New York by the Numbers
Monthly Economic and Fiscal Outlook

A Message from the Comptroller

Dear New Yorkers,

Here at the Comptroller’s office, we have many critical responsibilities. But there’s none we take more seriously than protecting the retirement security of the members of the City’s five pension funds: our teachers, cops, firefighters, sanitation workers, public hospital nurses, accountants, school crossing guards, and so many more.

So I’m delighted to report that for the fiscal year ending June 30, our five pension funds achieved a combined net return of 10.0%, outpacing the 7% actuarial target set for us by the State legislature (and ahead of some of our large U.S. public pension fund peers as well). As a result, the funds ended FY24 with a value of $274.4 billion in assets, making us now the third largest public pension system in the country.

Thanks to the hard work of our Bureau of Asset Management, working in close partnership with the trustees of the five funds, this 10% net return not only strengthens the retirement security of New Yorkers. It also translates into $1.8 billion of savings for the City budget over the next five fiscal years – money we can invest in our schools, parks, sanitation, safety, or other crucial programs to improve the quality of life for New Yorkers.

While I’m pleased by this year’s returns, we always stay focused on long-term results, the most important metric for determining a pension fund’s success. And on that note, the Systems have an annualized average five-year return of 7.4% and a ten-year return of 8.1%. We’ll keep working hard every day to achieve strong returns and provide retirement security for the hardworking New Yorkers who have served our city.

For our Spotlight this month, we take the first published look at consumer debt levels and trends for New York City households in recent years. With the help of federal pandemic stimulus, many households were able to pay down credit card debt in 2020 and 2021. Unfortunately, over the past year, credit card debt levels and delinquencies have increased significantly, especially among residents of the Bronx, low-income neighborhoods, and holders of student debt.

If we want all households to have financial security, the numbers show we’ve got work to do.

Brad

The U.S. Economy

• After slowing considerably in the first quarter, economic growth picked up in Q2, as real GDP expanded at a 2.8% annual rate in Q2—double the pace in Q1. While it’s a bit early to get a good read on the current (3^rd) quarter, nowcasts from regional Feds point to growth of 2-3%.
• The job market showed signs of cooling in July. Private-sector employment rose by 97K, well below the average gain of 177K over the first half of the year. The unemployment rate rose another 0.2 points to 4.3% (an almost 3-year high)—though this was driven by a rise in labor force participation rather than a decline in employment. These statistics may be affected by Hurricane Beryl, which struck Houston during the survey week. At least thus far, these indicators are more suggestive of a “soft landing” in the economy than a recession. But recent financial market volatility and the potential for decline in business and consumer sentiments remain economic risks if they persist.
• Inflation continued to move toward the Fed’s 2% target in June. The Consumer Price Index was flat, as energy prices fell, while the core CPI (ex-food and energy) was up 0.2%. Over the past 12 months, these two measures were up 3.0% and 3.2%, respectively—the smallest increases in over 3 years. The PCE deflator—an alternative inflation index—gave even more favorable signals, rising 2.5% over the past 12 months (with the core index rising 2.6%).
• Recent data from the NY Fed’s Consumer Credit Panel show overall delinquency rates leveling off in the second quarter, after rising steadily over the past year; however, there are some worrisome crosscurrents, as noted in this month’s Spotlight which focuses on NYC data.

New York City Economy

Payroll Employment & Industry Trends

• City-wide private-sector employment rose 9,000 in June, after a dip of 400 in May (revised from a moderate gain), and it is up 29K or 0.7% over the past 12 months. Once again, Health Care & Social Assistance accounted for much of June’s job gain, adding 6,100 jobs.
• For the first time this year, there were also sizable job gains in two of the city’s key industry sectors: Financial Activities added 3,700 jobs in June and Professional & Business Services added 6,500. Arts, Entertainment & Recreation saw a modest job gain of 1,300.
• In contrast, the Information sector shed another 5,600 jobs in June, and Construction saw a job loss of 1,800. Both sectors have seen significant job losses over the past 12 months.
• Compared with a year ago, the only sectors that have added any significant number of jobs are Health Care (+76K) and Government (+10K), with more modest gains in Accommodation & Food Services (+4K) and Arts & Entertainment (+1.3K).

