Since the jobs recovery began in late 2009, New York City has been one of the best performers in the nation.
As of August, total employment has increased by more than 290,000 jobs (note the partial government shutdown delayed the release of September employment for the city—it will now come out in late November, along with the October data). But there are a couple of important trends in the jobs data that are having a direct impact on the Manhattan office market: the recent slowdown and the lagging financial services sector.
In the early stages of the recovery, employment in New York City grew much more rapidly than the rest of the nation. From February 2010 through August 2011, employment in New York City grew twice as fast as the U.S. as a whole, increasing 3.6 percent compared with 1.8 percent for the U.S. In the two years since August 2011, employment in New York City has increased 3.8 percent, while nationally it is up 3.4 percent.
One important reason that the New York City growth rate has slowed back toward the national total has been the performance of the financial services sector. It’s no surprise that the point at which employment growth in the local economy began to slow the spring and early summer of 2011 saw a series of events that increased uncertainty, the eurozone debt crisis was reviving, the U.S. deficit ceiling debate was in full swing and the Dodd–Frank Wall Street Reform and Consumer Protection Act commonly known as Dodd Frank was signed into law in July 2011. The result of these events was a dramatic slowdown in the financial services sector. Employment in financial services peaked in August 2011 and has been trending lower since. As of August, there were 7,300 fewer financial services jobs in New York City than in August 2011. Since financial services is so important to the New York City economy, where it accounts for nearly twice the share of total jobs as it does nationally, an underperforming financial sector is a bigger drag here than just about anywhere else in the nation.
This is not a bad story. New York City is not lagging behind the rest of the nation—far from it. The vibrancy of the creative and technology industries is providing an important boost to the local economy and the local real estate market. But without a healthy and growing financial services sector, the New York City office market will face a greater-than-normal challenge in expanding.
New York City is matching the U.S. without a strong financial sector. Once financial services starts to grow again, and I expect it will, the city will do even better.