New York by the Numbers
Monthly Economic and Fiscal Outlook

The U.S. Economy

• The advance estimate for GDP growth in the first quarter of 2023 was 1.1%, slower than most economists recently expected but still consistent with a non-recessionary “soft landing” response to tightened monetary policy.
• On May 3, the Federal Reserve increased interest rates to a range between 5.0% and 5.25%. The statement accompanying the decision signaled the possibility of a pause in the hiking cycle after 10 consecutive increases.
• The turmoil in the banking sector, which began with the failures of Silicon Valley Bank and Signature Bank in March, was sparked again by First Republic’s disclosure of a drop in deposits exceeding 40% in the first quarter. The FDIC rapidly arranged First Republic’s sale to J.P. Morgan Chase, in hopes of containing the crisis and avoiding contagion among other regional banks.
• Although inflation is trending in the right direction in most categories of goods and services, the Federal Reserve’s preferred gauge (the core Personal Consumption Expenditures – PCE – price index) stood at 4.6% year-over-year in March, far above the Fed’s target of 2%.
• The job market continues to show resilience, with 253,000 jobs added in April and the unemployment rate dropping to 3.4% (lowest since May 1969). Average hourly earnings in April grew 4.4% over the year and the March Wages and Salaries component of the Employment Cost Index came in at 5.0% over the year.
• Job openings and quits rates have fallen without an accompanying rise in the unemployment rate. This loosening of the job market likely portends a future reduction in wage growth and gives credence to the hope that the Fed can engineer a “soft-landing” reduction of inflation without an economic recession.
• The Secretary of the Treasury recently informed Congress that, because of lower tax receipts, the Federal Government is projected to hit the debt limit earlier than previously thought, potentially as early as June 1. The Fed’s chair remarked that breaching the debt limit would have “highly uncertain” and “averse” consequences on the U.S. economy, which the Fed may not be able to counter.

NYC Labor Markets

• New York City private-sector employment rose by a modest 6,700 jobs (0.16%) in March (seasonally adjusted), about half of the average monthly gain over the past year.
• As seen in Table 1, this increase was more than entirely accounted for by a 7,600 payroll gain in the health care sector, an industry responsible for 40% of the job growth in NYC from March 2022 to March 2023.
• Private sector employment now stands at 99.7% of its pre-pandemic level.

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

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

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

• Chart 1 shows that NYC employment in key industries differ in their degree of recovery relative to their pre-pandemic levels. Health care, information technology, and office-based employers maintain payrolls higher than before Covid-19 began, while accommodation and food, retail, construction, and the arts remain at reduced workforce levels.

Chart 1

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

• As seen in Chart 2, the unemployment rate in NYC continues to decline, with the exception of Black New Yorkers, for whom the unemployment rate is increasing and reached 12.5% in the first quarter of 2023 (see also a recent report from the Center for NYC Affairs).
• It should be noted that the data can be volatile due to the very small sample size of the CPS survey: in the first quarter of 2023 the number of employed survey respondents averaged 717 per month, while the number of unemployed respondents averaged 38 per month. Fewer than 10 respondents per month reported being unemployed in each of the Asian and White categories.

Chart 2

SOURCE: BLS, IPUMS-CPS

• The flow of layoffs in NY State, as observed through Worker Adjustment and Retraining Notification (WARN) notices, remains in line with pre-pandemic norms. In Chart 3 we compare the 3-month moving average in April 2022 through March 2023 to the equivalent period in 2018-2019. Layoffs in March 2023—around 2,000—were nearly double the level of April 2022 but comparable to March 2019.

Chart 3

SOURCE: Pawel Krolikowski and Kurt Lunsford (data as of 4.14.2023), Office of the New York City Comptroller

Inflation and Housing Costs

• Inflation is moderating both in the US and in the NYC area, as shown in Chart 4. The March headline CPI 12-month growth fell to 5.0% in the US and to 4.6% in the NYC area. Inflation peaked in June 2022 at 9.1% nationally and 6.7% in the NYC area.
• CPI grew at a slower rate in the NYC area than in the US since January 2021, with the differential widening to 2.5 percentage points (ppts) in the first quarter of 2022. The rates have more recently converged. In the first quarter of 2023, the differential averaged 0.3 ppts.

Chart 4

Source: BLS

• As shown in Chart 5, shelter inflation in the NYC area remained just shy of 6% in the first quarter of 2023. This is in sharp contrast with all other items in the basket, for which CPI inflation dropped to 3.8% in March (motor fuel, in particular, posted a -20.3% decline over the year).

Chart 5

Source: BLS

• Chart 6 shows that shelter inflation in the NYC area continues to lag the US, although the differential has narrowed from -3.5 ppts in June 2022 to -2.3 ppts in March of 2023. For all other items, NYC area inflation has modestly exceeded the US since December 2022

Chart 6

Source: BLS

• As seen in Chart 7, median asking rental rates for one-bedroom apartments in NYC on StreetEasy.com have increased by 20% over the past year. This rise has been accompanied by relatively low inventory of available apartments—averaging below 30,000 over the past 12 months as compared to a nearly 40,000 (-25%) average from 2015 through 2019.

