New York by the Numbers
Monthly Economic and Fiscal Outlook

A Message from the Comptroller

Dear New Yorkers,

When Mayor Adams released his Executive Budget last Tuesday, the Office of Management and Budget revised revenue projections for the current fiscal year upward by $1.6 billion (as our office had projected) based on increased collections year-to-date. Then the end of the month brought the news that personal income tax collections in April exceeded projections by an additional $2 billion.

That provides the Mayor and the City Council with an opportunity to invest strategically in an inclusive recovery that will bring our economy back to life and support struggling New Yorkers – while also making the city more resilient for future crises, with larger investments in long-term fiscal reserves and infrastructure.

Our spotlight this month takes a close look at New York metro area inflation compared to the nation. While inflation is at its highest locally since February 1991, it is more than 2% lower than the national average. Part of that is due to lower-than-national-average transportation spending (amidst rising fuel prices), no surprise given the prevalence of our public transit here.

More surprising is that “shelter CPI,” which reflects the cost of housing, is growing more slowly than elsewhere, even though rents here are rising rapidly. Why? It may be that rent stabilization acts to hold down inflation. Of course, even if its lower than in other U.S. cities, inflation is still eating into the pockets of working New Yorkers.

We’ll keep watching the numbers.

The U.S. Economy

• The nation’s real gross domestic product (RGDP) dropped by an annualized rate of 1.4% in the first quarter of 2022[1]. This unexpected decline came on the heels of a 6.9% increase in the last quarter of 2021.
  • Personal consumption expenditures (PCE) grew 2.7% last quarter, slightly higher than the 2.5% growth experience in the previous one, undeterred so far by inflation.
  • Investment grew 2.3%, a much slower growth than the 36.7% seen in the last quarter of 2021, while government consumption expenditures and gross investment dropped 2.7%.
  • Exports dropped 5.9%, after growing 22.4% in the final quarter last year, while imports, which deduct from economic growth, continued to grow, at 17.7%.
• The nation’s Consumer Price Index (CPI) rose by 8.5% for the 12-month period ending March 2022 (up from a 7.9% annual rate of inflation from the prior month). CPI for the NY-NJ-PA metro area rose 6.1% for the year ending in March – far higher than recent years, but more than 2% less than the national average. This month’s spotlight explores this difference between the NY metro area rate and the national rate.

NYC Labor Markets

• The private sector gained 35,000 new jobs in New York City in March 2022 (Table 1). This is an improvement from the 29,000 jobs gained in February and the loss of 6,000 jobs in January.
  • The City’s total employment, seasonally adjusted, grew 8.9% on an annualized basis in March 2022, higher than the national rate of 3.5%.
• Except for Information (-1,000), all industries showed some gains with the largest gains occurring in Health Care and Social Assistance (+8,600), Professional and Business Services (+7,500), Accommodation and Food Services (+7.500) and Educational Services (+5,000).
• As of March, the private sector has recovered 688,000 jobs or 75.7% of the losses suffered in March and April 2020.

Table 1: Seasonally Adjusted NYC Private Employment, by Industry (‘000s)

SOURCE: NYS DOL, and NYC Office of the Comptroller.

• The New York City unemployment rate declined to 6.1% in March from 6.6% in February, but it remains far above the nation’s (3.6% in March 2022).
• Unemployment rates continue to vary highly by race/ethnicity. The unemployment rate for Black New Yorkers declined to 10% in March, while the unemployment rate for Hispanic New Yorkers declined to 6.6%, compared to 4.8% for both white and Asian New Yorkers (Chart 1).
• Compared to pre-pandemic, the unemployment rate was 0.8 percentage points higher for Hispanic residents, 2.3 percentage points higher for Asian New Yorkers, 2.9 percentage points higher for non-Hispanic White New Yorkers, and 4.4 percentage points higher for Black New Yorkers.

Chart 1

SOURCE: Current Population Survey, unemployment rates are not seasonally adjusted, unemployment rates by race/ethnicity calculated as 3-month averages

• All boroughs are experiencing a steady decline in unemployment, and all are at their lowest unemployment rates since March 2020. (Chart 2)
• The Bronx unemployment rate remains well above the other boroughs. The gap between the Bronx’s unemployment rate and the citywide average narrowed slightly but remains wider than before the pandemic.

