NYC Economy Takes a Break in Fourth Quarter of 2017
February 8, 2018
City economic growth slowed to 1.2% in the 4th quarter
Private sector lost 17,300 jobs, largely in medium-wage industries
(New York, NY) — New York City’s economy slowed down at the end of 2017, as gross city product grew only 1.2% in the fourth quarter of 2017 (October through December), according to an analysis of the City’s economic performance released today by New York City Comptroller Scott M. Stringer. During the same quarter, the national economy expanded by 2.6%.
In the final three months of 2017, private-sector employers shed 17,300 jobs, including 15,700 jobs in medium-wage industries. For the whole of 2017, private-sector employers added jobs 71,400 in 2017, compared to 83,600 new private-sector jobs in 2016.
“The weakness in employment growth should serve as a reminder that the robust rate of job creation in the City over the last several years won’t continue forever,” said Comptroller Stringer. “We will continue to monitor the economy’s condition closely, but this quarter’s results highlight the need for prudence in the management of our finances.”
Released every three months, the Comptroller’s Quarterly Economic Update tracks New York City’s economic health and analyzes the City’s economy in a national context. The report includes information on economic growth, unemployment, average wages, business activity, real estate transactions, and other economic indicators.
Current and historical data in the Comptroller’s Quarterly Economic Update are available on a new website www.comptroller.nyc.gov/EconomicData that presents data on the City’s economy in an accessible, open, and easy to manipulate way. New Yorkers, policymakers, and economists are encouraged to explore the data that underpins the Comptroller’s Quarterly Economic Reports and analyze the City’s economic performance over time.
Findings in the Fourth Quarter Update include:
City Economic Growth Slowed
New York City’s economy ended 2017 with a whimper, growing only 1.2% in the fourth quarter. In contrast, the U.S. economy, as measured by the change in real GDP, grew 2.6% (advance estimate). For 2017 as a whole, the City’s economy grew 2.4%, slightly less than the 2.5% rate in 2016, but better than U.S. economic growth of 2.3%.
Private-Sector Slammed the Brakes on Hiring
Establishments in New York City (including government) shed 16,800 jobs, an annualized decline of 1.5%, registering the worst fourth quarter performance in eight years. Of 17,300 private-sector jobs lost in the fourth quarter, 15,700 were in medium-wage industries, followed by 1,300 in low-wage industries, and 300 in high-wage industries.
Private-sector job losses included:
- 4,000 in arts, entertainment, and recreation;
- 3,500 in administrative services;
- 2,600 in retail trade;
- 1,300 in accommodation; and
- 500 in food services and drinking places.
Job losses were partially offset by job gains in construction and financial activities.
- For the year, the city added 71,400 total private sector jobs, after adding 83,600 in 2016.
- Most of the new jobs (40,000 or 55.5%) paid under $60,000, followed by mid-wage jobs between $60,000 and $119,000 (18,000 or 25.5%) and high-wage jobs paying over $119,000 (14,000 or 19.0%).
Labor Force Participation Rate Retreated From Its Record High
The City’s labor force, which is the sum of all city residents who are employed or looking for a job, declined by 9,200 from its record high in the third quarter of 2017. As a result, the City’s labor-force-participation rate (LFPR), which is the ratio of the total labor force to the total non-institutional population (16 years old and over), fell slightly to 61.3%, off its record high of 61.5% in the third quarter.
As the labor force contracted, the unemployment rate fell in all five boroughs to their lowest fourth-quarter levels in at least 12 years. The unemployment rate in the fourth quarter of 2017 was:
- 5.9% in the Bronx;
- 4.4% in Brooklyn;
- 4.2% in Staten Island;
- 3.8% in Manhattan; and
- 3.7% in Queens.
Average Hourly Earnings and Personal Income Tax Collections Rose
Changes to the U.S. tax code at the beginning of 2018 appear to have had a significant impact on personal income tax collections at the end of 2017. Beginning in tax year 2018, taxpayers will lose the ability to deduct more than $10,000 in state and local taxes.
On a year-over-year basis, personal income taxes withheld from paychecks rose 16.2% to over $2.2 billion in the fourth quarter, while estimated tax payments, which reflect trends in taxpayers’ non-wage income, including interest earned, rental income, and capital gains, more than doubled.
Average hourly earnings (AHE) of all private NYC employees, another proxy for personal income, rose 3.7% on a year-over-year basis to $35.52 in the last quarter of 2017, the biggest fourth-quarter gain since 2008.
Venture Capital Investment On-Trend
Total investment in the New York metro area rose 32.5% on a year-over-year basis to $2.9 billion in the fourth quarter of 2017, as the number of deals rose to 177 from 169 in the prior year.
Total national growth in venture capital investment was slightly higher at 45% in the fourth quarter, as investment in Silicon Valley more than doubled.
New Commercial Leasing Grows, While Manhattan Residential Market Softens
New commercial leasing activity in Manhattan surpassed 7.0 million square feet in the fourth quarter, 21.8% higher than in same quarter last year.
However, residential housing prices in Manhattan continued to soften for the second consecutive quarter. Both average sales prices and average price per square foot fell for the second time after nine consecutive quarters of year-over-year growth.
Unlike Manhattan, housing market prices increased slightly in Brooklyn to $948,706. Similarly in Queens, the average sales price rose 8.9% to $624,698.
MTA Bus Ridership Continued Decline
Average weekday ridership on MTA NYC Transit fell 0.9% in October and November of 2017 from a year ago, as bus ridership fell 3.4%. During the same period, ridership on the Long Island Rail Road (LIRR) fell 0.5%, but increased 0.1% on Metro North.
For the entirety of 2017 through November, average weekly ridership fell 1.2% on MTA subways and 5.5% on the buses.
Leading Economic Indicators are Positive
The City’s leading economic indicators were mixed, but implied continued expansion. The current business condition index provided by ISM-New York, Inc. (which measures the current state of the economy from the perspective of business procurement professionals) fell to 55.3% in the fourth quarter, below the 56.4% in the prior quarter. However, a reading greater than 50% indicates growth.
In a positive sign, total building permits in the City rose 12.7% to 5,672 in the fourth quarter from a year ago. However, initial unemployment claims increased 2.8%, on a year-over-year basis, for the first time after twelve consecutive quarters of decline.