Economic Trouble Signs Emerge for NYC as Office Vacancy Rate Keeps Rising
First-time jobless claims rise, even as employers are financing a special tax to pay down unemployment insurance fund debts piled up in the pandemic.
Here is your April economic recovery update from THE CITY. We publish a new analysis of the city’s employment, job and fiscal indicators each month.
Fed Rate Hikes Slow NYC Economy
Higher interest rates are beginning to take a toll on the New York economy: The city averaged monthly job gains of only 12,000 during the first three months of 2023, well below the monthly average of 19,000 last year.
The good news is that gains have brought the city to within 30,000 jobs of the 2019 pre-pandemic record, which means that even at the current pace, New York City will completely recover by the end of the second quarter all the 1 million jobs it lost in the pandemic shutdown.
Despite headlines of major layoffs on Wall Street and in tech companies, employment in both sectors continued to increase — although more slowly than last year. Another area of job strength in March, and for the last two years, has been home health care.
But restaurant jobs, which are still below the 2019 peak, were virtually unchanged.
Unemployment Insurance Claims Increase
The city’s unemployment remained unchanged in March at 5.4% compared with the previous month. Nationally, the jobless rate was 3.5%.
Yet in a worrisome sign, the number of first-time claims for unemployment insurance has been creeping up. For much of this year, jobless claims have been 10% higher than a year ago, according to an analysis by James Parrott, an economist at The New School.
Not surprisingly given their concentration in industries that are especially prone to changes in the economy, like retail, Black and Hispanic workers are being affected the most. Black workers accounted for 26% of claims earlier this year while comprising only 18% of the workforce. Hispanic workers represented 24% of claims, though they make up 19% of all NYC workers.
The fallout from rising claims will also affect businesses. New York state owes the federal government $8 billion, which it had to borrow to pay unemployment insurance claims during the pandemic recession, and unlike other states did not use federal aid to pay down the debt. The result is that the state had to impose higher unemployment insurance taxes on businesses to chip away at the debt. A rising number of claims will delay when the debt is paid off.
Office vacancy rate keeps rising
Office occupancy declined in early April as schools closed for spring break in the New York area — but the big news is the worsening of the office market in Manhattan.
Office vacancy in the first three months of 2023 rose 16.1%, according to the real estate firm JLL, which means some 76 million square feet of office space is empty. The amount of space leased totalled only 4.6 million square feet, which is the lowest amount since early in 2021.
The situation is not likely to improve anytime soon: Companies are wrestling with their space needs as they continue to sort out how many employees will be in the office each day. In addition, almost 14 million square feet of modern office space is under construction, which is expected to lure tenants from older buildings.