Comptroller Stringer: New York City Growth Moderates in the First Quarter of 2018
May 8, 2018
Economic growth slowed to 2.7% in the City in 1st quarter of 2018
Job growth uneven as private sector gained 13,000 jobs in medium- and low-wage industries, while high-wage jobs drop by 2,200
Unemployment rate at historic low
(New York, NY) — The pace of New York City’s economic growth slowed during the first three months of 2018, according to the Quarterly Economic Update released today by New York City Comptroller Scott M. Stringer. The analysis found that Gross City Product grew by 2.7% from January through March, less than the 3.4% growth in the previous quarter (Q4 2017), but still outpacing the national economy, which expanded by 2.3%.
The report highlighted several economic indicators showing a mixed economic performance, including a record low unemployment rate, declining commercial leasing activity, and sluggish private sector job growth favoring low- and medium-wage industries.
“While our economy has been strong, weakening economic growth is a reminder that it won’t continue forever,” said Comptroller Stringer. “Over the last few years our economy has gone from a sprint to a jog, and now, with signs of a cooling job market and slowing economic growth, we’ve come to a walk. And while unemployment is at an all-time low, the concentration of job growth in low-wage industries is concerning for those New Yorkers who are trying to get ahead in our economy. We need discipline today, to prepare for the possibility of tougher times ahead. We will continue to monitor the economy’s condition closely, but this quarter’s results highlight the need for prudence in the management of our finances.”
Overall, in the first three months of 2018, private-sector employers added 13,000 jobs. However the distribution of these jobs, entirely in low- and medium-income industries, is cause for concern, especially as high-wage industries, such as information services and financial activities lost 2,200 jobs in the first quarter.
Released every three months, the Comptroller’s Quarterly Economic Update tracks New York City’s economic health and analyzes the City’s economy in a national context. The report includes information on economic growth, unemployment, average wages, business activity, real estate transactions, and other economic indicators.
Findings in the First Quarter Update include:
City Economic Growth Slowed
- New York City’s economy started 2018 at a moderate pace, growing 2.7% in the first quarter, from 3.4% growth in previous quarter, Q4 2017.
- The City continued to outpace the national economy, which grew 2.3% in Q1 2018, less than the 2.9% growth in Q4 2017, as measured by the change in real GDP.
Private-Sector Hiring Cooled
- The analysis found that New York City added 13,300 jobs in Q1 2018, an annualized increase of 1.2% and the lowest rate of growth since Q4 2016.
- Of the 13,000 private-sector jobs created in the first quarter of this year, 10,900 were in low-wage industries and 4,200 were in medium-wage industries.
- Job gains were partially offset by a 2,200 job loss in high-wage industries including information and financial services.
- While job growth cooled, wages rose slightly, as Average Hourly Earnings (AHE) of all private sector employees in New York City rose 2.3% on a year-over-year basis to $35.84 in the first quarter of 2018.
Unemployment Rate Fell To Record Low as Labor Force Participation Rate Stayed Unchanged
- Despite the apparent weakness in employment growth, NYC’s unemployment rate, adjusted for seasonality, fell to 4.3 percent in Q1 2018, the lowest rate on record.
- The number of unemployed people in New York City declined by 6,700, from 187,100 in Q4 2017, to 180,400 in Q1 2018.
- The unemployment rate in the first quarter of 2018 fell in all five boroughs to the lowest first-quarter levels on record: 6.1% in the Bronx, 4.4% in Brooklyn, 4.3% in Staten Island, 3.9% in Manhattan, and 3.8% in Queens.
Personal Income Tax Revenues Register a One Time Boost from Tax Reform
- NYC Personal Income Tax (PIT) revenues rose 33.0 percent, or $1.1 billion, on a year-over-year basis to over $4.4 billion in Q1 2018, possibly the highest level on record.
- The main factor was an increase in both estimated tax payments and withholding, the two main components of PIT revenues. Estimated tax payments, which reflect trends in taxpayers’ non-wage income, including interest earned, rental income, and capital gains, more than doubled to about $1.4 billion in Q1 2018.
- The injection of one-time tax revenues is largely due to changes to the U.S. tax code at the end of 2017. Lower tax rates on pass-through business income incentivized the self-employed and others with business income to shift profits from last year to 2018. In part as a result of the changes to the tax code, Wall Street bonuses grew 17% from the previous year.
- The surge in tax collections is not expected to last, but rather to return to more normal levels going forward.
Venture Capital Investment Keeps Growing
- Total investment in the New York metro area rose 61.1% on a year-over-year basis from $1.6 billion in the first quarter of 2017, to $2.6 billion in the first quarter of 2018.
New Commercial Leasing Falls, As Does the Vacancy Rate
- New commercial leasing activity in Manhattan declined to 7.1 million square feet in the first quarter, 7.0% lower than in same quarter last year.
- Nonetheless, the Manhattan commercial vacancy rate fell to its lowest first quarter rate in ten years – 8.8% — due to a drop in total available space. Total available space in Manhattan fell by over 3.0 million square feet in Q1 2018 from a year ago.
Residential Sales Fall in Manhattan, Brooklyn, and Queens
- In the first quarter of 2018, Manhattan residential housing prices continued to soften as both average sales prices and average price per square foot fell for the third consecutive quarter.
- The number of home sales also fell in Brooklyn and Queens. However, while Brooklyn housing prices declined by 1.2% to $982,093, the average sales price in Queens rose 11.9% to $624,554.
MTA Transit Ridership Declined
- Average weekday ridership on MTA NYC Transit fell 4.3% in January and February of 2018 from a year ago, as average weekday bus ridership fell 7.0% and average weekday subway ridership fell 3.3%.
- During the same period, Long Island Rail Road ridership fell 2.8% and Metro North ridership fell 1.3%.
Leading Economic Indicators are Mixed, but Positive
- The current business condition index provided by ISM-New York, Inc. rose to 60.3% in the first quarter, above the 55.3% in the prior quarter. Readings greater than 50% indicate growth.
- Initial unemployment claims decreased 12.7%, on a year-over-year basis, the biggest decline since Q4 2014.
- However, total building permits in the City fell 18.5% to 5,170 in the first quarter from the same time a year ago.
To view the full report, click here.