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

Source: NY Department of Labor, NYC Office of Management and Budget, and Office of the New York City Comptroller

Note: Due to revisions to earlier months made by NY DOL through June 2024, numbers may not match to previous monthly newsletters.

• Chart 1 shows how each major sector’s average pay scale (based on weekly earnings) relates to job growth over the past year. The size of each bubble reflects the size of that sector in terms of employment, the horizontal position reflects its average weekly pay in 2023, and the vertical position reflects its job growth. Almost all the job growth over the past year has been in lower-paying industries—most notably Health & Education Services.
• Within that sector, moreover, most of the job gain has been in the home health care industry, which is even lower paying than the broader sector as a whole.
• In contrast, the high-paying sectors of the city’s economy—Finance, Professional & Business Services, and especially Information—have seen job losses.

Chart 1

Sources: NY Department of Labor, Moody’s economy.com, NYC Office of Management & Budget

Labor Force Trends

• Whereas the national unemployment rate has edged up since April, New York City’s rate has been steady at 4.8% for three straight months now—its lowest level in almost two years—and the city’s employment-to-population ratio set another record high in June.
• Moreover, initial weekly jobless claims, which provide an almost real-time read on employment trends, have remained at subdued levels through the end of July, as shown in Chart 2 below, signaling continued strength in the job market.

Chart 2

Sources: NY Department of Labor; U.S. Department of Labor; and Office of the New York City Comptroller

Inflation & Wages

• From the onset of the pandemic in early 2020 until mid-2023, inflation in the New York metro area ran a bit below the U.S. pace, based on the CPI (Consumer Price Index). Over this period, prices rose 14.9% locally versus 17.3% nationwide—equaling annualized inflation rates of 4.3% and 4.9%, respectively. From mid-2023 to March 2024, these rates were roughly on par with each other.
• Over the past three months, however, this pattern has reversed, with U.S. inflation slowing to a 1.2% rate but local inflation accelerating to a 6.1% annualized rate. Over the past 12 months the difference is not as stark but still substantial: living costs rose 3.0% nationally but 4.2% locally.
• While it is not particularly worrisome that the favorable local pandemic divergence in inflation has reversed somewhat, there are some striking features in the details. Most notably, electricity prices, which were little changed nationwide in June, shot up locally and were up 16% from a year earlier. Prices for recreation services also shot up in June.
• As noted in June’s Newsletter, real wages (adjusted for inflation), have lagged even more locally than nationally since the pandemic. However, that trend reversed in June, as nominal wages shot up 1.1% (0.7% after adjusting for inflation) and were up 4.1% from a year earlier (just about the same as prices). Yet inflation-adjusted wages are still about 3% below pre-pandemic levels.

Wall Street Profits

• In the first quarter of 2024, New York Stock Exchange member firms generated $12.2 billion in profits, their highest level since the end of 2021 and about $5 billion more than the same quarter in the year prior, a 67.7% rise (Chart 3).

Chart 3

Source: Intercontinental Exchange, Inc.

Tourism

• Tourism remains a continued source of strength for the local economy. Hotel occupancy rates approached 90% in May and June—almost back up to pre-pandemic levels—and room rates have continued to edge up. An estimated 4,200 hotel rooms currently under construction are expected to come online by the end of this year, with another 2,000 expected in 2025. This would represent a roughly 5% increase in the total supply.
• Another indicator of solid tourism—and an important segment of New York City’s creative sector—Broadway theaters have seen a pickup in attendance since the Spring, with a number of new shows opening. As shown in Chart 4, attendance is running just 5-10% below comparable 2019 (pre-pandemic) levels, and revenues are roughly on par with 2019 levels.

