Comptroller Stringer: NYC’s Economic Growth Slowed at the End of 2016
February 8, 2017
NYC’s Gross City Product grew 1.8%, down from 2.8% last quarter
Unemployment rate ticked up to 5.6 percent as more New Yorkers entered the labor force
Average hourly earnings in NYC grew slower than inflation in the Fourth Quarter, remaining effectively flat for the year
Potential cuts from the Trump White House add economic uncertainty
(New York, NY) – New York City’s economy showed signs of slowing growth in the Fourth Quarter of 2016, according to a Quarterly Economic Update released today by New York City Comptroller Scott M. Stringer. The analysis found that the City’s economy grew 1.8 percent during the fall and winter of 2016, down from 2.8 percent growth in the Third Quarter, and the second lowest rate since 2014.
The report highlighted several economic indicators that show a slowdown, including rising unemployment, lackluster wage growth, declining commercial leasing activity, and continued declines in venture capital investments. The Comptroller’s report comes as the City faces extraordinary uncertainty around funding cuts from Washington.
“Last August I reported the economy had gone from a sprint to a jog. Now, New York City’s economy has slowed to a walk. After years of steady growth, we’re beginning to see real signs of an economic slowdown. From flat wage growth, to an uptick in unemployment, to declining venture capital investments, there are causes for concern and we need to be prepared,” New York City Comptroller Scott M. Stringer said. “The economy’s still growing, but we have to make smart choices now so we are prepared in case tougher times arrive.”
The Fourth Quarter of 2016 saw 24,700 New Yorkers join the labor force, a positive indicator, although it helped drive the unemployment rate up to 5.6 percent.
Increases in average hourly earnings (AHE) slightly lagged inflation, with year-over-year rises of 1.5 percent and 1.6 percent respectively. That means that real wages and consumer buying power did not increase between the Fourth Quarters of 2015 and 2016. Between January and December of 2016, the City’s AHE grew less than 1 percent – the lowest annual growth since 2009.
Businesses in the City also reported indicators of a slowdown as 2016 came to a close. Venture capital investment in the New York metro area declined for the third consecutive quarter, falling 10.2 percent to about $2 billion. Total venture capital investment during 2016 fell for the first year since 2012 to $7.9 billion – 9.6 percent less than last year. In a positive sign, the City’s share of venture capital nationwide grew to 13.5 percent of the total.
In the Fourth Quarter, new commercial leasing activity in Manhattan fell 8.6 percent year-over-year to 5.8 million square feet (msf) – the fifth decline in the last six quarters. Overall, in 2016 total leasing activity fell 6.7 percent.
Released every quarter, the Comptroller’s Quarterly Economic Update examines a broad range of data that reflect current economic conditions in New York City. The report also highlights relevant national indicators. Though numbers can change significantly from quarter to quarter, they can be used to identify what could be potential long-term trends. Findings include:
New York City’s economy slowed at the end of 2016
- The City’s economy expanded 1.8 percent in the Fourth Quarter of 2016, below the 2.8 percent growth in the Third Quarter.
- For the entirety of 2016, the City economy expanded by 2.9 percent, slower than growth of 3.3 percent in 2015.
- The City continued to outpace the nation, with U.S. GDP rising at a 1.6 percent rate for 2016 as a whole. The City’s Fourth Quarter growth almost matched national growth of 1.9 percent during that period.
The City’s job market was weaker than 2015
- Preliminary data indicate that the City lost 14,500 private-sector jobs in the Fourth Quarter – the first quarterly decrease since the Third Quarter of 2009. The majority of these jobs were in medium-wage industries (8,500), followed by high-wage industries (4,100), and low-wage industries (1,900).
- For 2016 as a whole, however, the City added a fairly robust 89,500 jobs, but lower than 119,100 added in 2015. This represents an increase of 2.1 percent, compared to 1.7 percent in the nation. Most new private-sector jobs in 2016 were in low-wage sectors (41,000 or 48.5 percent) followed by mid-wage (30,000 or 35.2 percent) and high-wage (14,000 or 16.3 percent).
Real wages remained flat
- Private-sector average hourly earnings (AHE) in the City increased 1.5 percent, just below the 1.6 percent inflation rate in the metro area. For all of 2016, the City’s AHE grew only 0.7 percent, the lowest growth since 2009, and below national growth of 2.5 percent.
- City personal income tax (PIT) revenues rose 2.9 percent on a year-over-year basis to about $2.6 billion in the last quarter of 2016. While income taxes withheld from paychecks rose 4.6 percent to over $1.9 billion, estimated tax payments, which reflect trends in taxpayers’ non-wage income, including interest earned, rental income, and capital gains, fell 7.9 percent to $297 million.
- For the full year, City PIT revenues fell one percent as withholding grew 2.7 percent, but estimated tax payments declined 10 percent.
Unemployment rate rose
- The City’s unemployment rate rose to 5.6 percent in the Fourth Quarter, up from 5.5 percent in the last quarter and above the U.S. average of 4.7 percent.
- The number of unemployed New Yorkers rose by 8,400 in the Fourth Quarter, after increasing by 6,800 last quarter.
- The City’s labor force increased by 24,700, implying that some discouraged job seekers have begun searching for work again.
- In the Fourth Quarter, the unemployment rate fell to 4.4 percent in Queens, 5.2 percent in Brooklyn, and 7 percent in the Bronx. The rate remained unchanged at 5.1 percent in Staten Island and increased from 4.4 to 4.5 percent in Manhattan.
Venture capital investing and commercial leasing activity continued to contract
- Venture capital investment in the New York metro area fell for the third consecutive quarter, declining 10.2 percent, to about $2 billion, but the City’s share of venture capital nationwide grew to 16.8 percent of the total.
- For the full year, investment fell 9.6 percent to $7.9 billion, the first year of decline since 2012, and the City’s share of venture capital nationwide grew to 13.5 percent.
- For the fifth time in the last six quarters, commercial leasing activity in Manhattan contracted, falling 6 percent to 5.8 million square feet in the Fourth Quarter.
- In all of 2016, total Manhattan commercial leasing activity fell 6.7 percent.
Manhattan’s housing market slowed
- While the average home sales price in Manhattan increased for the seventh consecutive quarter, growing 7.7 percent to about $2.1 million, the number of sales fell 7 percent.
- Housing market conditions tightened in both Brooklyn and Queens, as the number of sales grew and average prices increased 17.3 percent to $947,553 and 9.8 percent to $573,455, respectively.