Chart 2

SOURCE: NYS Department of Labor

NYC Real Estate Markets

• Data from Douglas Elliman show that vacancy rates in higher-end brokered Manhattan apartments have remained below 2 percent since December. March 2022’s vacancy rate of 1.89 percent is a stark contrast from the 11.25 percent vacancy rate in March 2021.
• The volume of new leases is up by approximately 1,400 in March while listing inventory has dropped slightly. The average asking rent of $75.05 per square foot in March represents a 7.8 percent decrease from the prior month, but remains higher than any other month since the pandemic began (Table 2).

Table 2: Douglas Elliman Rental Matrix, Trends in High-End Residential Apartment Rentals

SOURCE: Elliman Report, March 2022, Manhattan, Brooklyn and Queens Rentals.

*NOTE:  2021 data reflect expanded collection of listing data

• March data from Streeteasy.com show a continued ascension of median citywide rents as depicted by the black line in Chart 3. March’s median citywide rent of $3,000 was 20 percent higher than median rents in March 2021 and surpassed its pre-pandemic peak to hit its highest level ever.
• Citywide inventory increased by 10% to 2,900 additional apartments available for rent in March, compared to February, bringing the number of available apartments to more than 27,000 units. But that remains about half of what it was just one year prior, and near historic lows.

Chart 3

SOURCE: Streeteasy.com

• The first quarter of 2022 was another strong one for New York City real estate sales, with total sales of $24.3 billion, up from $15 billion in the first quarter of 2021 (Chart 4).
• Residential sales totaled more than $15 billion, the highest first quarter going back to 2016. Commercial sales showed another strong quarter at $9 billion after a record-breaking quarter at the end of 2021 when commercial sales reached a total of $17 billion.

Chart 4

SOURCE: Comptroller’s Analysis of Department of Finance Data

• There were 1,204 residential building permits filed citywide in February 2022, which trails the average 1,544 permits that were filed in the last 12 months (March 2021 – February 2022).
• In a comparable 12-month period prior to the pandemic from March 2019 and February 2020, an average of 2,234 residential permits were filed.
• The current 12-month mean represents a decrease of 31 percent in residential permitting activity vs. the pre-pandemic average. (Chart 5)

Chart 5

SOURCE: U.S. Department of Housing and Urban Development SOCDS Building Permits Database

• Commercial office space availability remains near record-highs as leasing activity has slowed in 2022 when compared to the second half of 2021. This may be an indication that available square footage is plateauing, at least temporarily, at a higher level as companies have shifted to more remote/hybrid operations for a longer term (Chart 6).

Chart 6

SOURCE: CoStar

• The availability rate for retail space declined in 10 of 11 Manhattan submarkets during the first quarter of 2022, compared to the same quarter one year ago (Table 3). Times Square had the largest decline, with retail availability falling from 31.4% in the first quarter of 2021 to 17.6% in early 2022.
• However, compared to the first quarter of 2020, availability rates were elevated in seven of the 11 submarkets. The largest increase has been in Herald Square/34^th Street, which saw its first quarter retail availability rate rise from 25.0% in 2020 to 39.0% in 2022.

Table 3: Manhattan Retail Availability Rate

SOURCE: Cushman & Wakefield.

NYC Return to Office

• The latest security card data from Kastle Systems show New York City area office occupancy stayed flat (other than a dip for the Spring holidays) compared to March at the rate of 37.4% for the week ending April 27^th (Chart 7).
• Office occupancy in New York City remains above San Francisco and San Jose (with a small margin) but significantly below Houston, Dallas and Austin (where office occupancy has climbed above 50%).

Chart 7

SOURCE: Kastle Systems, weekdays excluding Federal holidays through April 27^th, 2022.

• The latest Google mobility data show time spent at New York City workplaces continued to be 25% below pre-pandemic levels through the first two weeks of April but declined to 36% as of April 22^nd due to school holidays (Chart 8).

Chart 8

SOURCE: GPS mobility data indexed to 1/3/2020 to 2/6/2020, from Google COVID-19 Community Mobility Reports.

• March data from the Current Population Survey show the share of New Yorkers working from home due to COVID continued to decline and reached the lowest point since the start of pandemic at 19.4% (Chart 9).

Chart 9

SOURCE: Current Population Survey, COVID Supplement

• After recovering from a drop in January amidst the Omicron surge, weekday MTA subway and bus ridership remained flat during the month of April, with weekday ridership averaging 56% of 2019 levels on the subways, and 63% on MTA buses (Chart 10).
• Vehicle crossings over MTA bridges and tunnels remain steady near pre-pandemic volumes.
• Both of the MTA’s commuter rail systems rose slightly to new pandemic-era highs during April, as average weekday ridership improved to 56% of pre-pandemic levels on the Long Island Rail Road (LIRR) and 55% on Metro-North Railroad (MNR).