 Chart 7

SOURCE: StreetEasy.com

Taxable Sales

• Newly released data on taxable sales through February 2023 allow a preliminary analysis three years into the COVID-19 pandemic, illustrated in Chart 8. Some technical notes:
  • The data are available on a quarterly basis, covering December-February (“first quarter”), March-May (“second quarter”) and so on.
  • The data are subject to revision. In the current release, NYC sales for 2022Q2 and 2022Q3 were revised up by 1.5% each since their first release, while 2022Q4 was already revised upward by 1.0% since its January release. Revisions become progressively smaller but stretch for 3 years.
• We index taxable sales to equal 100 in the first quarter of 2020. In the first quarters of the COVID-19 pandemic, taxable sales surged in the Metropolitan Statistical Area (MSA) while they remained well below pre-pandemic levels in NYC, consistent with an outflow of residents and far fewer office and other daily commuters.
• More recently, trends appear to be converging: taxable sales in 2023Q1 were 14.2% higher than three years prior in NYC, 16.7% higher in the inner MSA, and 20.6% higher in the outer MSA.

Chart 8

SOURCE: NYS Department of Taxation and Finance, Office of the New Yor City Comptroller. Inner MSA includes Long Island and the Lower Hudson Valley (Putnam, Rockland, and Westchester counties). Outer MSA includes the Mid-Hudson Valley (Dutchess, Orange, Sullivan, and Ulster counties).

NYC Population Estimates

• The Census Bureau released a new set (“vintage”) of population estimates for NYC covering the 2020-2022 period. The City’s population as of July 1, 2022 was estimated to be 8.34 million, reflecting a 2-year decline of 400,000.
• Estimates of the City’s population have fluctuated significantly in recent years, first due to changes in the methodology for the estimation of international migration and subsequently as they were re-benchmarked to the 2020 Census enumeration. The 2020 NYC enumeration may also have reflected a population overcount at the State level.
• In Chart 9 we show the Census Bureau’s population estimates according to three vintages:
  • 2017: before revisions of international migration, the NYC population estimate peaked at 8.62 million in 2017;
  • 2020: after revisions of international migration, the 2017 estimate of NYC population was revised to 8.44 million (-185,000). The change in methodology accounts for nearly all of the downward adjustment. Population kept declining in the rest of the decade, bottoming at 8.25 million in 2020;
  • 2022: after the 2020 Census enumeration, the estimate of NYC population as of July 1, 2020 was revised upward to 8.74 million (+487,000). The Census Bureau now estimates that population fell to 8.34 million as of July 1, 2022 (driven by outmigration to the rest of the United States totaling 529,400, and low international immigration between 2020 and 2021).

Chart 9

Source: Census Bureau, 2017, 2020, and 2022 vintages

• Chart 10 reports estimates of net international migration into NYC.
  • Before revision, international migration was estimated to have added more than 90,000 people to the City’s population in 2015-2017. After revision, the contribution to population growth dropped to below 50,000.
  • Net international migration continued to decline for the rest of the decade, bottoming at 20,000 between 2020 and 2021, at the height of the COVID-19 pandemic.
  • Net international migration was estimated at 54,300 from July 2021 through July 2022, a level not experienced since 2016. The estimate is based on responses to Census’ American Community Survey and was largely prior to the arrival of buses bringing asylum seekers to NYC from the southern border.

Chart 10

SOURCE: Census Bureau, 2017, 2020, and 2022 vintages.

• Estimates of domestic migration are mainly based on changes of address in IRS tax filings and Medicare records. Chart 11 reports NYC’s net domestic migration in the three vintages. Unlike international migration, revisions to net domestic migration were modest.
  • NYC has historically lost population to the rest of the United States. The annual outflow increased as the decade progressed, going from 48,700 in 2011 to 151,900 in 2020.
  • During the COVID-19 pandemic, New York City experienced significant population losses. Estimates of net domestic outmigration jumped to 313,400 in 2021 and remained elevated at 216,000 in 2022.

Chart 11

SOURCE: Census Bureau, 2017, 2020, and 2022 vintages

Homeless and Asylum Seekers

• The number of people in New York City’s shelters continues to rise, driven primarily by steadily increasing numbers of asylum seekers (Chart 12). In April 2023, the combined average number of individuals in Department of Homeless Services’ (DHS) shelters and Humanitarian Emergency Response and Relief Centers (HERRCs) reached nearly 85,000, 87% above its level one year prior. Approximately 46% of the combined population were recently arrived asylum seekers.
• The count of individuals in shelter who are not believed to be recently arrived asylum seekers has grown by 6% since September 2022 (the first month in which a separate count of asylum seekers became available). The non-asylum seeker shelter population grew in April by more than 1,200 individuals, which is more than the net growth of 789 individuals from the prior five months of September 2022 through March 2023.
• As of May 3rd, the number of asylum seekers currently housed by the City is over 37,500. In the two weeks since 4/19, the number increased by approximately 2,700.
• • The City has opened 122 DHS emergency shelters and 8 HERRCs for asylum seekers. Since March 1st, one new HERRC has opened, and 24 new shelters have opened, including nine from April 23rd to April 30th.
• With the anticipated expiration of Title 42 (the pandemic-era rule that the federal government has been using to reject asylum seekers without hearings) on May 11^th, the Adams Administration expects the number of asylum seekers to grow significantly.

