New York by the Numbers
Monthly Economic and Fiscal Outlook

A Message from the Comptroller

Dear New Yorkers,

The new year got off to a strong start economically, with job growth far higher than expected nationally, and strong in New York City as well. If you’re surprised by this, because you keep hearing about expectations of a recession caused by the Fed raising interest rates, well, economists were surprised too.

Over the past year, the Fed has increased rates at the fastest clip in decades, from near zero to 4.5%, yet growth in many areas remains strong. Inflation measures have softened meaningfully from their peak, but are still well above the Fed’s comfort level – so continued interest-rate increases are expected. Most economists continue to project a mild recession for 2023, but there remains a lot of uncertainty about where things are headed.

The past year’s inflation has eroded purchasing power for many working families, as price increases outstripped wage gains. The minimum wage for New York City reached $15 per hour in 2019, but its purchasing power has declined to $13.38 in inflation-adjusted dollars – leaving many low-income families struggling to afford rising rents, food, child care, and energy costs.

That’s why the Governor and legislators in Albany are considering increases to New York’s minimum wage – including indexing it to inflation, as 18 other states and many cities now do (as a result of which the minimum wage is now $16.99 in San Francisco, $17.29 in Denver, and $18.69 in Seattle).

This month’s spotlight compares the impacts of two legislative proposals in Albany to raise the wage. Governor Hochul’s proposal would index the current wage to inflation (with a 3% cap and off-ramps that would limit increases in some years). We estimate this proposal would result in a $16.28 minimum wage by 2026, with direct impacts on approximately 14% of NYC workers, for an aggregate increase of $400 million.

The Raise Up NY proposal would raise the minimum wage up to $21.25 by 2026, and then index it to inflation plus labor productivity. We project that this would directly affect more than 26% of NYC workers, with aggregate wage gains of over $6 billion.

Dive into the numbers with us below.

Sincerely,

Brad Lander

The U.S. Economy

• The Bureau of Labor Statistics reported 517,000 jobs added to U.S. payrolls in January, a stronger than expected expansion. Some of the gain is attributable to unseasonably warm temperatures across the country – but together with other measures of still-high labor demand, the persistence of a hot labor market is indicated.
• U.S. labor markets continue to grow despite the Federal Reserve tightening monetary policy, with unemployment at 3.4% in January – its lowest rate since 1969. The December number of job openings per unemployed worker rose to 1.8, while the quits rate remained at an elevated 2.7%.[10]
• A tight labor market may be expected to portend rapidly escalating wages. But thus far, we haven’t seen it. January’s nominal average hourly wage growth was a mere 0.3% (or an annual rate of 3.7%).
• The Consumer Price Index (CPI) increased in January (0.5%) with year-over-year inflation falling to 6.4%. Per the data from the Bureau of Labor Statistics, the shelter index accounted for nearly 50 percent of the January monthly increase; the index increased by 0.7 percent. The food index and the energy index also increased by 0.5 percent and 2.0 percent, respectively.  The Producer Price Index (PPI) and the Personal Consumption Expenditure (PCE) index both declined in December, but show 6.2% and 5.0% growth year-over-year, respectively.
• The Fed raised interest rates by 25 basis points early in February (0.25%) to a range of 4.5-4.75%. Recent statements by the Fed Chairman indicate that rates may rise higher than 5.0% in 2023 if wage growth and inflation figures are not indicative of decelerating prices.
• Treasury yield curves are more sharply inverted than at any time since 1981, with 2-year rates more than 0.8% above 10-year rates. This rare phenomenon is usually interpreted as indicative of market expectations of a high likelihood of impending recession, although economists’ forecasts vary widely. Real gross domestic product (GDP) in the 4^th quarter of 2022 grew by 2.9% according to advanced estimates by the Bureau of Economic Analysis. This rise continues after growth of 3.2% in the 3^rd quarter, with the year 2022 finishing moderately strong after real GDP decreases in its first half.

NYC Labor Markets

• New York City added over 20,000 private jobs in December. The 4,021,000 privately employed in the City are 97.9% of the pre-pandemic peak (see Table 1).
• New York City employment in health care and social assistance increased by more than 18,000 jobs in the fourth quarter of 2022, while jobs in food and hospitality grew by over 14,000 in the same period. Together, these two categories accounted for roughly three-fourths of 4^th-quarter growth in private payroll employment, and more than half of the growth seen throughout 2022 (see Chart 1).
• Employment in retail businesses fell in December and remains 13% below its pre-pandemic level (see Chart 2).

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

SOURCE: NYS DOL, NYC Office of Management and Budget, and Office of the NYC Comptroller

Note: Due to revisions to earlier months, numbers may not match to previous monthly newsletters.