Chart 10

SOURCE: Metropolitan Transportation Authority, Day-by-Day Ridership Numbers.

NOTE: Excludes federal holidays.

• The spring season began with continued growth in biking across the city. More than 428,000 bikers crossed the City’s four East River bridges during the month of March, 49% higher than the roughly 288,000 crossings in March 2019 and 6% higher than volume in March 2021 (Chart 11).

Chart 11

SOURCE: New York City Department of Transportation, Bicycle Counts.

Note: Includes the Brooklyn Bridge, the Ed Koch Queensboro Bridge, the Manhattan Bridge, and the Williamsburg Bridge.

NYC Business and Tourism

• Broadway shows grossed $34 million in revenue for the week ending April 24^th, reaching 90% of gross revenue during the same week in 2019 (Chart 12). Attendance totaled 267,796, down 15% from 316,868 in 2019.

Chart 12

SOURCE: The Broadway League

• Following a sharp dip in hotel demand brought on by the Omicron wave at the turn of the year, revenue per available room in April rose to $213, a near rebound to December’s $214 revenue per available room amount. Total room demand in March also rallied, reaching 2.59 million rooms but still shy of the December high mark of 2.68 million rooms, and far below pre-pandemic highs of over 3.5 million. (Chart 13)

Chart 13

SOURCE: STR via CoStar

• Data from OpenTable show New York City restaurant reservations for the week ending April 28^th are down 39% from pre-pandemic levels but have recovered substantially from early January when they were down as much as 81% (Chart 14).
• Excluding restaurants that have closed, seated diners at restaurants open for reservations continue to grow and reached 88% of pre-pandemic levels in April 2022, compared to April 2019 (not shown).

Chart 14

SOURCE: OpenTable.com

Note: OpenTable is one of many companies that offer restaurant reservation software, including Resy and Yelp. Trends in OpenTable reservation data may also be impacted by changing market share across software platforms, and diners’ propensity to book reservations.

• More travelers returned to airports in March, as nationwide passenger volumes reached 88% of pre-pandemic levels, a new pandemic-era record (Chart 15). Volume at New York City-area airports also improved to 83% of pre-COVID levels from March 2019.
• Lower air travel volume in the New York City area is the result of a slower recovery in international travel. During February, domestic passenger volume was down 13% at local airports, while international volume was down 41%, as compared to February 2019.

Chart 15

SOURCE: U.S. Transportation Security Administration and the Port Authority of New York and New Jersey.

• Daily visitors to Times Square in March 2022 averaged 259,574, more than double the number from one year ago, the highest level since the pandemic began, but still more than 25% below the pre-pandemic high of 400,000 (Chart 16).

Chart 16

SOURCE: Times Square Alliance.

City Finances

Executive Budget: City Revisions to FY 2022 Overall Tax Forecast

• The NYC Office of Management and Budget revised its FY 2022 forecast for tax revenues significantly upward, by $1.6 billion, in the Executive Budget released last week.
• The revision essentially reflected unanticipated strength in collection patterns seen through March, which showed revenues exceeding OMB’s previous Plan forecast by almost $1.6 billion.
• However, these revisions did not incorporate additional revenues from recent April personal income tax collections, which exceeded the prior Plan estimates by an additional $2 billion, as detailed below.

Additional Personal Income Tax Revenue:  April Collections (Table 4)

• The April data indicates that FY 2022 will likely be another record for NYC personal income taxes. Compared to a forecast for the month of $1.2 billion, filing data showed actual collections of $3.3 billion.
• Almost all measures of tax liability are higher compared to last year (adjusted for filing dates) and have more than doubled in the past 5 years.
• Estimated payments, which include first quarter installment and extension payments, were 16.2 percent higher than in 2021 and almost three times higher than five years ago in 2017.
• April’s result brings year to date personal income tax collections to $14.6 billion, just shy of the $14.7 billion forecast for the entire fiscal year (with two additional months of collections remaining, so final collections will be well above projection, even as just adjusted by OMB in the Executive Budget).

