U.S. Economy

New York City's Endangered Economic Miracle

A decaying public transportation system and economic troubles in the suburbs will make it tough for the city to maintain its momentum.
Corrected

Getting around is kinda gloomy.

Photographer: Spencer Platt/Getty Images

It has been an impressive run for New York City's economy. After trailing the country in job growth for most of the post-World War II era, the city turned the tables in 2006, and kept them turned for a decade. 1

Job Growth in NYC and the Nation

Change in nonfarm payroll employment, trailing 12 months, not seasonally adjusted

Source: U.S. Bureau of Labor Statistics

As you can kind of see in the above chart (if you look really, really closely), that stretch of unbroken outperformance ended in October 2016 after exactly 10 years. Still, employment growth in the city experienced a bit of a resurgence in the middle of 2017, and for the full year the city had the same rate of job growth -- 1.5 percent -- as the country as a whole, according to jobs data released this week by the Bureau of Labor Statistics. For a crowded, expensive city with a public transportation system that's falling apart, that's not bad.

The rest of the New York-Newark-Jersey City metropolitan statistical area, which includes suburban counties in New York, New Jersey and Pennsylvania but not Connecticut, has been having a tougher time of it. 2  Job growth in the metro area outside the city was just 0.3 percent in 2017.

Job Growth in NYC and the Rest of the Metro Area

Change in nonfarm payroll employment, trailing 12 months, not seasonally adjusted

Source: U.S. Bureau of Labor Statistics

Here's another view of the city's economic outperformance versus surrounding areas, using the Federal Reserve Bank of New York's index of coincident economic indicators, which factors in employment, real earnings, the unemployment rate and average weekly hours worked in manufacturing.

NYC Is Where the Region's Growth Is

Index of coincident economic indicators, July 2000 = 100

Source: Federal Reserve Bank of New York

The contrast with the previous two and a half decades is quite striking:

NYC Used to Be the Laggard

Index of coincident economic indicators, January 1965 = 100

Sources: Federal Reserve Bank of New York, author's calculations

New York City has gone from troubled metropolis dragging its state and region down to pretty much the best thing going for miles and miles. Which makes me wonder: Is that sustainable?

In one sense it is: Most of New York City's major industries -- finance, media, tourism, tech -- serve national and global markets, not regional ones. Tough times in New Jersey won't have much direct effect on demand for their products and services.

But the city's labor market is regional, with 608,000 people, or about 15 percent of the workforce, commuting into the city every day as of 2013. Perhaps more important, so are its politics. For most of the first half of the 20th century, New York City had the political clout that came with being home to more than half of New York state's people. That hasn't been true since the 1950s, and despite gains in recent decades, the city still accounted for just 43 percent of the state population as of 2016.

Organizations with huge influence on the city's economy such as the Metropolitan Transportation Authority and Port Authority of New York and New Jersey thus remain in the hands of state politicians (and in the case of the Port Authority, out-of-state politicians). Economic struggles outside the city could thus reduce the appetite for infrastructure investments key to the city's continued economic success. In fact, they probably already have, as indicated by the failure so far to build a new New Jersey-to-Manhattan rail tunnel and the long-running underinvestment in the city's subways. 3 With New Jersey and Connecticut both facing huge state pension funding shortfalls (New York state's pensions are in good shape overall, although some fear that the city's are getting to be too expensive), these suburban economic pressures seem likely to increase. And I'm not even getting into the national political picture, which has turned strangely hostile to densely packed, high-tax cities since New Yorker Donald Trump became president a year ago.

New York City's strong economic growth over the past quarter-century has been enabled in part by the sharp declines the city experienced in the 1970s, which left it with a transportation infrastructure and housing stock that, while decayed, had been built to support a larger city and larger workforce. It is only in the past seven years that payroll employment in the city has surpassed its June 1969 peak of 3.84 million and stayed there. 4 As of December it was 4.50 million (4.44 million with seasonal adjustments) and rising.

More Jobs in NYC Than Ever Before

Nonfarm payroll employment in New York City, not seasonally adjusted

Source: U.S. Bureau of Labor Statistics

The city's population, at an estimated 8.54 million as of July 2016, is also setting new records every year. New York City has entered uncharted territory. The question is whether it can keep moving forward now that it's there.

(Corrects name of Metropolitan Transportation Authority in ninth paragraph of article published Jan. 24.)
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
  1. I use not-seasonally-adjusted numbers in the charts because those are available back to 1950 for New York City, while the seasonally adjusted ones only go back to 1990. (I started this first chart in 1952 because there were some huge job gains in 1950-1951 that messed with the scale.) Since I'm looking at 12-month changes, seasonal factors shouldn't matter anyway, but the numbers I use here will differ slightly from those derived from the more commonly used seasonally adjusted data.

  2. The Bridgeport-Stamford-Norwalk metro area, which comprises Fairfield County, Connecticut, saw job growth of 0.8 percent in 2017.

  3. Yeah, yeah, it would also help if it didn't cost $3.5 billion to lay a mile of underground track in New York City.

  4. It surpassed it in December 2007 and again in December 2008 (remember, these numbers aren't seasonally adjusted), but didn't do so again until October 2011.

To contact the author of this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor responsible for this story:
Brooke Sample at bsample1@bloomberg.net

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