Chart 4

Source: The Broadway League

Office Market

• While meaningful signs of distress remain, New York City’s office market appears to have begun a broad-based, albeit gradual, recovery, as illustrated by vacancy rates in Chart 5 below.
• Since the start of this year, the high end of the city’s office market has strengthened. In just the past three months, the vacancy rate on 5-star (top-tier) office space has declined by a full point to 16%—the lowest since mid-2020—while market rents have continued to inch higher and are just 3% below their pre-pandemic peaks (not adjusted for inflation). Vacancy levels are relatively high in this segment due to extensive new development, which takes time to fill.
• Among Class A properties that are not 5-star (i.e. 2^nd tier properties), vacancy rates have trended down modestly since peaking in April; and market rents have continued to rise slowly but steadily, reaching a 3½ year high.
• Also encouragingly, over this same three-month period, the market for lower-rated offices (i.e. Class B and C) appears to be stabilizing, with vacancy rates finally flattening after continuing to rise not only during the peak of the pandemic, but even through 2022 and 2023. As of early August, office vacancy rates across this segment were slightly lower than in the first half of the year. Moreover, market asking rents on both Class B and C properties have come off their lows and are higher than they have been in almost three years, though still down 11% and 8% from their respective pre-pandemic peaks (and by more, after adjusting for inflation).

Chart 5

Source: Costar

Residential Real Estate Market

• The home sales market cooled further in June, based on data from StreetEasy. Selling prices continued to edge down, and the inventory of homes on the market held steady at a 3-year high but still lower than in the year leading up to the pandemic. It remains to be seen what effect the recent drop in mortgage rates will have on the sales market.
• In contrast, the rental market has resumed tightening so far this year. Rents continued to climb in June and were up 3% from a year earlier in Manhattan and up roughly 4.5% in Brooklyn and Queens. Citywide, rents are up 21% from the start of the pandemic.
• The inventory of available rental units has increased in line with typical springtime seasonal patterns but is still quite low and down from a year ago. Inventory remains lower than during the years leading up to the pandemic.

Homelessness & Asylum Seekers

• Chart 6 shows the population (as a monthly average) in City shelters and other City-provided facilities.
• The average number of newly arrived migrants in City-funded shelter decreased by approximately 750 individuals compared to June 2024. Overall, this population represents approximately 54% of the total individuals in shelter.
• For newly arrived families with children, the 60-day shelter stay rule implemented by the Adams Administration in January continues to apply. As of July 21, a total of 12,186 families with children in emergency shelters have been given 60-day notices. These households include a total of 38,170 individuals, 19,848 adults, and 18,322 children. Of the 16,418 adults from families with children in households whose 60-day notices had expired as of July 21, 14% remain in the shelter where their 60-day notice was given, 35% have been transferred to other shelters, and 51% are not in shelter. See the Comptroller’s resource hub for more information.
• The number of people in shelter who are not asylum-seekers increased by approximately 550 individuals in July; this population has increased by more than 4,000 since July 2023.

Chart 6

Source: NYC DHS, NYC Mayor’s Office, Office of the NYC Comptroller

Note: Figures shown are monthly averages. July 2024 reflects July 1-28. Data on the asylum seeker population within DHS shelters is not available prior to August 31, 2022. Other Facilities include spaces operated by NYCEM, HPD, and DYCD, and those outside of NYC.

City Finances

City Worker Headcount

• The Adopted FY 2025 Budget authorizes total full-time headcount for FY 2025 at 299,566 positions, an increase of 753 positions compared to the Executive FY 2025 Budget and April Financial Plan.
• Most of the addition is due to newly funded positions. The agencies that received most of this increase include:
  • the Department of Sanitation (79 from PEG Restorations to Get Stuff Clean and Lot Cleaning programs, and 32 newly funded positions for Encampment and Lot Cleaning);
  • the Department of Parks and Recreation (343 positions for Second Shift Cleaning) and;
  • the Department of Social Services (124 newly funded positions for the Shelter to Housing Action Plan).
• 93 positions that were taken as part of PEG vacancy reductions were also restored, primarily in the Department of Sanitation.
• As of July 31, the City’s actual full-time workforce is 284,383 with a vacancy rate of 5.1 percent against the FY 2025 Adopted Plan. See the NYC Agency Staffing Dashboard for more details by agency. A 2-for-1 hiring restriction, where one employee can be hired for every two that leave or retire, is still in effect for City agencies.