Chart 1

SOURCE: NYS DOL, NYC Office of Management and Budget, and Office of the NYC Comptroller

Chart 2

SOURCE: NYS DOL, NYC Office of Management and Budget, and Office of the NYC Comptroller

Note: Pre-Pandemic employment based on February 2020, seasonally adjusted

• New York City’s seasonally adjusted unemployment rate edged up slightly to 5.9% in December, significantly higher than the U.S. rate of 3.5% in that same month. In the last quarter, the unemployment rate (not seasonally adjusted) for Black New Yorkers remains much higher than for other residents (Chart 3).
• The local ratio of job openings to unemployed workers is much lower than the national average. In New York State (the smallest geographical unit where data are available), there were 1.1 job openings per unemployed worker in November, while nationally that rate is 1.8.

Chart 3

SOURCE: IPUMS-CPS, Office of the NYC Comptroller

Housing & Real Estate

• Median New York City asking rents held steady at $3,400 in December. Asking rents have been stable for the past half year but remain up 16% from pre-pandemic levels and up 27% from pandemic lows (Chart 4).
• The number of listed apartments available for rent fell by over 3,000 units (11%) from November to December, led by Brooklyn and Queens, which dropped 13% and 10% respectively.

Chart 4

SOURCE: Streeteasy.com

• The City’s Department of Homeless Services’ (DHS) shelter census has continued to reach record high levels as asylum seekers continue to arrive in New York City. The average monthly census increased by 5.8% from December to January. To put this increase in perspective, there has not been a December to January census increase above 0.5% in the last six years (Chart 5).
• The census reached a record 71,020 individuals on February 4^th, 2023.
• As of February 12, 2023, the City reports that 21,758 asylum seeking individuals were residing in the DHS shelter system, and an additional 7,381 individuals were residing in one of six Humanitarian Emergency Response and Relief Centers (HERRCs) that the City has established in response to the asylum seeker crisis of the last seven months. 45,600 asylum seekers have passed through the City’s care over this period.

Chart 5

SOURCE: NYC DHS, via NYC Open Data

Note: The HERRCs are not included in the above chart.

Travel and Tourism

• NYC hotels capped off a strong year of recovery in December 2022 with total room demand hitting 93% of its December 2019 level (Chart 6). Revenue per available room (RevPAR) was $303, 14% higher than December 2019 in nominal terms. Adjusted for inflation, RevPAR was close to its pre-pandemic level.

Chart 6

SOURCE: STR via CoStar

City Finances

Highlights of the Tentative FY 2024 Property Assessment Roll

• The Department of Finance (DOF) recently released the Tentative Property Assessment Roll for Fiscal Year 2024, with assessment values reflecting real estate activity between January 6, 2022 and January 5, 2023. Property tax liabilities are based on the assessment roll, and owners are given a period to request changes to their tentative assessment before the Final Roll is published in May.
• The roll included a 6.0% increase in the taxable assessed value for Tax Class 1[11] properties (most residential property of one to three units), the largest increase in the last 10 fiscal years—FY 2014 to FY 2023. The average annual increase for this time period was 3.6%. One driver of the recent increase in taxable assessed values is the increase in the median price for a one family home, which increased by 10.2% from 2020 to 2021 and 7.0% from 2021 to 2022.
• Despite the record increase in residential rents for most of 2022[12], the total market value of Tax Class 2 properties (rental, condominiums, and cooperative buildings) went up only by 0.9%. By law, condominiums and cooperative buildings are valued by using income from comparable rental buildings, so any valuation issues with rental buildings would impact condominiums and cooperative buildings. For calendar year 2022, there appears to be a disconnect between rents and the market values for rental buildings.
• For FY 2022, DOF reduced the total market value for Tax Class 4 properties (all commercial and industrial properties) by 17.4%. Subsequently, the total market value was increased in FY 2023 and FY 2024 by 9.7% and 7.4% respectively but remains lower than the pre-pandemic level used for FY 2021 assessments. The FY 2024 total taxable assessed value, on the other hand, is now higher than its value in FY 2021 for Class 4 properties.
• Confused by the different trends between market values and assessed values, and the fractional assessments behind them? Of course you are. The system is opaque and confusing. Here’s DOF’s explainer, the NYC Advisory Commission on Property Tax Reform’s Final Report recommending changes, and the Comptroller’s Office’s proposal for property tax reform to move forward in Albany this legislative session.

Chart 7

SOURCE: NYC Department of Finance and Office of the NYC Comptroller

• Brooklyn added the most tax lots from FY 2023 to FY 2024 — 1,737. It also added the most in the market value increase — $31.7 billion. Brooklyn has experienced significant construction activity the last several years. The tax lots increase is a strong reflection of continuing construction activities.

Chart 8

SOURCE: NYC Department of Finance and NYC Office of the Comptroller

• Although the office market continues to experience an elevated vacancy rate, the market value of Class A office buildings increased by 7.1%. Condo office parcels (16% of total office market value) had the highest percentage increase—8.6% among office buildings.
• The market value of non-condo hotel properties increased by 8.3% while condo hotel properties (26% of total hotel market value) increased by 12.2%.
• Total market values for Manhattan rental buildings decreased by 2.6%, with a 7.6% decrease among 4-10 family properties in the borough. Total market values for Manhattan cooperative buildings decreased by 1%.