Table 4: April Personal Income Tax Collections*

$ (‘000,000s)

Source: NYS Dept of Taxation and Finance, NYC Comptroller Calculations.  Data is preliminary through April 28th

* 2021 and 2020 filing deadlines were shifted from April to May in 2021 and June and July of 2020  

Cash Balances

• The City’s central treasury balance (funds available for expenditure) stood at $10.9 billion as of Thursday, April 28^th (Chart 17). While this is consistent with the same time last year, the current cash balance is higher than anticipated due to timing of transfers from capital proceeds and the unexpectedly high personal income tax proceeds noted above. (Chart 17)
• The Comptroller’s Office’s review of the City’s cash position during the second quarter of FY 2022 and projections for cash balances through June 30^th, 2022, are available here.

Chart 17

SOURCE: Office of the NYC Comptroller

Spotlight

U.S vs NY Metro Area Inflation

Inflation measures in the US are at multi-decade highs. In this spotlight we provide an analysis of the Consumer Price Index (CPI) in the NY metropolitan area and how it differs from the national average. CPI inflation in the NY area has been slower than the national average.[2] As of March 2022, NY-area prices grew 6.1%, the highest level since February 1991, but still 2.4 percentage points below the 8.5% national average (measured as the 12-month percentage change).[3]

What accounts for this difference? Mostly housing and transportation.

How is CPI calculated? The basket of goods and services consumed in NYC has a different composition than in the US. The table below reports the relative importance (weights) of the main components of CPI in the nation and the NY-area (note that shelter and private transportation are sub-components of housing and transportation, respectively).[4] The weights reflect the fact that, on average, NY-area households spend a greater share of our budgets on housing, but less on transportation, relative to the US. Shelter costs make up 37.5% of consumption in the NY-metro area but 32.9% nationwide, while private transportation costs are 17.4% of the nation’s basket of goods and services but only 13.0% in the metro area due to higher use of public transit in the New York area. Table S.1 reports the main components of the two baskets.

Table S.1:  Difference between NY-metro area and US CPI Expenditure Weights

Source: Bureau of Labor Statistics https://www.bls.gov/cpi/tables/relative-importance/2021.xlsx

While both transportation and housing costs have been rising, they have been growing more slowly than the national average. Transportation, the CPI component with the fastest growth in the US (affected highly by rising fuel prices) is growing more slowly in the NY area (+14.7%) than in the US (+22.6%). Shelter prices are increasing at less than half the speed in the NY area (2.1%) versus nationally (5.0%).

Table S.2: 12-month Inflation Rates NY-Metro Area vs US by Expenditure Category

Source: Bureau of Labor Statistics.

What determines shelter CPI? Shelter CPI is largely determined by two components: Rent and Owner Equivalent Rent (OER).[5] The former captures contract rents, while the latter imputes the rental value of owner-occupied housing units (that is, the market rent the units would command). Housing units are assigned to one of six sub-samples: a different sub-sample is measured every month, resulting in two price measurements over the year for each housing unit. Each month, Rent and OER are the weighted average of the 6-month price changes across all the sub-samples. A regression of NY shelter inflation on the NY Rent and OER components shows that OER is more closely correlated with NY shelter inflation, with a coefficient between 0.65 and 0.75.[6]

But aren’t rents in NYC growing at double-digit rates? Yes, as can also be seen elsewhere in this newsletter. What might explain the discrepancy between the increase in market-rate rents noted above, and the slower-than-national average increase in shelter CPI? There are several possible explanations:

1. In NYC, about half of all rental units are rent stabilized apartments, which are protected from market increases by regulation. The data on NYC rental prices in Table 2 and Chart 3 above are reflective of unregulated market-rate units.[7] If this is the case, then rent stabilized units are helping to moderate inflation in New York.
2. NYC is the largest but not the only residential market in the metro area, and rents may be rising faster in the city than in the suburbs.
3. Shelter CPI is a weighted average of price inflation observed or estimated up to 6 months prior.

A NYC-specific rent inflation index is available from Streeteasy, which is derived from listings of the same unit over time to separate pure price movements from quality fluctuations in the inventory on the market.[8] The series starts in January 2007. Over the period both data series are available, the index is more volatile than NY shelter CPI,[9] with periods of deflation in the aftermath of the Great Recession (dropping around -9% in the summer of 2009) and during the first half of the pandemic. The 12-month percentage change reached an all-time low at -13.5% in March 2021 and started growing again in September of that year. It has increased sharply since then, reaching +22.4% in March 2022, the latest available at the time of writing this note. The relationship between the Streeteasy index and NY area shelter CPI is lagged: in Chart S.1 below we report NY shelter CPI with the Streeteasy index lagged 6 months.

