New York by the Numbers
Monthly Economic and Fiscal Outlook

A Message from the Comptroller

Dear New Yorkers,

The cherry blossoms and tulips let us know we’re well into April now, but unfortunately the New York State Fiscal Year 2024 budget – due on March 31^st – still hasn’t bloomed. We’re waiting to see what the State budget agreement will mean for New York City: will it help us meet the growing cost of providing shelter and services for asylum-seekers, or will it cost the city hundreds of millions through cost-shifts?

Three years after the pandemic began, the data tells us that economic patterns are largely stabilizing following dramatic changes, with employment back at 99.5% of pre-pandemic levels, workers and employers settling into hybrid schedules, impacted industries like accommodations and food services returning, with low office occupancy and high residential rents becoming a new normal.

Our Spotlight this month looks at newly available data on changes in personal income tax liabilities in the first two years of the pandemic. The numbers show that New Yorkers making under $50,000 saw aggregate incomes rise in 2020 due to pandemic-era unemployment and economic stimulus payments, as we explored in our January Spotlight. Unfortunately, those gains were largely erased in 2021 as enhanced pandemic benefits ended, just in time for inflation to raise the cost of living.

Meanwhile, the highest income filers, New Yorkers making over $25 million (fewer than 1,000 households, though it varies annually), saw aggregate income gains of nearly $62 billion over those two years, driven primarily by capital gains from the booming stock market (although it has since been on the decline). That $62 billion was 73% of the city’s total income growth, less than 1-in-5,000 of its households.

According to recent numbers from Forbes, New York City has reclaimed its status as home to the most billionaires of any city on the planet (107, worth $640 billion), and the most millionaires, too. A recent report from the Institute on Taxation and Economic Policy found that New York is home to both the highest concentration of extreme wealth and the highest income inequality in the U.S.

According to the “New New York” Panel convened by Governor Hochul and Mayor Adams (and chaired by former Deputy Mayors Doctoroff and Buery), the way to keep New York’s economy growing – but share prosperity better – in the face of our post-pandemic challenges is to invest in transit, housing, child care, and the public realm. Those investments, they argue, will keep wealthy New Yorkers here, while also making it possible for a much broader set of New Yorkers to be able to afford to live, work, and raise families here.

The New New York Panel didn’t say where we could find the money to pay for those investments. This month’s “Spotlight” brightly illuminates one answer.

Sincerely,

Brad Lander

The U.S. Economy

• Employment gains remained high in March, with payrolls nationally increasing by 236,000 on a seasonally adjusted basis—slower growth than in the prior two months, and much slower than a year ago, but still consistent with healthy and not-overheated economic expansion. Leading the increase were jobs in leisure and hospitality (+72,000), health care and social assistance (+51,000), and government jobs (+47,000).
• But despite the payroll growth, other signs suggest labor market tightness may be easing nationally. The most recent data from the Job Openings and Labor Turnover Survey (JOLTS) from the U.S. Department of Labor shows job openings have declined to 1.7 per unemployed worker in February, down from a peak of 2.0 in July 2022. The quits rate has also declined to 2.6% of the labor force after hitting a high of 3.0% last April.
• Price inflation remains more than double the rate than the Federal Reserve’s long-term target of 2 percent, as measured by the annual change in the Personal Consumption Expenditures (PCE) index. The “core” PCE index, which removes volatile food and energy prices, stood at 4.6% in February year-over-year. The PCE index is a somewhat broader measure than the well-known Consumer Price Index (CPI), which is based more on urban consumers. Recent rapid growth in housing costs in several cities have caused these two measures to diverge by nearly 1%—the latest core CPI in February was 5.5% above the same month one year prior.
• In their March 21-22 meeting, the Fed’s Open Market Committee (FOMC) opted to raise the target Federal Funds rate by 25 basis points, or one-quarter of one percent, to a target range of 4.75-5.00%. They reaffirmed their willingness to raise rates further this year as warranted to meet their inflation objective. They noted that recent events in the banking system may result in tighter credit conditions but expressed uncertainty over the magnitude of the effects.

NYC Labor Markets

• NYC private payrolls continued to see strong growth into February, adding 26,600 jobs to the January level on a seasonally adjusted basis. The largest increases were in education (+6,700) and health care/social services (+5,000). Employment is now at 99.5% of February 2020 levels.
• Contradicting its recent downward trend, information technology jobs increased by 3,800 in February, a gain of nearly 2%. One month’s data does not constitute a trend reversal, but employment in this high-wage sector—which we have forecast to fall in 2023—will be one to watch closely through this year.
• Construction jobs also grew by 3,400, more than 2%. Construction employment, which fell during the pandemic to nearly half of its pre-pandemic level, is now above 93% of February 2020 payrolls (See Chart 1).
• No large industry experienced a significant decline in February, although employment in finance remained flat.

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

• After falling through the first eight months of last year, New York City’s unemployment rate has been slowly rising since August 2022 and stood at 5.4% in February. This increase has coincided with a turn in the direction of change in the City’s labor force, which increased by nearly 65,000 from August 2022 to February 2023. Receding pandemic-related health concerns and economic disruptions may be a major factor incentivizing many in NYC to return to job seeking, simultaneously increasing the labor force and the measured unemployment rate.
• The City’s unemployment rate (5.4%) remains higher than that of New York State (4.2%) and the U.S. (3.6% in February, 3.5% in March).

