 1.4% of all city tax revenues, and 1% of the overall budget, which includes grants from the federal government and state.
And there is some good news from Hudson Yards, which doesn’t pay property taxes but makes payments to the city based on its revenues from the rents it collects from office buildings. The payments are first used to pay for the bonds issued to build the 7 line subway extension to Hudson Yards, but then can be put into the city’s general fund.
Payments from the West Side complex are running about $200 million above projections, the comptroller noted. That is because modern so-called Class A office space like that at Hudson Yards is the one strong sector of commercial real estate.
Jobs Rebound; Unemployment Remains Higher Than U.S. Overall
New York City added jobs in May, reversing a decline for the previous month and leaving the city just shy of its 2019 pre-pandemic employment record.
Data from the state Labor Department showed the city gained 14,300 jobs in May with gains primarily in the same sectors that lost jobs in April: trade, warehousing and healthcare. This suggests the previous decline was primarily the result of temporary factors or a sampling error, according to the monthly economic report from Lander.
In addition, the city showed an unexpected increase of almost 3,000 jobs in the motion picture and sound recording industries despite a writers’ strike that has crippled production. It may take another month or two for the job losses to show up in the data.
The city now stands 30,000 jobs short of its February 2020 employment record.
While Mayor Eric Adams repeatedly has said this means the city is at 99% of the previous high, the nation as a whole has seen a more than 3% increase from its pre-pandemic jobs record.
Meanwhile, the Center for an Urban Future (CUF) published a report showing that New York City’s retail sector remains 11.1% below its February 2020 level, while the nation as a whole has surpassed its pre-pandemic level by 0.7%. The issue is crucial, said CUF Executive Director Jonathan Bowles, because retail jobs remains the most accessible work for people of color. It is also a major reason for the city’s sky-high Black unemployment rate.
Overall, the city’s unemployment rate ticked down to 5.3% in May from 5.4% the previous month.
The local jobless rate has remained stuck at that level since last October, while the national rate has been consistently lower, with the May figure at 3.7%.