Income Tax Revenues

• Personal Income Tax (PIT) withholding collections totaled $1.19 billion in January (6.7% above January 2022). After adjusting for estimated collections on base salary, and calendar differences, our tracking estimate of bonus payments continues to indicate a decline of around 20% for this year’s high season for bonuses, measured thus far from early December through early February.
• Estimated tax payments received in January were $494 million, 47.5% below the prior year in January. The January installment is the last of the tax year and can be depressed by capital loss-taking at the end of the year as well as a late adjustment to lower net capital gains realized throughout the tax year. 2022 was the first year since 2009 to end with a lower stock market valuation than it began.

New York City’s Cash Balances

• Current cash balances are at a historical high. As of February 2nd, the City’s cash balance stands at $14.6 billion, compared to $7.2 billion at the same time last year. The cash balance includes $1.954 billion in the Revenue Stabilization Fund (RSF), the City’s rainy-day fund. The majority of funds, $1.455 billion, were allocated to the RSF in FY 2022.
• On January 25th, 2023, the City received $1.7 billion in new Pass Through Entity Tax (PTET). The PTET is an optional tax that partnerships or New York S corporations may annually elect to pay on certain income. The PTET is intended to be revenue neutral but currently reflects as an increase against the cash balance at the same time last year.
• The Comptroller’s Office’s review of the City’s cash position during the first quarter of FY 2023 and projections for cash balances through March 31, 2022, are available here.

---

Contributors

The Comptroller thanks the following members of the Bureau of Budget for their contributions to this newsletter:  Jonathan Siegel, Chief Economist; Yaw Owusu-Ansah, Director of Tax Policy and Revenue Analysis; Steve Corson, Senior Research Analyst; Astha Dutta, Economic Data Analyst; Irina Livshits, Chief, Fiscal Analysis Division; Marcia Murphy, Principal Revenue Analyst; Krista Olson, Deputy Comptroller; and Francesco Brindisi, Executive Deputy Comptroller.  He also thanks Archer Hutchinson for his ongoing efforts in the design and lay-out.

---

Endnotes

[1] Food and service workers in the hospitality industry have a tip allowance of $5.0 and $2.50, respectively. Starting in 2021, tip allowances were eliminated in other (“miscellaneous”) industries. The minimum wage for home care aides is described in the main text.

[2] Outside of New York City and Nassau, Suffolk, and Westchester counties, indexation would start the year after the minimum reaches $15.

[3] The definition of home care aide is available here.

[4] This appears to be the case in NYS Department of Budget’s projection, where the annual unemployment rate increases to 4.8% in 2023 and 5.2% in 2024, from its average of 4.4% in 2022.

[5] A description of the methodology is available in the technical appendix.

[6] Wage compression would push compensation higher also above the minimum, generating a spillover effect onto “indirectly affected” workers. Given the uncertainty surrounding the simulation exercise, we don’t also make a modeling assumption regarding indirect effects. An alternative set of results for the Raise Up NY proposal (based on a different methodology that is also inclusive of indirect effects) is available from the Economic Policy Institute. As a modeling choice, EPI assumes that wages between 100% and 115% of the minimum are indirectly affected while CBO stretches the boundary to 150% of the minimum. Spillover effects can be noisy in the data as documented in Autor D.H., Manning A., Smith C.L. (2016) “The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment,” American Economic Journal: Applied Economics, 8(1), January.

[7] One of the main reasons for observing hourly wages below the minimum is the lower tipped minimum wage. The data are also subject to measurement error as usual work hours tend to overestimate actual hours (as surveyed in CPS). Measurement errors tend to be more prevalent among employees that are not paid by the hour (see Lemieux T. (2006) “Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?” American Economic Review, 96(3), June). A discussion of measurement error in survey responses regarding income and wages can be found in Meyer B.D., Mok, W. K. C., and Sullivan J. X.(2015) “Household Surveys in Crisis,” Journal of Economic Perspectives, 29(4), Fall.

[8] Cooper D., Luengo-Prado M.J., and Parker J.A. (2020) “The Local Aggregate Effects of Minimum Wage Increases,” Journal of Money, Credit and Banking, 52: 5-35.

[9] See Dube A., Lindner A. (2021) “City Limits: What Do Local-Area Minimum Wages Do?” Journal of Economic Perspectives, 35(1), Winter; Ashenfelter O.C., Jurajda Š. (2022) “Minimum Wages, Wages, and Price Pass-Through: The Case of McDonald’s Restaurants,” Journal of Labor Economics, Vol.40(S1).

[10] See Bureau of labor statistics JOLTS data.

[11] The definitions for the tax classes can be found on the Department of Finance site.

[12] Please see for instance the StreetEasy Rent Index.

Sincerely,

Brad Lander