Chart S.1

Source: Bureau of Labor Statistics, Streeteasy, Comptroller’s Office.

How unusual is the CPI differential between the NY area and the US? Fairly unusual. To answer this question, we look at 50 years of data, from January 1972 to March 2022. For each month, we take the 12-month percentage increase in the price indexes. The chart shows the difference of NY and US CPI. In the past 50 years, the only other period when NY CPI ran consistently 2 percentage points below the US was the late 1970s, as shown in Chart S.2.

Chart S.2

Source: Bureau of Labor Statistics, Comptroller’s Office.

In Chart S.3 below, we superimpose US inflation to the NY-US differential. The data shows that the differential is negatively correlated with US CPI: it turns negative when US inflation rises and it becomes positive when US inflation drops. If this historical norm continues to hold, the inflation differential could become positive when US CPI cools down.

Chart S.3

Source: Bureau of Labor Statistics, Comptroller’s Office.

Because shelter is the largest component of both the US and NY baskets, the overall inflation differential tends to move in tandem with the shelter inflation differential. Using the latter as an explanatory variable for the former, we find that a one-percentage point change in the shelter CPI differential is associated with a 0.35-0.41 percentage point change in the NY-US differential. During the pandemic (March 2020 to present), shelter inflation accounts for a larger fraction of the overall CPI differential: a one-percentage point change in the shelter CPI differential is associated with a 0.8 percentage point change in the NY-US differential.[10]

What to expect going forward? We estimate how NY shelter CPI could evolve in the next few months based on the historical correlation with the Streeteasy index, but without embedding the model within a forecast of national and local economic conditions. Because of the lagged relationship between the two series, the steep growth in the Streeteasy index is not yet fully reflected in NY shelter CPI. The models suggest that NY shelter CPI could rise from 2.1% in March 2022 to exceed 4.0% by the end of the year.[11] This would be the highest NY shelter CPI since March 2007.

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[1] Bureau of Economic Analysis, advanced estimate

[2] Office of the NYS Comptroller (2022) Inflation in the NYC Metropolitan Area, April, https://www.osc.state.ny.us/reports/inflation-new-york-city-metropolitan-area

[3] All CPI data are for urban consumers. Data are not seasonally adjusted.

[4] Bureau of Labor Statistics, Relative Importance and Weight Information for the Consumer Price Index, https://www.bls.gov/cpi/tables/relative-importance/home.htm

[5] See BLS, CPI Handbook of Methods, https://www.bls.gov/opub/hom/cpi/ and BLS Handbook of Methods, Chapter 17. The Consumer Price Index (Updated 2-14-2018).

[6] NY OER is only available from December 1982. In the regression, we allow for coefficients to change after an identified structural break in April 2008. The relationships do not change appreciably over the pandemic period. The 2019-2020 weights show that NY Rent and OER have weights of 11.8 and 24.6, respectively. Therefore, OER accounted for about 2/3 of NY Shelter CPI (based on the US weights, OER accounted for roughly 3/4 of US shelter CPI). See BLS https://www.bls.gov/cpi/tables/relative-importance/2021.xlsx

[7] For estimates of the effect of rent inflation on NY-area rent CPI, see Poole R., Verbrugge R. (2007) “Explaining the Rent-OER Inflation Divergence, 1996-2006,” BLS Working Paper 410, October, https://www.bls.gov/osmr/research-papers/2007/pdf/ec070090.pdf.

[8] The data are available here: https://cdn-charts.streeteasy.com/rentals/All/rentalIndex_All.zip?_ga=2.87469342.764839364.1650594099-1891154224.1650457526. Methodological note are here: https://streeteasy.com/blog/methodology-streeteasy-rent-indices/ and https://streeteasy.com/blog/methodology-price-and-rent-indices/

[9] Over the period where both series are available, the coefficient of variation for the Streeteasy data is 3.3, versus a coefficient of variation of 0.37 for NY shelter CPI.

[10] We run OLS regressions to estimate the correlation NY-US differential and NY-US shelter differential over the entire sample but we allow the coefficient to vary over time at two junctures: a structural break identified in March 1989 as well as over the pandemic period (March 2020 to the present).

[11] A similar dynamic could be at play in the US as a whole, according to Bolhuis M.A., Cramer J.N, and Summers L.H. (2022) “The Coming Rise in Residential Inflation,” NBER Working Paper Series No.29795, February

Sincerely,

Brad Lander