Chart 2

SOURCE: NY State Department of Labor. Labor force changes shown are monthly and both labor force and unemployment rate are seasonally adjusted.

Housing

• Median asking rent for NYC residential properties rose slightly in February, to $3,490 per month from $3,450 in January, according to StreetEasy, but remains slightly below last summer’s all-time highs (Chart 3).
• Rental rates in Brooklyn have been responsible for most of the movement in citywide averages during the past six months, having fallen by 5% since July 2022 while Queens stayed mostly unchanged. After staying relatively flat since July 2022, Manhattan and Bronx median rents increased to $4,295 and $2,385, respectively in February. These median rents are the highest since StreetEasy began reporting data in.

Chart 3

SOURCE: StreetEasy.com

• The number of people in New York City’s shelters continues to rise, driven primarily by steadily increasing numbers of asylum seekers (Chart 4). In March 2023, the combined average number of individuals in Department of Homeless Services’ (DHS) shelters and Humanitarian Emergency Response and Relief Centers (HERRCs) reached nearly 81,000, 79% above its level one year prior. Approximately 45% of the combined population were recently-arrived asylum seekers. In contrast, the count of non-asylum-seeking sheltered individuals has grown by only 3% since September 2022 (the first month in which a separate count of asylum seekers became available).
• As of April 9^th, the number of asylum seekers currently housed by the City is over 33,900.

Chart 4

SOURCE: NYC DHS, via NYC Open Data, NYC Mayor’s Office, Office of the NYC Comptroller

NOTE: Figures shown are monthly averages. Data on the asylum seeker population within DHS shelters is not available prior to August 31, 2022.

Office Market

• There has been little movement over the past two years in market rents charged for NYC office space. Mean market rents for office space have stabilized at about 6% below their 2019 levels.
• Since the first quarter of 2020, available office space has increased by nearly 50%, or 41.7 million square feet. Over half of that additional vacant square footage is found in Class A properties. There has been little fluctuation since the second quarter of 2021.

Chart 5

SOURCE: CoStar

• Security card data from Kastle show average worker physical presence in New York City area offices on any given day remains below 50% of pre-pandemic levels. After growing steadily from the start of 2021 until October 2022, office worker occupancy averaged over the work week has stabilized at a maximum of 48% since November. These worker occupancy rates are similar to most other metro areas tracked by Kastle. It appears that many office workplaces are settling into a hybrid work arrangement in which many employees work 2 – 3 days a week in the office, and 2 – 3 days at home.

Chart 6

SOURCE: Kastle Workplace Occupancy Barometer

City Finances

Preliminary FY 2023 Tax Collections

• Through the end of February 2023, the city has collected $837 million more taxes than what the Mayor had projected in the January Plan.
• This has been primarily due to strong sales tax collections and audits.
• In March 2023, the city received $203,669.96 of cannabis tax, its first revenue since the Marijuana Regulation & Taxation Act (MRTA) was signed into law in 2021.
• The city is projected to receive $403.7 million of Pass-Through Entity Tax in March 2023.

Table 2: Year-to-Date (February 2023) FY 2023 Tax Collections

*This includes Pass-Through Entity Tax

SOURCE: NYC Office of Management and Budget’s January 2023 Cash Plan; NYC Financial Management System (FMS); NYC DOF; NYS Comptroller

Income Tax Withholding in Bonus Season

• We estimate that NYC withholding revenues from bonuses paid in the most recent season from December 2022 through March 2023 were $1.38 billion, down 18% from the prior year. This decline is likely largely a result of lower 2022 earnings in the securities sector. Similarly, the Office of the New York State Comptroller estimates that the securities industry bonus pool dropped 21 percent, returning to pre-pandemic levels.

New York City’s Cash Balances

• On April 6th^th, the City’s unrestricted cash balance reached $17.77 billion, a record high resulting from a combination of normal seasonal inflows, timing, and particular circumstances this 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.
• Typically at the end of March, cash balances rise with the arrival of the “Spring Advance,” a component of NYS Education Aid. This year, NYC received $3.9 billion in NYS Education Aid, consistent with last year’s level.
• On January 25^th, 2023, for the first time as a result of changes to State law, 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.
• This year’s cash balance is also high relative to last year’s due to the increase in property tax receipts. Combined receipts from December through March were about $1 billion higher than the prior year.
• Also, on January 3^rd, the City received $2.3 billion in American Rescue Plan-State and Local Fiscal Recovery Funds (ARP-SLFRF) and Coronavirus Response and Relief Supplemental Appropriations (CRRSA) education grants.
• Balances are projected to return to more normal levels by the end of the Fiscal Year, in part due to pay-outs for retroactive collective bargaining agreements. The Comptroller’s Office’s review of the City’s cash position during the second quarter of FY 2023 and projections for cash balances through June 30, 2023, are available here.

Sincerely,

Brad Lander