New York by the Numbers
Weekly Economic and Fiscal Outlook

A Message from the Comptroller

We are living through extraordinary times – as a nation, as a City, and as individuals and communities.  A pandemic is raging that has no parallel in the past century. And in an unprecedented move, our economy has been put on hold in order to protect lives and “flatten the curve.” The shutdown has resulted in mass layoffs and lost income for hundreds of thousands of New Yorkers, and a dramatic drop in tax revenues that blew a hole in the Fiscal Year 2021 budget proposed by Mayor de Blasio in January.  In these difficult and uncertain times, I offer this weekly update on the state of our City’s economy and finances in order to provide the public, elected officials, advocates and experts with a clear-eyed, sober assessment of the challenges.

Make no mistake – New York City will recover. Together we have overcome many challenges, and I know we will rise to the one ahead.

Sincerely,

Scott M. Stringer

Read the Comptroller’s testimony and report on the FY 21 Executive Budget.

The Economy

National Indicators

The U.S. economy showed tentative signs that it had hit bottom in April and was beginning to recover in May, as businesses began to re-open in a number of states across the country.

• The unemployment rate fell from 14.7% in April to 13.3% in May (see the Spotlight of the Week section below for information on recent measurement errors in the unemployment rate). Economists had expected a 19.0% unemployment rate in April.
• As recorded, there were 21.0 million unemployed persons in May, compared to 23.1 million in April. The monthly average for the 12 months preceding March was 5.9 million, so there is still a long road to travel to employment recovery.
• Private sector employers rehired 3.1 million workers in May – about 15% of the jobs lost between February and April (Table 1). The biggest gains were in bars and restaurants, which regained nearly 1.4 million jobs; ambulatory health services (primarily doctor’s and dentist’s offices); construction; retail; and manufacturing.  Hotel employment continued to fall, however, with travel still at a standstill.  The motion picture and sound recording industry also continued to shed jobs.
• Government employment continued to fall, declining by another 585,000 jobs in May. Since February, state and local governments have shed nearly 1.6 million jobs, the majority (1.3 million) in local governments.

Table 1

New York City

• Initial unemployment claims by New York City residents fell by 55 percent for the week ending May 30^th, to 43,703 (Chart 1). This is still more than six times the weekly average prior to the closure of nonessential businesses in mid-March under the State and City emergency orders.
• Since the COVID-19 pandemic led to the shutdown of nonessential businesses, nearly 1.2 million New York City residents have applied for unemployment.

Chart 1

SOURCE: NYS DOL

City Finances

Tax Revenues

The COVID-19 pandemic has had a devastating impact on the City’s hospitality sector.

• Employment in the sector, including restaurants and bars and accommodations, declined by 66 percent in April, with job losses totaling nearly 217,000, including a 53 percent decline in the accommodation sector, or 26,100 jobs.
• Hotel occupancy tax revenue had already started to drop precipitously in March, and early estimates indicate that it will plummet even further in the quarter ending June 30, 2020, declining by nearly 80% since the quarter ending Dec 31, 2019 (Chart 2). The tax, which brought in $625 million in FY 2019, will likely bring in about $470 million in FY 2020.
• Hotel rooms are also subject to the sales tax, which can therefore also be expected to decline by roughly $120 million as a result of lost room-nights.

Chart 2

• The recovery in the hospitality sector and related tax revenues is expected to be very slow, significantly lagging the pace of other sectors.

COVID Spending

The authorized budget for COVID-related spending is $2.623 billion for FY 2020 (Table 2). More than half of this spending, $1.42 billion, is for medical, surgical and lab supplies. Other significant COVID-related spending includes $246 million for NYC Health+Hospitals, $379 million for COVID-19 response in the Department of Emergency Management, and $250 million for uniformed agencies overtime.

Of this total, $2.36 billion has been committed – that is, the City has incurred contractual obligations for that amount – and $867 million has been expended as of June 4.  Medical, surgical and lab supplies account for $1.20 billion of the commitments.

Table 2: COVID19 Budget and Expenditures, FY 2020

SOURCE: Office of the Comptroller from FMS.

Cash Position

The City’s central treasury balance (funds available for expenditure) stood at $5.125 billion as of Thursday, June 4.  At the same time last year, the City had $6.882 billion.

The Comptroller’s Office’s review of the City’s cash position during the first quarter and projections for cash balances through September 30^th, 2020, are available here.

Chart 3

Spotlight of the Week

How Many People Are Actually Unemployed?

A misclassification error in Bureau of Labor Statistics (BLS) data has resulted in an undercount of unemployed persons, estimated at almost 5 percentage points in April, and about 3 percentage points in May (Chart 1).  The error arose from the classification of workers who were on temporary layoffs as employed but “temporarily absent from work” during the so-called reference week – the week in which the household survey that forms the basis for the monthly employment numbers is conducted.  Interviewees characterize their own status from a list of options, and some may have chosen the “temporarily absent from work” option in the expectation that they will soon return to work, even though they are currently receiving unemployment benefits.

U.S. Unemployment Rate as Recorded and Adjusted for Undercount Error

SOURCE: U.S. Bureau of Labor Statistics

The Bureau estimates that the actual unemployment rate in April was therefore 19.5%, and 16.4% in May – an additional 4.9 million unemployed workers in May.  The good news is that many of these people will likely return to their previous jobs relatively quickly – indeed, some may already have returned in May as businesses began to re-open in many states.

The bad news, of course, is that there are still at least 21 million and as many as 26 million Americans out of work.  No one knows how quickly the jobs recovery will take place.  Most economists expect a fairly quick but partial rebound over the summer, but a slowing pace of recovery after that, as many businesses will have permanently shuttered during the months-long lockdowns.

Other issues have affected the employment statistics since March, including lower response rates and changes in the rate of business “births” and “deaths”.  The BLS has made adjustments for these factors, but the figures may ultimately be subject to large-than-usual revisions as more complete information becomes available.