The city economy shifted into second gear in March with growing jobs numbers — but New York’s comeback will depend on when the vaccine rollout convinces office workers and tourists to return.
At the moment, both are saying: Not just yet.
“We are in a wait-and-see period,” said Danny Mangru, research director for New York at the real estate firm Savills, which earlier this month issued a sobering report on the city’s office market. “We will see more activity once more of the population is vaccinated post-Labor Day.”
Meanwhile, the employment picture is slowly improving.
The city gained 16,000 jobs in March — the largest increase since August, the state Labor Department reported Thursday.
The return of limited indoor dining led to a boost in restaurant jobs, while motion picture companies, temp agencies and colleges and universities began adding workers in significant numbers. The unemployment rate declined from 12.9% to 11.7% — still nearly double the national average.
“Finally, the city’s jobs picture is beginning to brighten after six months of being in a holding pattern,” said James Parrott, who tracks the city’s economy at the New School’s Center for New York City Affairs. “Nearly every industry showed some improvement, and together with fewer new unemployment claims, there are signs of further gains in the months ahead.”
New York Lags
But the city’s economic hole remains deeper than that of any other major city in America.
New York lost almost 14% of its jobs in the first year of the pandemic recession, Parrott calculated, the most among the nation’s 15 largest cities. Only San Francisco and Los Angeles recorded declines of more than 10%.
Among metropolitan areas, New York ranked 81st out of 82 in job loss, according to Oxford Economics, with only Las Vegas posting worse numbers.
As New York posted modest gains, the nation added 916,000 jobs overall. That proved well above expectations and led economists to predict even more positions would be added in April.
New York remains almost 600,000 jobs below the record 4.7 million recorded in early 2020, a decline of 12%. The cumulative national drop, in contrast, is 5%.
The city’s unemployment rate is almost twice the national rate of 6% — and that doesn’t count people who have stopped looking for work or who can only find part-time work. If those people are included, what’s called the underemployment rate would be higher than 24%, according to Parrott.
The restaurant industry illustrates the problem. Employment remains 140,000 jobs below the early 2020 record, a decline of 45%.
“It’s shocking,” said Andrew Rigie, executive director of the New York City Hospitality Alliance. And, he notes, “Many people who worked in the restaurants have left New York City and it’s not clear when and if they will come back.’’
Room at the Inn
The leisure and hospitality sector is in large part dependent on tourists. Some are slowly reappearing in places like Times Square, but it’s a far cry from the almost 67 million tourists the city drew in 2019.
Hotel occupancy reached 55.2% for the week of April 3, according to the data firm STR, marking the highest percentage since March 2020.
But the figure is misleading, since it includes only hotels that have remained open. The figure is a dismal 35.1% when those closed since the pandemic began are counted.
And the average room rate of $138 is far too low for most hotel owners. The break-even figure for a unionized hotel is about $200 a night.
The office market continues to deteriorate. The Savills report on the first quarter showed the vacancy rate had soared to a decades-high of 17.2% with asking rents declining 10% over the past year to $76.27 a square foot. Sublease space put on the market by companies that can’t break their lease is 22 million square feet, two-thirds more than before the pandemic.
The tea leaves about whether companies will soon recall workers to the office remain hard to read. Google, the biggest tech employer in New York, said it would begin bringing back workers in the coming months.
J.P. Morgan Chase CEO Jamie Dimon said recently his firm would only need 60% of the space it has leased before the pandemic, citing remote working arrangements. But he has also said the company is committed to its new $3 billion Park Avenue headquarters, which had been expected to house 14,000 employees.
“Anytime you come out of these downturns you have to watch out for the trendsetters — and Google and J.P Morgan Chase are trendsetters,” Mangru said.
A Call for Retraining
Mayor Bill de Blasio, who has ordered many city workers to begin to return to their offices, is now tying the future to the vaccine rollout.
Earlier this week, the mayor reported that the city’s COVID-19 positivity rate had declined to 5.3% and the seven-day daily average of new cases trended down to 2,637. The number of New Yorkers hospitalized dropped to 2.99 per 100,000.
“This is the lowest I’ve seen in quite a while,” he said, adding, “the trajectory is very good.”
Rigie argues that restaurants would increase hiring if eateries and bars could operate under the same rules that apply everywhere else in the state — where people can sit at the bar and where venues have occupancy of 75% of capacity, rather than the 50% imposed in the five boroughs.
In the end, he acknowledges, the recovery will depend on office workers and visitors.
“You have a long way to go if you are a restaurant in Midtown or Downtown and office buildings are at 15% occupancy,” he said. “Or if you rely on the tourists.”
Even with a pickup in the economy, Parrott now estimates the city will still be 300,000 jobs below its pre-pandemic level at the end of the year and that those hardest hit will still be people of color.
“The city urgently needs to begin putting in place a massive job market reallocation system to prepare workers whose jobs have permanently disappeared for opportunities in growing sectors like tech, health care, and physical and care infrastructure,” he said.