Chart 12

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

• After two years of post-pandemic recovery, 2023 year-to-date card-swipe entry data from Kastle Systems are indicating stability in the rate of utilization of NYC office space—a rate that averages 47% of the pre-pandemic usage. This suggests the possibility of a “new normal” for office attendance in New York City, with pandemic-accelerated remote and hybrid work continuing indefinitely.
• Stabilizing preferences for physically returning to the office have shown different patterns in localities across the country, as seen in Chart 13. In Houston, 2023 utilization to-date has averaged 60% while in San Jose it has been 39%.

Chart 13

SOURCE: Kastle Back to Work Barometer

• Lower utilization of office space will result in lower leasing activity, barring other changes to demand. The long-term leases prevalent in much of the office market may result in the effects of such reduced demand being spread over many years. Chart 14 shows that, after having recovered partially from its pandemic lows, NYC office leasing activity has declined in the past two quarters, particularly for Class A office space.

Chart 14

SOURCE: CoStar

City Finances

The tax forecast in the Mayor’s Executive Budget added a total of $2.1 billion to FY 2023 revenues. This amount is consistent with collection trends through March, when collections stood $1.8 billion above the forecast published in January.

Personal Income Tax

• Table 3 below takes a closer look at preliminary income taxes collections in April and compares them with the April forecast revisions. At the time of writing, collections data are not final, and tax audits as well as other smaller components are not yet known. Nonetheless, the data should provide a good approximation of the final numbers.
  • Through March, collections in Personal Income Tax (PIT) and Pass-Through Entity Tax (PTET) were ahead of January expectations by $475 million.
  • Business income taxes collections where ahead of January expectations by $140 million.
  • PIT and corporation taxes surprised to the upside again in April, with collections above January expectations by $1.1 billion and $334 million, respectively.
  • Overall, income taxes through April were $2.2 billion above the January forecast but only $1.0 billion was added in the April re-estimate, leaving an excess of $1.1 billion. The amount that will be recognized in the upcoming revenue re-estimate will in part depend on PIT and PTET refunds.

Table 2. FY2023 Income Taxes: Collections vs. OMB Forecasts ($m)

SOURCE: NYC OMB, NYS Department of Taxation and Finance, Office of the NYC Comptroller

• Information on 2022 PIT liability will not be available until next year. In Table 4 we attempt a first look at some of the more volatile income tax components using currently available information on PIT and PTET (we exclude withholdings on wage income, which through April total $9.6 billion and have grown 4.0% from the same period in FY 2022). We estimate a 20.4% decline in collections FY through April (likely due largely to lower income from capital gains). It should be noted that PTET distributions to the City are estimates and, as such, subject to revision.

Table 3. Selected Personal Income Tax Components in FY 2022 and FY 2023 ($m)

* Collections through March excluding $288.5 million in March payments attributed to 2023 liability.

** Includes first quarterly installments because FY2023 split between installments and extensions is not yet available.

*** Excludes $250 million EITC increase in FY 2023.

The table excludes returns, refunds, and State/City offsets collected in the first half of each fiscal year to avoid distortions from the outsized payments in October 2022 (which belong to the 2021 tax year). State/City offsets stem from revisions to the allocation of income tax liability between the State and the City.

SOURCE: NYC OMB, NYS Department of Taxation and Finance, Office of the NYC Comptroller

New York City’s Cash Balances

• On April 21st, the City’s cash balance reached $18.7 billion, the highest amount on record, due to a combination of normal seasonal highs, timing, and circumstances particular to this year
• As of May 2nd, the City’s cash balance stands at $17.4 billion, $7.5 billion higher than 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 fiscal year 2022.
• On January 3rd, 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.
• From December through April, the City received over $1.7 billion in FEMA from the Department of Homeland Security for reimbursement of COVID-19 related expenditures.
• The City’s cash balances were also boosted by higher-than-expected property and sales tax receipts. Combined property tax receipts from December through April were about $1 billion higher than the prior year.  Meantime, combined sales tax receipts from December through April were about $468 million higher than the prior year.
• 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.

On May 25, 2023, the New York City Banking Commission (to which the Comptroller appoints 1 of the 3 members) will hold a public hearing, and then vote on the designation of banks eligible to hold deposits of City funds. Members of the public may submit written comments ahead of the meeting or make in-person comments during the public comment session of the hearing. In light of recent bank failures (Signature Bank was a NYC depository bank; the City’s deposits were fully collateralized to prevent losses), as well as recent measures to insure that the City’s designated banks are more accountable to the public, the Banking Commission is giving increased scrutiny to the designation process.

Sincerely,

Brad Lander