Chart 7

Source: Office of the New York City Comptroller, Mayor’s Office of Management and Budget

Nominal and Inflation-Adjusted PIT & PTET Collections

• PIT and PTET collections were below expectations in the last quarter of FY 2024, leading to a $350 million reduction in budgeted amounts since the Executive Budget was released in April. Here, we look at how inflation-adjusted collections compared to pre-pandemic levels.
• In Chart 8 we show the 12-month rolling sum of collections indexed to December 2019, in nominal and inflation-adjusted terms. The data show that in June 2024, 12-month collections were above December 2019 levels by 15.1%. Yet this represents a 10.2 percentage point drop from the level in June 2023, which is in part due to timing factors that inflated FY 2023 collections and depressed FY 2024 numbers.
• In inflation-adjusted terms, the timing shifts pushed the index into negative territory in December 2023 (-3.2%), where it remained as of June 2024 (-2.3%) due to the weaker-than-expected collections.
• Both OMB and our office expect PIT and PTET to post a combined growth rate above 10% in FY 2025, which would push the inflation-adjusted 12-month collections back above pre-pandemic levels.

Chart 8

Source: Office of the NYS Comptroller, NYS Department of Taxation and Finance, Bureau of Labor Statistics, Office of the NYC Comptroller. We used the 12-month rolling average of NYC-area CPI (not seasonally adjusted) for the inflation adjustment.

IRS County-to-County Migration Data

• The IRS recently published the 2021-2022 migration file which looks at county-level incoming and outgoing flows of individual federal tax filers. The data are based on the location of tax filing. Federal Adjusted Gross Income (AGI) reported in the data is the income earned in 2021 (but filed in 2022).
• Table 2 shows that in 2022 the net outflow of tax filers from NYC to the rest of the US amounted to 77,677 filers, representing 177,739 individuals. Federal AGI was $10.6 billion less for incoming filers than outgoing filers.
• While still elevated, net outflows were significantly lower than in 2020 and 2021. Census annual population estimates (which are in part based on IRS data) point to a further deceleration of net domestic outmigration between 2022 and 2023, as shown in the April Newsletter.
• Average AGI of incoming filers increased significantly from 2021 to 2022, rising by $41,600 and suggesting that some higher-income taxpayers returned to the City. Historically, the average federal AGI of outgoing filers exceeds that of incoming filers but in 2022 the difference ($141,900 vs. $140,700) was the lowest in absolute and percentage terms since 2012, and a significant reversal of the spike seen in 2020 and 2021. (See the 2023 Annual State of the City’s Economy and Finances for a similar analysis based on Census’ American Community Survey data).

Table 2: Net Domestic Outflow of Federal Income Tax Filers from NYC

Source: IRS migration data and county data, Office of the NYC Comptroller.

Note: AGI based on the tax year preceding the year of filing (e.g., in the 2022 row, the AGI is for tax year 2021). AGI difference is total AGI of incoming filers minus the total AGI of outgoing filers. Net outflow as % of total AGI is the AGI difference divided by total NYC AGI in the preceding tax year (e.g., in the 2022 row, the denominator is total tax year 2020 federal AGI in NYC). Average AGI is total incoming/outgoing AGI divided by the number of incoming/outgoing filers. The count of individuals is derived from the number of dependents in the tax returns.

New York City’s Cash Balances

• As of August 6, 2024, the City’s central treasury balance stood at $9.3 billion, compared to $12.4 billion at the same time in FY 2024.
• The June 1, 2024 cash balance projection preceded the release of the City’s FY 2025 Adopted Budget Agreement. An interim update to this projection incorporating changes from the Adopted Budget can be found here.

Sincerely,

Brad Lander