In testimony before the City Council's Finance Committee on Thursday, IBO director Ronnie Lowenstein described herself as "more than a little surprised" to say that the city's fiscal picture "looks better than most anyone would have expected 12 months ago." She said the city's total peak-to-trough job losses will reach 156,000, about 8.2% less than the 170,000 layoffs projected at the start of 2009 by then-city comptroller William Thompson.
That being said, the city ended January with a 10.4% unemployment rate, down 100 basis points from the previous month, the state Labor Department reported. New York City's unemployment rate is still higher than the national rate of 9.7% for January and the statewide rate of 8.8% for the month, which also declined 100 basis points from December '09.
"We expect that job losses will end in the first quarter of this calendar year, followed by modest job growth of 14,000 during the rest of this year and by an additional 103,000 over the next two years," said Lowenstein. Health and education jobs will account for nearly one-third of this growth, she added.
Lowenstein said the city will manage to avoid two consecutive years of declining tax revenues, although she acknowledged that for fiscal 2010, this was due largely to increases in the property and sales tax rates. She said the recession will prove to be "one of the mildest since World War II," and credited the federal bailout of financial firms with limiting the impact.
Changes in the makeup of the city's employment base have proven to be a bulwark against heavier job losses. A major plus has been the growth in the "recession proof" health and education sectors as a share of that base. "Additionally, employment did not drop as steeply in business services as it had in prior recessions," Lowenstein said Thursday. "And although local real estate values have declined, they have not fallen at the catastrophic rates seen in some parts of the country."
However, Lowenstein warned that the city's current position rests on "two shaky pillars: the national economy and the even creakier New York State budget." Nationally, she said, "continued weakness in the labor and housing markets and the winding down of federal stimulus spending could undercut the recovery and weaken the economic and fiscal outlook for the city." Meanwhile, "the greatest near-term risk" for the Bloomberg administration's budget plan could stem from the state's fiscal shortfall.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
